<PAGE>
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1993
Commission file number 1-9447
KAISER ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3030279
(State of Incorporation) (I.R.S. Employer Identification No.)
5847 SAN FELIPE, SUITE 2600, HOUSTON, TEXAS 77057-3010
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 267-3777
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------- ----------------------
Common Stock, $.01 par value New York Stock Exchange
$.65 Depositary shares, each New York Stock Exchange
representing ownership of one-tenth
of a share of Series A Mandatory
Conversion Premium Dividend Preferred
Stock
Series A Mandatory Conversion Premium None
Dividend Preferred Stock, $.05 par value
8.255% PRIDES, Convertible Preferred New York Stock Exchange
Stock, $.05 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes _ X__
No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. ___
As of March 21, 1994, there were 58,095,599 shares of the common stock
of the registrant outstanding. Based upon New York Stock Exchange
closing prices on March 21, 1994, the aggregate market value of the
registrant's common stock, $.65 depositary shares, and 8.255% PRIDES
held by non-affiliates was $313.0 million.
Certain portions of the registrant's annual report to shareholders for
the fiscal year ended December 31, 1993, are incorporated by reference
into Parts I, II, and IV of this Report on Form 10-K. Certain portions
of the registrant's definitive proxy statement to be filed not later than
120 days after the close of the registrant's fiscal year are incorporated
by reference into Part III of this Report on Form 10-K.
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NOTE
Kaiser Aluminum Corporation's Report on Form 10-K filed with the
Securities and Exchange Commission includes all exhibits required to
be filed with the Report. Copies of this Report on Form 10-K,
including only Exhibit 21 of the exhibits listed on pages 28 - 33 of
this Report, are available without charge upon written request. The
registrant will furnish copies of the other exhibits to this Report on
Form 10-K upon payment of a fee of 25 cents per page. Please contact
the office set forth below to request copies of this Report on Form
10-K and for information as to the number of pages contained in each
of the other exhibits and to request copies of such exhibits:
Corporate Secretary
Kaiser Aluminum Corporation
5847 San Felipe, Suite 2600
Houston, Texas 77057-3010
(i)
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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T A B L E O F C O N T E N T S
Page
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PART I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . 14
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS. . . . . . . . . . . . . . . . . . 18
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . 19
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . 19
PART III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . 19
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 19
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . 19
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . .20
SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
INDEX OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 28
EXHIBIT 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(ii)
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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PART I
ITEM 1. BUSINESS
Industry Overview
Primary aluminum is produced by the refining of bauxite (the major
aluminum-bearing ore) into alumina (the intermediate material) and the
reduction of alumina into primary aluminum. Approximately two pounds
of bauxite are required to produce one pound of alumina, and
approximately two pounds of alumina are required to produce one pound
of primary aluminum. Aluminum's valuable physical properties include
its light weight, corrosion resistance, thermal and electrical
conductivity, and high tensile strength.
Demand
The packaging and transportation industries are the principal
consumers of aluminum in the United States, Japan, and Western Europe.
In the packaging industry, which accounted for approximately 22% of
consumption in 1992, aluminum's recyclability and weight advantages
have enabled it to gain market share from steel and glass, primarily
in the beverage container area. The aluminum packaging market in the
United States, Japan, and Western Europe grew at a rate of
approximately 4.0% per year during the period 1982-1992, and total
United States aluminum beverage can shipments increased at a rate of
approximately 2.5% in 1993, 1.5% in 1992, and 3.9% in 1991. Nearly all
beer cans and approximately 95% of the soft drink cans manufactured
for the United States market are made of aluminum. Despite the flat
demand currently being experienced in the can stock market, growth in
the packaging area is generally expected to continue in the 1990s due
to general population increase and to further penetration of the
beverage can market in Western Europe and Japan, where aluminum cans
are a substantially lower percentage of the total beverage container
market than in the United States.
In the transportation industry, which accounted for approximately 28%
of aluminum consumption in the United States, Japan, and Western
Europe in 1992, automotive manufacturers use aluminum instead of steel
or copper for an increasing number of components, including radiators,
wheels, and engines, in order to meet more stringent environmental and
fuel efficiency requirements through vehicle weight reduction.
Management believes that sales of aluminum to the transportation
industry have considerable growth potential due to projected increases
in the use of aluminum in automobiles. According to industry sources,
aluminum content in United States automobiles nearly doubled in the
last 15 years to an average of 191 pounds per vehicle and the amount
of aluminum consumed in the manufacture of Japanese automobiles more
than doubled from 1983 to 1990. Management believes that the use of
aluminum in automobiles in the United States and Japan will
approximately double between 1991 and 2006.
Supply
As of year-end 1993, Western world aluminum capacity from 109 smelting
facilities was approximately 16.4 million tons* per year. Net exports
of aluminum from the Commonwealth of Independent States (the "C.I.S.")
increased substantially from 1990 levels during the period from 1991
through 1993 and have contributed to a significant increase in London
Metal Exchange stocks of primary aluminum.
---------------------
* All references to tons in this Report refer to metric tons of
2,204.6 pounds.
- 1 -
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
Based upon information currently available, Kaiser Aluminum
Corporation (the "Company") believes that only moderate additions will
be made during 1994-1995 to Western world alumina and primary aluminum
production capacity; however, due to the decline of primary aluminum
prices since January 1, 1991, and other factors, curtailments or
permanent shutdowns have been announced, to management's knowledge,
with respect to approximately three million tons of primary aluminum
production capacity. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Trends." The increases
in alumina capacity during 1994-1995 will come from incremental
expansions of existing refineries and not from new plants, which
generally require a four to five-year design, engineering, and
construction period.
Recent Industry Trends
The aluminum industry has been cyclical and market prices of alumina
and primary aluminum have been volatile from time to time. During
1989, tight supply conditions for alumina and strong demand for
primary aluminum resulted in unusually high spot prices for alumina.
During 1990, a moderate surplus of alumina supply developed due to new
alumina production from two facilities restarted in prior years
(including the Company's Alpart refinery) and increased production at
other refineries. Furthermore, curtailments of primary aluminum
production in response to declining ingot prices have increased the
surplus of alumina supply. Since 1990, spot prices of alumina have
declined substantially due to these factors and slow economic growth
in major aluminum consuming countries. Contract prices for deliveries
of alumina in 1993 were in a lower range than the ranges applicable
during the past several years. As a result of these factors and the
continuing expansion of existing alumina refineries during 1992-1993,
the current surplus of alumina is expected to continue.
During 1989 and 1990, primary aluminum smelters throughout the world
operated at near capacity levels. This factor, combined with
increased production from smelter capacity additions during 1989 and
1990, resulted in a reduction of the market price of primary aluminum
from 1988 peak prices. Additions to smelter capacity in 1991, 1992,
and 1993, continued high operating rates in the Western world, and slow
economic growth in major aluminum consuming countries, as well as
exports from the C.I.S. have contributed to an oversupply of primary
aluminum and a significant increase in primary aluminum inventories in
the world. If Western world production and exports from the C.I.S.
continue at current levels, primary aluminum inventory levels are
expected to increase further in 1994. The foregoing factors have
contributed to a significant reduction in the market price of primary
aluminum, and may continue to adversely affect the market price of
primary aluminum in the future. The average price of primary aluminum
was at historic lows in real terms for the year ended 1993. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Trends."
Government officials from the European Union, the United States,
Canada, Norway, Australia, and the Russian Federation met in a
multilateral conference in January 1994 to discuss the current excess
global supply of primary aluminum. All participants have ratified as a
trade agreement the resulting Memorandum which provides, in part, for
(i) a reduction in Russian Federation primary aluminum production by
300,000 tons per year within three months of the date of ratification
of the Memorandum and an additional 200,000 tons within the following
three months, (ii) improved availability of comprehensive data on
Russian aluminum production, and (iii) certain assistance to the
Russian aluminum industry. A Russian Federation Trade Ministry
official has publicly stated that the output reduction would remain in
effect for 18 months to two years, provided that other worldwide
production cutbacks occur, existing trade restrictions on aluminum are
eliminated, and no new trade restrictions on aluminum are imposed. The
Memorandum does not require specific levels of production cutbacks by
other producing nations. The Memorandum was finalized at a second
meeting of the participants held at the end of February 1994.
- 2 -
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
The Company
General
The Company is a direct subsidiary of MAXXAM Inc. ("MAXXAM"). The
Company, through its subsidiary, Kaiser Aluminum & Chemical
Corporation ("KACC"), operates in all principal aspects of the
aluminum industry - the mining of bauxite, the refining of bauxite
into alumina, the production of primary aluminum from alumina, and the
manufacture of fabricated (including semi-fabricated) aluminum
products. In addition to the production utilized by KACC in its
operations, KACC sells significant amounts of alumina and primary
aluminum in the domestic and international markets. In 1993, KACC
produced approximately 2,826,600 tons of alumina, of which
approximately 71% was sold to third parties, and produced 436,200 tons
of primary aluminum, of which approximately 56% was sold to third
parties. KACC is also a major domestic supplier of fabricated
aluminum products. In 1993, KACC shipped approximately 373,200 tons
of fabricated aluminum products to third parties, which accounted for
approximately 6% of the total tonnage of United States domestic
shipments in 1993. A majority of KACC's fabricated products are used
by customers as components in the manufacture and assembly of finished
end-use products.
The following table sets forth total shipments and intracompany
transfers of KACC's alumina, primary aluminum, and fabricated aluminum
operations:
Year Ended December 31,
------------------------------
1993 1992 1991
------ ------ ------
(in thousands of tons)
ALUMINA:
Shipments to Third Parties 1,997.5 2,001.3 1,945.9
Intracompany Transfers 807.5 878.2 884.2
PRIMARY ALUMINUM:
Shipments to Third Parties 242.5 355.4 340.6
Intracompany Transfers 233.6 224.4 199.6
FABRICATED ALUMINUM PRODUCTS:
Shipments to Third Parties 373.2 343.6 314.2
Business Strategy
KACC has made significant changes in the mix of products sold to
customers by disposing of selected assets, restarting and increasing
its percentage ownership interest in the Alumina Partners of Jamaica
("Alpart") alumina refinery, and increasing production of alumina at
Gramercy, Louisiana, and Queensland Alumina Limited ("QAL") in
Australia. The percentage of KACC's alumina production sold to third
parties increased from approximately 35% in 1987 to approximately 71%
in 1993, and the percentage of its primary aluminum production sold to
third parties increased from approximately 20% in 1987 to
approximately 56% in 1993.
KACC has concentrated its fabricated products operations on the
beverage container market (which historically has been recession-
resistant); high value-added, heat-treated sheet and plate products
for the aerospace industry; hubs, wheels and other products for the
truck, trailer and shipping container industry; parts for air bag
canisters and other automotive components; and distributor markets for
a variety of semifabricated aluminum products. Since January 1,
- 3 -
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
1989, KACC has constructed four new fabrication facilities and has
modernized and expanded others, with the objective of reducing
manufacturing costs and expanding sales in selected product markets in
which KACC has production expertise, high-quality capability, and
geographic and other competitive advantages.
KACC has taken steps to control and reduce costs, improve the
efficiency and increase the capacity of its alumina and primary
aluminum production and fabricating operations, modernize its
facilities, and streamline and decentralize its management structure
to reduce corporate overhead and shift decision-making and
accountability to its business units. In October 1993, KACC announced
that it is restructuring its flat-rolled products operation at its
Trentwood plant in Spokane, Washington, to reduce that facility's
annual operating costs. This effort is in response to overcapacity in
the aluminum rolling industry, flat demand in the U. S. can stock
market, and declining demand for aluminum products sold to customers
in the commercial aerospace industry, all of which have resulted in
declining prices in Trentwood's key markets. The Trentwood
restructuring is expected to result in annual cost savings of at least
$50.0 million after it has been fully implemented (which is expected
to occur by the end of 1995). See "- Production Operations - Fabricated
Products - Flat-Rolled Products".
Primary aluminum production at KACC's Mead and Tacoma smelters was
curtailed in 1993 because of a power reduction imposed by the
Bonneville Power Administration (the "BPA") which reduced the
operating rates for those smelters. See "- Primary Aluminum Products."
Furthermore, KACC announced on February 24, 1994, that it will
curtail approximately 9.3% of its annual production capacity currently
available from its primary aluminum smelters.
KACC has also attempted to lessen its exposure to possible future
declines in the market prices of alumina and primary aluminum by
entering into fixed and variable rate power and fuel supply contracts,
and a labor contract with the United Steelworkers of America (the
"USWA") which provides for semi-variable compensation with respect to
approximately 73% of KACC's domestic hourly work force. See
"- Production Operations" and "- Employees."
Sensitivity to Prices and Hedging Programs
The Company's earnings are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also
depend to a significant degree upon the volume and mix of all products
sold by KACC. Through its variable cost structures, forward sales, and
hedging programs, KACC has attempted to mitigate its exposure to
possible further declines in the market prices of alumina and primary
aluminum while retaining the ability to participate in favorable
pricing environments that may materialize. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Trends - Sensitivity to Prices and Hedging Programs."
Production Operations
The Company's operations are conducted through KACC's decentralized
business units which compete throughout the aluminum industry.
o The Alumina Business Unit, which mines bauxite and obtains
additional bauxite tonnage under long term contracts,
produced approximately 8% of Western world alumina in 1993.
During 1993, KACC utilized approximately 82% of its bauxite
production at its alumina refineries and the remainder was
either sold to third
- 4 -
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
parties or tolled into alumina by a third party. In
addition, during 1993 KACC utilized approximately 29%
of its alumina for internal purposes and sold the remainder
to third parties. KACC's share of total Western world
alumina capacity was 8% in 1993.
o The Primary Aluminum Products Business Unit operates two
domestic smelters wholly owned by KACC and two foreign
smelters in which KACC holds significant ownership interests.
In 1993, KACC utilized approximately 44% of its primary
aluminum for internal purposes and sold the remainder to
third parties. KACC's share of total Western world primary
aluminum capacity was 3% in 1993.
o Fabricated products are manufactured by three Business Units
- Flat-Rolled Products, Extruded Products (including rod and
bar), and Forgings - which manufacture a variety of
fabricated products (including body, lid, and tab stock for
beverage containers, sheet and plate products, screw machine
stock, redraw rod, forging stock, truck wheels and hubs, air
bag canisters, and other forgings and extruded products) and
operate plants located in principal marketing areas of the
United States and Canada. Substantially all of the primary
aluminum utilized in KACC's fabricated products operations is
obtained internally, with the balance of the metal utilized
in its fabricated products operations obtained from scrap
metal purchases. In 1993, KACC shipped approximately 373,200
tons of fabricated aluminum products to third parties, which
accounted for approximately 6% of the total tonnage of United
States domestic fabricated shipments for such year.
Alumina
-------
The following table lists KACC's bauxite mining and alumina refining
facilities as of December 31, 1993:
<TABLE>
<CAPTION>
Annual
Production Total
Capacity Annual
Company Available to Production
Activity Facility Location Ownership the Company Capacity
-------- -------- -------- --------- ------------ ----------
(tons) (tons)
<S> <C> <C> <C> <C> <C>
Bauxite Mining KJBC(1) Jamaica 49% 4,500,000 4,500,000
Alpart(2) Jamaica 65% 2,275,000 3,500,000
--------- ---------
6,775,000 8,000,000
========= =========
Alumina Refining Gramercy Louisiana 100% 1,000,000 1,000,000
Alpart Jamaica 65% 943,000 1,450,000
QAL Australia 28.3% 934,000 3,300,000
--------- ---------
2,877,000 5,750,000
========= =========
</TABLE>
--------------------------
(1) Although KACC owns 49% of Kaiser Jamaica Bauxite Company, it has the
right to receive all of such entity's output.
(2) Alpart bauxite is refined into alumina at the Alpart refinery.
Bauxite mined in Jamaica by Kaiser Jamaica Bauxite Company ("KJBC") is
refined into alumina at KACC's plant at Gramercy, Louisiana, or is
sold to third parties. In 1979, the Government of Jamaica granted KACC
a mining lease
- 5 -
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
for the mining of bauxite sufficient to supply KACC's then-existing
Louisiana alumina refineries at their annual capacities of 1,656,000
tons per year until January 31, 2020. Alumina from the Gramercy plant
is sold to third parties. KACC has entered into a series of medium-
term contracts for the supply of natural gas to the Gramercy plant.
The price of such gas varies based upon certain spot natural gas
prices, with floor and ceiling prices applicable to approximately one-
half of the delivered gas. KACC has, however, established a fixed
price for a portion of the delivered gas through a hedging program.
Alpart holds bauxite reserves and owns an alumina plant located in
Jamaica. KACC has a 65% interest in Alpart and Hydro Aluminium a.s.
("Hydro") owns the remaining 35% interest. KACC has management
responsibility for the facility on a fee basis. KACC and Hydro have
agreed to be responsible for their proportionate shares of Alpart's
costs and expenses. Alpart began a program of modernization and
expansion of its facilities in 1991. As a part of that program, the
capacity of the Alpart alumina refinery has been increased to
1,450,000 tons per year as of December 31, 1992. In 1981, the
Government of Jamaica granted Alpart a mining lease covering bauxite
reserves sufficient to operate the Alpart plant until December 31,
2019. In connection with the expansion program, the Alpart partners
have entered into an agreement with the Government of Jamaica designed
to assure that sufficient reserves of bauxite will be available to
Alpart to operate its refinery, as it has been expanded and as it may
be expanded through the year 2024 (to a capacity of 2,000,000 tons per
year).
In mid-1990, Alpart entered into a five-year agreement for the supply
of substantially all of its fuel oil, the refinery's primary energy
source. In February 1992, the term of this agreement was extended to
1996 and the quantity of fuel oil to be supplied was increased. The
price for 80% of the initial quantity remains fixed at a price which
prevailed in the fourth quarter of 1989; the price for 80% of the
increased quantity is fixed at a negotiated price; and the price for
the balance of the initial and increased quantities was based upon
certain spot fuel oil prices plus transportation costs. Alpart has
purchased all of the quantities of fuel oil which could be purchased
based upon certain spot fuel oil prices under both the initial and
extended agreements.
KACC holds a 28.3% interest in QAL, which owns the largest and one of
the most efficient alumina refineries in the world, located in
Queensland, Australia. QAL refines bauxite into alumina, essentially
on a cost basis, for the account of its stockholders pursuant to long-
term tolling contracts. The stockholders, including KACC, purchase
bauxite from another QAL stockholder pursuant to long-term supply
contracts. KACC has contracted to take approximately 751,000 tons per
year of capacity or pay standby charges. KACC is unconditionally
obligated to pay amounts calculated to service its share ($73.6
million at December 31, 1993) of certain debt of QAL, as well as other
QAL costs and expenses, including bauxite shipping costs. QAL's annual
production capacity is approximately 3,300,000 tons, of which
approximately 934,000 tons are available to KACC.
KACC's principal customers for bauxite and alumina consist of large
and small domestic and international aluminum producers that purchase
bauxite and reduction-grade alumina for use in their internal refining
and smelting operations and trading intermediaries who resell raw
materials to end-users. In 1993, KACC sold all of its bauxite to one
customer, and sold alumina to 13 customers, the largest and top five
of which accounted for approximately 22% and 79% of such sales,
respectively. Among alumina producers, the Company believes KACC is
now the world's second largest seller of alumina to third parties.
KACC's strategy is to sell a substantial portion of the bauxite and
alumina available to it in excess of its internal refining and
smelting requirements pursuant to forward sales contracts. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Trends - Sensitivity to Prices and Hedging
Programs." Marketing and sales efforts are conducted by executives of
the Alumina Business Unit and KACC.
- 6 -
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
Primary Aluminum Products
-------------------------
The following table lists KACC's primary aluminum smelting facilities
as of December 31, 1993:
<TABLE>
<CAPTION>
Annual Total
Capacity Annual 1993
Company Available Rated Operating
Location Facility Ownership the Company Capacity Rate
-------- -------- --------- ----------- -------- ---------
(tons) (tons)
<S> <C> <C> <C> <C> <C>
Domestic
Washington Mead 100% 200,000 200,000 80%
Washington Tacoma 100% 73,000 73,000 77%
------- -------
Subtotal 273,000 273,000
------- -------
International
Ghana Valco 90% 180,000 200,000 88%
Wales, United Anglesey 49% 55,000 112,000 112%
------- -------
Subtotal 235,000 312,000
------- -------
Total 508,000 585,000
======= =======
</TABLE>
KACC owns two smelters located at Mead and Tacoma, Washington, where
alumina is processed into primary aluminum. The Mead facility uses
pre-bake technology and produces primary aluminum, almost all of which
is used at KACC's Trentwood fabricating facility and the balance of
which is sold to third parties. The Tacoma plant uses Soderberg
technology and produces primary aluminum and high-grade, continuous-
cast, redraw rod, which currently commands a premium price in excess
of the price of primary aluminum. Both smelters have achieved
significant production efficiencies in recent years through retrofit
technology, cost controls, and semi-variable wage and power contracts,
leading to increases in production volume and enhancing their ability
to compete with newer smelters. At the Mead plant, KACC has converted
to welded anode assemblies to increase energy efficiency, reduced the
number of anodes used in the smelting process, changed from pencil to
liquid pitch to produce carbon anodes which achieved environmental and
operating savings, and engaged in efforts to increase production
through the use of improved, higher-efficiency reduction cells.
Electrical power represents an important production cost for KACC at
its Mead and Tacoma smelters. The electricity supply contracts
between the BPA and KACC expire in 2001. The electricity contracts
between the BPA and its direct service industry customers (which
consist of 15 energy intensive companies, principally aluminum
producers, including KACC) permit the BPA to interrupt up to 25% of
the amount of power which it normally supplies to such customers.
Both the Mead and Tacoma plants operated at approximately full rated
capacity during 1991-1992, but operated at less than rated capacity
throughout 1993. As a result of drought conditions, in January 1993
the BPA reduced the amount of power it normally supplies to its direct
service industry customers. In response to such reduction, KACC
removed three reduction potlines from production (two at the Mead
smelter and one at the Tacoma smelter) and purchased substitute power
in the first quarter of 1993 at increased costs. Despite the
temporary availability of such power through July 1993, KACC operated
its Mead and Tacoma smelters at the reduced operating rates introduced
in January 1993, and operated its Trentwood fabrication facility
without any curtailment of its production. The Company currently
anticipates that in 1994, KACC will operate the Mead and Tacoma
smelters at rates which do not exceed the current operating rates of
75% of full capacity for such smelters. The BPA has recently notified
its direct service industry customers that it intends to restore full
power through July 31, 1994.
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
Through June 1996, KACC pays for power on a basis which varies, within
certain limits, with the market price of primary aluminum, and
thereafter KACC will pay for power at variable rates to be negotiated.
During 1993, KACC paid for power under its power supply contract with
the BPA at the floor rate. Effective October 1, 1993, an increase in
the base rate the BPA charges to its direct service industry customers
for electricity was adopted which will increase KACC's production
costs at the Mead and Tacoma smelters by approximately $15.0 million
per year (approximately $9.1 million per year based on KACC's current
operating rate of approximately 75% of full capacity). The rate
increase generally is expected to remain in effect for two years. In
the event that the BPA's revenues fall below certain levels prior to
April 1994, the BPA may impose up to a 10% surcharge on the base rate
it charges to its direct service industry customers, effective during
the period from October 1994 through October 1995 (which would
increase KACC's production costs at the Mead and Tacoma smelters by
approximately $9.1 million per year based on KACC's current operating
rate of approximately 75% of full capacity). In addition, in order to
comply with certain federal laws and regulations applicable to
endangered fish species, the BPA may be required in the future to
reduce its power generation and to purchase substitute power (at
greater expense) from other sources.
KACC manages, and holds a 90% interest in, the Volta Aluminum Limited
("Valco") aluminum smelter in Ghana. The Valco smelter uses pre-bake
technology and processes alumina supplied by KACC and the other
participant into primary aluminum under long-term tolling contracts
which provide for proportionate payments by the participants in
amounts intended to pay not less than all of Valco's operating and
financing costs. KACC's share of the primary aluminum is sold to third
parties. Power for the Valco smelter is supplied under an agreement
which expires in 1997, subject to Valco's right to extend the
agreement for 20 years. The agreement indexes the price of two-thirds
of the contract quantity to the market price of primary aluminum and
fixes the price for the remainder. The agreement also provides for a
review and adjustment of the base power rate and the price index every
five years. The Valco smelter restarted production early in 1985 after
being closed for more than two years due to lack of rainfall and the
resultant hydroelectricity shortage. The Company believes that there
has been sufficient rainfall and water storage such that an adequate
supply of electricity for the Valco plant at its current operating
rate is probable for at least one year.
KACC has a 49% interest in the Anglesey Aluminium Limited ("Anglesey")
aluminum smelter and port facility at Holyhead, Wales. The Anglesey
smelter uses pre-bake technology. KACC supplies 49% of Anglesey's
alumina requirements and purchases 49% of Anglesey's aluminum output.
KACC sells its share of Anglesey's output to third parties. Power for
the Anglesey aluminum smelter is supplied under an agreement which
expires in 2001.
KACC has developed and installed proprietary retrofit technology in
all of its smelters. This technology -- which includes the redesign of
the cathodes and anodes that conduct electricity through reduction
cells, improved "feed" systems that add alumina to the cells, and a
computerized system that controls energy flow in the cells --
enhances KACC's ability to compete more effectively with the
industry's newer smelters. KACC is actively engaged in efforts to
license this technology and sell technical and managerial assistance
to other producers worldwide, and may participate in joint ventures
or similar business partnerships which employ KACC's technical and
managerial knowledge. Pursuant to various arrangements, KACC's
technology has been installed in aluminum smelters located in West
Virginia, Ohio, Missouri, Kentucky, Sweden, Germany, India, Australia,
New Zealand, Ghana, the C.I.S., and the United Kingdom. See "-- Research
and Development."
KACC's principal primary aluminum customers consist of large trading
intermediaries and metal brokers, who resell primary aluminum to
fabricated product manufacturers, and large and small international
aluminum fabricators. In 1993, KACC sold the approximately 56% of its
primary aluminum production not utilized for internal purposes to
approximately 50 customers, the largest and top five of which
accounted for approximately 44% and 64% of such sales, respectively.
Marketing and sales efforts are conducted by a small staff located at
the business unit's headquarters in
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ITEM 1. BUSINESS (continued)
Pleasanton, California, and by senior executives of KACC who
participate in the structuring of major sales transactions. A majority
of the business unit's sales are based upon long-term relationships
with metal merchants and end-users.
Fabricated Products
-------------------
KACC manufactures and markets fabricated aluminum products for the
packaging, transportation, construction, and consumer durables markets
in the United States and abroad. Sales in these markets are made
directly and through distributors to a large number of customers, both
domestic and foreign. In 1993, seven domestic beverage container
manufacturers constituted the leading customers for KACC's fabricated
products and accounted for approximately 19% of the Company's sales
revenue.
KACC's fabricated products compete with those of numerous domestic and
foreign producers and with products made with steel, copper, glass,
plastic, and other materials. Product quality, price, and availability
are the principal competitive factors in the market for fabricated
aluminum products. KACC has refocused its fabricated products
operations to concentrate on selected products in which KACC has
production expertise, high quality capability, and geographic and
other competitive advantages.
Flat-Rolled Products - The Flat-Rolled Products Business Unit, the
largest of KACC's fabricated products businesses, operates the
Trentwood sheet and plate mill at Spokane, Washington. The Trentwood
facility is KACC's largest fabricating plant and accounted for
substantially more than one-half of KACC's 1993 fabricated products
shipments. The business unit supplies the beverage container market
(producing body, lid, and tab stock), the aerospace market, and the
tooling plate, heat-treated alloy and common alloy coil markets, both
directly and through distributors. KACC announced in October 1993 that
it is restructuring its flat-rolled products operation at its
Trentwood plant to reduce that facility's annual operating costs. This
effort is in response to overcapacity in the aluminum rolling
industry, flat demand in the U.S. can stock market, and declining
demand for aluminum products sold to customers in the commercial
aerospace industry, all of which have resulted in declining prices in
Trentwood's key markets. The Trentwood restructuring is expected to
result in annual cost savings of at least $50.0 million after it
has been fully implemented (which is expected to occur by the end of
1995). In connection with the restructuring, Trentwood completed an
organizational streamlining that included a reduction of approximately
80 salaried employees. In addition, KACC has reached an agreement
with the USWA that will reduce the total number of hourly employees at
Trentwood by approximately 300 employees, or about 25%, by the end of
1995. The agreement with the USWA also includes a commitment by KACC
to spend up to $50.0 million of capital at Trentwood over three years,
provided that goals on cost reduction and profitability are met or
exceeded.
KACC's flat-rolled products are sold primarily to beverage container
manufacturers located in the western United States where KACC has a
transportation advantage. Quality of products for the beverage
container industry, timeliness of delivery, and price are the primary
bases on which KACC competes. The Company believes that KACC's capital
improvements at Trentwood have enhanced the quality of KACC's products
for the beverage container industry and the capacity and efficiency of
KACC's manufacturing operations. The Company believes that KACC is one
of the highest quality producers of aluminum beverage can stock in the
world.
In 1993, the Flat-Rolled Products Business Unit had 22 foreign and
domestic can stock customers, the majority of which were beverage can
manufacturers (including seven of the eight major domestic beverage
can manufacturers) and the balance of which were brewers. The largest
and top five of such customers accounted for approximately 25% and
56%, respectively, of the business unit's sales revenue. In 1993, the
business unit shipped products to over 200 customers in the aerospace,
transportation, and industrial ("ATI") markets, most of which were
distributors who sell
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ITEM 1. BUSINESS (continued)
to a variety of industrial end-users. The top five customers in the
ATI markets for flat-rolled products accounted for approximately 10%
of the business unit's sales revenue. The marketing staff for the
Flat-Rolled Products Business Unit is headquartered in Pleasanton,
California, and is also located at the Trentwood facility. Sales are
made directly to customers (including distributors) from ten sales
offices located throughout the United States. International customers
are served by a sales office in the Netherlands and by independent
sales agents in Asia and Latin America. See also "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Trends - Sensitivity to Prices and Hedging Programs -
Aluminum Processing" for a discussion of demand for fabricated
products in the aerospace market.
Extruded Products - The Extruded Products Business Unit is
headquartered in Dallas, Texas, and operates soft-alloy extrusion
facilities in Los Angeles, California; Santa Fe Springs, California;
Sherman, Texas; and London, Ontario, Canada; a cathodic protection
business located in Tulsa, Oklahoma, that also extrudes both aluminum
and magnesium; and rod and bar facilities in Newark, Ohio, and
Jackson, Tennessee, which produce screw machine stock, redraw rod,
forging stock, and billet. Each of the soft-alloy extrusion facilities
has fabricating capabilities and provides finishing services. The
Extruded Products Business Unit's major markets are in the
transportation industry, to which it provides extruded shapes for
automobiles, trucks, trailers, cabs, and shipping containers, and
distribution, durable goods, defense, building and construction,
ordnance, and electrical markets. In 1993, the Extruded Products
Business Unit had over 900 customers for its products, the largest
and top five of which accounted for approximately 6% and 19%,
respectively, of its sales revenue. Sales are made directly from
plants as well as marketing locations across the United States.
Forgings - The Forgings Business Unit operates forging facilities at
Erie, Pennsylvania; Oxnard, California; and Greenwood, South Carolina;
and a machine shop at Greenwood, South Carolina. The Forgings Business
Unit is one of the largest producers of aluminum forgings in the
United States and is a major supplier of high-quality forged parts to
customers in the automotive, commercial vehicle, and ordnance markets.
The high strength-to-weight properties of forged aluminum make it
particularly well suited for automotive applications. The Forgings
Business Unit entered the castings business by purchasing the assets
of Winters Industries, which supplies cast aluminum engine manifolds
to the automobile, truck, and marine markets. The casting production
facilities include two foundries and a machining facility in Ohio.
KACC has recently implemented a plan to discontinue its castings
operations at these facilities. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of
Operations - Aluminum Processing." In 1993, the Forgings Business
Unit had over 500 customers for its products, the largest and top five
of which accounted for approximately 20% and 57%, respectively, of the
Forgings Business Unit's sales revenue. The Forgings Business Unit's
headquarters is located in Erie, Pennsylvania, and additional sales,
marketing, and engineering groups are located in the midwestern and
western United States.
Competition
Aluminum products compete in many markets with steel, copper, glass,
plastic, and numerous other materials. Within the aluminum business,
KACC competes with both domestic and foreign producers of bauxite,
alumina, and primary aluminum, and with domestic and foreign
fabricators. KACC's principal competitors in the sale of alumina
include Alcoa of Australia Ltd., Billiton International Metals B.V.,
Clarendon Ltd., and Pechiney S.A. In addition to the foregoing, KACC
competes with most aluminum producers in the production of primary
aluminum. Many of KACC's competitors have greater financial resources
than KACC. In addition, the C.I.S. has been supplying large quantities
of primary aluminum to the Western world.
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ITEM 1. BUSINESS (continued)
Primary aluminum and, to some degree, alumina are commodities with
generally standard qualities, and competition in the sale of these
commodities is based primarily upon price, quality, and availability.
The Company believes that, assuming the current relationship between
worldwide supply and demand for alumina and primary aluminum does not
change materially, the loss of any one of KACC's customers, including
intermediaries, would not have a material adverse effect on the
Company's business or operations.
KACC also competes with a wide range of domestic and international
fabricators in the sale of fabricated aluminum products. Competition
in the sale of fabricated products is based upon quality,
availability, price, and service, including delivery performance. KACC
concentrates its fabricating operations on selected products in which
KACC has production expertise, high quality capability, and geographic
and other competitive advantages.
Research and Development
KACC conducts research and development activities principally at three
facilities dedicated to that purpose - the Center for Technology
("CFT") in Pleasanton, California; the Primary Aluminum Products
Division Technology Center ("DTC") adjacent to the Mead smelter in
Washington; and the Alumina Development Laboratory ("ADL") at the
Gramercy, Louisiana refinery. Net expenditures for Company-sponsored
research and development activities were $18.5 million in 1993, $13.5
million in 1992, and $11.4 million in 1991. KACC's research staff
totaled 160 at December 31, 1993. KACC estimates that research and
development net expenditures will be in the range of approximately $17
- $19 million in 1994.
CFT concentrates its research and development efforts on flat-rolled
products while providing specialized services to KACC's other business
units. Its activities include development of can stock products and
aircraft sheet and plate products, and process improvements directed
at efficiency and quality. In can stock, CFT works to optimize the
product's metallurgy, surface characteristics, coatings, and
lubrication. CFT also offers research and development, technical
services, and selected proprietary technology for license or sale to
third parties. CFT provided technology and technical assistance to
Samyang Metal Co. Ltd. in building an aluminum rolling mill in Yongju,
Korea. CFT also is engaged in cooperative research and development
projects with Furukawa Electric Co., Ltd., Pechiney Rhenalu, and
Kawasaki Steel Corporation of Japan, with respect to the ground
transportation market.
DTC maintains specialized laboratories and a miniature carbon plant
where experiments with new anode and cathode technology are performed.
DTC supports KACC's primary aluminum smelters, concentrating on the
development of cost-effective technical innovations and equipment and
process improvements. Energy savings of approximately 10% have been
achieved at smelters utilizing proprietary DTC developed technologies
(which are employed in both retrofit and new construction
applications), such as improved cathode and anode design and
insulation, modified electrolyte chemistry, distributive
microprocessor control, and modified cell magnetics. Other proprietary
DTC retrofit technologies, such as redesigned reduction cells, have
helped KACC's older smelters achieve competitiveness with more
recently constructed facilities. KACC is actively engaged in efforts
to license this technology and sell technical and managerial
assistance to other producers worldwide. Pursuant to various
arrangements, KACC's technology has been installed in aluminum
smelters located in West Virginia, Ohio, Missouri, Kentucky, Sweden,
Germany, India, Australia, New Zealand, Ghana, and the United Kingdom.
KACC has entered into agreements with respect to the Krasnoyarsk
smelter located in Russia pursuant to which KACC has licensed certain
of its technology for use in such facility and agreed to provide
purchasing services in obtaining western-sourced technology and
equipment to be used in such facility. These agreements were entered
into in November 1990, and the services under them are expected to be
completed in 1994. In addition, KACC has entered into
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ITEM 1. BUSINESS (continued)
agreements with respect to the Nadvoitsy smelter located in Russia and
the Korba smelter of the Bharat Aluminum Co. Ltd., located in India,
pursuant to which KACC has licensed certain of its technology for use
in such facilities. The agreements relating to the Nadvoitsy and Korba
smelters were entered into in 1993, and the services under such
agreements are expected to be completed in 1995 and 1994,
respectively.
ADL has developed technologies which have improved alumina refinery
efficiency. These include a high capacity thickener process used in
the separation of alumina from bauxite slurry, plant conversion
designs that enable alumina refineries to convert from the production
of fine alumina to the preferred coarser "sandy" alumina, technology
that enables refineries to process different qualities of bauxite, and
computer-aided instrumentation systems to improve process efficiencies
and energy use in alumina refineries. KACC is actively pursuing the
licensing of alumina refinery technology worldwide. KACC's technology
is in use in alumina refineries in the Americas, Australia, India, and
Europe.
KACC's technology sales and revenue from technical assistance to third
parties were $12.8 million in 1993, $14.1 million in 1992, and $10.9
million in 1991.
Employees
During 1993, KACC employed an average of approximately 10,220 persons,
compared with an average of approximately 10,130 employees in 1992,
and approximately 9,970 employees in 1991. At December 31, 1993, KACC's
work force was approximately 10,029, including a domestic work force of
approximately 5,930, of whom approximately 4,150 were paid at an
hourly rate. Most hourly paid domestic employees are covered by
collective bargaining agreements with various labor unions.
Approximately 73% of such employees are covered by a master agreement
(the "Labor Contract") with the USWA which expires on October 31,
1994. The Labor Contract covers KACC's plants in Spokane (Trentwood),
Mead, and Tacoma, Washington; Gramercy, Louisiana; and Newark, Ohio.
The Labor Contract provides for floor level wages at all covered
plants. In addition, for workers covered by the Labor Contract at the
Mead and Newark plants, for any quarterly period when the average
Midwest U.S. transaction price of primary aluminum is $.54 per pound
or above, a bonus payment is made. The amount of the quarterly bonus
payment changes incrementally with each full cent change in the price
of primary aluminum between $.54 per pound and $.61 per pound, remains
constant when the price is $.61 or more per pound but is below $.74
per pound, changes incrementally again with each full cent change in
the price between $.74 per pound and $.81 per pound, and remains at
the ceiling when the price is $.81 per pound or more. Workers covered
by the Labor Contract at the Trentwood, Tacoma, and Gramercy plants may
receive quarterly bonus payments based on various indices of
productivity, efficiency, and other aspects of specific plant
performance, as well as, in certain cases, the price of alumina or
primary aluminum. The particular quarterly bonus variable
compensation formula currently applicable at each plant will remain
applicable for the remainder of the contract term.
Pursuant to the Labor Contract, base wage rates were raised $.50 per
hour in 1990 and were raised an additional $.50 per hour effective
November 1, 1993. Each of the employees covered by the Labor Contract
has received $2,000 in lump-sum signing and special bonuses. In
addition, in the first quarter of 1991 KACC acquired up to $4,000 of
preference stock held in the stock bonus plan for the benefit of
approximately 80% of the employees covered by the Labor Contract
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ITEM 1. BUSINESS (continued)
and in February 1994 acquired an additional $2,000 of such preference
stock held in the stock bonus plan for the benefit of substantially
the same employees. In the first quarter of 1991, KACC acquired up
to $4,000 of preference stock which had been held for the benefit of
each of certain salaried employees, and in February 1994 acquired an
additional $2,000 of such preference stock held in the stock bonus
plan for the benefit of substantially the same employees. The
February 1994 acquisitions of preference stock were in the aggregate
amount of $5.4 million. The Company considers KACC's employee
relations to be satisfactory.
Environmental Matters
The Company and KACC are subject to a wide variety of international,
state, and local environmental laws and regulations ("Environmental
Laws") which continue to be adopted and amended. The Environmental
Laws regulate, among other things, air and water emissions and
discharges; the generation, storage, treatment, transportation, and
disposal of solid and hazardous waste; the release of hazardous or
toxic substances, pollutants and contaminants into the environment;
and, in certain instances, the environmental condition of industrial
property prior to transfer or sale. In addition, the Company and KACC
are subject to various federal, state, and local workplace health and
safety laws and regulations ("Health Laws").
From time to time, KACC is subject, with respect to its current and
former operations, to fines or penalties assessed for alleged breaches
of the Environmental and Health Laws and to claims and litigation
brought by federal, state or local agencies and by private parties
seeking remedial or other enforcement action under the Environmental
and Health Laws or damages related to alleged injuries to health or to
the environment, including claims with respect to certain waste
disposal sites and the remediation of sites presently or formerly
operated by KACC. See "LEGAL PROCEEDINGS." KACC is currently subject
to a number of lawsuits under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("CERCLA").
KACC, along with several other entities, has been named as a
Potentially Responsible Party ("PRP") for remedial costs at certain
third-party sites listed on the National Priorities List under CERCLA
and, in certain instances, may be exposed to joint and several
liability for those costs or damages to natural resources.
KACC's Mead, Washington facility has been listed on the National
Priorities List under CERCLA. In addition, in connection with certain
of its asset sales, KACC has indemnified the purchasers of assets with
respect to certain liabilities (and associated expenses) resulting
from acts or omissions arising prior to such dispositions, including
environmental liabilities. While the ultimate extent of KACC's
liability for pending or potential fines, penalties, remedial costs,
claims, and litigation relating to environmental and health and safety
matters cannot be determined at this time and, in light of evolving
case law relating to insurance coverage for environmental claims,
management is unable to determine definitively the extent of such
coverage, management currently believes that the resolution of these
matters (even without giving effect to potential insurance recovery)
should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Environmental capital spending was $12.6 million in 1993, $13.1
million in 1992, and $11.2 million in 1991. Annual operating costs for
pollution control, not including corporate overhead or depreciation,
were approximately $22.4 million in 1993, $21.6 million in 1992, and
$17.8 million in 1991. Legislative, regulatory, and economic
uncertainties make it difficult to project future spending for these
purposes. However, the Company currently anticipates that in the 1994-
1995 period, environmental capital spending will be within the range
of approximately $7.0 - $20.0 million per year, and operating costs
for pollution control will be within the range of $20.0 - $22.0
million per year. These expenditures will be made to assure compliance
with applicable Environmental Laws and are expected to include, among
other things, additional "red mud" disposal facilities and improved
levees at the Gramercy, Louisiana refinery (which are being financed
by the industrial revenue bonds); bath crushing improvements, baking
furnace modernization, and
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ITEM 1. BUSINESS (continued)
improved calcining controls at the Mead, Washington facility; new and
continuing environmental projects at the Trentwood, Washington
facility; and environmental projects required under the Clean Air Act
Amendments of 1990. In addition, $7.2 million in cash expenditures in
1993, $9.6 million in 1992, and $14.0 million in 1991 were charged to
previously established reserves relating to environmental cost.
Approximately $7.0 million is expected to be charged to such reserves
in 1994.
Note 10 of the Notes to Consolidated Financial Statements contained in
the Company's 1993 Annual Report to Shareholders (the "Annual Report")
is incorporated herein by reference.
ITEM 2. PROPERTIES
The locations and general character of the principal plants, mines,
and other materially important physical properties relating to KACC's
operations are described in "ITEM 1. BUSINESS," and those descriptions
are incorporated herein by reference. KACC owns in fee or leases all
the real estate and facilities used in connection with its business.
Plants and equipment and other facilities are generally in good
condition and suitable for their intended uses, subject to changing
environmental requirements. Although KACC's domestic aluminum smelters
and alumina facility were initially designed early in KACC's history,
they have been modified frequently over the years to incorporate
technological advances in order to improve efficiency, increase
capacity, and achieve energy savings. The Company believes that KACC's
domestic plants are cost competitive on an international basis. Due to
KACC's variable cost structure, the plants' operating costs are
relatively lower in periods of low primary aluminum prices and relatively
higher in periods of high primary aluminum prices.
The Company's obligations under the Credit Agreement entered into on
February 17, 1994, which replaced the Company's prior credit
agreement, are secured by, among other things, mortgages on KACC's
major domestic plants (other than the Gramercy alumina plant). See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Financial Condition and Capital Spending."
ITEM 3. LEGAL PROCEEDINGS
Aberdeen Pesticide Dumps Site Matter
The Aberdeen Pesticide Dumps Site, listed on the Superfund National
Priorities List, is composed of five separate sites around the town of
Aberdeen, North Carolina. These sites (collectively, the "Sites")
include the Farm Chemicals Site, Twin Sites, Fairway Six Site, McIver
Dump Site and the Route 211 Site. The Sites are of concern to the
United States Environmental Protection Agency (the "EPA") because of
their past use as either pesticide formulation facilities or pesticide
disposal areas from approximately the mid 1930s through the late
1980s.
The United States originally filed a cost recovery complaint (as
amended, the "Complaint") in the United States District Court for the
Middle District of North Carolina, Rockingham Division, No. C-89-23 1
-R, against five defendants on March 31, 1989, and subsequently
amended its complaint to add another ten defendants on February 6,
1991, and another four defendants on August 1, 1991. Neither the
Company nor KACC were defendants named in the Complaint. The Complaint
seeks reimbursement for past and future response costs and a
determination of liability of the defendants
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ITEM 3. LEGAL PROCEEDINGS (continued)
under Section 107 of CERCLA. On or about October 2, 1991, KACC, along
with approximately 17 other parties, was served with third party
complaints from four of the defendants named in the Complaint (the
"Third Party Plaintiffs") alleging claims arising under various
theories of contribution and indemnity. On October 22, 1992, the
United States filed a motion for leave to file an amended complaint
naming KACC as a first party defendant in its cost recovery action. On
February 16, 1993, the court granted that motion.
The EPA has performed a Remedial Investigation/Feasibility Study and
issued a Record of Decision ("ROD") dated September 30, 1991, for the
Sites. The major remedy selected for the five Sites in the ROD
consisted of excavation of contaminated soil treatment of the
contaminated soil at a single location utilizing thermal treatment and
placement of the treated material back into the areas of excavation.
The estimated cost of such remedy for the five Sites is approximately
$32 million. Other possible remedies described in the ROD included on-
site incineration and on-site ash disposal at an estimated cost of
approximately $53 million, and off-site incineration and disposal at
an estimated cost of approximately $222 million. The Company
understands that the EPA is also investigating contamination of
groundwater at the Sites. The EPA has stated that it has incurred past
costs at the Sites in the range of $7.5 - $8 million as of February 9,
1993, and alleges that response costs will continue to be incurred in
the future.
On May 20, 1993, the EPA issued three unilateral Administrative Orders
under Section 106(a) of CERCLA ordering the respondents, including
KACC, to perform the remedial design and remedial action described in
the ROD for the Farm Chemicals Site (EPA Docket No. 93-13-C), Twin
Sites (EPA Docket No. 93-14-C) and Fairway Six Site (EPA Docket No.
93-15-C). The estimated cost as set forth in the ROD for the remedial
action at the three Sites is approximately $27 million. In addition to
KACC, respondents named in the Administrative Orders for all three
Sites include J.M. Taylor, Grower Service Corporation, E.I. DuPont
de Nemours & Co., Olin Corporation, UCI Holdings, Inc., PPG
Industries, Inc., and Union Carbide Corporation. Ciba-Geigy
Corporation, Hercules, Inc., Mobil Oil Corporation, Shell Oil Company,
The Boots Company (USA), Inc., Nor-Am Chemical Co., George D.
Anderson, Farm Chemicals, Inc., Partners In The Pits, Ltd., Dan F.
Maples, Pits Management Corp., Maples Golf Construction, Inc., Yadco
of Pinehurst, Inc. and Robert Trent Jones are named as respondents for
one or two of the Sites.
KACC has entered into an Agreement in Principle with certain of the
respondents to participate jointly in responding to the Administrative
Orders, to share costs incurred on an interim basis, and to seek to
reach a final allocation of costs through agreement or to allow such
final allocation and determination of liability to be made by the
United States District Court. A definitive PRP Participation Agreement
is currently awaiting execution by the group. By letter dated July 6,
1993, KACC has notified the EPA of its ongoing participation with such
group of respondents which, as a group, are intending to comply with
the Administrative Orders to the extent consistent with applicable
law.
By letters dated December 30, 1993, the EPA notified KACC of its
potential liability for, and requested that KACC, along with certain
other companies, undertake or agree to finance, groundwater
remediation at certain of the Sites. With respect to the Farm
Chemicals and Twin Sites, in addition to KACC, the EPA issued such
letters to J.M. Taylor, Grower Services Corporation, Farm Chemicals,
Inc., E.I. DuPont de Nemours and Company, Olin Corporation, UCI
Holdings, Inc., Union Carbide Corporation, Miles, Inc., Mobil Oil
Corporation, Shell Oil Company, Hercules, Inc., The Boots Company
(USA), Inc., Nor-Am Chemical Company, and Ciba-Geigy Corporation. With
respect to the Fairway Six Site, in addition to KACC, the EPA issued
such letters to J.M. Taylor, G.D. Anderson, Grower Service
Corporation, Partners in Pits, Dan Maples, Pits Management
Corporation, Maples Golf Construction, Inc., Yadco of Pinehurst Inc.,
Robert Trent Jones, E.I. DuPont de Nemours and Company, Olin
Corporation, UCI Holdings, Inc., Union Carbide Corporation, Miles,
Inc., Ciba-Geigy Corporation, and Hercules, Inc. The ROD-selected
remedy for the groundwater remediation selected by the EPA includes
extraction, on site treatment by coagulation, flocculation,
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<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
precipitation, air stripping, GAC absorption, and discharge on site
for the Farm Chemicals/Twin Sites and extraction, on-site treatment by
GAC absorption and discharge on-site for the Fairway Six Site. The EPA
has estimated the total present worth cost, including 30 years of
operation and maintenance, at $11,849,757. KACC, along with other
notified parties, plans to meet with representatives of the EPA to
discuss whether an agreement to perform this remediation is possible.
Based upon the information presently available to it, the Company is
unable to determine whether KACC has any liability with respect to any
of the Sites or, if there is any liability, the amount thereof. Two
government witnesses have testified that KACC acquired pesticide
products from the operator of the formulation site over a two to three
year period. KACC has been unable to confirm the accuracy of this
testimony.
United States of America v. Kaiser Aluminum & Chemical Corporation
On February 8, 1989, a civil action was filed by the United States
Department of Justice at the request of the EPA against KACC in the
United States District Court for the Eastern District of Washington,
Case No. C-89-106-CLQ. The complaint alleged that emissions from
certain stacks at KACC's Trentwood facility in Spokane, Washington
intermittently violated the opacity standard contained in the
Washington State Implementation Plan ("SIP"), approved by the EPA
under the federal Clean Air Act. The complaint sought injunctive
relief, including an order that KACC take all necessary action to
achieve compliance with the Washington SIP opacity limit and the
assessment of civil penalties of not more than $25,000 per day.
In the course of the litigation, questions arose as to whether the
observers who recorded the alleged exceedances were qualified under
the Washington SIP to read opacity. In July 1990, KACC and the
Department of Justice agreed to a voluntary dismissal of the action.
At that time, however, the EPA had arranged for increased surveillance
of the Trentwood facility by consultants and the EPA's personnel. From
May 1990 through May 1991, these observers recorded approximately 130
alleged exceedances of the SIP opacity rule. Justice Department
representatives have stated their intent to file a second lawsuit
against KACC based on the opacity observations recorded during that
period.
The second lawsuit has not yet been filed. Instead, KACC has entered
into negotiations with the EPA to resolve the claims against KACC
through a consent decree. Although the EPA and KACC have made
substantial progress in negotiating the terms of the consent decree,
key issues remain to be resolved. Anticipated elements of any
settlement would include a commitment by KACC to improve the emission
control equipment at the Trentwood facility and a civil penalty
assessment against KACC, in an amount to be determined.
At this time, the Company cannot predict the likelihood that the EPA
and KACC will reach an agreement upon the terms of a consent decree.
In the event that the negotiations are not successful the matter
likely would be resolved in federal court.
Catellus Development Corporation v. Kaiser Aluminum & Chemical
Corporation and James L. Ferry & Son, Inc.
On January 7, 1991, the City of Richmond, et al. (the "Plaintiffs")
filed a Second Amended Complaint for Damages and Declaratory Relief
against the United States of America, the United States Maritime
Administration and Santa Fe Land Corporation (now known as Catellus
Development Corporation ("Catellus")) (collectively, the "Defendants")
alleging, among other things, that the Defendants caused or allowed
hazardous substances, pollutants, contaminants, debris, and other solid
wastes to be discharged, deposited, disposed of or released on certain
property located in Richmond, California (the "Property") formerly
owned by Catellus and leased to (i) KACC for the purpose of
- 16 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
shipbuilding activities conducted by KACC on behalf of the United
States during World War II, and (ii) subsequent tenants thereafter.
Plaintiffs allege, among other things, that (i) the Defendants are
jointly and severally liable for response costs and natural resources
damages under CERCLA, (ii) Defendant United States of America is
liable on grounds of negligence for damages under the Federal Tort
Claims Act, and (iii) Defendant Catellus is strictly liable on
grounds of negligence for such discharge, deposit, disposal or
release. Certain of the Plaintiffs have alleged that they had incurred
or expect to incur costs and damages in the amount of approximately
$49 million, in the aggregate.
On or about September 23, 1992, the Plaintiffs filed a Third Amended
Complaint, alleging, among other things, that (i) the Defendants are
jointly and severally liable for response costs, declaratory relief,
and natural resources damages under CERCLA; (ii) Defendant United
States of America is liable on grounds of negligence, continuing
trespass, and continuing nuisance for damages under the Federal Tort
Claims Act; (iii) Defendant Catellus is strictly liable on grounds of
continuing nuisance, continuing trespass, and negligence for such
discharge, deposit, disposal or release; (iv) Catellus is liable to
indemnify Plaintiffs; and (v) Catellus is liable for fraudulent
concealment of the alleged contamination.
On February 20, 1991, Catellus filed a third party complaint (the
"Third Party Complaint") against KACC and James L. Ferry & Son, Inc.
("Ferry") in the United States District Court for the Northern
District of California, Case No. C-89-2935 DLJ. The Third Party
Complaint was served on KACC as of April 12, 1991. The Third Party
Complaint alleges that, if the allegations of the Plaintiffs are true,
then KACC and Ferry (which is alleged to have performed certain
excavation activities on the Property and, as a result thereof, to
have released contaminants on the Property and to have arranged for
the transportation, treatment, and disposal of such contaminants) are
liable for Catellus' response costs and damages under CERCLA and
damages under other theories of negligence and nuisance and, in the
case of KACC, waste. Catellus seeks (i) contribution from KACC and
Ferry, jointly and severally, for its costs and damages pursuant to
CERCLA; (ii) indemnity from KACC and Ferry for any liability or
judgment imposed upon it; (iii) indemnity from KACC and Ferry for
reasonable attorneys fees and costs incurred by it; (iv) damages for
the injury to its interest in the Property; and (v) treble damages
from KACC pursuant to California Code of Civil Procedure Section 732.
On June 4, 1991, Catellus served on KACC a first amended third party
complaint which alleges, in addition to the allegations of the Third
Party Complaint, that KACC and/or a predecessor in interest to KACC is
also liable for Catellus' damages, if any, on the basis of alleged
contractual indemnities contained in certain former leases of the
Property.
The Third Party Complaint was amended on or about October 26, 1992.
The amended Third Party Complaint alleges that, if the allegations of
the Plaintiffs are true, then KACC and Ferry are liable for (i)
Catellus' response costs and natural resources damage under CERCLA;
(ii) damages under theories of negligence, trespass and nuisance;
(iii) indemnity (equitable and contractual); and (iv) attorneys fees
under California Code of Civil Procedure Section 1021.6.
By letter dated October 26, 1992, counsel for certain underwriters at
Lloyd's London and certain London Market insurance companies ("London
Insurers") advised that the London Insurers agreed to reimburse KACC
for defense expenses in the third party action filed by Catellus,
subject to a full reservation of rights.
The Plaintiffs filed a motion for leave to file a Third Amended
Complaint which would have added KACC as a first party defendant. This
motion was denied. On October 26, 1992, the Plaintiffs served a
separate Complaint against KACC for damages and declaratory relief.
The claims asserted by the Plaintiffs are for (i) recovery of costs,
natural resources damages, and declaratory relief under CERCLA; (ii)
damages for injury to the Property arising from negligence,
- 17 -
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<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
(iii) damages under a theory of strict liability; (iv) continuing
nuisance and continuing trespass; (v) equitable indemnity; (vi)
response costs incurred by the Richmond Redevelopment Agency under
California Health & Safety Code Section 33459.4; and (vii) declaratory
relief on the state claims. This matter has been tendered to the
London Insurers.
Picketville Road Landfill Matter
On July 1, 1991, the EPA served on KACC and 13 other PRPs a Unilateral
Administrative Order For Remedial Design and Remedial Action (the
"Order") at the Picketville Road Landfill site in Jacksonville,
Florida. The EPA seeks remedial design and remedial action pursuant to
CERCLA from some, but apparently not all, PRPs based upon a Record of
Decision outlining remedial cleanup measures to be undertaken at the
site adopted by the EPA on September 28, 1990. The site was operated
as a municipal and industrial waste landfill from 1968 to 1977 by the
City of Jacksonville. KACC was first notified by the EPA on January
17, 1991, that wastes from one of KACC's plants may have been
transported to and deposited in the site. In its Record of Decision,
the EPA estimated that the total capital, operations, and maintenance
costs of its elected remedy for the site would be approximately $9.9
million. In addition, the EPA has reserved the right to seek recovery
of its costs incurred relating to the Order, including, but not
limited to, reimbursement of the EPA's cost of response. Through
negotiations with the EPA and other PRPs, KACC has reached an
agreement with such PRPs under which KACC will fund $146,700 of the
cost of the remedial action (unless remedial costs exceed $19 million
in which event the settlement agreement will be re-opened). The
implementation of the foregoing agreement is subject to continuing
discussions among the EPA, the other PRPs, and KACC.
Asbestos-related Litigation
KACC is a defendant in a number of lawsuits in which the plaintiffs
allege that certain of their injuries were caused by exposure to
asbestos during, and as a result of, their employment with KACC or to
products containing asbestos produced or sold by KACC. The lawsuits
generally relate to products KACC has not manufactured for at least 15
years. The number of such lawsuits instituted against KACC increased
substantially in 1993 and management believes the number of such
lawsuits will continue to increase at a greater annualized rate than
in prior years. For additional information see "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Financial Condition and Capital Spending - Asbestos
Contingencies."
Various other lawsuits and claims are pending against KACC.
Management believes that resolution of the lawsuits and claims made
against KACC, including matters discussed above, will not have a
material adverse effect on the Company's consolidated financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders of the Company
during the fourth quarter of 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
From January 1, 1991, through July 17, 1991, there was no established
public trading market for the Company's common stock, which was
indirectly owned 100% by MAXXAM. On July 18, 1991, the Company issued
7,250,000 shares of common stock, and since that time the Company's
common stock has been traded on the New York Stock Exchange. The
number of record holders of the Company's common stock at March 21,
1994 was 117. The stock
- 18 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS (continued)
symbol is KLU. Page 62 of the Annual Report, and the information in
Note 9 of the Note to Consolidated Financial Statements under the heading
"Dividends on Common Stock" at page 54 of the Annual Report, are
incorporated herein by reference. The Company has paid a $.05 per share
common stock dividend each quarter since its initial public offering of
the stock in July 1991, through the fourth quarter of 1992. The
Company does not expect to declare a common stock dividend until
aluminum prices strengthen.
The Indentures and the 1994 Credit Agreement (Exhibits 4.1 through 4.4
to this Report) contain restrictions on the ability of the Company to
pay dividends on or make distributions on account of the Company's
common stock and restrictions on the ability of the Company's
subsidiaries to transfer funds to the Company in the form of cash
dividends, loans or advances. Exhibits 4.1 through 4.4 to this
Report; Note 6 of the Notes to Consolidated Financial Statements at pages
39-42 of the Annual Report; and the information under the heading
"Financial Condition and Capital Spending - Capital Structure" at pages
23-25 of the Annual Report, are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the Company is incorporated herein by
reference to the table at page 3 of this Report; to the table at
page 20 of the Annual Report; in the discussion under the heading
"Results of Operations" at page 21 of the Annual Report; to Note 1
of the Notes to Consolidated Financial Statements at pages 35-37
of the Annual Report; and to pages 60-61 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pages 20-30 of the Annual Report are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 31-59 and page 62 of the Annual Report, Schedules II, V,
VI, IX, and X to this Report, and the Report of Independent Public
Accountants with respect to such Schedules, are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Information required under Part III (Items 10, 11, 12, and 13) has
been omitted from this Report since the Company intends to file with
the Securities and Exchange Commission, not later than 120 days after
the close of its fiscal year, a definitive proxy statement pursuant to
Regulation 14A which involves the election of directors.
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<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Index to Financial Statements and Schedules
1. Financial Statements
--------------------
The Consolidated Financial Statements of the Company, the
Notes to Consolidated Financial Statements, the Report of
Independent Public Accountants, and Quarterly Financial Data
are included on pages 31-59 and 62 of the Annual Report.
2. Financial Statement Schedule Page
----------------------------- ----
Report of Independent Public Accountants . . . . . . . . 21
Schedule II - Amounts Receivable from Related
Parties and Underwriters,
Promoters, and Employees Other
Than Related Parties . . . . . . . . . . 22
Schedule V - Consolidated Property, Plant, and
Equipment . . . . . . . . . . . . . . . 23
Schedule VI - Accumulated Depreciation, Depletion,
and Amortization of Consolidated
Property, Plant, and Equipment. . . . . 24
Schedule IX - Consolidated Short-Term Borrowings. . . 25
Schedule X - Supplementary Consolidated Income
Statement Information . . . . . . . . . 26
All other schedules are inapplicable or the required information
is included in the Consolidated Financial Statements or the Notes
thereto.
3. Exhibits
--------
Reference is made to the Index of Exhibits immediately preceding
the exhibits hereto (beginning on page 28), which index is
incorporated herein by reference.
(b) Reports on Form 8-K
No Report on Form 8-K was filed by the Company during the last
quarter of the period covered by this Report.
(c) Exhibits
Reference is made to the Index of Exhibits immediately preceding the
exhibits hereto (beginning on page 28), which index is incorporated
herein by reference.
- 20 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in Kaiser Aluminum
Corporation and subsidiaries annual report to shareholders incorporated
by reference in this Form 10-K and have issued our report thereon dated
February 24, 1994. Our report on the financial statements includes an
explanatory paragraph with respect to the change in methods of
accounting for postretirement benefits other than pensions,
postemployment benefits, and income taxes in 1993 as discussed in
Note 1 of the Notes to Consolidated Financial Statements. Our audit
was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index at
Item 14(a)2. above are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken
as a whole.
ARTHUR ANDERSEN & CO.
Houston, Texas
February 24, 1994
- 21 -<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE II
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
(In millions of dollars)
Balance at
Deductions End of Year
Balance at ----------------------- ----------------
Beginning Amounts Amounts Not
Name of Debtor of Year Additions Collected Written Off Current Current
-------------- ----------- --------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1993
----
None
1992
----
J. A. Bonn (1) $.1 $.1
1991
----
J. M. Seidl(2) $1.3 1.3
J. A. Bonn (1) .1 $ .1
(1) This note bears interest at 7.09% per annum and is due on the earlier of demand, the
termination of Mr. Bonn's employment, or on June 30, 1994. The interest is payable
quarterly. The note is secured by real estate owned by Mr. Bonn. The full amount of
the note was paid in March 1992.
(2) The note of $1.0, together with its accrued interest (at 8.9% per annum), was transferred
to the Company by MAXXAM in September 1991 and was subsequently paid off in cash.
</TABLE>
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<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED PROPERTY, PLANT, AND EQUIPMENT
(In millions of dollars)
Balance at Other Balance at
Beginning Changes End of
Description of Year Additions Retirements Add (Deduct) Year
----------- ---------- --------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Land $ 84.8 $ 1.8 $ 5.1 $ 91.7
Land improvements 39.0 1.0 3.4 43.4
Buildings 155.0 5.9 $ (.7) 24.2 184.4
Machinery and equipment 1,010.7 63.4 (15.7) 164.6 1,223.0
Leasehold improvements 9.1 .7 (.3) .9 10.4
Construction in progress 70.3 (5.1) (.3) 64.9
-------- -------- -------- -------- --------
Total $1,368.9 $ 67.7 $ (17.0) $ 198.2(1) $1,617.8
======== ======== ======== ======== ========
Year ended December 31, 1992:
Land $ 49.5 $ 11.0 $ 24.3 $ 84.8
Land improvements 33.7 5.5 (.2) 39.0
Buildings 135.3 16.6 $(.2) 3.3 155.0
Machinery and equipment 925.7 94.6 (4.8) (4.8) 1,010.7
Leasehold improvements 5.8 3.3 9.1
Construction in progress 87.5 (16.6) (.1) (.5) 70.3
-------- -------- -------- -------- --------
Total $1,237.5 $ 114.4 $ (5.1) $ 22.1(2) $1,368.9
======== ======== ======== ======== ========
Year ended December 31, 1991:
Land $ 43.3 $ 1.4 $ (.2) $ 5.0 $ 49.5
Land improvements 27.7 1.8 4.2 33.7
Buildings 123.5 5.9 (.7) 6.6 135.3
Machinery and equipment 866.7 71.6 (6.0) (6.6) 925.7
Leasehold improvements 5.0 .7 .1 5.8
Construction in progress 52.4 36.7 (.1) (1.5) 87.5
-------- -------- -------- -------- --------
Total $1,118.6 $ 118.1 $ (7.0) $ 7.8 $1,237.5
======== ======== ======== ======== ========
(1) Consists principally of the initial impact of adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as of January 1, 1993, which required the Company to
restate certain assets to their pre-tax amounts from their net-of-tax amounts originally recorded
in connection with the acquisition by MAXXAM in October 1988.
(2) Consists principally of reclassifications from other current and long-term assets
to property, plant, and equipment.
</TABLE>
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<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VI
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF CONSOLIDATED PROPERTY, PLANT, AND EQUIPMENT
(In millions of dollars)
Balance at Other Balance at
Beginning Changes End of
Description of Year Additions Retirements Add (Deduct) Year
----------- ---------- --------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Depletable land $ 1.5 $ .6 $ 1.4 $ 3.5
Land improvements 6.3 2.1 1.4 9.8
Buildings 30.7 8.4 $ (.1) 7.2 46.2
Machinery and equipment 261.2 85.4 (5.1) 49.9 391.4
Leasehold improvements 2.4 .6 (.1) .3 3.2
------ ------ ------ ------ ------
Total $302.1 $ 97.1 $ (5.3) $ 60.2(1) $454.1
====== ====== ====== ====== ======
Year ended December 31, 1992:
Depletable land $ 1.2 $ .3 $ 1.5
Land improvements 4.8 1.6 $ (.1) 6.3
Buildings 21.9 7.3 $ (.1) 1.6 30.7
Machinery and equipment 193.2 70.5 (1.1) (1.4) 261.2
Leasehold improvements 1.9 .6 (.1) 2.4
------ ------ ------ ------ ------
Total $223.0 $ 80.3 $ (1.2) nil $302.1
====== ====== ====== ====== ======
Year ended December 31, 1991:
Depletable land $ .7 $ .5 $ 1.2
Land improvements 3.5 1.1 $ .2 4.8
Buildings 14.6 6.5 $ (.1) .9 21.9
Machinery and equipment 128.3 64.5 (1.6) 2.0 193.2
Leasehold improvements 1.2 .6 .1 1.9
------ ------ ------ ------ ------
Total $148.3 $ 73.2 $ (1.7) $ 3.2 $223.0
====== ====== ====== ====== ======
(1) Consists principally of the initial impact of adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as of January 1, 1993, which required the Company
to restate certain assets to their pre-tax amounts from their net-of-tax amounts originally recorded
in connection with the acquisition by MAXXAM in October 1988.
</TABLE>
- 24 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE IX
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED SHORT-TERM BORROWINGS
(In millions of dollars)
Maximum Average Weighted
Weighted Amounts Amount Average
Category of Balance Average Outstanding Outstanding Interest Rate
Aggregate Short- at End of Interest During During the During the
Terms Borrowings Year Rate the Year Year(1) Year(2)
---------------- --------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Bank borrowings(3)
1993 $ .5 8.0% $ 18.5 $ 6.2 4.5%
1992 4.8 4.8 52.8 29.6 4.7
1991 6.3 4.9 50.6 29.2 7.0
(1) Based on outstanding borrowings at the end of each month.
(2) Based on outstanding borrowings and weighted average interest rates at the end of each
month.
(3) Short-term bank borrowings are made available on an uncommitted basis and no fee is
charged. Maturities generally range from one to ten days with no formal provisions for
the extension of maturities. Interest rates are based upon short-term prevailing rates.
</TABLE>
- 25 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE X
----------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTARY CONSOLIDATED INCOME STATEMENT INFORMATION(1)
(In millions of dollars)
Charged to Costs and Expenses
Year End December 31,
-----------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $168.9 $147.0 $161.4
====== ====== ======
Taxes, other than payroll and income
taxes - production levy on bauxite $ 27.9 $ 31.5 $ 34.0
====== ====== ======
(1) The amounts for amortization of intangible assets and preoperating costs and similar
deferrals, royalties, and advertising costs are not reported as these items did not
exceed 1% of sales and revenues.
</TABLE>
- 26 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
KAISER ALUMINUM CORPORATION
Date: March 30, 1994 By George T. Haymaker, Jr.
----------------------------
George T. Haymaker, Jr.
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 30, 1994 George T. Haymaker, Jr.
---------------------------------
George T. Haymaker, Jr.
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Date: March 30, 1994 John T. La Duc
---------------------------------
John T. La Duc
Vice President and Chief
Financial Officer
(Principal Financial Officer)
Date: March 30, 1994 Charlie Alongi
---------------------------------
Charlie Alongi
Controller
(Principal Accounting Officer)
Date: March 30, 1994 Robert J. Cruikshank
---------------------------------
Robert J. Cruikshank
Director
Date: March 30, 1994 Charles E. Hurwitz
---------------------------------
Charles E. Hurwitz
Director
Date: March 30, 1994 Ezra G. Levin
---------------------------------
Ezra G. Levin
Director
Date: March 30, 1994 Robert Marcus
---------------------------------
Robert Marcus
Director
Date: March 30, 1994 Paul D. Rusen
---------------------------------
Paul D. Rusen
Director
- 27 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
INDEX OF EXHIBITS
Exhibit
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation of Kaiser Aluminum
Corporation (The "Company" or "KAC"), dated February 21, 1991
(incorporated by reference to Exhibit 3.1 to Amendment No. 2
to the Registration Statement on Form S-1, dated June 11,
1991 filed by KAC, Registration No. 33-37895).
3.2 By-laws of KAC, amended as of February 26, 1991 (incorporated
by reference to Exhibit 3.2 to Amendment No. 2 to the
Registration Statement on Form S-1, dated June 11, 1991,
filed by KAC, Registration No. 33-37895).
4.1 Indenture, dated as of February 1, 1993, among Kaiser Aluminum &
Chemical Corporation ("KACC"), as Issuer, Kaiser Alumina
Australia Corporation, Alpart Jamaica Inc., and Kaiser Jamaica
Corporation, as Subsidiary Guarantors, and The First National
Bank of Boston, as Trustee, regarding KACC's 12-3/4% Senior
Subordinated Notes Due 2003 (incorporated by reference to Exhibit
4.1 to Form 10-K for the period ended December 31, 1992, filed by
KACC, File No. 1-3605).
4.2 First Supplemental Indenture, dated as of May 1, 1993
(incorporated by reference to Exhibit 4.2 to the Report on Form
10-Q for the quarterly period ended June 30, 1993, filed by KACC,
File No. 1-3605).
*4.3 Indenture, dated as of February 17, 1994, among KACC, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc.,
Kaiser Jamaica Corporation, and Kaiser Finance Corporation, as
Subsidiary Guarantors, and First Trust National Association as
Trustee, regarding KACC's 9-7/8% Senior Notes Due 2002.
*4.4 Credit Agreement, dated as of February 17, 1994, among KAC, KACC,
the financial institutions a party thereto, BankAmerica Business
Credit, Inc., as Agent, and certain financial institutions.
4.5 Credit Agreement, dated as of December 13, 1989 (the "1989
Credit Agreement"), among KACC, KAC, the financial institutions
a party thereto, Bank of America National Trust and Savings
Association, as Agent, and Mellon Bank, N.A., as Collateral
Agent (incorporated by reference to Exhibit 4.3 to Amendment
No. 5 to the Registration Statement on Form S-1, dated
December 13, 1989, filed by KACC Registration No. 33-30645).
4.6 First Amendment to the 1989 Credit Agreement, dated as of April
17, 1990 (incorporated by reference to Exhibit 4.2 of the Report
on Form 10-Q for the quarterly period ended September 30, 1990,
of MAXXAM, Inc. ("MAXXAM") filed November 6, 1990, File No.
1-3924).
4.7 Second Amendment to the 1989 Credit Agreement, dated as of
September 17, 1990 (incorporated by reference to Exhibit 4.3
of the Report on Form 10-Q for the quarterly period ended
September 30, 1990, of MAXXAM, filed November 6, 1990,
File No. 1-3924).
4.8 Third Amendment to the 1989 Credit Agreement, dated as of
December 7, 1990 (incorporated by reference to Exhibit 4.6 to
Amendment No. 1 to the Registration Statement on Form S-1,
dated February 13, 1991, filed by KAC, Registration
No. 33-37895).
- 28-<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
Exhibit
Number Description
------- -----------
4.9 Fourth Amendment to the 1989 Credit Agreement, dated as of
April 19, 1991 (incorporated by reference to Exhibit 4.1 of
the Report on Form 10-Q for the quarterly period ended
March 31, 1991, filed by KACC, File No. 1-3605).
4.10 Fifth Amendment to the 1989 Credit Agreement, dated as of
March 13, 1992 (incorporated by reference to Exhibit 4.8 to
Form 10-K for the period ended December 31, 1991, filed by
KAC, File No. 1-9447).
4.11 Seventh Amendment to the 1989 Credit Agreement, dated as of
November 6, 1992 (incorporated by reference to Exhibit 4.10 to
Amendment No. 5 to the Registration Statement on Form S-2,
dated January 22, 1993, filed by KACC, Registration
No. 33-48260).
4.12 Eighth Amendment to the 1989 Credit Agreement, dated as of
January 7, 1993 (incorporated by reference to Exhibit 4.12 to
Amendment No. 5 to the Registration Statement on Form S-2,
dated January 22, 1993, filed by KACC, Registration
No. 33-48260).
4.13 Ninth Amendment to 1989 Credit Agreement, dated as of May 19,
1993 including the form of Intercompany Note annexed as an
Exhibit thereto (incorporated by reference to Exhibit 4.10 to
Amendment No. 2 to the Registration Statement on form S-1,
dated June 22, 1993, filed by KACC, Registration No. 33-49555).
4.14 Tenth Amendment to 1989 Credit Agreement, dated as of
July 23,1993 (incorporated by reference to Exhibit 4.13 to
the Registration Statement on Form S-3, dated August 26,
1993, filed by KACC, Registration No. 33-50097).
4.15 Eleventh Amendment to 1989 Credit Agreement, dated as of
August 27, 1993 (incorporated by reference to Exhibit 4.13
to the Registration Statement on Form S-3, dated October 13,
1993, filed by KAC, Registration No. 33-50581).
4.16 Twelfth Amendment to 1989 Credit Agreement, dated as of
December 20, 1993 (incorporated by reference to Exhibit 4.15
to Amendment No. 3 to the Registration Statement on Form S-2,
dated February 8, 1994, filed by KACC, Registration
No. 33-50097).
4.17 Certificate of Designation of Series A Mandatory Conversion
Premium Dividend Preferred Stock of KAC, dated June 28, 1993
(incorporated by reference to Exhibit 4.3 to the Report on
Form 10-Q for the quarterly period ended June 30, 1993, filed
by KAC, File No. 1-9447).
4.18 Deposit Agreement between KAC and The First National Bank of
Boston, dated as of June 30, 1993 (incorporated by reference to
Exhibit 4.4 to the Report on Form 10-Q for the quarterly period
ended June 30, 1993, filed by KAC, File No. 1-9447).
4.19 Intercompany Note between KAC and KACC (incorporated by
reference to Exhibit 4.2 to Amendment No. 5 to the
Registration Statement on Form S-1, dated December 13, 1989,
filed by KACC, Registration No. 33-30645).
- 29 -<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
Exhibit
Number Description
------- -----------
4.20 Senior Subordinated Intercompany Note between KACC and
MAXXAM, dated January 14, 1993 (incorporated by reference to
Exhibit 4.13 to Amendment No. 5 to the Registration Statement
on Form S-2, dated January 22, 1993, filed by KACC,
Registration No. 33-48260).
*4.21 Certificate of Designation of KAC's 8.255% Preferred
Redeemable Increased Dividend Equity Securities, dated
February 17, 1994.
*4.22 Senior Subordinated Intercompany Note between KAC and KACC
dated February 15, 1994.
*4.23 Senior Subordinated Intercompany Note between KAC and KACC
dated March 17, 1994.
*4.24 Senior Subordinated Intercompany Note between KAC and KACC
dated June 30, 1993.
KAC has not filed certain long-term debt instruments not
being registered with the Securities and Exchange Commission
where the total amount of indebtedness authorized under any
such instrument does not exceed 10% of the total assets of
KAC and its subsidiaries on a consolidated basis. KAC agrees
and undertakes to furnish a copy of any such instrument to the
Securities and Exchange Commission upon its request.
10.1 Form of indemnification agreement with officers and directors
(incorporated by reference to Exhibit (10)(b) to the
Registration Statement of KAC on Form S-4, File No. 33-12836).
10.2 Tax Allocation Agreement between MAXXAM and KACC
(incorporated by reference to Exhibit 10.21 to Amendment
No. 6 to the Registration Statement on Form S-1, dated
December 14, 1989, filed by KACC, Registration No. 33-30645).
10.3 Tax Allocation Agreement between KAC and MAXXAM (incorporated
by reference to Exhibit 10.23 to Amendment No. 2 to the
Registration Statement on Form S-1, dated June 11, 1991, filed
by KAC, Registration No. 33-37895).
10.4 Tax Allocation Agreement, dated as of June 30, 1993, between
KACC and KAC (incorporated by reference to Exhibit 10.3 to
the Report on Form 10-Q for the quarterly period ended
June 30, 1993, filed by KACC, File No. 1-3605).
10.5 Amended and Restated Alumina Supply Agreement, dated as of
October 11, 1989 (incorporated by reference to Exhibit 10.19
to Amendment No. 3 to the Registration Statement on Form S-1,
dated November 14, 1989, filed by KACC, Registration
No. 33-30645).
10.6 Assumption Agreement, dated as of October 28, 1988
(incorporated by reference to Exhibit HHH to the Final
Amendment to the Schedule 13D of MAXXAM Group Inc. and
others in respect of the Common Stock of KAC, par value
$.33-1/3 per share).
10.7 Agreement, dated as of June 30, 1993, between KAC and MAXXAM
(incorporated by reference to Exhibit 10.2 to the Report on
Form 10-Q for the quarterly period ended June 30, 1993, filed
by KACC, File No. 1-3605).
- 30 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
Exhibit
Number Description
------- -----------
Executive Compensation Plans and Arrangements
----------------------------------------------
10.8 KACC's Bonus Plan (incorporated by reference to Exhibit 10.25
to Amendment No. 6 to the Registration Statement on Form S-1,
dated December 14, 1989, filed by KACC, Registration
No. 33-30645).
10.9 KaiserTech Limited Long Term Incentive Plan, dated June 2,
1989 (incorporated by reference to Exhibit 10.14 to Form 10-K
for the period ended December 31, 1989, filed by KACC,
File No. 1-3605).
10.10 Amendment No. 2 to KaiserTech Limited Long Term Incentive
Plan, dated as of December 18, 1991 (incorporated by reference
to Exhibit 10.7 to Form 10-K for the period ended December 31,
1991, filed by KAC, File No. 1-9447).
10.11 Amendment No. 3 to Kaiser Aluminum Long Term Incentive Plan,
dated as of December 31, 1991 (incorporated by reference to
Exhibit 10.8 to Form 10-K for the period ended December 31,
1991, filed by KAC, File No. 1-9447).
10.12 Kaiser 1993 Omnibus Stock Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Report on Form 10-Q for
the quarterly period ended June 30, 1993, filed by KACC,
File No. 1-3605).
10.13 Kaiser Aluminum Middle Management Long-Term Incentive Plan,
dated June 25, 1990, as amended (incorporated by reference
to Exhibit 10.22 to Amendment No. 1 to the Registration
Statement on Form S-1, dated February 13, 1991, filed by
KAC, Registration No. 33-37895).
10.14 Employment Agreement, dated April 1, 1993, among KAC, KACC,
and George T. Haymaker, Jr. (incorporated by reference to
Exhibit 10.2 to the Report on Form 10-Q for the quarterly
period ended March 31, 1993, filed by KAC, File No. 1-9447).
10.15 Employment Agreement, dated as of October 1, 1992, among KAC,
KACC and A. Stephens Hutchcraft, Jr. (incorporated by
reference to Exhibit 10.15 to Amendment No. 5 to the
Registration Statement on Form S-2, dated January 22, 1993,
filed by KACC, Registration No. 33-48260).
10.16 Severance Agreement, dated July 1, 1985, between KACC and
A. Stephens Hutchcraft, Jr., as amended (incorporated by
reference to Exhibit (10)(f) to Form 10-K for the period
ended December 31, 1988, filed by KACC, File No. 1-3605).
10.17 Amendment, dated October 31, 1989, to the Severance Agreement
of A. Stephens Hutchcraft, Jr. referenced in Exhibit 10.16
above (incorporated by reference to Exhibit 10.24 to Amendment
No. 5 to the Registration Statement on Form S-1, dated
December 13, 1989, filed by KACC, Registration No. 33-30645).
10.18 Consulting Agreement, dated November 19, 1993 between KACC
and A. Stephens Hutchcraft, Jr. (incorporated by reference to
MAXXAM's Annual Report on Form 10-K for the period ended
December 31, 1993, File No. 1-3924; the "MAXXAM 1993
Form 10-K").
- 31 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
Exhibit
Number Description
------- -----------
10.19 Employment Agreement, dated September 26, 1990, between KACC,
MAXXAM and John T. La Duc (incorporated by reference to
Exhibit 10.20 to Amendment No. 1 to the Registration Statement
on Form S-1, dated February 13, 1991, filed by KAC,
Registration No. 33-37895).
10.20 Employment Agreement, dated as of August 22, 1990, among
KACC, MAXXAM and Robert W. Irelan (incorporated by reference
to Exhibit 10.2 of the Report on Form 10-Q for the quarterly
period ended March 31, 1991, filed by KACC, File No. 1-3605).
10.21 Promissory Note, dated October 4, 1990, by Robert W. Irelan
and Barbara M. Irelan to KACC (incorporated by reference to
Exhibit 10.54 to Form 10-K for the period ended December 31,
1990, filed by MAXXAM, File No. 1-3924).
10.22 Real Estate Lien Note, dated October 4, 1990, by Robert W.
Irelan and Barbara M. Irelan to KACC and related Deed of Trust
(incorporated by reference to Exhibit 10.55 to Form 10-K for
the period ended December 31, 1990, filed by MAXXAM, File
No. 1-3924).
10.23 Employment Agreement, dated as of March 8, 1990, between
MAXXAM and Anthony R. Pierno (incorporated by reference to
Exhibit 10.28 to Form 10-K for the period ended December 31,
1990, filed by MAXXAM, File No. 1-3924).
10.24 Promissory Note, dated February 1, 1989, by Anthony R. Pierno
and Beverly J. Pierno to MAXXAM (incorporated by reference to
Exhibit 10.30 to Form 10-K for the period ended December 31,
1988, filed by MAXXAM, File No. 1-3924).
10.25 Promissory Note, dated July 19, 1990, by Anthony R. Pierno
to MAXXAM (incorporated by reference to Exhibit 10.31 to Form
10-K for the period ended December 31, 1990, filed by MAXXAM,
File No. 1-3924).
10.26 Commercial Guaranty, dated February 22, 1993, executed by
MAXXAM in favor of Charter National Bank-Houston, with
respect to a loan from Charter National Bank-Houston to
Anthony R. Pierno (incorporated herein by reference to
Exhibit 10.27 to Form 10-K for the period ended December 31,
1992, filed by KAC,File No. 1-9447).
10.27 Commercial Guaranty, dated January 24, 1994, between MAXXAM
and Charter National Bank-Houston, in respect of a loan from
Charter National Bank-Houston to Anthony R. Pierno and a
related letter agreement (incorporated by reference to the
MAXXAM 1993 Form 10-K).
10.28 Employment Agreement, dated as of March 8, 1990, between
MAXXAM and Byron L. Wade (incorporated by reference to
Exhibit 10.50 to Form 10-K for the period ended
December 31, 1990, filed by MAXXAM, File No. 1-3924).
10.29 Promissory Note, dated July 20, 1993, between MAXXAM and
Byron L. Wade (incorporated by reference to the MAXXAM
1993 Form 10-K).
- 32 -<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
Exhibit
Number Description
------ -----------
10.30 Employment Agreement, dated as of July 1, 1991, by and
among MAXXAM,KACC and Joseph A. Bonn (incorporated by
reference to Exhibit 10.23 to Form 10-K for the period
ended December 31, 1991, filed by KACC, File No. 1-3605).
10.31 Agreement, dated December 20, 1991, between KAC and Joseph
A. Bonn (incorporated by reference to Exhibit 10.3 to the
Report on Form 10-Q for the quarterly period ended
March 31, 1992, filed by KAC, File No. 1-9447).
10.32 Employment Agreement, dated August 20, 1993, between
KACC and Robert E. Cole (incorporated by reference
to the MAXXAM 1993 Form 10-K).
*13 Pages 20-30 and 32-62 of KAC's Annual Report to shareholders for
the year ended December 31, 1993 which are incorporated by
reference into this Report.
*21 Significant subsidiaries of KAC.
*99 Report of Independent Public Accountants.
----------
*Filed herewith
- 33 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
SUBSIDIARIES
Listed below are the principal subsidiaries of Kaiser Aluminum Corporation
and the jurisdiction of their incorporation or organization. Certain
subsidiaries are omitted which, considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
<TABLE>
<CAPTION>
Place of
Name or Organization Incorporation
-------------------- -------------
<S> <C>
Alpart Jamaica Inc. . . . . . . . . . . . . . . . Delaware
Alumina Partners of Jamaica (partnership) . . . . . Delaware
Anglesey Aluminium Limited . . . . . . . . . . . . United Kingdom
Kaiser Alumina Australia Corporation . . . . . . . Delaware
Kaiser Aluminium Europe (U.K.) Limited . . . . . . United Kingdom
Kaiser Aluminium International, Inc. . . . . . . . Delaware
Kaiser Aluminum & Chemical Corporation . . . . . . Delaware
Kaiser Aluminum & Chemical International N.V. . . . Netherlands
Antilles
Kaiser Aluminum & Chemical of Canada Limited. . . . Ontario
Kaiser Aluminum Technical Services, Inc . . . . . . California
Kaiser Bauxite Company . . . . . . . . . . . . . . Nevada
Kaiser Center, Inc. . . . . . . . . . . . . . . . . California
Kaiser Center Properties (partnership) . . . . . . California
Kaiser Finance Corporation . . . . . . . . . . . . Delaware
Kaiser Jamaica Bauxite Company (partnership). . . . Jamaica
Kaiser Jamaica Corporation . . . . . . . . . . . . Delaware
Queensland Alumina Limited. . . . . . . . . . . . . Queensland
Strombus International Insurance Company, Ltd . . . Bermuda
Trochus Insurance Company, Ltd. . . . . . . . . . . Bermuda
Volta Aluminium Company Limited. . . . . . . . . . Ghana
</TABLE>
- 34 -
<PAGE>
PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
PRODUCTION AND RESEARCH FACILITIES
(100% owned unless otherwise noted)
Alumina and Bauxite Fabricated Products
Gramercy, Louisiana Flat Rolled Products
--------------------
Alumina Partners of Jamaica, Trentwood, Washington
(Alpart), Jamaica (65%)
Kaiser Jamaica Bauxite Company (KJBC),
Jamaica (49%) Extruded Products, including
Rod and Bar
----------------------------
Queensland Alumina Limited (QAL), Jackson, Tennessee
Australia (28.3%) Los Angeles, California
Alumina Development Laboratory, Santa Fe Springs, California
Gramercy, Louisiana Newark, Ohio
Sherman, Texas
Tulsa, Oklahoma
Kaiser Aluminum & Chemical
of Canada Limited,
Primary Products London, Ontario, Canada
Mead, Washington Forgings
Tacoma, Washington --------
Anglesey Aluminium Limited, Alliance, Ohio
Wales (49%) Canton, Ohio
Volta Aluminium Company Limited (Valco), Erie, Pennsylvania
Ghana (90%) Greenwood, South Carolina,
Division Technology Center, Forge
Mead, Washington Greenwood, South Carolina,
Machine Shop
Center for Technology Oxnard, California
Pleasanton, California
- 35 -
<PAGE> 1
EXECUTION COPY
==========================================================
KAISER ALUMINUM & CHEMICAL CORPORATION,
as Issuer,
KAISER ALUMINA AUSTRALIA CORPORATION,
ALPART JAMAICA INC.,
KAISER FINANCE CORPORATION and
KAISER JAMAICA CORPORATION,
as Subsidiary Guarantors,
AND
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
----------------------------------------------------------------------
INDENTURE
Dated as of February 17, 1994
----------------------------------------------------------------------
$225,000,000
9 % Senior Notes due 2002
==========================================================
<PAGE>
<PAGE> 2
RECONCILIATION AND TIE SHEET*
between
PROVISIONS OF THE TRUST INDENTURE ACT OF 1939
and
INDENTURE DATED AS OF FEBRUARY 17, 1994
between
KAISER ALUMINUM & CHEMICAL CORPORATION
KAISER ALUMINA AUSTRALIA CORPORATION,
ALPART JAMAICA INC.,
KAISER FINANCE CORPORATION and
KAISER JAMAICA CORPORATION
and
FIRST TRUST NATIONAL ASSOCIATION, TRUSTEE
Sections Sections of
of Act Indenture
- -------- -------
310(a)(1). . . . . . . . . . . . . . . . . . 7.09
310(a)(2). . . . . . . . . . . . . . . . . . 7.09
310(a)(3). . . . . . . . . . . . . . . . . . Inapplicable
310(a)(4). . . . . . . . . . . . . . . . . . Inapplicable
310(a)(5). . . . . . . . . . . . . . . . . . 7.09
310(b) . . . . . . . . . . . . . . . . . . . 7.08, 7.10
310(c) . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . 7.13(a), 7.13(c)
311(b) . . . . . . . . . . . . . . . . . . . 7.13(b), 7.13(c)
311(c) . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . 5.01, 5.02(a)
312(b) . . . . . . . . . . . . . . . . . . . 5.02(b)
312(c) . . . . . . . . . . . . . . . . . . . 5.02(c)
313(a) . . . . . . . . . . . . . . . . . . . 5.04(a)
313(b)(1). . . . . . . . . . . . . . . . . . Inapplicable
313(b)(2). . . . . . . . . . . . . . . . . . 5.04(b)
313(c) . . . . . . . . . . . . . . . . . . . 5.04(c)
313(d) . . . . . . . . . . . . . . . . . . . 5.04(d)
314(a)(1). . . . . . . . . . . . . . . . . . 5.03(a)
314(a)(2). . . . . . . . . . . . . . . . . . 5.03(b)
314(a)(3). . . . . . . . . . . . . . . . . . 5.03(c)
314(a)(4). . . . . . . . . . . . . . . . . . 5.03(d)
314(b) . . . . . . . . . . . . . . . . . . . Inapplicable
314(c)(1). . . . . . . . . . . . . . . . . . 14.05
i
<PAGE>
<PAGE> 3
314(c)(2). . . . . . . . . . . . . . . . . . 14.05
314(c)(3). . . . . . . . . . . . . . . . . . Inapplicable
314(d) . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . 14.05
314(f) . . . . . . . . . . . . . . . . . . . Omitted
315(a) . . . . . . . . . . . . . . . . . . . 7.01
315(b) . . . . . . . . . . . . . . . . . . . 6.07
315(c) . . . . . . . . . . . . . . . . . . . 7.01
315(d) . . . . . . . . . . . . . . . . . . . 7.01
315(e) . . . . . . . . . . . . . . . . . . . 6.08
316(a)(1). . . . . . . . . . . . . . . . . . 6.06, 8.04
316(a)(2). . . . . . . . . . . . . . . . . . Omitted
316(b) . . . . . . . . . . . . . . . . . . . 6.04
316(c) . . . . . . . . . . . . . . . . . . . 8.05
317(a) . . . . . . . . . . . . . . . . . . . 6.02
317(b) . . . . . . . . . . . . . . . . . . . 4.04(a)
318(a) . . . . . . . . . . . . . . . . . . . 14.07
318(c) . . . . . . . . . . . . . . . . . . . 14.07
_________________________
*This Reconciliation and Tie Sheet is not a part of the Indenture.
ii
<PAGE>
<PAGE> 4
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
ARTICLE ONE
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Certain terms defined . . . . . . . . . . . . . . . 9
SECTION 1.02. References are to Indenture . . . . . . . . . . . . .29
SECTION 1.03. Other definitions . . . . . . . . . . . . . . . . . .29
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
<S> <C> <C>
SECTION 2.01. Designation, amount, authentication and
delivery of Notes . . . . . . . . . . . . . . . . . 31
SECTION 2.02. Form of Notes and Trustee's certificate . . . . . . . 31
SECTION 2.03. Date of Notes and denominations . . . . . . . . . . . 31
SECTION 2.04. Execution of Notes. . . . . . . . . . . . . . . . . . 32
SECTION 2.05. Exchange and transfer of Notes. . . . . . . . . . . . 32
SECTION 2.06. Temporary Notes . . . . . . . . . . . . . . . . . . . 33
SECTION 2.07. Mutilated, destroyed, lost or stolen Notes. . . . . . 33
SECTION 2.08. Cancellation of surrendered Notes . . . . . . . . . . 34
ARTICLE THREE
REDEMPTION AND PURCHASES OF NOTES
<S> <C> <C>
SECTION 3.01. Redemption prices . . . . . . . . . . . . . . . . . . 34
SECTION 3.02. Notice of redemption; selection of Notes. . . . . . . 34
SECTION 3.03. When Notes called for redemption become
due and payable . . . . . . . . . . . . . . . . . . 35
SECTION 3.04. Cancellation of redeemed Notes. . . . . . . . . . . . 36
SECTION 3.05. Purchase of Notes at option of the holder
upon Change of Control. . . . . . . . . . . . . . . 36
SECTION 3.06. Effect of Change of Control Purchase Notice . . . . . 38
SECTION 3.07. Deposit of Change of Control Purchase Price . . . . . 39
SECTION 3.08. Covenant to comply with securities laws upon
purchase of Notes . . . . . . . . . . . . . . . . . 39
SECTION 3.09. Repayment to the Company. . . . . . . . . . . . . . . 39
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
<S> <C> <C>
SECTION 4.01. Payments on the Notes . . . . . . . . . . . . . . . . 39
SECTION 4.02. Maintenance of office or agency for registration of
transfer, exchange and payment of Notes. . . . . . 39
SECTION 4.03. Appointment to fill a vacancy in the office of
Trustee . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.04. Provision as to paying agent. . . . . . . . . . . . . 40
SECTION 4.05. Maintenance of corporate existence. . . . . . . . . . 41
SECTION 4.06. Officers' Certificate as to default and statement
as to compliance. . . . . . . . . . . . . . . . . . 41
SECTION 4.07. Usury laws. . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.08. Restrictions on transactions with Affiliates. . . . . 42
iii
<PAGE>
<PAGE> 5
<S> <C> <C>
SECTION 4.09. Limitations on Restricted Payments and
Restricted Investments . . . . . . . . . . . . . . 43
SECTION 4.10. Limitation on Indebtedness and Preferred Stock. . . . 47
SECTION 4.11. Limitation on Liens . . . . . . . . . . . . . . . . . 50
SECTION 4.12. Subsidiary guarantees, etc. . . . . . . . . . . . . . 52
SECTION 4.13. Limitation on dividends and other payment
restrictions affecting Subsidiaries . . . . . . . . 54
SECTION 4.14. Limitation on Asset Sales . . . . . . . . . . . . . . 54
ARTICLE FIVE
NOTEHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
<S> <C> <C>
SECTION 5.01. Company to furnish Trustee information as to names
and addresses of noteholders . . . . . . . . . . . 57
SECTION 5.02. Preservation and disclosure of lists.. . . . . . . . 57
SECTION 5.03. Reports by the Company. . . . . . . . . . . . . . . .58
SECTION 5.04. Reports by the Trustee. . . . . . . . . . . . . . . .59
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON EVENT OF DEFAULT
<S> <C> <C>
SECTION 6.01. Events of Default defined . . . . . . . . . . . . . .60
SECTION 6.02. Payment of Notes on default; suit therefor. . . . . .62
SECTION 6.03. Application of moneys collected by Trustee. . . . . .63
SECTION 6.04. Limitation on suits by holders of Notes . . . . . . .63
SECTION 6.05. Proceedings by Trustee; remedies cumulative
and continuing; delay or omission not waiver
of default. . . . . . . . . . . . . . . . . . . . .64
SECTION 6.06. Rights of holders of majority in principal amount of
Notes to direct Trustee and to waive defaults . . .64
SECTION 6.07. Trustee to give notice of defaults known to it, but
may withhold in certain circumstances. . . . . . . 65
SECTION 6.08. Requirement of an undertaking to pay
certain suits under the Indenture or against
the Trustee. . . . . . . . . . . . . . . . . . . . 65
SECTION 6.09. Waiver of stay or extension laws. . . . . . . . . . .65
ARTICLE SEVEN
CONCERNING THE TRUSTEE
<S> <C> <C>
SECTION 7.01. Duties and responsibilities of Trustee. . . . . . . .66
SECTION 7.02. Reliance on documents, opinions, etc. . . . . . . . .67
SECTION 7.03. No responsibility for recitals, etc . . . . . . . . .67
SECTION 7.04. Trustee, paying agent or Note registrar may
own Notes . . . . . . . . . . . . . . . . . . . . .68
SECTION 7.05. Moneys received by Trustee to be held in trust
without interest. . . . . . . . . . . . . . . . . .68
SECTION 7.06. Compensation and expenses of Trustee. . . . . . . . .68
SECTION 7.07. Right of Trustee to rely on Officers' Certificate
where no other evidence specifically prescribed. . 68
SECTION 7.08. Conflicting interest of Trustee . . . . . . . . . .. 69
iv
<PAGE>
<PAGE> 6
<S> <C> <C>
SECTION 7.09. Requirements for eligibility of Trustee . . . . . . .73
SECTION 7.10. Resignation or removal of Trustee . . . . . . . . . .73
SECTION 7.11. Acceptance by successor to Trustee; notice of
succession of a Trustee. . . . . . . . . . . . . . 74
SECTION 7.12. Successor to Trustee by merger, consolidation or
succession to business; notice by Trustee of
change in its location . . . . . . . . . . . . . . 75
SECTION 7.13. Limitations on rights of Trustee as a creditor. . . .75
ARTICLE EIGHT
CONCERNING THE NOTEHOLDERS
<S> <C> <C>
SECTION 8.01. Evidence of action by noteholders . . . . . . . . . .78
SECTION 8.02. Proof of execution of instruments and of
holding of Notes. . . . . . . . . . . . . . . . . .79
SECTION 8.03. Who may be deemed owners of Notes . . . . . . . . . .79
SECTION 8.04. Notes owned by Company or controlled by controlling
persons disregarded for certain purposes. . . . . .79
SECTION 8.05. Record date for action by noteholders . . . . . . . .79
SECTION 8.06. Instruments executed by noteholders bind
future holders. . . . . . . . . . . . . . . . . . .80
ARTICLE NINE
NOTEHOLDERS' MEETINGS
<S> <C> <C>
SECTION 9.01. Purposes for which meetings may be called . . . . . .80
SECTION 9.02. Manner of calling meetings; record date . . . . . . .81
SECTION 9.03. Call of meeting by Company or noteholders . . . . . .81
SECTION 9.04. Who may attend and vote at meetings . . . . . . . . .81
SECTION 9.05. Regulations . . . . . . . . . . . . . . . . . . . . .81
SECTION 9.06. Manner of voting at meetings and record to be kept. .82
SECTION 9.07. Exercise of rights of Trustee and noteholders not to
be hindered or delayed. . . . . . . . . . . . . . .82
ARTICLE TEN
SUPPLEMENTAL INDENTURES
<S> <C> <C>
SECTION 10.01. Purposes for which supplemental indentures may
be entered into without consent of noteholders. . .83
SECTION 10.02. Modification of Indenture with consent of holders of
a majority in principal amount of Notes. . . . . ..83
SECTION 10.03. Effect of supplemental indentures . . . . . . . . . .84
SECTION 10.04. Notes may bear notation of changes by supplemental
indentures. . . . . . . . . . . . . . . . . . . . .84
SECTION 10.05. Officers' Certificate and Opinion of Counsel. . . . .85
ARTICLE ELEVEN
CONSOLIDATION, MERGER AND SALE
<S> <C> <C>
SECTION 11.01. Company may consolidate, etc., on certain terms . . .85
SECTION 11.02. Successor corporation to be substituted . . . . . . .86
SECTION 11.03. Opinion of Counsel. . . . . . . . . . . . . . . . . .86
v
<PAGE>
<PAGE> 7
ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
<S> <C> <C>
SECTION 12.01. Satisfaction and discharge of Indenture . . . . . . .87
SECTION 12.02. Application by Trustee of funds deposited for
payment of Notes. . . . . . . . . . . . . . . . . .87
SECTION 12.03. Repayment of moneys held by paying agent. . . . . . .88
SECTION 12.04. Repayment of moneys held by Trustee . . . . . . . . .88
SECTION 12.05. Reinstatement . . . . . . . . . . . . . . . . . . . .88
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
<S> <C> <C>
SECTION 13.01. Incorporators, stockholders, officers and directors
of Company exempt from individual liability. . . . 88
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
<S> <C> <C>
SECTION 14.01. Successors and assigns of Company bound by
Indenture . . . . . . . . . . . . . . . . . . . . .89
SECTION 14.02. Acts of board, committee or officer of successor
corporation valid . . . . . . . . . . . . . . . . .89
SECTION 14.03. Required notices or demands may be served by
mail; waiver. . . . . . . . . . . . . . . . . . . .89
SECTION 14.04. Indenture and Notes to be construed in accordance
with the laws of the State of New York. . . . . . .90
SECTION 14.05. Evidence of compliance with conditions precedent. . .90
SECTION 14.06. Payments due on Saturdays, Sundays and holidays . . .90
SECTION 14.07. Provisions required by Trust Indenture Act of 1939
to control. . . . . . . . . . . . . . . . . . . . .91
SECTION 14.08. Provisions of the Indenture and Notes for the sole
benefit of the parties and the noteholders. . . . .91
SECTION 14.09. Severability. . . . . . . . . . . . . . . . . . . . .91
SECTION 14.10. Indenture may be executed in counterparts; acceptance
by Trustee. . . . . . . . . . . . . . . . . . . . .91
SECTION 14.11. Article and Section headings. . . . . . . . . . . . .91
SECTION 14.12. No Adverse Interpretation of Other Instruments. . . .91
ARTICLE FIFTEEN
GUARANTEE OF NOTES
<S> <C> <C>
SECTION 15.01. Guarantee . . . . . . . . . . . . . . . . . . . . . .91
SECTION 15.02. Guarantee senior in respect of Subordinated Notes . .92
SECTION 15.03. Subsidiary Guarantors may consolidate, etc., on
certain terms . . . . . . . . . . . . . . . . . . .92
SECTION 15.04. Application of certain terms and provisions to the
Subsidiary Guarantors. . . . . . . . . . . . . . ..93
SECTION 15.05. Release of Guarantee. . . . . . . . . . . . . . . . .94
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
vi
<PAGE>
<PAGE> 8
SCHEDULE A - SCHEDULE OF LIENS SECURING INDEBTEDNESS IN EXCESS OF
$5,000,000
SCHEDULE B - REAL PROPERTY CONSTITUTING PERMITTED COLLATERAL
vii
<PAGE>
<PAGE> 9
THIS INDENTURE, dated as of the 17th day of February, 1994,
between KAISER ALUMINUM & CHEMICAL CORPORATION, a corporation
duly organized and existing under the laws of the State of
Delaware (hereinafter referred to as the "Company"), as Issuer,
KAISER ALUMINA AUSTRALIA CORPORATION, KAISER FINANCE CORPORATION,
ALPART JAMAICA INC. and KAISER JAMAICA CORPORATION, as Subsidiary
Guarantors, and FIRST TRUST NATIONAL ASSOCIATION, a national
banking association (hereinafter referred to as the "Trustee"),
as Trustee.
W I T N E S S E T H:
- - - - - - -
WHEREAS, the Company has duly authorized an issue of its
9 % Senior Notes due February 15, 2002 (hereinafter referred to
as the "Notes"), for an aggregate principal amount of up to two
hundred twenty five million dollars ($225,000,000), to be issued
as registered Notes without coupons, to be authenticated by the
certificate of the Trustee, to be payable on February 15, 2002,
and to be redeemable and purchasable as hereinafter provided;
and, to provide the terms and conditions upon which the Notes are
to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture;
WHEREAS, the payment of the principal of, premium, if any,
Change of Control Purchase Price, Asset Sale Purchase Price and
interest on, the Notes is hereby expressly designated, and the
monetary obligations of the Company under the Notes shall
hereafter constitute for all purposes, Senior Indebtedness of the
Company under the terms of the Subordinated Note Indenture (as
hereinafter defined);
WHEREAS, the Guarantee (as hereinafter defined) of each
Subsidiary Guarantor in respect of the Notes is hereby expressly
designated, and the monetary obligations of such Subsidiary
Guarantor under the Notes shall hereafter constitute for all
purposes Senior Indebtedness of such Subsidiary Guarantor under
the terms of the Subordinated Note Indenture, to the extent that
such Subsidiary Guarantor is a guarantor under the Subordinated
Note Indenture;
WHEREAS, the Company has duly delivered written notice to
the trustee under the Subordinated Note Indenture designating the
Notes and the Guarantee as Senior Indebtedness thereunder;
WHEREAS, the Notes and the Trustee's certificate of
authentication to be borne by the Notes are to be substantially
in the following forms, respectively:
[FORM OF FACE OF NOTE]
No. [Principal Amount]
Issue Date: CUSIP 483008 AE 8
KAISER ALUMINUM & CHEMICAL CORPORATION
9 % SENIOR NOTE DUE 2002
KAISER ALUMINUM & CHEMICAL CORPORATION, a corporation duly
organized and existing under the laws of the State of Delaware
(herein referred to as the "Company"), for value received, hereby
promises to pay to ____________________, or registered assigns,
the principal sum of ____________________ DOLLARS on February 15,
2002, at the office or agency of the Company in the Borough of
Manhattan, the City of New York, State of New York, in such coin
or currency of The
<PAGE>
<PAGE> 10
United States of America as at the time of payment is legal
tender for the payment of public and private debts, and to pay to
the registered holder hereof, as hereinafter provided, interest
on said principal sum at the rate per annum specified in the
title of this Note, in like coin or currency, semiannually on
February 15 and August 15 in each year. Interest shall accrue
from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided
for, from February 17, 1994. The interest so payable on any
February 15 or August 15 will, subject to certain exceptions
provided in the Indenture hereinafter referred to, be paid to the
person in whose name this Note is registered at the close of
business on the February 1 or August 1, as the case may be, next
preceding such February 15 or August 15 whether or not such
February 1 or August 1 is Business Day. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months.
Payment of interest shall be made at the office or agency of the
Company maintained for such purpose within the City and State of
New York or, at the option of the Company, by check mailed by
first-class mail to the address of the person entitled thereto at
such address as shall appear on the registry books of the
Company.
As provided in the Indenture, this Note shall be deemed to
be a contract made under the laws of the State of New York, and
for all purposes shall be governed by and construed in accordance
with the laws of such State.
Reference is made to the further provisions of this Note set
forth on the reverse hereof. Such further provisions shall for
all purposes have the same effect as though fully set forth at
this place.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have
been signed by the Trustee under the Indenture referred to on the
reverse hereof.
IN WITNESS WHEREOF, KAISER ALUMINUM & CHEMICAL CORPORATION
has caused this instrument to be duly executed under its
corporate seal.
Dated
KAISER ALUMINUM & CHEMICAL
CORPORATION
By: ___________________
Name:
Title:
[Corporate Seal]
Attest:
________________________________
Secretary
2
<PAGE>
<PAGE> 11
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Notes described in the within-mentioned
Indenture.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By: ___________________________
Authorized Signatory
[FORM OF REVERSE OF NOTE]
KAISER ALUMINUM & CHEMICAL CORPORATION
9 % SENIOR NOTE DUE 2002
This Note is one of a duly authorized issue of Notes of the
Company known as its 9 % Senior Notes due 2002 (herein referred
to as the "Notes"), limited to an aggregate principal amount of
two hundred twenty five million dollars ($225,000,000), all
issued or to be issued under and pursuant to an indenture, dated
as of February 17, 1994 (herein referred to as the "Indenture"),
duly executed and delivered between the Company, the Subsidiary
Guarantors (as defined in the Indenture) and First Trust National
Association, as trustee (herein referred to as the "Trustee"), to
which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the respective rights,
limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company, the Subsidiary Guarantors
and the holders of the Notes. All terms used in this Note which
are defined in the Indenture shall have the meanings assigned to
them in the Indenture.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal amount of
this Note plus any accrued interest to the date of acceleration
may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the
conditions provided in the Indenture. The Indenture provides
that in certain events such declaration and its consequences may
be waived by the holders of a majority of the aggregate principal
amount of the Notes then outstanding or outstanding on the record
date, if any, fixed therefor in accordance with the provisions of
the Indenture. It is also provided in the Indenture that the
holders of a majority of the aggregate principal amount of the
Notes at the time or on any such record date outstanding may on
behalf of the holders of all of the Notes waive, prior to such
declaration, any past default under the Indenture and its
consequences, except a default in the payment of the principal
of, premium, if any, Change of Control Purchase Price, Asset Sale
Purchase Price or interest on any of the Notes or a default in
respect of a covenant or provision in the Indenture which under
Article Ten of the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Note.
Payment of the Notes is guaranteed on a senior basis by
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
Finance Corporation and Kaiser Jamaica Corporation and, under
certain circumstances set forth in the Indenture, may be
guaranteed by certain other Subsidiaries and Non-Affiliate Joint
Ventures of the Company. Under certain circumstances set forth
in the Indenture, each
3
<PAGE>
<PAGE> 12
of the Subsidiary Guarantors may be released from their
respective obligations under the Indenture and the Notes.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a
majority of the aggregate principal amount of the Notes then
outstanding or outstanding on the record date, if any, fixed
therefor in accordance with the provisions of the Indenture,
evidenced as in the Indenture provided, to execute supplemental
indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of
the holders of the Notes; provided, however, that, as provided in
Section 10.02 of the Indenture, without the consent of each
holder of an outstanding Note affected, no such supplemental
indenture shall, inter alia, (i) extend the stated maturity of
----- ----
any Note, reduce the interest rate, extend the time or alter the
manner of payment of interest thereon, or reduce the principal
amount thereof, or alter the timing of or reduce any premium
payable upon the redemption thereof, or reduce the amount payable
thereon in the event of acceleration or the amount thereof
payable in bankruptcy, or (ii) reduce the aforesaid percentage of
aggregate principal amount of Notes, the consent of the holders
of which is required for any such supplemental indenture.
Any such consent or waiver by the registered holder of this
Note (unless effectively revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued in exchange or
substitution herefor, irrespective of whether or not any notation
of such consent or waiver is made upon this Note or such other
Note.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price and interest on this
Note at the place, at the respective times, at the rate and in
the currency herein prescribed.
The Notes are issuable as fully registered Notes without
coupons in denominations of $1,000 and any integral multiple of
$1,000. At the office or agency to be maintained by the Company
referred to on the face hereof, and in the manner and subject to
the limitations provided in the Indenture, Notes may be exchanged
for a like aggregate principal amount of Notes in other
authorized denominations, without payment of any charge other
than a sum sufficient to reimburse the Company for any tax or
other governmental charge incident thereto. Principal of,
premium, if any, Change of Control Purchase Price, Asset Sale
Purchase Price and interest on this Note are payable at the
office or agency of the Company referred to on the face hereof,
except that, at the option of the Company, payment of interest
hereon may be made by check mailed by first-class mail to the
address of the person entitled thereto at such address as shall
appear on the registry books of the Company.
The Notes are subject to redemption on or after February 15,
1998, at the option of the Company, in whole or in part on any
date prior to maturity, upon mailing by first-class mail a notice
of such redemption not less than 15 nor more than 60 days prior
to the date fixed for redemption to the holders of Notes to be
redeemed in whole or in part at their addresses as they shall
appear upon the registry books of the Company, all as provided in
the Indenture. Any such notice which is mailed in the manner
hereinabove provided shall be conclusively presumed to have been
duly given, whether or not the holder receives the notice.
The table below shows the redemption prices (expressed as a
percentage of principal amount) on the dates shown below. If
redeemed during the 12-month period beginning February 15, the
redemption price shall be:
4
<PAGE>
<PAGE> 13
Redemption
Year Price
---- ----------
1998 . . . . . . . . . . . . . . . . . . . .104.125%
1999 . . . . . . . . . . . . . . . . . . . .102.750%
2000 . . . . . . . . . . . . . . . . . . . .101.375%
2001 and thereafter . . . . . . . . . . . . .100.000%
in each case together with accrued and unpaid interest to (but
not including) the date fixed for redemption.
Subject to the terms and conditions of the Indenture, if any
Change of Control (as defined in the Indenture) occurs on or
prior to maturity, the Company shall offer to purchase from each
holder all or any part of the holder's Notes for which a Change
of Control Purchase Notice shall have been delivered as provided
in the Indenture and not withdrawn, on the date that is 30
Business Days after the occurrence of such Change of Control (the
"Change of Control Purchase Date"), for a Change of Control
Purchase Price equal to 101% of the principal amount thereof plus
accrued interest to (but not including) the Change of Control
Purchase Date, which Change of Control Purchase Price shall be
paid in cash.
Holders have the right to withdraw any Change of Control
Purchase Notice by delivering to the Trustee a written notice of
withdrawal in accordance with the provisions of the Indenture.
If cash sufficient to pay the Change of Control Purchase
Price of all Notes or portions thereof to be purchased on the
Change of Control Purchase Date is deposited with the Trustee as
of the Change of Control Purchase Date, interest shall cease to
accrue (whether or not this Note is delivered to the Trustee or
any other office or agency maintained for such purpose) on such
Notes (or portions thereof) on and after the Change of Control
Purchase Date, and the holders thereof shall have no other rights
as such (other than the right to receive the Change of Control
Purchase Price, upon surrender of such Notes).
Subject to the terms and conditions of the Indenture, the
Company shall apply the Net Cash Proceeds (as defined in the
Indenture) of Asset Sales (as defined in the Indenture), under
certain circumstances described in the Indenture, to (x) the
prepayment of Indebtedness (as defined in the Indenture) in
respect of or under the Credit Agreement (as defined in the
Indenture) and the Specified Pari Passu Indebtedness (as defined
in the Indenture) unless the holders thereof elect not to receive
such prepayment and (y) an offer to purchase (an "Asset Sale
Offer") the then outstanding Notes, on any Business Day occurring
no later than 175 days after the receipt by the Company (or any
of its Subsidiaries, if applicable) of such Net Cash Proceeds, at
a price equal to 100% of the principal amount thereof together
with accrued interest, if any, to but not including the Asset
Sale Purchase Date (as defined in the Indenture). Such Asset
Sale Offer with respect to the Notes shall be in an aggregate
principal amount (the "Asset Sale Offer Amount") equal to the Net
Cash Proceeds (rounded down to the nearest $1,000) from the Asset
Sales to which the Asset Sale Offer relates multiplied by a
fraction, the numerator of which is the principal amount of the
Notes outstanding (determined as of the close of business on the
day immediately preceding the date notice of such Asset Sale
Offer is mailed) and the denominator of which is the principal
amount of the Notes outstanding plus the aggregate principal
amount of Indebtedness under the Credit Agreement and the
Specified Pari Passu Indebtedness outstanding (determined as of
the close of business on the day immediately preceding the date
notice of such Asset Sale Offer is mailed). If (x) no
Indebtedness is outstanding in respect of or under the Credit
Agreement or the Specified Pari Passu Indebtedness or (y) the
holders of such Indebtedness entitled to
5
<PAGE>
<PAGE> 14
receive payment elect not to receive the payments provided for in
the previous sentence, or (z) the application of such Net Cash
Proceeds results in the complete prepayment of such Indebtedness,
then in each case any remaining portion of such Net Cash Proceeds
will be required to be applied to an Asset Sale Offer to purchase
the Notes.
Upon surrender of this Note, the transfer of this Note is
registrable by the registered holder hereof in person or by his
attorney duly authorized in writing on the registry books of the
Company at the office or agency to be maintained by the Company
referred to on the face hereof, subject to the terms of the
Indenture but without payment of any charge other than a sum
sufficient to reimburse the Company for any tax or other
governmental charge incident thereto. Upon any such registration
of transfer, a new Note or Notes of authorized denomination or
denominations, for the same aggregate principal amount, will be
issued to the transferee in exchange herefor.
Prior to due presentation for registration of transfer, the
Company, the Trustee, any paying agent and any Note registrar may
deem and treat the person in whose name this Note shall be
registered upon the registry books of the Company as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment of or on account of
the principal hereof, premium, if any, Change of Control Purchase
Price, Asset Sale Purchase Price and interest due hereon and for
all other purposes, and neither the Company nor the Trustee nor
any paying agent nor any Note registrar shall be affected by any
notice to the contrary. All such payments shall be valid and
effectual to satisfy and discharge the liability on this Note to
the extent of the sum or sums so paid.
No recourse shall be had for the payment of the principal
of, premium, if any, Change of Control Purchase Price, Asset Sale
Purchase Price or the interest on this Note, or for any claim
based hereon, or otherwise in respect hereof, or based on or in
respect of the Indenture or any indenture supplemental thereto,
against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor
corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty
or otherwise, all such liability being, by the acceptance hereof
and as part of the consideration for the issue hereof, expressly
waived and released.
6
<PAGE>
<PAGE> 15
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
------------------
------------------
(Insert assignee's soc.
sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent
to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: ___________________ Your Signature:
(Sign exactly as your name(s) appear(s) on the Note)
Signature Guarantee: _____________________________________
(bank, trust company or member firm
of the New York Stock Exchange)
7
<PAGE>
<PAGE> 16
OPTION OF HOLDER TO ELECT PURCHASE
Upon an offer by the Company to purchase all or any part of this
Note pursuant to Section 3.05 or 4.14 of the Indenture, please
check the appropriate box below if you wish to elect to have all
or any part of this Note so purchased.
Section 3.05___
Section 4.14___
If you wish to have only part of this Note purchased by the
Company pursuant to Section 3.05 or Section 4.14 of the Indenture,
state the principal amount you elect to have purchased:
$___________________
Date: _____________ Signature: ______________________
______________________
(Sign exactly as your name(s) appear(s) on the face of this Note)
Signature Guarantee: ___________________________________
(bank, trust company or member firm
of the New York Stock Exchange)
8
<PAGE>
<PAGE> 17
AND WHEREAS, all acts and things necessary to make the
Notes, when executed by the Company and authenticated and
delivered by the Trustee as in this Indenture provided, the
valid, binding and legal obligations of the Company, and to
constitute these presents a valid indenture and agreement
according to its terms, have been done and performed, and the
execution and delivery of this Indenture and the issuance
hereunder of the Notes have in all respects been duly authorized,
and the Company, in the exercise of the legal right and power
vested in it, executes and delivers this Indenture and proposes
to make, execute, issue and deliver the Notes;
THEREFORE, in consideration of the premises and of the
purchase and acceptance of the Notes by the holders thereof, the
Company, each Subsidiary Guarantor and the Trustee each covenants
and agrees, for the equal and proportionate benefit of the
respective holders from time to time of the Notes, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Certain terms defined. The terms defined in
----------------------
this Section 1.01 (except as herein otherwise expressly provided
or unless the context otherwise requires), for all purposes of
this Indenture and of any indenture supplemental hereto, shall
have the respective meanings specified in this Section 1.01. All
other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939 (as defined herein) or which are by
reference therein defined in the Securities Act of 1933 (as
defined herein) (except as herein otherwise expressly provided or
unless the context otherwise requires) shall have the meanings
assigned to such terms in said Trust Indenture Act and in said
Securities Act as they were in force at the date of the execution
and delivery of this Indenture.
14 1/4% Senior Subordinated Notes: The term "14 1/4% Senior
----------------------------------
Subordinated Notes" shall mean the Company's 14 1/4% Senior
Subordinated Notes Due 1995, as amended, which were retired in
1993 and are no longer outstanding as of the date of this
Indenture.
14 1/4% Senior Subordinated Note Indenture: The term "14
-------------------------------------------
1/4% Senior Subordinated Note Indenture" shall mean the 14 1/4%
Senior Subordinated Note Indenture, dated as of December 21,
1989, among the Company, as issuer, the parties named therein as
and, if applicable, thereafter becoming, subsidiary guarantors,
and The Bank of New York, a New York banking corporation, as
trustee, as amended or supplemented from time to time in
accordance with the terms thereof.
Affiliate: The term "Affiliate" shall mean any other Person
----------
directly or indirectly controlling or controlled by or under
direct or indirect common control with a specified Person;
provided, however, that the term Affiliate shall not (other than
- -------- -------
for purposes of Section 3.07) include the Company, any Subsidiary
of the Company or any Non-Affiliate Joint Venture of the Company
so long as no Affiliate of the Company has any direct or indirect
interest therein, except through the Company and/or its
Subsidiaries and/or its Non-Affiliate Joint Ventures. For the
purpose of this definition, control when used with respect to any
-------
specified Person means the possession of the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise; and the terms controlling and controlled have
----------- ----------
meanings correlative to the foregoing. The fact that an
Affiliate of a Person is a partner of a law firm that renders
services to such Person or its Affiliates does not (other than
for purposes of Section 3.07) mean that the law firm is an
Affiliate of such Person.
9
<PAGE>
<PAGE> 18
AJI: The term "AJI" shall mean Alpart Jamaica Inc., a
----
Delaware corporation, and its successors.
Alpart: The term "Alpart" shall mean Alumina Partners of
-------
Jamaica, a Delaware general partnership, and its successors.
Asset Sale: The term "Asset Sale" shall mean any sale,
-----------
transfer or other disposition (including, without limitation,
dispositions pursuant to a merger, consolidation or sale and
leaseback transaction) of any assets (other than cash or Cash
Equivalents) on or after the date of the initial issuance of the
Notes by the Company or any of its Subsidiaries to any Person
other than the Company or any of its Subsidiaries or any Non-
Affiliate Joint Venture; provided, however, that solely for the
-------- -------
purposes of the definition of Consolidated Cash Flow Available
for Fixed Charges, the term Asset Sale shall exclude dispositions
pursuant to a sale and leaseback transaction if the lease under
such sale and leaseback transaction is required to be classified
and accounted for as a Capitalized Lease Obligation; and
provided, further, that the term Asset Sale shall not include a
- -------- -------
Refinancing Sale and Leaseback Transaction; and provided,
--------
further, that the following sales, transfers or other
- -------
dispositions of assets shall not be an "Asset Sale" hereunder:
(A) in the ordinary course of business of the Company and
its Subsidiaries,
(B) in a single transaction or group of related
transactions, the gross proceeds of which (exclusive of
indemnities) do not exceed $10,000,000 (such proceeds, to the
extent non-cash, to be determined in good faith by the Board of
Directors of the Company),
(C) resulting from the creation, incurrence or assumption
of (but not any foreclosure with respect to) any Lien not
prohibited by Section 4.11,
(D) in connection with any consolidation or merger of the
Company or any Subsidiary Guarantor or sale of all or
substantially all of the property of the Company or any
Subsidiary Guarantor in compliance with the provisions of Article
Eleven, Section 15.03(a) or Section 15.03(b)(i) hereof, as the
case may be,
(E) by a Subsidiary to its stockholders not prohibited by
this Indenture,
(F) which are Restricted Investments or Restricted Payments
permitted by Section 4.09, or
(G) which consist of extensions, modifications, renewals or
exchanges of Restricted Investments pursuant to clause (b) of the
definition thereof, so long as neither the Company nor any of its
Subsidiaries receives any cash proceeds as a result of such
transaction.
Attributable Debt: The term "Attributable Debt" shall mean,
------------------
with respect to a Refinancing Sale and Leaseback Transaction, as
of the date of consummation of such transaction, the greater of
(a) the Fair Market Value of the property subject to such
Refinancing Sale and Leaseback Transaction and (b) the present
value (discounted at the interest rate borne by the Notes,
compounded semi-annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease
included in such Refinancing Sale and Leaseback Transaction
(including any period for which such lease has been extended).
Bank: The term "Bank" shall mean any of the financial
-----
institutions that are, or from time to time become, lenders under
the Credit Agreement.
10
<PAGE>
<PAGE> 19
Bank Agent: The term "Bank Agent" shall mean BankAmerica
-----------
Business Credit, Inc., as agent under the Credit Agreement, and
any successor agent appointed under the Credit Agreement or any
agent under any agreement or agreements pursuant to which
Indebtedness under the Credit Agreement has been Refinanced (or
successively Refinanced) and as to whom the Company has notified
the Trustee and the noteholders pursuant to the terms of this
Indenture.
Bank Guarantors: The term "Bank Guarantors" shall mean each
----------------
of the following Persons, as long as such Person guarantees any
Indebtedness under the Credit Agreement: Akron Holding Company,
an Ohio corporation, Kaiser Aluminum & Chemical Investment, Inc.,
a Delaware corporation, Kaiser Aluminum Properties, Inc., a
Delaware corporation, Kaiser Aluminum Technical Services, Inc., a
California corporation, Oxnard Forge Die Company, Inc., a
California corporation, Kaiser Aluminium International, Inc., a
Delaware corporation, KAC, KFC, each of their respective
successors, each Subsidiary Guarantor and each Non-Recourse
Guarantor so long as such Non-Recourse Guarantor does not
constitute a Subsidiary Guarantor and would not be required to
become a Subsidiary Guarantor hereunder.
Board of Directors: The term "Board of Directors," when
-------------------
used with reference to the Company, shall mean the Board of
Directors of the Company, or the executive committee of the Board
of Directors of the Company, or any other duly authorized
committee of the Board of Directors of the Company.
Board Resolution: The term "Board Resolution" shall mean,
-----------------
with respect to any Person, a copy of a resolution certified by
the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification,
and delivered to the Trustee.
Business Day: The term "Business Day" shall mean a day
-------------
other than a Saturday, a Sunday or a day in The City of New York,
New York, Houston, Texas or San Francisco, California on which
banking institutions are authorized or obligated by law,
regulation or executive order to be closed.
Capital Stock: The term "Capital Stock" shall mean, with
--------------
respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of
capital stock, partnership interests or other undivided ownership
interests in such Person, and warrants, options and similar
rights (other than debt securities convertible into capital
stock) to acquire such capital stock, partnership interests or
other undivided ownership interests in such Person.
Capitalized Lease Obligations: The term "Capitalized Lease
------------------------------
Obligations" shall mean, with respect to any Person, the
obligations of such Person to pay rent or other amounts under any
lease of (or other agreement conveying the right to use) real or
personal property, which obligations are required to be
classified and accounted for as a capital lease obligation on a
balance sheet of such Person under GAAP and, for purposes of this
Indenture, the amount of such obligations at any date shall be
the amount of the liability thereof at such date, determined in
accordance with GAAP.
CARIFA Financing: The term "CARIFA Financing" shall mean
-----------------
the $60,000,000 CBI Industrial Revenue Bonds, Caribbean Basin
Projects Financing Authority CBI Industrial Revenue Bonds 1991
Series A and Series B (Alumina Partners of Jamaica Project)
issued pursuant to that certain Bond Purchase Agreement dated as
of December 1, 1991, among the Caribbean Basin Projects Financing
Authority, Alumina Partners of Jamaica and PaineWebber
Incorporated of Puerto Rico, and any letters of credit supporting
such bonds.
11
<PAGE>
<PAGE> 20
Cash Equivalents: The term "Cash Equivalents" shall mean,
-----------------
with respect to any Person:
(A) Government Securities having maturities of not more
than one year from the date of acquisition,
(B) certificates of deposit of any commercial bank
incorporated under the laws of the United States, or any state,
territory or commonwealth thereof, of recognized standing having
capital and unimpaired surplus in excess of $100,000,000 and
whose short-term commercial paper rating at the time of
acquisition is at least A-2 or the equivalent by Standard &
Poor's Corporation or at least P-2 or the equivalent by Moody's
Investors Services, Inc. (any such bank, an "Approved Bank"),
which certificates of deposit have maturities of not more than
one year from the date of acquisition,
(C) repurchase obligations with a term of not more than 31
days for underlying securities of the types described in clauses
(A) , (B) and (D) of this definition entered into with any
Approved Bank,
(D) commercial paper or finance company paper issued by any
Person incorporated under the laws of the United States, or any
state thereof, and rated at least A-2 or the equivalent by
Standard & Poor's Corporation or at least P-2 or the equivalent
by Moody's Investors Services, Inc., and in each case maturing
not more than one year from the date of acquisition, and
(E) investments in money market funds that are registered
under the Investment Company Act of 1940, which have net assets
of at least $100,000,000 and at least 85% of whose assets consist
of investments or other obligations of the type described in
clauses (A) through (D) above.
Center for Technology: The term "Center for Technology"
----------------------
shall mean the Company's facilities located in Pleasanton,
California.
Commission: The term "Commission" shall mean the United
-----------
States Securities and Exchange Commission.
Common Stock: The term "Common Stock" shall mean the
-------------
Company's common stock, par value $.01 per share, as it exists on
the date of this Indenture.
Company: The term "Company" shall mean Kaiser Aluminum &
--------
Chemical Corporation, a Delaware corporation, and, subject to the
provisions of Article Eleven, shall also include its successors
and assigns.
Consolidated Amortization Expense: The term "Consolidated
----------------------------------
Amortization Expense" shall mean, with respect to any Person for
any period, the amortization expense (including without
limitation goodwill, deferred financing charges and other
intangible items) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with
GAAP.
Consolidated Cash Flow Available for Fixed Charges: The
---------------------------------------------------
term "Consolidated Cash Flow Available for Fixed Charges" shall
mean (without duplication), with respect to any Person for any
period, the sum of the amounts for such period of (i)
Consolidated Net Income, (ii) Consolidated Fixed Charges, (iii)
Consolidated Income Tax Expense (other than income taxes
(including credits) with respect to items of Net Income not
included in the definition of Consolidated Net Income), (iv)
Consolidated Depreciation Expense, (v) Consolidated Amortization
Expense and (vi) any other non-cash items reducing Consolidated
Net Income, minus any non-cash items increasing Consolidated Net
Income, all as determined on a consolidated basis for such Person
and its Subsidiaries in accordance with GAAP; provided, however,
-------- -------
12
<PAGE>
<PAGE> 21
that (x) if, during such period, such Person or any of its
Subsidiaries shall have engaged in any Asset Sale, Consolidated
Cash Flow Available for Fixed Charges of such Person and its
Subsidiaries for such period shall be reduced by an amount equal
to the Consolidated Cash Flow Available for Fixed Charges (if
positive) directly attributable to the assets that are the
subject of such Asset Sale for such period, or increased by an
amount equal to the Consolidated Cash Flow Available for Fixed
Charges (if negative) directly attributable to the assets that
are the subject of such Asset Sale for such period and (y) if,
during such period, such Person or any of its Subsidiaries shall
have acquired any material assets out of the ordinary course of
business, Consolidated Cash Flow Available for Fixed Charges
shall be calculated on a pro forma basis as if such asset
acquisition and related financing had occurred at the beginning
of such period.
Consolidated Depreciation Expense: The term "Consolidated
----------------------------------
Depreciation Expense" shall mean, with respect to any Person for
any period, the depreciation and depletion expense (including
without limitation the amortization expense associated with
Capitalized Lease Obligations) of such Person and its
Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP.
Consolidated Fixed Charge Coverage Ratio: The term
-----------------------------------------
"Consolidated Fixed Charge Coverage Ratio" shall mean, with
respect to any Person as of the date of the transactions giving
rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio (the "Transaction Date"), the ratio of (i) the
aggregate amount of Consolidated Cash Flow Available for Fixed
Charges of such Person for the four fiscal quarters immediately
prior to the Transaction Date for which financial information in
respect thereof is available to (ii) the aggregate Consolidated
Fixed Charges of such Person for the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately
subsequent to such fiscal quarter to be accrued during such
period (based upon the pro forma amount of Indebtedness to be
outstanding on the Transaction Date), assuming for the purposes
of this measurement that the interest rates on which floating
interest rate obligations of such Person are based equal such
rates in effect on the Transaction Date; provided, however, that
-------- -------
if the Company or any of its Subsidiaries has incurred Interest
Hedging Obligations which would have the effect of changing the
interest rate on any Indebtedness for such four quarter period
(or any portion thereof), the resulting rate shall be used for
such four quarter period or portion thereof; and provided,
--------
further, that any Consolidated Fixed Charges with respect to
- -------
Indebtedness incurred or for which such Person otherwise becomes
liable during the fiscal quarter in which the Transaction Date
occurs shall be calculated as if such Indebtedness was so
incurred on the first day of the fiscal quarter in which the
Transaction Date occurs.
Consolidated Fixed Charges: The term "Consolidated Fixed
---------------------------
Charges" shall mean (without duplication), with respect to any
Person for any period, the sum of:
(i) the interest expense of such Person and its
Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (less, to the extent included therein,
(a) the portion of the interest expense required to be funded or
economically borne by the Company's minority partners in the
Company's joint ventures and (b) interest expense related to the
PIK Note),
(ii) all fees, commissions, discounts and other charges of
such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, with respect to
letters of credit and bankers' acceptances and the costs (net of
benefits) associated with Interest Hedging Obligations,
(iii) the aggregate amount of dividends paid or other
similar distributions made by such Person and its Subsidiaries
during such period with respect to preferred stock (including
preference stock) of such Person or its Subsidiaries determined
on a consolidated basis in accordance with GAAP, and
13
<PAGE>
<PAGE> 22
(iv) amortization or write-off of debt discount in
connection with any Indebtedness of such Person and its
Subsidiaries, determined on a consolidated basis in accordance
with GAAP (excluding, to the extent otherwise included, (A) the
amortization or write-off of any deferred financing costs in
connection with the amendment or refinancing of the Credit
Agreement and the Old Credit Agreement and/or the repurchase,
defeasance or redemption of the 14 1/4% Senior Subordinated Notes
and (B) the amortization or write-off of any debt discount and
the premiums paid in excess of the principal amount in connection
with the repurchase, defeasance or redemption of the 14 1/4%
Senior Subordinated Notes).
Consolidated Income Tax Expense: The term "Consolidated
--------------------------------
Income Tax Expense" shall mean (without duplication), with
respect to any Person for any period, the aggregate of the income
tax expense (net of applicable credits) of such Person and its
Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP.
Consolidated Net Income: The term "Consolidated Net Income"
------------------------
shall mean, with respect to any Person for any period, the
aggregate of the Net Income of such Person and its Subsidiaries
for such period taken as a single accounting period, all as
determined on a consolidated basis in accordance with GAAP,
excluding (in each case to the extent otherwise included):
(i) extraordinary gains but not extraordinary losses and
excluding gains from extinguishment of debt,
(ii) the Net Income of any Person that is not a Subsidiary
of such Person or that is accounted for on the equity method of
accounting, except to the extent of the amount of dividends or
other distributions (other than dividends or distributions of
Capital Stock) actually paid to such Person or any of its
Subsidiaries by such other Person during such period,
(iii) except to the extent included by clause (ii), the Net
Income of any Person accrued prior to the date it becomes a
Subsidiary of such Person or is merged into or consolidated with
such Person or any of its Subsidiaries or that Person's assets
are acquired by such Person or any of its Subsidiaries,
(iv) the Net Income of any Subsidiary of such Person during
such period (A) to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary of such Net
Income is not at the time permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Subsidiary or (B) in the case of a foreign Subsidiary or a
Subsidiary with significant foreign source income, to the extent
such Net Income has not been distributed to such Person and such
distribution would result in a material tax liability not
otherwise deducted from the calculation of Consolidated Net
Income whether or not such deduction is required by GAAP,
(v) net after tax gains from Asset Sales (but not excluding
the net after tax losses from Asset Sales) and
(vi) interest income arising from the Existing Intercompany
Note, except to the extent such interest income is actually
received by the Company in cash;
provided, however, that:
- -------- -------
(1) in determining Consolidated Net Income with respect to
the Company there shall be disregarded (a) any charge with
respect to premiums paid in excess of the principal amount in
connection with the repurchase, defeasance or redemption of the
14 1/4% Senior Subordinated Notes and (b) the
14
<PAGE>
<PAGE> 23
amortization or write-off of any unamortized deferred financing
costs and debt discount (other than original issue discount with
respect to Indebtedness Incurred after the date hereof) in
connection with the amendment or refinancing of the Credit
Agreement and the Old Credit Agreement and/or the repurchase,
defeasance or redemption of the 14 1/4% Senior Subordinated
Notes, and
(2) the Net Income of each of the Specified Parties
otherwise included in the Consolidated Net Income of the Company
shall not be subject to any of the limitations contained in
clauses (ii) and (iv)(B) of this definition so long as the
Company's cash management and intercompany practices with respect
to such entity, as the case may be, for such period are
consistent with past practice.
Consolidated Net Worth: The term "Consolidated Net Worth"
-----------------------
shall mean, with respect to any Person as of any date, the total
stockholders' equity of such Person as of such date plus the
amount of Indebtedness outstanding under the PIK Note as of such
date, less, to the extent otherwise included, amounts
attributable to Redeemable Stock and, in the case of the Company,
the amount attributable to the Existing Intercompany Note, in
each case determined on a consolidated basis in accordance with
GAAP; provided, however, that in determining Consolidated Net
-------- -------
Worth with respect to the Company there shall be disregarded:
(i) any charge with respect to premiums paid in excess of
the principal amount in connection with the repurchase,
defeasance or redemption of the 14 1/4% Senior Subordinated Notes
and
(ii) the amortization or write-off of any unamortized
deferred financing costs or debt discount (other than original
issue discount with respect to Indebtedness Incurred after the
date hereof) in connection with the amendment or refinancing of
the Credit Agreement and the Old Credit Agreement and/or the
repurchase, defeasance or redemption of the 14 1/4% Senior
Subordinated Notes.
Credit Agreement: The term "Credit Agreement" shall mean
-----------------
that certain Credit Agreement, dated as of February 15, 1994,
among the Company, KAC, the financial institutions that are, or
from time to time become, parties thereto, BankAmerica Business
Credit, Inc., as agent, including all related notes, collateral
documents and guarantees, and any agreement (including all
related notes, collateral documents and guarantees) pursuant to
which Indebtedness thereunder has been Refinanced (or
successively Refinanced), in each case as any of the same has
been or may be amended, supplemented, restated, restructured or
otherwise modified from time to time (in each case, in whole or
in part).
Currency Hedging Obligation: The term "Currency Hedging
----------------------------
Obligation" with respect to any Person shall mean the monetary
obligations of such Person pursuant to any foreign exchange
contract, currency swap agreement, option or futures contract,
forward contract or other similar agreement or arrangement
designed to protect such Person or any of its Subsidiaries
against fluctuations in currency values.
Defaulting Equity Owner: The term "Defaulting Equity Owner"
------------------------
shall mean, with respect to any Permitted Entity, any Equity
Owner who causes an Equity Owner Default.
Equity Owner: The term "Equity Owner" shall mean, with
-------------
respect to any Permitted Entity, any holder of an Ownership
Interest in such Permitted Entity.
Equity Owner Default: The term "Equity Owner Default" shall
---------------------
mean, with respect to any issuance of Permitted Entity Securities
to the Equity Owners of a Permitted Entity, the failure by one or
more of such Equity Owners to acquire such Permitted Entity
Securities in an amount corresponding to at least its Ownership
Interest of such Permitted Entity and, as a result thereof, such
Equity Owner
15<PAGE>
<PAGE> 24
becomes subject to, directly or indirectly, a dilution of its
interest in the future net income of such Permitted Entity and/or
a penalty pursuant to the terms of the governing documents of
such Permitted Entity.
Event of Default: The term "Event of Default" shall mean
-----------------
any event specified in Section 6.01, continued for the period of
time, if any, and after the giving of notice, if any, therein
designated.
Exchange Act: The term "Exchange Act" shall mean the
-------------
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Securities and Exchange Commission
thereunder.
Existing Intercompany Note: The term "Existing Intercompany
---------------------------
Note" shall mean the Non-Negotiable Intercompany Note, dated
December 21, 1989, issued by KAC to the Company in an initial
principal amount of $818,585,280, as such Non-Negotiable
Intercompany Note may be amended.
Fair Market Value: The term "Fair Market Value" shall mean,
------------------
with respect to any property other than cash, the fair market
value of such property as determined in good faith by the Board
of Directors of the Company, whose determination shall be
evidenced by a Board Resolution; provided, however, that, in the
-------- -------
event the Company makes a payment in the form of or otherwise
transfers property other than cash to, or receives property other
than cash from, an Affiliate in an amount in excess of
$10,000,000, the Company, in addition, shall have received an
opinion from an independent investment banking firm of national
standing selected by the Company to the effect that the Board of
Director's determination of fair market value is fair.
GAAP: The term "GAAP" shall mean generally accepted
-----
accounting principles as in effect on December 31, 1992, and used
in the preparation of the Company's consolidated balance sheet at
such date and the Company's statements of consolidated income and
cash flows for the year then ended, but in any event (i) giving
effect to, but excluding the effect of any one-time charge
related to the implementation of, Statement of Financial
Accounting Standards No. 106 (Employers' Accounting for
Postretirement Benefits Other Than Pensions) and (ii) giving
effect to Statement of Financial Accounting Standards No. 109
(Accounting for Income Taxes).
Government Securities: The term "Government Securities"
----------------------
shall mean direct obligations of, or obligations guaranteed by,
the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of
America is pledged.
Guarantee: The term "Guarantee" shall mean, with respect to
----------
any Subsidiary Guarantor, the guarantee of such Subsidiary
Guarantor set forth in Article Fifteen.
Improvements: The term "Improvements" shall mean any
-------------
accessories, accessions, additions, attachments, substitutions,
replacements, improvements, parts and other property now or
hereafter affixed to any U.S. Fixed Assets or used in connection
therewith.
Indebtedness: The term "Indebtedness" shall mean, with
-------------
respect to any Person at any date, any of the following (without
duplication):
(a) the principal amount of all obligations (unconditional
or contingent) of such Person for borrowed money (whether or not
recourse is to the whole of the assets of such person or only to
a portion thereof) and the principal amount of all obligations
(unconditional or contingent) of such Person evidenced
16
<PAGE>
<PAGE> 25
by debentures, notes or other similar instruments (including,
without limitation, reimbursement obligations with respect to
letters of credit and bankers' acceptances);
(b) all obligations of such Person to pay the deferred
purchase price of property or services, except (x) accounts
payable and other current liabilities arising in the ordinary
course of business and (y) compensation, pension obligations and
other obligations arising from employee benefits and employee
arrangements;
(c) Capitalized Lease Obligations of such Person;
(d) all Indebtedness of others secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed
or guaranteed by such Person;
(e) preferred stock (including preference stock) that is
Redeemable Stock (the amount of the Indebtedness in respect of
such preferred stock to be equal to the aggregate liquidation
value thereof);
(f) all Indebtedness of others guaranteed by such Person;
(g) pension obligations and other similar obligations
arising from employee benefits, to the extent unfunded and
assumed by such Person after the date of the initial issuance of
the Notes in the acquisition, by such Person, of the assets or
Capital Stock of another Person ("Assumed Pension Obligations");
and
(h) all obligations under Refinancing Sale and Leaseback
Transactions;
and the amounts thereof shall be the outstanding balance of any
such unconditional obligations as described in clauses (a)
through (f) (other than clause (d)), and the maximum liability of
any such contingent obligations at such date (other than with
respect to clause (d)) and, in the case of clause (d), the lesser
of the fair market value at such date of any asset subject to any
Lien securing the Indebtedness of others and the amount of the
Indebtedness secured and, in the case of clause (g), the amount
of Assumed Pension Obligations shall be the amount determined by
the Company in good faith as evidenced by a certificate of the
Chief Financial Officer of the Company delivered to the Trustee
and, in the case of clause (h), the Attributable Debt with
respect to such Refinancing Sale and Leaseback Transactions;
provided, however, that Indebtedness shall not include:
- -------- -------
(A) the obligations of such Person and/or any of its
Subsidiaries to purchase or sell goods, services or technology
utilized in their bauxite, aluminum and alumina business and
related extensions thereof, including on a take-or-pay basis,
pursuant to agreements entered into in the ordinary course of
business consistent with past practice, or to fund or guarantee
the obligations of National Refractories & Minerals Corporation
or any of its Affiliates in an aggregate principal amount at any
time outstanding not exceeding $7,500,000;
(B) obligations of such Person arising from the honoring by
a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business, provided that such obligations are
--------
extinguished within two Business Days of their incurrence (or, in
the case of foreign overdrafts, within five Business Days of
their incurrence) unless covered by an overdraft credit line;
(C) obligations of such Person resulting from the
endorsement of negotiable instruments for collection in the
ordinary course of business;
17
<PAGE>
<PAGE> 26
(D) Indebtedness consisting of letters of credit to the
extent collateralized by cash or Cash Equivalents; and
(E) Liens on assets of KAAC granted to secure Indebtedness
of QAL, provided that such Liens are (i) in existence on the date
--------
of this Indenture, (ii) similar in all material respects to Liens
in existence on the date of this Indenture or (iii) not on assets
consisting of cash, Cash Equivalents or fixed assets and such
assets are used or to be used in connection with the business of
QAL.
Indenture: The term "Indenture" shall mean this instrument
----------
as originally executed, or, if amended or supplemented as herein
provided, as so amended or supplemented.
Interest Hedging Obligation: The term "Interest Hedging
----------------------------
Obligation" with respect to any Person shall mean the monetary
obligations of such Person pursuant to any interest rate swap
agreement, interest rate collar agreement, interest rate cap
agreement, options or futures contract, forward contract or other
agreement or arrangement designed to protect such Person or any
of its Subsidiaries against fluctuations in interest rates.
KAAC: The term "KAAC" shall mean Kaiser Alumina Australia
-----
Corporation, a Delaware corporation, and its successors.
KAC: The term "KAC" shall mean Kaiser Aluminum Corporation,
----
a Delaware corporation, and its successors.
KFC: The term "KFC" shall mean Kaiser Finance Corporation,
----
a Delaware corporation, and its successors.
KJC: The term "KJC" shall mean Kaiser Jamaica Corporation,
----
a Delaware corporation, and its successors.
Lien: The term "Lien" shall mean, with respect to any asset
-----
of any Person, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
Maximum Secured Amount: The term "Maximum Secured Amount"
-----------------------
shall mean, at any time (i) $300,000,000, plus (ii) Net
----
Betterments at such time, plus (iii) the outstanding amount of
----
Indebtedness relating to the CARIFA Financing secured by a Lien
on Permitted Collateral, but in no event more than $43,000,000,
minus (iv) in the event of a sale of Permitted Collateral which
- -----
is subject to a Lien permitted by clause (i) of Section 4.11(b)
of this Indenture, the amount, if any, of the net proceeds
thereof required to be applied to a permanent repayment or
commitment reduction in respect of the Indebtedness secured by
such Lien, minus (v) in the event of the Refinancing of any
-----
Indebtedness secured by a Lien permitted by clause (i) of Section
4.11(b), the lesser of (A) the amount of Indebtedness, if any,
not secured by Permitted Collateral which Refinances, in whole or
in part, such Indebtedness secured by a Lien permitted by
clause (i) of Section 4.11(b) of this Indenture and (B) the
amount, if any, by which the Maximum Secured Amount immediately
prior to such Refinancing, in whole or in part, of such
Indebtedness secured by a Lien permitted by clause (i) of
Section 4.11(b) of this Indenture exceeds the aggregate amount of
Indebtedness which is secured by a Lien on Permitted Collateral
permitted by clause (i) or clause (viii)(a) of Section 4.11(b) of
this Indenture after giving effect to such Refinancing.
18
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<PAGE> 27
MAXXAM: The term "MAXXAM" shall mean MAXXAM Inc., a
-------
Delaware corporation, and its successors.
Net Betterments: The term "Net Betterments" shall mean the
----------------
amount, if any, by which capital expenditures (determined in
accordance with GAAP) by the Company or any of its Subsidiaries
in respect of the Permitted Collateral on a cumulative basis for
the period from the date hereof through the date of determination
exceeds depreciation (determined in accordance with GAAP) in
respect of the Permitted Collateral on a cumulative basis for
such period (provided, however, that with respect to any
-------- -------
Permitted Collateral existing at the time of the merger of a
subsidiary of MAXXAM with and into KAC on October 28, 1988 (the
"Merger"), the depreciation shall be the historical depreciation
before adjustments to reflect the acquisition of the Company in
the Merger), but in no event less than zero, provided, that in
--------
the event any Permitted Collateral ceases to constitute Permitted
Collateral in accordance with the definition thereof, only the
amount of Net Betterments in respect of such Permitted Collateral
at such time shall be included in any subsequent calculation of
Net Betterments and provided, further, that (a) Improvements
-------- -------
which are subject to a Lien permitted by clause (iv), (v) or (vi)
of Section 4.11(b) and (b) U.S. Fixed Assets to the extent
subject to a Lien permitted by clause (ix) of Section 4.11(b)
shall not be included in the determination of Net Betterments.
Net Cash Proceeds: The term "Net Cash Proceeds" shall mean
------------------
cash payments received (but if received in a currency other than
United States dollars, such payments shall not be deemed received
until the earliest time at which such currency is, or could
freely be, converted into United States dollars) by or on behalf
of the Company and/or any of its Subsidiaries (including any cash
payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise or the
cash realization of any non-cash proceeds of any Asset Sale, but,
in each case, only as and when, and to the extent, received) from
an Asset Sale, in each case and without duplication, net of:
(i) all legal, title and recording tax expenses,
commissions, consulting fees, investment banking, broker's and
accounting fees and expenses and fees and expenses incurred in
obtaining regulatory approvals in connection with such Asset
Sale,
(ii) the amounts of (A) any repayments of debt secured,
directly or indirectly, by Liens on the assets which are the
subject of such Asset Sale or (B) any repayments of debt
associated with such assets which is due by reason of such Asset
Sale (i.e., such disposition is permitted by the terms of the
----
instruments evidencing or applicable to such debt, or by the
terms of a consent granted thereunder, on the condition that the
proceeds (or portion thereof) of such disposition be applied to
such debt), provided, that this clause (B) shall not apply with
--------
respect to any U.S. Fixed Assets which do not constitute
Permitted Collateral, and, in the case of clauses (A) and (B),
other fees, expenses and other expenditures, in each case,
reasonably incurred as a consequence of such repayment of debt
(whether or not such fees, expenses or expenditures are then due
and payable or made, as the case may be),
(iii) all amounts deemed appropriate by the Company (as
evidenced by a signed certificate of the Chief Financial Officer
of the Company delivered to the Trustee) to be provided as a
reserve, in accordance with GAAP ("GAAP Reserves"), against any
liabilities associated with such assets which are the subject of
such Asset Sale,
(iv) all foreign, federal, state and local taxes payable
(including taxes reasonably estimated to be payable) in
connection with or as a result of such Asset Sale, and
(v) with respect to Asset Sales by Subsidiaries of the
Company, the portion of such cash payments attributable to
Persons holding a minority interest in such Subsidiary;
19
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<PAGE> 28
provided, in each such case, that such fees and expenses and
- --------
other amounts are not payable to an Affiliate of the Company
(except for amounts payable pursuant to the Tax Sharing
Agreements), and provided, further, that required redemptions of
-------- -------
existing preferred stock (including preference stock) of the
Company outstanding on the date hereof or issued pursuant to
collective bargaining arrangements and related employee benefit
arrangements in effect on the date hereof, in each case, from
Persons other than Affiliates of the Company, shall be deemed to
be a fee, expense or other expenditure of such Asset Sale.
Notwithstanding the foregoing, Net Cash Proceeds shall not
include proceeds received in a foreign jurisdiction from an Asset
Sale of an asset located outside the United States to the extent:
(i) such proceeds cannot under applicable law be
transferred to the United States or
(ii) such transfer would result (in the good faith
determination of the Board of Directors of the Company set forth
in a Board Resolution) in a foreign tax liability that would be
materially greater than if such Asset Sale occurred in the United
States;
provided that if, as, and to the extent that any of such proceeds
- --------
may lawfully be (in the case of clause (i)) or are (in the case
of clause (ii)) transferred to the United States, such proceeds
shall be deemed to be cash payments that are subject to the terms
of this definition of Net Cash Proceeds. Subject to the
provisions of the next preceding sentence, Net Cash Proceeds
shall also include:
(i) cash distributions actually received by or on behalf of
the Company or any of its Subsidiaries from any Non-Affiliate
Joint Venture of the Company representing the proceeds of a
transaction by such Non-Affiliate Joint Venture that would
constitute an Asset Sale if such Non-Affiliate Joint Venture were
a Subsidiary of the Company and
(ii) the amount of any reversal of GAAP Reserves (but only
as and when, and to the extent, reversed) which amount is
otherwise a deduction from Net Cash Proceeds.
Net Income: The term "Net Income" shall mean, with respect
-----------
to any Person for any period, the net income (loss) of such
Person for such period determined in accordance with GAAP.
Non-Affiliate Joint Venture: The term "Non-Affiliate Joint
----------------------------
Venture" shall mean any joint venture, partnership or other
Person (other than the Company or a Subsidiary of the Company) in
which the Company and/or its Subsidiaries have an ownership
interest equal to or greater than 5% and in which no Affiliate of
the Company has a direct or an indirect ownership interest other
than by virtue of the direct or indirect ownership interest in
such Non-Affiliate Joint Venture held (in the aggregate) by the
Company and/or one or more of its Subsidiaries, provided that
--------
such Non-Affiliate Joint Venture is engaged in one or more of the
lines of business in which the Company or its Subsidiaries or its
Non-Affiliate Joint Ventures are engaged in as of the date of
this Indenture or reasonably related extensions of such lines.
Non-Defaulting Equity Owner: The term "Non-Defaulting
----------------------------
Equity Owner" shall mean, with respect to any Permitted Entity,
any Equity Owner that is not a Defaulting Equity Owner.
Non-Recourse Guarantor: The term "Non-Recourse Guarantor"
-----------------------
shall mean a Subsidiary of the Company that guarantees any
Indebtedness under the Credit Agreement, provided that such
--------
guarantee is non-recourse to the assets of such Subsidiary other
than to intercompany Indebtedness owed, or from time to time
owing, by the Company to such Subsidiary, and all monetary
proceeds therefrom.
20
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<PAGE> 29
Note or Notes; outstanding: The terms "Note" or "Notes"
---------------------------
shall mean any Note or Notes, as the case may be, authenticated
and delivered under this Indenture.
The term "outstanding," when used with reference to Notes,
shall, subject to the provisions of Section 8.04, mean, as of any
particular time, all Notes authenticated and delivered by the
Trustee under this Indenture, except
(a) Notes theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(b) Notes, or portions thereof, for which the payment of
principal, interest, any redemption price, any Change of Control
Purchase Price or any Asset Sale Purchase Price in the necessary
amount shall have been deposited in trust with the Trustee or
with any paying agent (other than the Company) or shall have been
set aside and segregated in trust by the Company (if the Company
shall act as its own paying agent), provided that such Notes
--------
shall have reached their stated maturity or, if such Notes are to
be or may be redeemed or purchased prior to the maturity thereof,
notice of such redemption or purchase shall have been given as in
Article Three provided, or provision satisfactory to the Trustee
shall have been made for giving such notice; and
(c) Notes in lieu of or in substitution for which other
Notes shall have been authenticated and delivered pursuant to the
terms of Section 2.07, unless proof satisfactory to the Trustee
is presented that any such Notes are held by bona fide holders in
due course.
Noteholder; registered holder: The terms "noteholder,"
------------------------------
"holder of Notes," "registered holder" or other similar term
shall mean any person who shall at the time be the registered
holder of any Note or Notes on the registry books of the Company
kept for that purpose in accordance with the provisions of this
Indenture.
Officers' Certificate: The term "Officers' Certificate"
----------------------
shall mean a certificate of the Company signed on behalf of the
Company by the Chairman of the Board, the President or any Vice
President and by the Chief Financial Officer, the Controller, the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company. Each such certificate shall include
the statements provided for in Section 14.05 if and to the extent
required by the provisions thereof.
Old Credit Agreement: The term "Old Credit Agreement" shall
---------------------
mean that certain Credit Agreement, dated as of December 13,
1989, among the Company, KAC, the financial institutions party
thereto, Bank of America National Trust and Savings Association,
as agent, and Mellon Bank, N.A., as collateral agent, which was
replaced by the Credit Agreement.
Opinion of Counsel: The term "Opinion of Counsel" shall
-------------------
mean an opinion in writing signed by legal counsel, who may be an
employee of, or of counsel to, the Company and who shall be
reasonably satisfactory to the Trustee. Each such opinion shall
include the statements provided for in Section 14.05 if and to
the extent required by the provisions thereof.
Ownership Interest: The term "Ownership Interest" shall
-------------------
mean, with respect to any Equity Owner of a Permitted Entity at
the time of the determination thereof, the proportion held at
such time by such Equity Owner of the outstanding Permitted
Entity Securities of such Permitted Entity that are last entitled
to payment upon liquidation or dissolution as provided in the
governing instruments of such Permitted Entity or pursuant to an
agreement among the Equity Owners of such Permitted Entity.
21
<PAGE>
<PAGE> 30
Permitted Collateral: The term "Permitted Collateral" shall
---------------------
mean real property (as set forth in Schedule B hereto), plant and
equipment of the Company or any of its Subsidiaries located in
the United States of America which, as of the date of issuance of
the Notes, secures Indebtedness under the Credit Agreement
(whether or not the Liens on such real property, plant or
equipment are perfected at such time), together with any
Improvements thereto or thereon, any real property that is
contiguous to or structurally related to such real property (the
"Contiguous Property") and any real property, plant or equipment,
whether owned on the date of the issuance of the Notes or
thereafter acquired, located or used at any time after the date
of issuance of the Notes at a facility (other than the Company's
Gramercy alumina refinery) owned, leased, occupied or used by the
Company or any of its Subsidiaries as of the date of issuance of
the Notes or on any Contiguous Property, and any proceeds
thereof, provided, that notwithstanding anything to the contrary
--------
contained in this Indenture, any Permitted Collateral which is
released from all Liens thereon securing Indebtedness and which
does not become subject to a new Lien within 60 days of such
release securing Indebtedness which Refinances any of the
Indebtedness (in whole or in part) previously secured by such
Permitted Collateral shall not thereafter constitute "Permitted
Collateral" under the Indenture.
Permitted Dividend Encumbrance: The term "Permitted Dividend
-------------------------------
Encumbrance" shall mean, with respect to any Person, any
consensual encumbrances or restrictions on the ability of such
Person to pay dividends or make any other distributions on its
Capital Stock or pay any Indebtedness owed to the Company or any
Subsidiaries of the Company (or, in the case of a Permitted
Entity, to its Equity Owners) or to make loans or advances or
transfer any of its assets to the Company or any Subsidiary of
the Company (or, in the case of a Permitted Entity, to its Equity
Owners) existing under or by reason of any of:
(i) this Indenture;
(ii) Indebtedness permitted under Section 4.10(b)(ii);
(iii) Indebtedness or other obligations in existence on the
date of this Indenture and customary rights of first refusal with
respect to the Company's and its Subsidiaries' interests in their
respective Subsidiaries, Non-Affiliate Joint Ventures and
Permitted Entities;
(iv) applicable law and agreements with foreign governments
with respect to assets located in their jurisdictions;
(v) (A) customary provisions restricting (i) the subletting
or assignment of any lease or (ii) the transfer of copyrighted or
patented materials, (B) provisions in agreements that restrict
the assignment of such agreements or rights thereunder or (C)
provisions of a customary nature contained in the terms of
Capital Stock restricting the payment of dividends and the making
of distributions on Capital Stock;
(vi) Indebtedness or other obligations of any other Person
acquired (whether pursuant to a purchase of stock or assets)
(including any Non-Affiliate Joint Venture of the Company or
Permitted Entity that becomes a Subsidiary of the Company) or
applicable to any assets at the time such Person or assets were
acquired by the Company, its Subsidiaries or a Permitted Entity,
in each case which Indebtedness and obligations (A) were not
created in anticipation of such acquired Person becoming a
Subsidiary of the Company or a Permitted Entity, as the case may
be, or such assets being acquired by the Company, its
Subsidiaries or such Permitted Entity, as the case may be, and
(B) which encumbrances and restrictions are not applicable to any
Person or the property or assets of any Person other than the
Person or the property or assets of the Person so acquired
(including the Capital Stock of such Person)
22
<PAGE>
<PAGE> 31
or any newly organized entity formed to effect such acquisition
and, in each case, the monetary proceeds thereof;
(vii) encumbrances and restrictions with respect to such
Person imposed in connection with an agreement for the sale or
disposition of such Person or its assets;
(viii) encumbrances and restrictions applicable only to (A)
Alpart and its assets and Capital Stock with respect to
Indebtedness permitted to be Incurred by Alpart pursuant to
Section 4.10(a), (B) Alpart, KJC and AJI and their respective
assets and Capital Stock with respect to Indebtedness permitted
to be Incurred pursuant to Section 4.10(b)(iii), (C) KAAC and its
assets and Capital Stock with respect to Indebtedness permitted
to be Incurred pursuant to Section 4.10(b)(iv) and (D) the Person
that Incurred such Indebtedness and such Person's assets and
Capital Stock with respect to Indebtedness permitted to be
Incurred pursuant to Section 4.10(b)(viii) or (ix); in each case
provided, that the Board of Directors of the Company has
- --------
determined in good faith that such encumbrances and restrictions
would not singly or in the aggregate have a materially adverse
effect on the holders of the Notes;
(ix) Indebtedness of a Person that was a Subsidiary at the
time of Incurrence and the Incurrence of which Indebtedness is
permitted by Section 4.10, provided that such encumbrances and
--------
restrictions apply only to such Subsidiary and its assets, and
provided, further, that the Board of Directors of the Company has
- -------- -------
determined in good faith, at the time of creation of each such
encumbrance or restriction, that such encumbrances and
restrictions would not singly or in the aggregate have a
materially adverse effect on the holders of the Notes;
(x) the subordination of (A) any Indebtedness owed by the
Company or any of its Subsidiaries to the Company or any other
Subsidiary to (B) any other Indebtedness of the Company or any of
its Subsidiaries, provided (A) such other Indebtedness is
--------
permitted under this Indenture and (B) the Board of Directors of
the Company has determined in good faith, at the time of creation
of each such encumbrance or restriction, that such encumbrances
and restrictions would not singly or in the aggregate have a
materially adverse effect on the holders of the Notes;
(xi) the subordination of (A) any Indebtedness owed by a
Permitted Entity to its Equity Owners or any other Person to (B)
any other Indebtedness of such Permitted Entity, provided (I)
--------
such other Indebtedness, at the time of the Incurrence thereof,
is permitted by the definition of Permitted Entity and (II) the
Board of Directors of the Company has determined in good faith,
at the time of creation of each such encumbrance or restriction,
that such encumbrances and restrictions would not singly or in
the aggregate have a materially adverse effect on the holders of
the Notes;
(xii) Refinancing Indebtedness that is otherwise permitted
in connection with any Refinanced Indebtedness, provided that, in
--------
the case of all Refinancing Indebtedness other than Refinancing
Indebtedness Incurred with respect to Indebtedness permitted
under Section 4.10(b)(ii), any such encumbrances or restrictions
shall not be materially less favorable to the holders of the
Notes; and
(xiii) the sale or other disposition of property subject to
a Lien securing Indebtedness, provided that such Lien and such
--------
Indebtedness are otherwise permitted by this Indenture.
Permitted Entity: The term "Permitted Entity" shall mean
-----------------
any Person (other than a Subsidiary Guarantor) designated as such
by a Board Resolution and as to which:
(i) the Company, any Subsidiary Guarantor or any Permitted
Entity own all or a portion of the Permitted Entity Securities of
such Person;
23
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<PAGE> 32
(ii) no more than 10 unaffiliated Equity Owners own of
record any Permitted Entity Securities of such Person;
(iii) at all times, each Equity Owner owns a proportion of
each class of Permitted Entity Securities of such Person
outstanding equal to such Equity Owner's Ownership Interest at
such time, other than as a result of an Equity Owner Default;
(iv) no Indebtedness or preferred stock (including
preference stock) is or has been Incurred by such Person that is
outstanding other than (x) Permitted Entity Securities held by
Equity Owners and/or (y) if such Person is a Subsidiary of the
Company, Indebtedness permitted to be Incurred by such Subsidiary
at the time of the Incurrence thereof under Sections 4.10(b)(v)
and 4.10(b)(xiii);
(v) there exist no consensual encumbrances or restrictions
on the ability of such Person to (x) pay dividends or make any
other distributions to its Non-Defaulting Equity Owners or (y)
make loans or advances or transfer any of its assets to its Non-
Defaulting Equity Owners, in each case other than Permitted
Dividend Encumbrances of such Permitted Entity;
(vi) the Company, any Subsidiary Guarantor or any Permitted
Entity has the right at any time (whether by agreement, operation
of law or otherwise) to (A) require the Permitted Entity that it
owns an Ownership Interest in to dissolve, liquidate or wind up
its affairs (subject to any right of the other Equity Owners
and/or such Permitted Entity to acquire all of the Permitted
Entity Securities owned by such Equity Owner) and, subject to
applicable law, to distribute its remaining assets to its Equity
Owners after payment to creditors or (B) have all of the
Permitted Entity Securities that it owns purchased by such
Permitted Entity and/or other Equity Owners; and
(vii) the business engaged by such Person is one in which
the Company or its Subsidiaries or its Non-Affiliate Joint
Ventures were engaged on the date of this Indenture or reasonably
related thereto or is the business of holding or disposing of
Permitted Entity Securities.
Permitted Entity Securities: The term "Permitted Entity
----------------------------
Securities" shall mean, with respect to any Permitted Entity, any
Capital Stock or Indebtedness (whether or not a security) of such
Permitted Entity, other than Indebtedness permitted to be
Incurred by such Permitted Entity pursuant to clause (iv)(y) of
the definition of Permitted Entity, but in any event including
Permitted Indebtedness described in clause (b) of the definition
thereof.
Permitted Indebtedness: The term "Permitted Indebtedness"
-----------------------
shall mean:
(a) Indebtedness and preferred stock (including preference
stock) of the Company and its Subsidiaries existing on the date
of this Indenture, including, but not limited to, the
Subordinated Notes;
(b) Indebtedness (including Redeemable Stock) owed or
issued by the Company to a Subsidiary or owed or issued by a
Subsidiary to the Company, any other Subsidiary of the Company or
to any other holder of Capital Stock of such Subsidiary in
proportion to such holder's ownership interest in such
Subsidiary;
(c) Indebtedness and preferred stock (including preference
stock) of a Permitted Entity to the extent not prohibited by
clause (iii) or clause (iv)(x) of the definition thereof;
(d) Indebtedness of the Company and its Subsidiaries by
reason of entering into indemnification agreements and guarantees
in connection with the disposition of assets, provided that the
--------
Indebtedness
24
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<PAGE> 33
with respect to such indemnification agreements and guarantees
shall be limited to the amount of the net proceeds of such
disposition;
(e) guarantees, letters of credit and indemnity agreements
relating to performance and surety bonds incurred in the ordinary
course of business;
(f) Indebtedness of a Subsidiary of the Company (including
undrawn amounts under lines of credit that are subsequently drawn
upon) issued, assumed or guaranteed by such Subsidiary prior to
the date upon which such Subsidiary becomes a Subsidiary of the
Company (excluding Indebtedness incurred by such entity in
connection with, or in contemplation of, its becoming a
Subsidiary of the Company), provided that such Indebtedness and
--------
the holders thereof do not, at any time, have direct or indirect
recourse to any property or assets of the Company and its
Subsidiaries other than the property and assets of such acquired
entity and its Subsidiaries, including the Capital Stock thereof,
or any newly organized entity formed to effect such acquisition,
and, in each case, the monetary proceeds thereof;
(g) Indebtedness incurred by the Company in connection with
the purchase, redemption, retirement or other acquisition by the
Company of the USWA Preferred Stock outstanding on the date
hereof (plus additional shares of such USWA Preferred Stock
issued as dividends thereon or on such shares issued as
dividends);
(h) Indebtedness of the Company and its captive wholly
owned insurance Subsidiaries in respect of letters of credit in
an aggregate amount not to exceed at any one time outstanding
$20,000,000 issued for the account of the Company or such
Subsidiaries in support of certain self-insurance and reinsurance
obligations entered into from time to time by the Company or such
captive wholly owned insurance Subsidiaries of the Company;
(i) Indebtedness consisting of industrial revenue bonds and
related indemnity agreements; and
(j) prior to the merger of the Company and KAC,
Indebtedness in respect of the Preferred Dividend Intercompany
Notes.
Person: The term "Person" shall mean any individual,
-------
corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or
other agency or political subdivision thereof.
PIK Note: The term "PIK Note" shall mean that certain PIK
---------
Note issued by the Company to a subsidiary of MAXXAM on
December 15, 1992, in the principal amount of $2.5 million,
bearing interest at a rate equal to 12% per annum and due on
June 30, 1995.
Preferred Dividend Intercompany Notes: The term "Preferred
--------------------------------------
Dividend Intercompany Notes" shall mean (i) the intercompany note
in respect of the Series A Shares, (ii) the intercompany note in
respect of the PRIDES and (iii) any other intercompany note
representing a loan by KAC to the Company from the proceeds of an
offering of preferred stock by KAC which loan shall have a term
not in excess of five years from the date of issuance and shall
be in an amount equal to the aggregate dividends scheduled to
accrue on such preferred stock during the term thereof and
payable at approximately the same times and in approximately the
same amounts as such dividends are payable, provided, that
--------
(a) the aggregate amount of all such intercompany notes referred
to in this clause (iii) shall not exceed $50,000,000 at any one
time outstanding and (b) the remaining net proceeds from such
preferred stock offering shall have been used by KAC to make a
capital contribution to (or to purchase common stock of) the
Company.
25
<PAGE>
<PAGE> 34
Preferred Stock ($100): The term "Preferred Stock ($100)"
-----------------------
shall mean the Company's 4 % Preference Stock, par value $100 per
share, 4 % Preference Stock (1957 Series), par value $100 per
share, 4 % Preference Stock (1959 Series), par value $100 per
share, and 4 % Preference Stock (1966 Series), par value $100 per
share.
Principal; principal amount: The terms "principal" or
----------------------------
"principal amount" of a Note shall mean the principal amount of
such Note as set forth on the face of such Note.
Prospectus: The term "Prospectus" shall mean that certain
-----------
prospectus dated February 10, 1994, relating to the offering by
the Company of the Notes.
QAL: The term "QAL" shall mean Queensland Alumina Limited,
----
a Queensland, Australia corporation, and its successors.
Redeemable Stock: The term "Redeemable Stock" shall mean,
-----------------
with respect to any Person, any preferred Capital Stock of such
Person, that, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the
option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, in whole or in part,
pursuant to a sinking fund obligation or otherwise, or, at the
option of the holder thereof, is redeemable in whole or in part,
or is exchangeable into a security of a Person other than the
issuer of such Capital Stock that is owned by such Person or its
Subsidiaries or into indebtedness of, or that is owned by, such
Person or its Subsidiaries, in each case on or prior to the
scheduled maturity date of the Notes.
Refinance: The term "Refinance" shall mean to renew,
----------
extend, refund, replace, restructure, refinance, amend or modify
any Indebtedness. The term "Refinancing" shall have a
correlative meaning.
Refinancing Sale and Leaseback Transaction: The term
-------------------------------------------
"Refinancing Sale and Leaseback Transaction" shall mean any sale
and leaseback transaction with respect to which the Attributable
Debt is at least $100,000,000, and which is designated by the
Company as a Refinancing Sale and Leaseback Transaction in a
notice to the Trustee pursuant to the terms hereof, which notice
shall indicate the Attributable Debt with respect to such
Refinancing Sale and Leaseback Transaction.
Responsible Officer: The term "responsible officer," when
--------------------
used with respect to the Trustee, shall mean any officer in its
principal corporate trust office and every other officer and
assistant officer to whom any corporate trust matter is referred
because of his knowledge of and familiarity with the particular
subject.
Restricted Investment: The term "Restricted Investment"
----------------------
shall mean, with respect to any Person:
(i) any amount paid, or any property transferred, in each
case, directly or indirectly by such Person for Capital Stock or
other securities of, or as a contribution to, any Affiliate of
the Company;
(ii) any direct or indirect loan or advance by such Person
to any Affiliate of the Company other than accounts receivable of
such Person relating to the purchase and sale of inventory, goods
or services arising in the ordinary course of business;
(iii) any direct or indirect guarantee by such Person of
any obligations, contingent or otherwise, of any Affiliate of the
Company; and
26<PAGE>
<PAGE> 35
(iv) the acquisition by such Person of, or any investment
by such Person in, any Capital Stock or similar interest of any
other Person (other than the Company);
provided, however, that the following shall not be Restricted
- -------- -------
Investments:
(a) investments in or acquisitions of Capital Stock or
similar interests in any Person (other than a Person in which
Affiliates of the Company have an interest other than through the
Company, its Subsidiaries and its Non-Affiliate Joint Ventures)
that:
(I) is or becomes, at the time of the acquisition
thereof, a Subsidiary of the Company and is or is to be
primarily engaged in an operating business or
(II) is, at the time of the acquisition thereof,
engaged or to be engaged primarily in businesses in which
the Company or its Subsidiaries or its Non-Affiliate Joint
Ventures were engaged on the date of this Indenture or
reasonably related extensions thereof, provided that such
---------
securities are not, at the time of the acquisition thereof
(without regard to any exchanges, modifications or other
changes thereto subsequent to such acquisition), registered
under the Exchange Act;
(b) Restricted Investments of such Person existing as of
the date of this Indenture and any extension, modification or
renewal of such Restricted Investment (but not increases thereof,
other than as a result of the accrual or accretion of interest or
original issue discount pursuant to the terms of such Restricted
Investment), or any Restricted Investment made in connection with
an exchange of such Restricted Investment with the issuer
thereof;
(c) investments in or acquisitions of Permitted Entity
Securities of any Permitted Entity;
(d) transactions with officers or directors of the Company
or any Subsidiary of the Company entered into in the ordinary
course of business (including compensation or employee benefit
arrangements with any officer or director of the Company or any
Subsidiary of the Company);
(e) investments in or acquisitions of Capital Stock or
similar interests in Persons (other than Affiliates of the
Company) received in the bankruptcy or reorganization of or by
such Person or any exchange of such investment with the issuer
thereof or taken in settlement of or other resolution of claims
or disputes, and, in each case, extensions, modifications and
renewals thereof; and
(f) investments in Persons (other than Affiliates of the
Company) received by such Person as consideration from Asset
Sales to the extent not prohibited by Section 4.14 (including,
for the purposes of this definition, those sales, transfers and
other dispositions described in clause (B) and the transactions
described in clause (D) of such definition) or any exchange of
such investment with the issuer thereof, and extensions,
modifications and renewals thereof.
Securities Act of 1933: The term "Securities Act of 1933"
-----------------------
shall mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the Securities and Exchange
Commission thereunder.
Significant Subsidiary: The term "Significant Subsidiary"
-----------------------
shall have the meaning assigned to that term under Regulation S-X
of the Securities Act as in effect on the date of this Indenture;
provided, however, that (i) each Subsidiary Guarantor on the date
- -------- -------
of this Indenture shall be deemed to be a Significant Subsidiary
of the Company for so long as such Subsidiary is a Subsidiary
Guarantor and (ii)
27<PAGE>
<PAGE> 36
each of VALCO, KAAC and Alpart, and each Subsidiary of the
Company that, directly or indirectly, holds an interest in VALCO,
Alpart or QAL, and each Subsidiary Guarantor that becomes a
Subsidiary Guarantor after the date of this Indenture (so long as
such Subsidiary Guarantor is a Subsidiary Guarantor) shall be
deemed to be a Significant Subsidiary if it (singly, or, in the
case of VALCO, Alpart or QAL, together with the other
Subsidiaries of the Company that hold an interest in such entity)
meets the total assets test of the term "Significant Subsidiary"
under Regulation S-X as in effect on the date of this Indenture,
but substituting 5% in such test for 10%.
Specified Parties: The term "Specified Parties" shall mean
------------------
each of AJI, Alpart, KAAC, KJC, VALCO, Kaiser Aluminium
International, Inc., a Delaware corporation, and its successors,
Kaiser Bauxite Company, a Nevada corporation, and its successors,
Kaiser Jamaica Bauxite Company, a Jamaican partnership, and its
successors, and Queensland Alumina Security Corporation, a
Delaware corporation, and its successors.
Subordinated Notes: The term "Subordinated Notes" shall
-------------------
mean the Company's 12 3/4% Senior Subordinated Notes due 2003, as
amended from time to time, issued pursuant to the Subordinated
Note Indenture.
Subordinated Note Indenture: The term "Subordinated Note
----------------------------
Indenture" shall mean the indenture, dated as of February 1,
1993, among the Company, as issuer, the parties named therein as
and, if applicable, thereafter becoming guarantors, and The First
National Bank of Boston, a national banking association, as
trustee, as amended or supplemented from time to time in
accordance with the terms thereof.
Subsidiary: The term "Subsidiary" shall mean any
-----------
corporation or other entity of which more than 50% of the equity
interest (which for a corporation shall be the outstanding stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation, irrespective of whether or not at
the time stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned
(either alone or through Subsidiaries or together with
Subsidiaries) by the Company or another Subsidiary; provided,
--------
however, that Queensland Alumina Security Corporation, a Delaware
- -------
corporation, shall be deemed not to be a Subsidiary of the
Company or any of its Subsidiaries and shall be deemed to be a
Non-Affiliate Joint Venture (for as long as it meets the
definition of Non-Affiliate Joint Venture and for as long as its
operations remain substantially the same), and provided, further,
-------- -------
that, for purposes of the definitions of Asset Sale and Net Cash
Proceeds and for purposes of Section 4.14, each of Alpart and
VALCO, so long as it is not a wholly owned Subsidiary, shall be
deemed not to be a Subsidiary of the Company or any of its
Subsidiaries and shall be deemed to be a Non-Affiliate Joint
Venture of the Company (for as long as it meets the definition of
Non-Affiliate Joint Venture). For purposes of this definition,
any directors' qualifying shares shall be disregarded in
determining the ownership of a Subsidiary.
Subsidiary Guarantors: The term "Subsidiary Guarantors"
----------------------
shall mean the Persons from time to time named as Subsidiary
Guarantors in this Indenture or that become Subsidiary Guarantors
hereunder, and each of their respective successors, provided,
--------
however, that in the event that a Subsidiary Guarantor is
- -------
released from its Guarantee in accordance with the terms of this
Indenture, such Subsidiary Guarantor shall without any further
action no longer be a Subsidiary Guarantor for any purpose of
this Indenture or the Notes. On the date of this Indenture, the
Subsidiary Guarantors are AJI, KFC, KAAC and KJC.
Tax Sharing Agreements: The term "Tax Sharing Agreements"
-----------------------
shall mean, collectively, the tax-sharing agreement between the
Company and KAC, dated as of June 30, 1993, and the tax-sharing
28
<PAGE>
<PAGE> 37
agreement between the Company and MAXXAM, dated as of December
21, 1989, as each is described in the Prospectus and as each may
be amended in accordance with Section 4.08(b)(x) of this
Indenture.
Trust Indenture Act of 1939: The term "Trust Indenture Act
----------------------------
of 1939" shall mean the Trust Indenture Act of 1939 as it was in
force at the date of this Indenture, except as provided by
Article Ten.
Trustee; principal office: The term "Trustee" shall mean
--------------------------
First Trust National Association, a national banking association,
until a successor replaces it in accordance with the provisions
of Article Seven. The term "principal office of the Trustee"
shall mean the office of the Trustee at which at any particular
time its corporate trust business may be principally
administered, which office at the date hereof is located at First
Trust Center, 180 East 5th Street, St. Paul, Minnesota 55101.
U.S. Fixed Assets: The term "U.S. Fixed Assets" shall mean,
------------------
at any time, any real property, plant or equipment of the Company
or any of its Subsidiaries located at such time in the United
States of America, now owned or hereafter acquired, together with
any fixed assets that are Improvements thereto or thereon and any
fixed assets that are proceeds thereof.
USWA Preferred Stock: The term "USWA Preferred Stock" shall
---------------------
mean the shares of the Company's Cumulative (1985 Series A)
Preference Stock and shares of the Company's Cumulative (1985
Series B) Preference Stock that have been or may in the future be
issued in connection with the Kaiser Aluminum USWA Employee Stock
Ownership Plan and/or the Kaiser Aluminum Salaried Employee Stock
Ownership Plan.
VALCO: The term "VALCO" shall mean Volta Aluminium Company
------
Limited, a Ghanaian corporation, and its successors.
SECTION 1.02. References are to Indenture. Unless the
----------------------------
context otherwise requires, all references herein to "Articles,"
"Sections" and other subdivisions refer to the corresponding
Articles, Sections and other subdivisions of this Indenture, and
the words "herein," "hereof," hereby," "hereunder" and words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision hereof.
SECTION 1.03. Other definitions.
------------------
The following terms are defined in the referenced section of
this Indenture and have the meaning set forth therein for all
purposes in this Indenture (except as otherwise expressly
provided or unless the context otherwise requires):
Term Defined in Section
"applicants" . . . . . . . . . . . . . . . 5.02(b)
"Asset Sale Offer" . . . . . . . . . . . . 4.14(b)
"Asset Sale Offer Amount". . . . . . . . . 4.14(b)
"Asset Sale Purchase Date" . . . . . . . . 4.14(b)
"Asset Sale Purchase Notice" . . . . . . . 4.14(b)
"Asset Sale Purchase Price". . . . . . . . 4.14(b)
"Change of Control". . . . . . . . . . . . 3.05(a)
"Change of Control Purchase Date". . . . . 3.05(a)
"Change of Control Purchase Notice". . . . 3.05(c)
"Change of Control Purchase Price" . . . . 3.05(a)
29
<PAGE>
<PAGE> 38
"Controlled Non-Affiliate Joint Venture" . 4.09(a)
"Incur". . . . . . . . . . . . . . . . . . 4.10(a)
"Notice of Default". . . . . . . . . . . . 6.01(c)
"Other Indebtedness" . . . . . . . . . . . 4.10(c)
"PRIDES" . . . . . . . . . . . . . . . . . 4.09(b)(IX)
"record date". . . . . . . . . . . . . . . 2.03
"Refinanced Indebtedness". . . . . . . . . 4.10(b)(vi)
"Refinancing Indebtedness" . . . . . . . . 4.10(b)(vi)
"Restricted Payment" . . . . . . . . . . . 4.09(a)
"Series A Shares". . . . . . . . . . . . . 4.09(b)(IX)
"Specified Pari Passu Indebtedness". . . . 4.14(b)
"surviving corporation". . . . . . . . . . 11.01(a)
"Twenty-Five Million Threshold". . . . . . 4.14(c)
"Voting Stock" . . . . . . . . . . . . . . 3.05(a)
The following terms are defined in the referenced section of
this Indenture and have the meaning set forth therein for
purposes provided therein, and such definitions are limited to
those sections of the Indenture specifically referenced:
<TABLE>
<CAPTION>
Defined in Definition Limited
Term Section to Section
---- ----------- -------------------
<S> <C> <C>
"amount" . . . . . . . .7.08(d). . . . . . . . . 7.08
"cash transaction" . . .7.13(c). . . . . . . . . 7.13
"Company". . . . . . . .7.08(d). . . . . . . . . 7.08
"Company". . . . . . . .7.13(c). . . . . . . . . 7.13
"defaults" . . . . . . .6.07 . . . . . . . . . . 6.07
"defaults" . . . . . . .7.13(c). . . . . . . . . 7.13
"director" . . . . . . .7.08(d). . . . . . . . . 7.08
"dividends". . . . . . .7.13(a). . . . . . . . . 7.13(a)
"executive officer". . .7.08(d). . . . . . . . . 7.08
"in default" . . . . . .7.08(c). . . . . . . . . 7.08(c)(6), (7)
(8) and (9)
"other indenture securities" . . . . . . . . . . 7.13(c) . 7.13
"outstanding". . . . . . . . . . . . . . . . . . 7.08(d) 7.08
"person" . . . . . . . .7.08(d). . . . . . . . . 7.08
"security" . . . . . . .7.08(c). . . . . . . . . 7.08(c)(6), (7)
(8) and (9)
"security" . . . . . . .7.08(d). . . . . . . . . 7.08 (other
than
7.08(c)(6),
(7), (8) and
(9))
"self liquidating paper"7.13(c). . . . . . . . . 7.13
"trust". . . . . . . . .7.08(d). . . . . . . . . 7.08
"voting security". . . .7.08(d). . . . . . . . . 7.08
</TABLE>
30
<PAGE>
<PAGE> 39
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
SECTION 2.01. Designation, amount, authentication and
----------------------------------------
delivery of Notes. The Notes shall be designated as the
- -----------------
Company's 9 % Senior Notes due 2002. Notes for an aggregate
principal amount of two hundred twenty five million dollars
($225,000,000), upon the execution of this Indenture, or from
time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and deliver said Notes to or upon
the written order of the Company, signed by its Chairman of the
Board, President or a Vice President, without any further
corporate action by the Company.
The aggregate principal amount of Notes authorized by this
Indenture is limited to two hundred twenty five million dollars
($225,000,000), and, except as provided in this Section 2.01 and
in Section 2.07, the Company shall not execute and the Trustee
shall not authenticate or deliver Notes in excess of such
aggregate principal amount.
Nothing contained in this Section 2.01 or elsewhere in this
Indenture, or in the Notes, is intended to or shall limit
execution by the Company or authentication or delivery by the
Trustee of Notes under the circumstances contemplated by Sections
2.05, 2.06, 2.07, 3.03, 3.05 and 10.04.
SECTION 2.02. Form of Notes and Trustee's certificate. The
----------------------------------------
definitive Notes and the Trustee's certificate of authentication
to be borne by the Notes shall be substantially in the form set
forth in the Recitals of this Indenture, which are part of this
Indenture, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as the officers
executing the same may deem appropriate and as are not
inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock
exchange on which the Notes may be listed, or to conform to
usage.
SECTION 2.03. Date of Notes and denominations. The Notes
--------------------------------
shall bear interest at the rate per annum of 9 %, payable semi-
annually on February 15 and August 15, shall mature on
February 15, 2002 and shall be issuable as registered Notes
without coupons in denominations of $1,000 and any integral
multiple thereof. The person in whose name any Note is
registered at the close of business on any record date (as
hereinbelow defined) with respect to any interest payment date
shall be entitled to receive the interest payable thereon on such
interest payment date notwithstanding the cancellation of such
Note upon any registration of transfer or exchange thereof
subsequent to such record date and prior to such interest payment
date, unless such Note shall have been redeemed on a date fixed
for redemption subsequent to such record date and prior to such
interest payment date, or unless an Event of Default shall have
occurred and be continuing as the result of a default in the
payment of interest due on such interest payment date on any
Note, in which case such defaulted interest shall be paid to the
person in whose name such Note (or any Note or Notes issued upon
registration of transfer or exchange thereof) is registered on
the record date for the payment of such defaulted interest. The
principal of, premium, if any, Change of Control Purchase Price,
Asset Sale Purchase Price and interest on the Notes shall be
payable at the office or agency to be maintained by the Company
in accordance with the provisions of Section 4.02; provided,
however, that payment of interest may be made at the option of
the Company by check mailed by first-class mail to the address of
the person entitled thereto as such address shall appear on the
registry books of the Company. The term "record date" as used in
this Section 2.03 with respect to any interest payment date shall
mean the close of business on the February 1 or August 1, as
31
<PAGE>
<PAGE> 40
the case may be, next preceding such interest payment date,
whether or not such February 1 or August 1 is a Business Day, and
such term, as used in this Section 2.03, with respect to the
payment of any defaulted interest shall mean the tenth day next
preceding the date fixed by the Company for the payment of
defaulted interest whether or not a Business Day, but in no case
shall such record date be less than ten days after notice thereof
shall have been mailed by or on behalf of the Company to all
registered holders of Notes at their addresses.
The Notes shall be dated the date of their authentication.
Except as provided in the next sentence, interest shall accrue on
the Notes from the most recent date to which interest has been
paid or duly provided for or, if no interest has been paid or
duly provided for, from February 17, 1994. Each Note
authenticated between the record date for any interest payment
date and such interest payment date shall be dated the date of
its authentication but shall bear interest from such interest
payment date; provided, however, that if and to the extent the
Company shall default in the payment of the interest due on such
interest payment date, then any Note so authenticated shall bear
interest from the February 15 or August 15, as the case may be,
next preceding the date of such Note to which interest has been
paid or duly provided for or, if no interest has been paid or
duly provided for on the Notes, from February 17, 1994.
Interest on the Notes shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
SECTION 2.04. Execution of Notes. The Notes shall be
-------------------
signed on behalf of the Company, manually or in facsimile, by its
Chairman of the Board or its President or a Vice President under
its corporate seal (which may be in facsimile) reproduced thereon
and attested, manually or in facsimile, by its Secretary or an
Assistant Secretary. Only such Notes as shall bear thereon a
certificate of authentication substantially in the form
hereinbefore recited, signed manually by the Trustee, shall be
entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such signature by the Trustee upon
any Note executed by the Company shall be conclusive evidence
that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
In case any officer of the Company whose signature appears
on any of the Notes, manually or in facsimile, shall cease to be
such officer before such Notes so signed shall have been
authenticated and delivered by the Trustee, such Notes
nevertheless may be authenticated and delivered as though the
person whose signature appears on such Notes had not ceased to be
such officer of the Company; and any Note may be signed, and the
corporate seal reproduced thereon may be attested, on behalf of
the Company, manually or in facsimile, by persons as, at the
actual date of the execution of such Note, shall be the proper
officers of the Company, although at the date of the execution of
this Indenture any such person was not such officer.
SECTION 2.05. Exchange and transfer of Notes. Notes may be
-------------------------------
exchanged for a like aggregate principal amount of Notes in other
authorized denominations. Notes to be exchanged shall be
surrendered at the office or agency to be maintained by the
Company in accordance with the provisions of Section 4.02, and
the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor the Note or Notes which the
noteholder making the exchange shall be entitled to receive.
The Company shall keep, at the office or agency to be
maintained by the Company in accordance with the provisions of
Section 4.02, a register or registers in which, subject to such
reasonable regulations as it may prescribe, the Company shall
register Notes and shall register the transfer of Notes as in
this Article Two provided. Upon surrender for registration of
transfer of any Note at such office or agency,
32
<PAGE>
<PAGE> 41
the Company shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Note
or Notes for a like aggregate principal amount.
All Notes presented or surrendered for exchange,
registration of transfer, redemption, purchase or payment shall,
if so required by the Company or the Trustee or any Note
registrar (if other than the Trustee), be accompanied by a
written instrument or instruments of transfer, in form
satisfactory to the Company and the Trustee or the Note registrar
(if other than the Trustee), duly executed by the registered
holder or by his attorney duly authorized in writing and, in
every case, each Note presented or surrendered for registration
of transfer shall be accompanied by the assignment form attached
to the Notes, duly executed by the registered holder or by his
attorney duly authorized in writing.
No service charge shall be made for any exchange or
registration of transfer of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.
The Company shall not be required to issue, register the
transfer of or exchange any Notes for a period of fifteen days
next preceding any date for the selection of Notes to be
redeemed. The Company shall not be required to register the
transfer of or exchange any Note called or being called for
redemption except, in the case of any Note to be redeemed in
part, the portion thereof not to be so redeemed. The Company
shall not be required to register the transfer of or exchange any
Note in respect of which a Change of Control Purchase Notice or
an Asset Sale Purchase Notice has been given (unless such notice
has been withdrawn in accordance with Section 3.06 or 4.14)
except, in the case of any Note to be purchased in part, the
portion thereof not to be so purchased.
SECTION 2.06. Temporary Notes. Pending the preparation of
----------------
definitive Notes, the Company may execute and the Trustee shall
authenticate and deliver temporary Notes (printed, lithographed
or typewritten) of any authorized denomination and substantially
in the form of the definitive Notes, but with or without a
recital of specific redemption prices and with such omissions,
insertions and variations as may be appropriate for temporary
Notes, all as may be determined by the Company. Temporary Notes
may contain such reference to any provisions of the Indenture as
may be appropriate. Every temporary Note shall be authenticated
by the Trustee upon the same conditions and in substantially the
same manner, and with the same effect, as the definitive Notes.
Without unnecessary delay the Company will execute and deliver to
the Trustee definitive Notes and thereupon any or all temporary
Notes may be surrendered in exchange therefor, at the office or
agency to be maintained by the Company in accordance with the
provisions of Section 4.02, and the Trustee shall authenticate
and deliver in exchange for such temporary Notes an equal
aggregate principal amount of definitive Notes. Until so
exchanged, the temporary Notes shall in all respects be entitled
to the same benefits under this Indenture, and shall be subject
to the same provisions hereof, as definitive Notes authenticated
and delivered hereunder.
SECTION 2.07. Mutilated, destroyed, lost or stolen Notes.
-------------------------------------------
In case any temporary or definitive Note shall become mutilated
or be destroyed, lost or stolen, the Company, in the case of any
mutilated Note shall, and in the case of any destroyed, lost or
stolen Note may, execute, and upon its request the Trustee shall
authenticate and deliver, a new Note bearing a number, letter or
other distinguishing symbol not contemporaneously outstanding in
exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen,
or, instead of issuing a substituted Note, if any such Note shall
have matured or shall be about to mature or shall have been
selected for redemption or if the Company shall have received a
Change of Control Purchase Notice or an Asset Sale Purchase
Notice in respect of any such Note (unless such notice has been
withdrawn in accordance with Section 3.06 or 4.14), the Company
may pay the same without surrender thereof except in the case of
a mutilated Note. In every case the applicant for a substituted
Note or for such payment shall furnish to the
33
<PAGE>
<PAGE> 42
Company and to the Trustee such security or indemnity as may be
required by them to save each of them harmless, and, in every
case of destruction, loss or theft, the applicant shall also
furnish to the Company and to the Trustee evidence to their
satisfaction of the destruction, loss or theft of such Note and
of the ownership thereof. The Trustee may authenticate any such
substituted Note and deliver the same, or the Trustee or any
paying agent of the Company may make any such payment, upon the
written request or authorization of any officer of the Company.
Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and
any other expenses connected therewith.
Every substituted Note issued pursuant to the provisions of
this Section 2.07 shall constitute an additional contractual
obligation of the Company whether or not the destroyed, lost or
stolen Note shall be found at any time, and shall be entitled to
all the benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
All Notes shall be held and owned upon the express condition
that the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or stolen
Notes, and shall preclude (to the extent lawful) any and all
other rights or remedies, notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other
securities without their surrender.
SECTION 2.08. Cancellation of surrendered Notes. All Notes
----------------------------------
surrendered for the purpose of payment, redemption, purchase by
the Company at the option of the holder, exchange, substitution
or registration of transfer, shall, if surrendered to the Company
or any paying agent or Note registrar, be delivered to the
Trustee and the same, together with Notes surrendered to the
Trustee for cancellation, shall be cancelled by it, and no Notes
shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Indenture. The Trustee shall
destroy cancelled Notes and shall deliver certificates of
destruction thereof to the Company. If the Company shall
purchase or otherwise acquire any of the Notes, however, such
purchase or acquisition shall not operate as a payment,
redemption or satisfaction of the indebtedness represented by
such Notes unless and until the Company, at its option, shall
deliver or surrender the same to the Trustee for cancellation.
ARTICLE THREE
REDEMPTION AND PURCHASES OF NOTES
SECTION 3.01. Redemption prices. The Company may, at its
------------------
option, redeem at any time all or from time to time any part of
the Notes, on any date prior to maturity at the redemption prices
specified in the Notes, together with accrued and unpaid interest
thereon to but excluding the date fixed for redemption and in the
manner set forth in this Article Three. The Company, however,
shall not have the right to redeem any of the Notes prior to
February 15, 1998.
SECTION 3.02. Notice of redemption; selection of Notes. In
-----------------------------------------
case the Company shall desire to exercise such right to redeem
all or, as the case may be, any part of the Notes in accordance
with the right reserved so to do, the Company, or, at the
Company's request, the Trustee in the name and at the expense of
the Company, shall fix a date for redemption and give notice of
such redemption to holders of the Notes to be redeemed as
hereinafter in this Section 3.02 provided.
Notice of redemption shall be given to the holders of Notes
to be redeemed as a whole or in part by mailing by first-class
mail a notice of such redemption not less than fifteen nor more
than sixty days
34
<PAGE>
<PAGE> 43
prior to the date fixed for redemption to their last addresses as
they shall appear upon the registry books of the Company, but any
failure to give such notice by mailing to the holder of any Note
designated for redemption as a whole or in part, or any defect
therein, shall not affect the validity of the proceedings for the
redemption of any other Notes.
Any notice which is mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether
or not the holder receives the notice.
Each such notice of redemption shall specify the total
principal amount to be redeemed, the date fixed for redemption
and the redemption price at which Notes are to be redeemed, and
shall state that payment of the redemption price of the Notes to
be redeemed will be made at the office or agency to be maintained
by the Company in accordance with the provisions of Section 4.02,
upon presentation and surrender of such Notes, that interest
accrued to but not including the date fixed for redemption will
be paid as specified in said notice, and that on and after said
date interest thereon will cease to accrue and that the only
remaining right of the noteholder is to receive payment of the
redemption price plus such accrued interest upon surrender. If
less than all the Notes are to be redeemed, the notice of
redemption to each holder also shall state the aggregate
principal amount of Notes to be redeemed and shall identify the
Notes of such holder to be redeemed. In case any Note is
redeemed in part only, the notice which relates to such Note
shall state the portion of the principal amount thereof to be
redeemed (which shall be $1,000 or an integral multiple thereof),
and shall state that on and after the date fixed for redemption,
upon surrender of such Note, the holder will receive, without
charge, a new Note or Notes of authorized denominations in the
principal amount thereof remaining unredeemed. Each notice shall
give the name and address of each paying agent.
On or prior to the date fixed for redemption specified in
the notice of redemption given as provided in this Section 3.02,
the Company will deposit with the Trustee or with one or more
paying agents (or, if the Company is acting as its own paying
agent, set aside, segregate and hold in trust as provided in
Section 4.04(c)) an amount of money sufficient to redeem on the
date fixed for redemption all the Notes or portions of Notes so
called for redemption (other than Notes or portions thereof
called for redemption on that date which have been delivered by
the Company to the Trustee for cancellation) at the applicable
redemption price, together with accrued interest to but not
including the date fixed for redemption.
If less than all the Notes then outstanding are to be
redeemed, the Company shall give the Trustee, at least
twenty-five days (or such shorter period acceptable to the
Trustee) in advance of the date fixed for redemption, notice of
the aggregate principal amount of Notes to be redeemed, and
thereupon the Trustee shall select in such manner as it shall
deem appropriate and fair, in its discretion, the Notes or
portions thereof to be redeemed and shall thereafter promptly
notify the Company of the Notes or portions thereof to be
redeemed within a sufficient period of time in order that the
notice provision in Section 3.02 may be satisfied.
SECTION 3.03. When Notes called for redemption become due
--------------------------------------------
and payable. If the giving of notice of redemption shall have
- -----------
been completed as provided in Section 3.02, the Notes or portions
of Notes specified in such notice shall become due and payable on
the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued to (but not
including) the date fixed for redemption, and on and after such
date fixed for redemption (unless the Company shall default in
the payment of such Notes at the redemption price, together with
interest accrued to (but not including) the date fixed for
redemption) interest on the Notes or portions of Notes so called
for redemption shall cease to accrue whether or not such Notes
are presented for payment and such Notes or portions thereof
shall be deemed not to be outstanding hereunder and shall not be
entitled to any right or benefit hereunder
35
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except to receive payment of the redemption price plus accrued
interest to but not including the redemption date. On
presentation and surrender of such Notes for redemption at said
place of payment in said notice specified on or after the date
fixed for redemption, the said Notes shall be paid and redeemed
by the Company at the applicable redemption price, together with
interest accrued to (but not including) the date fixed for
redemption. If the date fixed for redemption is an interest
payment date, such payment shall not include accrued interest,
which interest shall be paid in the usual manner otherwise
provided for herein. Upon presentation of any Note which is
redeemed in part only, the Company shall execute and register and
the Trustee shall authenticate and deliver to the holder thereof
at the expense of the Company, a new Note or Notes in principal
amount equal to the unredeemed portion of the Note so presented.
SECTION 3.04. Cancellation of redeemed Notes. All Notes
-------------------------------
surrendered to the Trustee, upon redemption pursuant to the
provisions of this Article Three, shall be forthwith cancelled by
it.
SECTION 3.05. Purchase of Notes at option of the holder
------------------------------------------
upon Change of Control.
- ----------------------
(a) If on or prior to maturity, there shall have occurred a
Change of Control, the Company shall offer to purchase each Note
at a purchase price in cash equal to 101% of the principal amount
thereof plus interest accrued to (but not including) the Change
of Control Purchase Date (the "Change of Control Purchase
Price"), on the date that is thirty Business Days after the
occurrence of the Change of Control (the "Change of Control
Purchase Date"), subject to the satisfaction by or on behalf of
the holder of the requirements set forth in Section 3.05(c).
Following a Change of Control, the Company shall not be obligated
to purchase any Notes pursuant to this Section 3.05(a) or give
any notice under Section 3.05(b) with respect to any subsequent
Change of Control. The Company's obligation to purchase Notes as
provided hereunder shall for all purposes hereof be satisfied by,
and shall cease upon, the deposit of funds with the Trustee as
provided for in Section 3.07.
A "Change of Control" shall be deemed to have occurred at
such time as MAXXAM, directly or indirectly, shall cease to have
(other than by reason of the existence of a Lien but including by
reason of the foreclosure of or other realization upon a Lien)
direct or indirect sole beneficial ownership (as defined under
Regulation 13d-3 of the Exchange Act as in effect on the date of
this Indenture) of at least 40% of the total Voting Stock, on a
fully diluted basis, of the Company; provided, however, that such
ownership by MAXXAM, directly or indirectly, of 30% or greater,
but less than 40%, of the total Voting Stock, on a fully diluted
basis, of the Company shall not be a Change of Control if MAXXAM,
through direct representation or through persons nominated by it,
controls a majority of the Board of Directors of the Company
necessary to effectuate any actions by the Board of Directors of
the Company; and provided, further, that the foregoing minimum
percentages shall be deemed not satisfied if any person or group
(as defined in Section 13(d)(3) of the Exchange Act as in effect
on the date of this Indenture) shall, directly or indirectly, own
more of the total Voting Stock entitled to vote generally in the
election of directors of the Company than MAXXAM.
"Voting Stock" means, with respect to any person, the
capital stock of such person having general voting power under
ordinary circumstances to elect at least a majority of the board
of directors, managers or trustees of such person (irrespective
of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the
happening of any contingency).
(b) Within ten Business Days after the occurrence of a
Change of Control, the Company shall mail a written notice of
Change of Control by first-class mail to the Trustee and to each
holder (and to beneficial owners as required by applicable law,
including without limitation, Rule 13e-4 of the Exchange Act, if
applicable) and shall cause a copy of such notice to be published
in a daily newspaper of national
36
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circulation. The notice shall include a form of Change of
Control Purchase Notice (as described below) to be completed by
the holder and shall state:
(1) the events causing a Change of Control and the
date of such Change of Control;
(2) the date by which the Change of Control Purchase
Notice pursuant to this Section 3.05 must be given;
(3) the Change of Control Purchase Date;
(4) the Change of Control Purchase Price;
(5) the name and address of the Trustee and the office
or agency referred to in Section 4.02;
(6) that the Notes must be surrendered to the Trustee
or the office or agency referred to in Section 4.02 to
collect payment;
(7) that the Change of Control Purchase Price for any
Note as to which a Change of Control Purchase Notice has
been duly given and not withdrawn will be paid promptly
following the later of the Change of Control Purchase Date
and the time of surrender of such Note as described in (6);
(8) the procedures the holder must follow to exercise
rights under this Section 3.05 and a brief description of
those rights; and
(9) the procedures for withdrawing a Change of Control
Purchase Notice.
(c) To accept the offer to purchase Notes described in
Section 3.05(a), a holder must deliver a written notice of
purchase (a "Change of Control Purchase Notice") to the Trustee
or to the office or agency referred to in Section 4.02 at any
time prior to the close of business on the Business Day
immediately preceding the Change of Control Purchase Date,
stating:
(1) the name of the holder, the principal amount of
Notes, the certificate number or numbers of the Note or
Notes which the holder will deliver to be purchased and a
statement that the offer to purchase is being accepted;
(2) the portion of the principal amount of the Note
which the holder will deliver to be purchased, which portion
must be $1,000 or an integral multiple thereof; and
(3) that such Note shall be purchased on the Change of
Control Purchase Date pursuant to the terms and conditions
specified in the Notes.
The delivery of the Note, by hand or by registered mail
prior to, on or after the Change of Control Purchase Date
(together with all necessary endorsements), to the Trustee or to
the office or agency referred to in Section 4.02 shall be a
condition to the receipt by the holder of the Change of Control
Purchase Price therefor; provided, however, that such Change of
Control Purchase Price shall be so paid pursuant to this Section
3.05 only if the Note so delivered to the Trustee or such office
or agency shall conform in all respects to the description
thereof set forth in the related Change of Control Purchase
Notice; and provided, further that the Company shall have no
obligation to purchase any Notes
37
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<PAGE> 46
with respect to which the Change of Control Purchase Notice has
not been received by the Company prior to the close of business
on the Business Day immediately preceding the Change of Control
Purchase Date.
In the event that the offer to purchase described in Section
3.05(a) shall be accepted in accordance with the terms hereof,
the Company shall purchase from the holder thereof, pursuant to
this Section 3.05, a portion of a Note if the principal amount of
such portion is $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to the purchase of all of
a Note also apply to the purchase of such portion of such Note.
Any purchase by the Company contemplated pursuant to the
provisions of this Section 3.05 shall be consummated by the
delivery by the Trustee or other paying agent of the
consideration to be received by the holder promptly following the
later of the Change of Control Purchase Date and the time of
delivery of the Note.
Notwithstanding anything herein to the contrary, any holder
delivering to the Trustee or to the office or agency referred to
in Section 4.02, the Change of Control Purchase Notice
contemplated by this Section 3.05(c) shall have the right to
withdraw such Change of Control Purchase Notice by delivery of a
written notice of withdrawal to the Trustee or to such office or
agency in accordance with Section 3.06 at any time prior to the
close of business on the Business Day next preceding the Change
of Control Purchase Date.
SECTION 3.06. Effect of Change of Control Purchase Notice.
--------------------------------------------
Upon receipt by the Company of the Change of Control Purchase
Notice specified in Section 3.05(c), the holder of the Note in
respect of which such Change of Control Purchase Notice was given
shall (unless such Change of Control Purchase Notice is withdrawn
as specified in the following paragraph) thereafter be entitled
to receive solely the Change of Control Purchase Price with
respect to such Note. Such Change of Control Purchase Price
shall be due and payable as of the Change of Control Purchase
Date and shall be paid to such holder promptly following the
later of (x) the Change of Control Purchase Date (provided the
conditions in Section 3.05(c), as applicable, have been
satisfied) and (y) the date of delivery of such Note to the
Trustee or to the office or agency referred to in Section 4.02 by
the holder thereof in the manner required by Section 3.05(c).
A Change of Control Purchase Notice may be withdrawn by
means of a written notice of withdrawal delivered to the office
of the Trustee or to the office or agency referred to in Section
4.02 at any time on or prior to the close of business on the
Business Day next preceding the Change of Control Purchase Date,
specifying:
(1) the certificate number or numbers of the Note or Notes
in respect of which such notice of withdrawal is being submitted;
(2) the principal amount of the Note or Notes with respect
to which such notice of withdrawal is being submitted; and
(3) the principal amount, if any, of such Note or Notes
which remains subject to the original Change of Control Purchase
Notice, and which has been or will be delivered for purchase by
the Company.
There shall be no purchase of any Notes pursuant to Section
3.05 if there has occurred (prior to, on or after, as the case
may be, the giving, by the holders of such Notes, of the required
Change of
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<PAGE> 47
Control Purchase Notice), and is continuing an Event of Default
(other than a default in the payment of the Change of Control
Purchase Price with respect to such Notes).
SECTION 3.07. Deposit of Change of Control Purchase Price.
--------------------------------------------
On or prior to the Change of Control Purchase Date, the Company
shall deposit with the Trustee (or, if the Company or a
Subsidiary or an Affiliate of either of them is acting as paying
agent, shall segregate and hold in trust as provided in Section
4.04(c)) an amount of cash in immediately available funds
sufficient to pay the aggregate Change of Control Purchase Price
of all the Notes or portions thereof which are to be purchased on
the Change of Control Purchase Date. Upon such deposit, the
Company shall be deemed to have satisfied its obligations to
purchase Notes pursuant to Section 3.05. If cash sufficient to
pay the Change of Control Purchase Price of all Notes or portions
thereof to be purchased on the Change of Control Purchase Date is
deposited with the Trustee as of the Change of Control Purchase
Date, interest shall cease to accrue (whether or not any such
Note is delivered to the Trustee or any other office or agency
maintained for such purpose) on such Notes (or portions thereof)
on and after the Change of Control Purchase Date, and the holders
thereof shall have no other rights as such (other than the right
to receive the Change of Control Purchase Price, upon surrender
of such Notes).
SECTION 3.08. Covenant to comply with securities laws upon
---------------------------------------------
purchase of Notes. In connection with any offer to purchase or
- ------------------
any purchase of securities under Section 3.05 hereof, the Company
shall (i) comply with Section 14(e) under the Exchange Act (or
any successor provision thereof), if applicable, and (ii)
otherwise comply with all Federal and state securities laws
regulating the purchase of the Notes so as to permit the rights
and obligations under Section 4.05 to be exercised in the time
and in the manner specified in Sections 4.05 and 4.06.
SECTION 3.09. Repayment to the Company. The Trustee shall
-------------------------
return to the Company any cash, together with interest or
dividends, if any, thereon (subject to the provisions of Section
7.05) held by it for the payment of the Change of Control
Purchase Price of the Notes that remain unclaimed as provided in
Section 12.04 hereof; provided, however, that to the extent that
the aggregate amount of cash deposited by the Company pursuant to
Section 3.07 exceeds the aggregate Change of Control Purchase
Price of the Notes or portions thereof to be purchased on the
Change of Control Purchase Date, then promptly after the Change
of Control Purchase Date, the Trustee shall return any such
excess to the Company together with interest or dividends, if
any, thereon (subject to the provisions of Section 7.05).
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
The Company covenants as follows:
SECTION 4.01. Payments on the Notes. The Company will duly
----------------------
and punctually pay or cause to be paid the principal of, premium,
if any, Change of Control Purchase Price, Asset Sale Purchase
Price and interest on each of the Notes at the time and place
such amounts may become due and payable and in the manner
provided in the Notes and this Indenture.
SECTION 4.02. Maintenance of office or agency for
------------------------------------
registration of transfer, exchange and payment of Notes. So long
- --------------------------------------------------------
as any of the Notes shall remain outstanding, the Company will
maintain an office or agency in the Borough of Manhattan, City of
New York, State of New York, where the Notes may be surrendered
for exchange or registration of transfer as in this Indenture
provided, and where notices and demands to or upon the Company in
respect to the Notes or of this Indenture may be served,
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<PAGE> 48
and where the Notes may be presented or surrendered for payment,
redemption or purchase. The Company may also from time to time
designate one or more other offices or agencies where the Notes
may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided,
--------
however, that no such designation or rescission shall in any
- -------
manner relieve the Company of its obligation to maintain an
office or agency in the Borough of Manhattan, City of New York,
State of New York for such purposes. The Company will give to
the Trustee notice of the location of any such office or agency
and of any change of location thereof. In case the Company shall
fail to maintain any such office or agency or shall fail to give
such notice of the location or of any change in the location
thereof, such surrenders, presentations and demands may be made
and notices may be served at the principal office of the Trustee
in St. Paul, Minnesota, and the Company hereby appoints the
Trustee its agent to receive at the aforesaid office all such
surrenders, presentations, notices and demands.
SECTION 4.03. Appointment to fill a vacancy in the office
--------------------------------------------
of Trustee. The Company, whenever necessary to avoid or fill a
- ----------
vacancy in the office of Trustee, will appoint, in the manner
provided in Section 7.10, a Trustee, so that there shall at all
times be a Trustee hereunder.
SECTION 4.04. Provision as to paying agent.
-----------------------------
(a) If the Company shall appoint a paying agent other than
the Trustee, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provisions of this Section
4.04,
(1) that it will hold all sums held by it as such
agent for the payment of the principal of, premium, if any,
Change of Control Purchase Price, Asset Sale Purchase Price
or interest on the Notes (whether such sums have been paid
to it by the Company or by any other obligor on the Notes)
in trust for the benefit of the holders of the Notes, and
will notify the Trustee of the receipt of sums to be so
held,
(2) that it will give the Trustee notice of any
failure by the Company (or by any other obligor on the
Notes) to make any payment of the principal of, premium, if
any, Change of Control Purchase Price, Asset Sale Purchase
Price or interest on the Notes when the same shall be due
and payable, and
(3) that it will at any time during the continuance of
any Event of Default specified in subsection (a) or (b) of
Section 6.01, upon the written request of the Trustee,
deliver to the Trustee all sums so held in trust by it.
If any obligations under the Credit Agreement are
outstanding, the Company will notify the Bank Agent of the name
and address of any paying agent other than the Company or the
Trustee.
(b) If the Company shall not act as its own paying agent,
it will, prior to each due date of the principal of, premium, if
any, Change of Control Purchase Price, Asset Sale Purchase Price
or interest on any Notes, deposit with such paying agent a sum
sufficient to pay the principal, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price or interest so
becoming due, such sum to be held in trust for the benefit of the
holders of Notes entitled to such principal, premium, if any,
Change of Control Purchase Price, Asset Sale Purchase Price or
interest, and (unless such paying agent is the Trustee) the
Company will promptly notify the Trustee of its failure so to
act.
(c) If the Company shall act as its own paying agent, it
will, on or before each due date of the principal of, premium, if
any, Change of Control Purchase Price, Asset Sale Purchase Price
or interest
40
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<PAGE> 49
on the Notes, set aside, segregate and hold in trust for the
benefit of the persons entitled thereto, a sum sufficient to pay
such principal, premium, if any, Change of Control Purchase
Price, Asset Sale Purchase Price or interest so becoming due and
will notify the Trustee of any failure to take such action.
(d) Anything in this Section 4.04 to the contrary
notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for
any other reason, pay or cause to be paid to the Trustee all sums
held in trust by it, or by any paying agent hereunder, as
required by this Section 4.04, such sums to be held by the
Trustee upon the trusts herein contained.
(e) Anything in this Section 4.04 to the contrary
notwithstanding, the agreement to hold sums in trust as provided
in this Section 4.04 is subject to the provisions of Sections
12.03 and 12.04.
SECTION 4.05. Maintenance of corporate existence. So long
-----------------------------------
as any of the Notes shall remain outstanding, the Company will at
all times (except as otherwise provided or permitted in this
Section 4.05 or elsewhere in this Indenture) do or cause to be
done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate existence of
each Subsidiary; provided, however, that nothing herein shall
-------- -------
require the Company to continue the corporate existence of any
Subsidiary other than a Subsidiary Guarantor (so long as any such
Subsidiary is a Subsidiary Guarantor) if in the judgment of the
Company it shall be necessary, advisable or in the interest of
the Company to discontinue the same; and provided, further, that
-------- -------
any Subsidiary Guarantor may:
(a) merge or consolidate with or into the Company or any
other Subsidiary Guarantor or transfer all or substantially all
of its property to the Company or any other Subsidiary Guarantor;
(b) merge or consolidate with or into any other Person or
transfer all or substantially all of its property to any other
Person as provided in Section 15.03; and
(c) liquidate or dissolve under the laws of its
jurisdiction of formation, provided that such Subsidiary
--------
Guarantor is wholly owned directly by the Company and/or another
Subsidiary Guarantor.
SECTION 4.06. Officers' Certificate as to default and
----------------------------------------
statement as to compliance. The Company will, so long as any of
- ---------------------------
the Notes are outstanding:
(a) deliver to the Trustee, promptly upon becoming aware of
any Event of Default or any event which after the passage of time
or notice would become an Event of Default, an Officers'
Certificate specifying such event or Event of Default;
(b) deliver to the Trustee within one hundred and twenty
days after the end of each fiscal year of the Company, beginning
with the fiscal year ending December 31, 1994, a statement as to
compliance signed on behalf of the Company by the Chairman of the
Board or the President or any Vice President and by the Chief
Financial Officer, Treasurer or Controller of the Company stating
as to each signer thereof that:
(1) a review of the activities of the Company during
such year and of performance under this Indenture has been
made under his supervision, and
(2) to the best of his knowledge, based on such
review, there is no Event of Default or event which with
notice or the passage of time would become an Event of
Default which has occurred and is continuing, or, if there
is such an event or Event of Default, specifying each such
event or Event of Default known to him and the nature and
status thereof; and
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(c) deliver to the Trustee within five days after becoming
aware of the occurrence thereof written notice of any
acceleration which, with the giving of notice and the lapse of
time, would be an Event of Default within the meaning of Section
6.01(d).
SECTION 4.07. Usury laws. The Company, to the extent it
-----------
may lawfully do so, will not voluntarily claim, and will actively
resist any attempts to claim, the benefit of any usury laws
against any holder of the Notes.
SECTION 4.08. Restrictions on transactions with Affiliates.
---------------------------------------------
(a) The Company shall not, and shall not permit any of its
Subsidiaries or its Non-Affiliate Joint Ventures to, enter into
any transaction or series of related transactions with any
Affiliate of the Company, unless:
(i) the terms thereof are no less favorable to the
Company, such Subsidiary or such Non-Affiliate Joint
Venture, as the case may be, than those that could
reasonably be expected to be obtained in a comparable
transaction with an unrelated Person,
(ii) such transaction or series of related
transactions shall have been approved as meeting such
standard, in good faith, by a majority of the independent
members of the Board of Directors of the Company evidenced
by a Board Resolution and
(iii) if the amount of such transaction or the
aggregate amount of such series of related transactions is
greater than $10,000,000, the Company, such Subsidiary
and/or such Non-Affiliate Joint Venture, as the case may be,
shall have received an opinion that such transaction or
series of related transactions is fair to the Company, such
Subsidiary and/or such Non-Affiliate Joint Venture, as the
case may be, from a financial point of view, from an
independent investment banking firm of national standing
selected by the Company.
The Company shall deliver to the Trustee, within 60 days after
the end of each fiscal quarter of the Company, an Officers'
Certificate which (x) shall specify the aggregate dollar amount
of transactions (other than transactions referred to in Section
4.08(b)) with Affiliates of the Company occurring during such
fiscal quarter, and (y) with respect to any transaction with an
Affiliate of the Company, or series of related transactions
(other than transactions referred to in Section 4.08(b)) with
Affiliates of the Company, occurring during such fiscal quarter,
shall briefly describe such transaction or transactions.
(b) The provisions contained in the foregoing paragraphs of
this Section 4.08 shall not apply to:
(i) the making of any Restricted Payments and
Restricted Investments otherwise permitted by Section 4.09
(other than 4.09(b)(IV)),
(ii) the making of payments permitted by the Tax
Sharing Agreements,
(iii) the making of payments to MAXXAM for
reimbursement for actual services provided thereby to the
Company or its Subsidiaries or Non-Affiliate Joint Ventures
based on actual costs and an allocable share of overhead
expenses,
(iv) compensation (in the form of reasonable
director's fees and reimbursement or advancement of
reasonable out-of-pocket expenses) paid to any director of
the Company or its Subsidiaries or Non-Affiliate Joint
Ventures for services rendered in such person's capacity as
42
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<PAGE> 51
a director and indemnification and directors' and officers'
liability insurance in connection therewith,
(v) compensation, indemnification and other benefits
paid or made available to officers and employees of the
Company or its Subsidiaries or Non-Affiliate Joint Ventures
for services actually rendered, comparable to those
generally paid or made available by entities engaged in the
same or similar businesses (including reimbursement or
advancement of reasonable out-of-pocket expenses and
directors' and officers' liability insurance),
(vi) loans to officers, directors and employees of the
Company or its Subsidiaries for business or personal
purposes and other loans and advances to such officers,
directors and employees for travel, entertainment, moving
and other relocation expenses, in each case made in the
ordinary course of business and consistent with past
practices of the Company and its Subsidiaries,
(vii) any amendment to the Existing Intercompany Note
that extends the maturity thereof or reduces the interest
rate thereon, or any other amendment thereto that does not
materially adversely affect the holders of the Notes,
(viii) the dividend by the Company of all or any
portion of the Existing Intercompany Note and accrued
interest thereon,
(ix) any merger, consolidation, transfer or sale
permitted by Section 11.01(b), and
(x) any amendment to the Tax Sharing Agreements,
provided that a majority of the independent members of the
---------
Board of Directors of the Company evidenced by a Board
Resolution determines that such amendment would not
materially adversely affect the holders of the Notes.
SECTION 4.09. Limitations on Restricted Payments and
---------------------------------------
Restricted Investments.
- -----------------------
(a) The Company shall not, directly or indirectly, (i)
declare or pay any dividend or make any distribution in respect
of its Capital Stock (other than dividends payable in Capital
Stock of the Company other than Redeemable Stock), (ii) make or
permit any of its Subsidiaries to make any payment on account of
the purchase, redemption or other acquisition or retirement of
any Capital Stock of the Company other than through the issuance
solely of Capital Stock of the Company (other than Redeemable
Stock) or rights thereto, provided that any Subsidiary of the
--------
Company may purchase Capital Stock of the Company from the
Company or from any other Subsidiary of the Company (which
purchase shall not be a Restricted Payment or a Restricted
Investment), (iii) make or permit any of its Subsidiaries to make
any voluntary purchase, redemption or other acquisition or
retirement for value of any Indebtedness that is subordinated
(pursuant to its terms) in right and priority of payment to the
Notes or any Subsidiary Guarantor's obligations under its
Guarantee, as the case may be, other than purchases, redemptions
or other acquisitions or retirements of Permitted Indebtedness
described in clause (b) of the definition thereof or purchases,
redemptions or other acquisitions otherwise permitted by the
terms hereof, (each of the foregoing in clauses (i), (ii) and
(iii) a "Restricted Payment"), (iv) to the extent the Company or
its Subsidiaries exercise actual control over a Non-Affiliate
Joint Venture existing on the date of this Indenture or formed or
acquired after the date of this Indenture (each a "Controlled
Non-Affiliate Joint Venture"), permit such Controlled Non-
Affiliate Joint Venture to make any Restricted Investment or (v)
make or permit any of its Subsidiaries to make any Restricted
Investment, unless at the time of, and after giving effect to,
each such Restricted Payment or Restricted Investment:
43
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<PAGE> 52
(A) no Event of Default (and no event that, after
notice or lapse of time or both, would become an Event of
Default) shall have occurred and be continuing (or would
occur and be continuing after giving effect thereto); and
(B) the Consolidated Fixed Charge Coverage Ratio of
the Company is greater than 2.0 to 1; and
(C) the sum of:
(x) the aggregate amount expended for all
Restricted Payments after December 31, 1992, and
(y) the aggregate amount of Restricted
Investments (less the amount of (1) such Restricted
Investments returned in cash, or in property if made in
property, (2) any guarantee that constitutes a
Restricted Investment, to the extent it has been
released, and (3) any direct liabilities or obligations
to be assumed or discharged in connection with such
Restricted Investments (in either case without recourse
to the Company, any of its Subsidiaries or any
Controlled Non-Affiliate Joint Venture) if such
liability or obligation had been a liability or
obligation of the Company, any of its Subsidiaries or
any Controlled Non-Affiliate Joint Venture)
(in each case, the amount expended for such Restricted
Payments and Restricted Investments or the amount of any
Restricted Investments returned, if paid or returned in
property other than in cash or a sum certain guaranteed, to
be the Fair Market Value of such property), would not exceed
the sum of:
(I) 50% of the Consolidated Net Income of the Company
(or, if the aggregate Consolidated Net Income of the Company
for any such period shall be a deficit, minus 100% of such
deficit) accrued on a cumulative basis for the period (taken
as one accounting period) from January 1, 1993 to the end of
the Company's most recently ended fiscal quarter for which
financial statements are available at the time such
Restricted Payment or Restricted Investment is being made,
and
(II) the aggregate net proceeds, including the Fair
Market Value of property other than cash, received by the
Company as capital contributions to the Company after
December 31, 1992, or from the issue or sale (other than to
a Non-Affiliate Joint Venture or to a Subsidiary of the
Company), after December 31, 1992, of Capital Stock other
than Redeemable Stock (including Capital Stock, other than
Redeemable Stock, issued upon the conversion of, or in
exchange for, indebtedness or Redeemable Stock, and
including upon exercise of warrants or options or other
rights to purchase such Capital Stock, issued after December
31, 1992), or from the issue or sale, after December 31,
1992 of any debt or other security of the Company
convertible or exercisable into such Capital Stock that has
been so converted or exercised;
provided, however, that in no event shall the Company make, or
- -------- -------
permit any of its Subsidiaries to make, a Restricted Payment or
Restricted Investment pursuant to this Section 4.09(a) to or in
MAXXAM or any Affiliate of MAXXAM if, after giving effect
thereto, (A) the aggregate amount of all Restricted Payments and
Restricted Investments (less the amount of (1) such Restricted
Investments returned in cash, or in property if made in property,
(2) any guarantee that constitutes a Restricted Investment, to
the extent it has been released, and (3) any direct liabilities
or obligations to be assumed or discharged in connection with
such Restricted Investments (in either case without recourse to
the Company, any of its Subsidiaries
44
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<PAGE> 53
or any Controlled Non-Affiliate Joint Venture) if such liability
or obligation had been a liability or obligation of the Company,
any of its Subsidiaries or any Controlled Non-Affiliate Joint
Venture) made pursuant to this Section 4.09(a) in any calendar
year to or in MAXXAM or any Affiliate of MAXXAM, less (B) the
aggregate amount of such Restricted Payments and Restricted
Investments made to or in KAC in such calendar year which are
distributed or paid within thirty days thereafter by KAC to its
holders of Common Stock other than MAXXAM and any Affiliate of
MAXXAM, would exceed (C) $75,000,000; and provided, further, that
-------- -------
notwithstanding the foregoing, the Company may make any such
Restricted Payment or Restricted Investment to or in MAXXAM or
any Affiliate of MAXXAM if, after giving pro forma effect
thereto, the Company's senior debt rating would be Baa3 (or the
equivalent) or better by Moody's Investor Services, Inc. (or a
successor rating agency) or BBB- (or the equivalent) or better by
Standard & Poor's Corporation (or a successor rating agency).
(b) The foregoing provisions of this Section 4.09 shall not
be violated by reason of the following Restricted Payments:
(I) the payment of any dividend or distribution or the
redemption of any securities within 60 days after the date
of declaration of such dividend or distribution or the
giving of the formal notice by the Company of such
redemption, if at said date of declaration of such dividend
or distribution or the giving of the formal notice of such
redemption, such dividend, distribution or redemption would
have complied with Section 4.09(a);
(II) the retirement of any shares of the Company's
Capital Stock by exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Non-
Affiliate Joint Venture or to a Subsidiary of the Company)
of other shares of its Capital Stock other than Redeemable
Stock or out of the proceeds of a substantially concurrent
capital contribution to the Company, provided, however,
--------- --------
that, to the extent the proceeds are so used, a sale of
Capital Stock or capital contribution permitted by this
clause (II) shall be excluded in determining the aggregate
net proceeds received by the Company referred to under
clause (II) of Section 4.09(a);
(III) the payments provided for by clauses (ii),
(iii), (iv) and (v) and the transactions described in
clauses (vi), (vii), (viii) and (ix) (so long as, in the
case of clause (ix), immediately following such transaction,
the Consolidated Net Worth of the entity that survives such
transaction is not materially lower than the Consolidated
Net Worth of the Company immediately prior to such
transaction) of Section 4.08(b);
(IV) the voluntary purchase, redemption or other
acquisition or retirement for value of Indebtedness that is
subordinated (pursuant to its terms) in right and priority
of payment to the Notes or any Subsidiary Guarantor's
obligation under its Guarantee, as the case may be, to the
extent that the aggregate amount expended (exclusive of
amounts expended pursuant to clauses (V) and (VIII) of this
Section 4.09(b)) for all such voluntary purchases,
redemptions or other acquisitions or retirements after the
date hereof (the amount expended for such purchases,
redemptions or other acquisitions or retirements, if paid in
property other than in cash or a sum certain guaranteed, to
be the Fair Market Value of such property) does not exceed
the aggregate net proceeds, including the Fair Market Value
of property other than cash, received by the Company or any
Subsidiary Guarantor from the issue or sale (other than an
issuance or sale to the Company or a Non-Affiliate Joint
Venture or Subsidiary of the Company), after the date
hereof, of Indebtedness that is subordinated (pursuant to
its terms) in right and priority of payment to the Notes or
such Subsidiary Guarantor's obligation under its Guarantee,
as the case may be, and that is otherwise permitted to be
incurred pursuant to this Indenture, provided that, to the
---------
extent the proceeds of Indebtedness so subordinated to the
Notes or any Subsidiary
45
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<PAGE> 54
Guarantor's obligation under its Guarantee, as the case may
be, are so used, the net proceeds of issuance of any such
Indebtedness upon conversion into Capital Stock shall not be
included in determining the aggregate net proceeds received
by the Company referred to under clause (II) of Section
4.09(a);
(V) the voluntary purchase, redemption or other
acquisition or retirement for value of any Indebtedness that
is subordinated (pursuant to its terms) in right and
priority of payment to the Notes or any Subsidiary
Guarantor's obligation under its Guarantee, as the case may
be, by exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Non-Affiliate
Joint Venture or to a Subsidiary of the Company) of Capital
Stock (other than Redeemable Stock) of the Company,
provided, however, that, to the extent the proceeds are so
--------- --------
used, the issuance of Capital Stock as permitted by this
clause (V) shall not be included in determining the
aggregate net proceeds received by the Company referred to
under clause (II) of Section 4.09(a);
(VI) the payment of dividends on, and the purchase,
redemption, retirement or other acquisition of, the USWA
Preferred Stock or the Preferred Stock ($100), provided that
--------
no such payment is made, directly or indirectly, to an
Affiliate of the Company;
(VII) the payment to KAC of an amount not to exceed
$300,000 in any fiscal year for the payment of KAC's
reasonable out-of-pocket expenses, provided that no part of
---------
such amount is paid directly or indirectly to any other
Affiliate of the Company and that, at the time of each such
payment, the Company is in compliance with clause (A) of
Section 4.09(a);
(VIII) Restricted Payments and Restricted Investments
after February 1, 1993, other than Restricted Payments and
Restricted Investments permitted by Section 4.09(a) or
clauses (I) through (VII) of Section 4.09(b), in an
aggregate amount such that the sum of:
(x) the aggregate amount expended for all such
Restricted Payments after February 1, 1993 made
pursuant to this clause (VIII); and
(y) the aggregate amount of all Restricted Investments
made after February 1, 1993 pursuant to this
clause (VIII) (less the amount of (1) such
Restricted Investments returned in cash, or in
property if made in property, (2) any guarantee
that constitutes a Restricted Investment, to the
extent it has been released, and (3) any direct
liabilities or obligations to be assumed or
discharged in connection with such Restricted
Investments (in either case without recourse to
the Company, any of its Subsidiaries or any
Controlled Non-Affiliate Joint Venture) if such
liability or obligation had been a liability or
obligation of the Company, any of its Subsidiaries
or any Controlled Non-Affiliate Joint Venture)
(in each case, the amount expended for such Restricted Payments
and Restricted Investments or the amount of any Restricted
Investments returned, if paid or returned in property other than
in cash or a sum certain guaranteed, to be the Fair Market Value
of such property)
would not exceed $50,000,000, provided that at the time of
---------
each such Restricted Payment or Restricted Investment made
pursuant to this clause (VIII), no Event of Default (and no
event that, after notice or lapse of time or both, would
become an Event of Default) shall have occurred and be
continuing (or would occur and be continuing after giving
effect thereto); and provided, further, that in no event
-------- -------
shall the Company make, or permit any of its Subsidiaries to
make, a
46<PAGE>
<PAGE> 55
Restricted Payment or Restricted Investment pursuant to this
clause (VIII) to or in MAXXAM or any Affiliate of MAXXAM if,
after giving effect thereto, (A) the aggregate amount of all
Restricted Payments and Restricted Investments (less the
amount of (1) such Restricted Investments returned in cash,
or in property if made in property, (2) any guarantee that
constitutes a Restricted Investment, to the extent it has
been released, and (3) any direct liabilities or obligations
to be assumed or discharged in connection with such
Restricted Investments (in either case without recourse to
the Company, any of its Subsidiaries or any Controlled Non-
Affiliate Joint Venture) if such liability or obligation had
been a liability or obligation of the Company, any of its
Subsidiaries or any Controlled Non-Affiliate Joint Venture)
made pursuant to this clause (VIII) to or in MAXXAM or any
Affiliate of MAXXAM, less (B) the aggregate amount of such
Restricted Payments and Restricted Investments made to or in
KAC which are distributed or paid within thirty days
thereafter by KAC to its holders of Common Stock other than
MAXXAM and Affiliates of MAXXAM, would exceed (C)
$20,000,000; and
(IX) in the event that the Company merges with or into
KAC and the Preferred Dividend Intercompany Notes are
extinguished, the payment of dividends on shares of KAC's
Preferred Redeemable Increased Dividend Equity Securities,
8.255% PRIDES, Convertible Preferred Stock (the "PRIDES") or
shares of KAC's Series A Mandatory Conversion Premium
Dividend Preferred Stock (the "Series A Shares") and any
other preferred stock of KAC the proceeds of which gave rise
to a Preferred Dividend Intercompany Note, in an aggregate
amount not to exceed the outstanding principal amount of
such Preferred Dividend Intercompany Notes at the time of
such merger.
No payments and other transfers made under clauses (II)
through (VII) and (IX) of this Section 4.09(b) shall reduce
the amount available for Restricted Payments and Restricted
Investments under Section 4.09(a); payments and other
transfers made under clauses (I) and (VIII) of this Section
4.09(b) shall reduce the amount available for Restricted
Payments and Restricted Investments under Section 4.09(a).
SECTION 4.10. Limitation on Indebtedness and Preferred
-----------------------------------------
Stock.
- ------
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or become liable with respect to, or extend the
maturity of or become liable for the payment of, contingently or
otherwise (collectively "Incur"), any preferred stock (including
preference stock) or Indebtedness, except that, without
duplication, the Company, the Subsidiary Guarantors and Alpart
may Incur preferred stock (including preference stock) or
Indebtedness (including, without duplication, guarantees of
Indebtedness of the Company and its Subsidiaries otherwise
permitted by this Indenture) if after giving effect thereto and
the receipt and application of the proceeds therefrom, and
assuming that the full amount of Indebtedness permitted to be
Incurred under Section 4.10(b)(ii) (after taking into account any
reduction in such amount as set forth in such Section
4.10(b)(ii)) has been Incurred (assuming, for purposes of this
calculation, an interest rate on such additional Indebtedness
equal to the weighted average interest rate on the Indebtedness
then outstanding under Section 4.10(b)(ii)), the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to
1; provided, however, that Indebtedness of Alpart Incurred
-------- -------
pursuant to this clause (a) shall not exceed an aggregate of
$150,000,000 at any one time outstanding, plus an amount equal to
the reasonable fees and expenses in connection with the
Incurrence of such Indebtedness.
(b) Notwithstanding the foregoing paragraph (a) of this
Section 4.10, the following shall be permitted:
47
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<PAGE> 56
(i) the Company and the Subsidiary Guarantors may
Incur Indebtedness in respect of the Notes;
(ii) the Company and the Subsidiary Guarantors may
Incur Indebtedness (without duplication), and the Bank
Guarantors may guarantee such Indebtedness, under the Credit
Agreement, in connection with Refinancing Sale and Leaseback
Transactions or otherwise in an aggregate amount at any one
time outstanding not to exceed $325,000,000, as reduced from
time to time by any permanent reduction in such amount as
set forth in a Board Resolution;
(iii) (A) Alpart may Incur Indebtedness in an
aggregate amount not to exceed $150,000,000 at any one time
outstanding and (B) the Company, KJC and AJI (without
duplication) may Incur Indebtedness in an aggregate amount
not to exceed at any one time outstanding the product of (I)
$150,000,000 multiplied by (II) the Company's then
percentage ownership interest in Alpart; provided, however,
--------- --------
that the aggregate Indebtedness (without duplication)
Incurred pursuant to clauses (A) and (B) of this clause
(b)(iii) may not exceed $150,000,000 at any one time
outstanding; and provided, further, that in each case the
--------- -------
proceeds of such Indebtedness are used solely for capital
improvements and expenditures, expansion and working capital
with respect to Alpart and/or to reimburse the partners of
Alpart for advances to Alpart used solely for capital
improvements and expenditures, expansion and working capital
with respect to Alpart, plus in each case an amount equal to
the reasonable fees and expenses in connection with the
Incurrence of such Indebtedness;
(iv) the Company and/or KAAC (without duplication) may
Incur Indebtedness in an amount not to exceed $75,000,000 at
any one time outstanding, the proceeds of which are used
solely for capital improvements and expenditures, expansion
and working capital with respect to QAL and/or to reimburse
the stockholders of QAL for advances to QAL used solely for
capital improvements and expenditures, expansion and working
capital with respect to QAL, plus an amount equal to the
reasonable fees and expenses in connection with the
Incurrence of such Indebtedness;
(v) VALCO may Incur Indebtedness, and the Company may
guarantee such Indebtedness, in an aggregate amount (without
duplication) not to exceed $25,000,000 at any one time
outstanding, the proceeds of which are used solely for
capital improvements and expenditures, expansion and working
capital with respect to VALCO and/or to reimburse the
shareholders of VALCO for advances to VALCO used solely for
capital improvements and expenditures, expansion and working
capital, plus an amount equal to the reasonable fees and
expenses in connection with the Incurrence of such
Indebtedness;
(vi) the Company and its Subsidiaries may Incur
Indebtedness ("Refinancing Indebtedness") that serves to
Refinance, in whole or in part, the Indebtedness permitted
by clauses (a) and (b) of this Section 4.10 (the "Refinanced
Indebtedness"), or any one or more successive Refinancings
of any thereof; provided, however, that:
--------- --------
(A) such Refinancing Indebtedness is in an
aggregate amount not to exceed the aggregate amount of
such Refinanced Indebtedness (including accrued
interest thereon and undrawn amounts under credit
arrangements otherwise permitted to be Incurred
pursuant to this Indenture), the amount of any premium
required to be paid in connection with such Refinancing
pursuant to the terms of such Refinanced Indebtedness
or the amount of any reasonable and customary premium
determined by the Company to be necessary to accomplish
such Refinancing by means of a redemption, tender
offer,
48
<PAGE>
<PAGE> 57
privately negotiated transaction, defeasance or other
similar transaction, and an amount equal to the
reasonable fees and expenses in connection with the
Incurrence of such Refinancing Indebtedness;
(B) neither the Company nor any of its
Subsidiaries is an obligor of such Refinancing
Indebtedness, except to the extent that such Person (I)
was an obligor of such Refinanced Indebtedness or (II)
is otherwise permitted, at the time such Refinancing
Indebtedness is Incurred, to be an obligor of such
Refinancing Indebtedness; and
(C) in the case of any Refinanced Indebtedness
that is subordinated (pursuant to its terms) in right
and priority of payment to the Notes or any Subsidiary
Guarantor's obligation under its Guarantee, as the case
may be, such Refinancing Indebtedness (I) has a final
maturity and weighted average maturity at least as long
as such Refinanced Indebtedness and (II) is
subordinated (pursuant to its terms) in right and
priority of payment to the Notes or such Subsidiary
Guarantor's obligation under its Guarantee, as the case
may be, at least to the same extent as such Refinanced
Indebtedness;
(vii) the Company may Incur Capitalized Lease
Obligations not exceeding $50,000,000 at any one time
outstanding in connection with the sale and leaseback of all
or a portion of the Company's interest in the Center for
Technology, provided that the Net Cash Proceeds therefrom
---------
are applied as provided by Section 4.14;
(viii) the Company and its Subsidiaries may Incur
Indebtedness, without duplication, the proceeds of which are
used solely to finance the construction, acquisition or the
acquisition and retrofitting of an aluminum smelter or
smelters or related facilities (or interests therein) and
the reasonable fees and expenses in connection with the
Incurrence of such Indebtedness, in an amount not to exceed
$150,000,000 in any fiscal year (without cumulation of
unused amounts to successive years);
(ix) the Company and its Subsidiaries may Incur
Indebtedness, the proceeds of which are used solely to
finance the construction or acquisition of a fabrication
plant or plants or related facilities and the reasonable
fees and expenses in connection with the Incurrence of such
Indebtedness, in an aggregate amount not to exceed
$25,000,000 in any fiscal year (without cumulation of unused
amounts to successive years);
(x) the Company and its Subsidiaries may Incur
preferred stock (including preference stock) that is not
Redeemable Stock; provided, however, that in the case of
--------- --------
preferred stock (including preference stock) Incurred by any
Subsidiary of the Company that is not a Subsidiary
Guarantor, such preferred stock shall be issued pro rata to
--- ----
the holders of Capital Stock of such Subsidiary;
(xi) the Company and its Subsidiaries may Incur
preferred stock (including preferred stock and preference
stock that is Redeemable Stock), provided that such
---------
preferred stock or preference stock is issued to the
Company, any of its Subsidiaries or pro rata to the holders
of Capital Stock of any such Subsidiary;
(xii) the Company and its Subsidiaries may Incur
Permitted Indebtedness; and
(xiii) the Company and its Subsidiaries may Incur
Indebtedness in an amount at any one time outstanding not to
exceed $75,000,000, provided that the amount of such
---------
Indebtedness that
49
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<PAGE> 58
may be Incurred by Subsidiaries of the Company (other than
Subsidiary Guarantors that are not Permitted Entities) shall
not exceed $25,000,000 at any one time outstanding, and
provided, further, that, to the extent
-------- -------
any such Indebtedness is Incurred from a Bank or an
affiliate thereof, the Bank Guarantors may guarantee such
Indebtedness.
(c) Notwithstanding the foregoing, no Subsidiary of the
Company shall assume, guarantee or in any other manner become
liable with respect to any Indebtedness of the Company or a
Subsidiary Guarantor (other than such Subsidiary) ("Other
Indebtedness") which is subordinated (pursuant to its terms) in
right and priority of payment to any other Indebtedness of the
Company or such Subsidiary Guarantor unless such Subsidiary also
assumes, guarantees or otherwise becomes liable with respect to
the Notes on a substantially similar basis for so long as such
Subsidiary is liable with respect to such Other Indebtedness;
provided, however, that if such Other Indebtedness is
- -------- -------
subordinated (pursuant to its terms) in right and priority of
payment to the Notes or any Subsidiary Guarantor's obligation
under its Guarantee, as the case may be, any such assumption,
guarantee or other liability of such Subsidiary with respect to
such Other Indebtedness shall be subordinated to such
Subsidiary's assumption, guarantee or other liability with
respect to the Notes to the same extent as such subordinated
Indebtedness is subordinated to the Notes or such Subsidiary
Guarantor's obligation under its Guarantee, as the case may be;
and provided, further, that this paragraph shall not be
-------- -------
applicable to any assumption, guarantee or other liability of any
Subsidiary of the Company which existed at the time such Person
became a Subsidiary of the Company and was not Incurred in
connection with, or in contemplation of, such Person becoming a
Subsidiary of the Company, or any Refinancing Indebtedness in
connection therewith complying with Section 4.10(b)(vi)
(provided, that the guarantee of such Refinancing Indebtedness is
--------
on substantially the same terms as the guarantee of the
Refinanced Indebtedness). In the event that any Subsidiary of
the Company (other than a Subsidiary Guarantor) is required to
guarantee the Notes pursuant to the next preceding sentence, the
Company shall cause such Subsidiary to (a) execute and deliver to
the Trustee a supplemental indenture in form and substance
reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall be named as an additional Subsidiary Guarantor
for so long as such Subsidiary Guarantor is so obligated with
respect to such Other Indebtedness and (b) deliver to the Trustee
an Opinion of Counsel reasonably satisfactory to the Trustee that
such supplemental indenture has been duly executed and delivered
by such Person.
(d) For the purpose of determining compliance with this
Section 4.10, in the event that any Indebtedness is permitted to
be Incurred pursuant to more than one clause of Section 4.10(b),
the Incurrence of such Indebtedness shall not limit the amount of
Indebtedness otherwise permitted to be Incurred, and shall not be
required to be included, under more than one such clause.
SECTION 4.11. Limitation on Liens.
--------------------
(a) The Company shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of their respective U.S. Fixed Assets to secure,
directly or indirectly, any Indebtedness, unless the Notes are
equally and ratably secured on a senior basis for so long as such
secured Indebtedness is so secured.
(b) Notwithstanding anything to the contrary, this
Section 4.11 shall not prohibit:
(i) Liens on the Permitted Collateral securing
outstanding Indebtedness permitted by this Indenture in an
aggregate principal amount not to exceed the Maximum Secured
Amount at the time such Indebtedness is Incurred;
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(ii) Liens in existence on the date of the issuance of
the Notes after giving effect thereto which Liens, if such
Liens secure a single or related items of Indebtedness in a
principal amount in excess of $5,000,000, are referred to in
Schedule A hereto;
(iii) Liens in favor of the Company or any Subsidiary
Guarantor;
(iv) Liens on U.S. Fixed Assets of a person existing
at the time such person is merged into or consolidated with
the Company or any Subsidiary of the Company, provided, that
--------
such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any other
U.S. Fixed Assets of the Company or any Subsidiary of the
Company;
(v) Liens on U.S. Fixed Assets existing at the time of
acquisition thereof by the Company or any Subsidiary of the
Company, provided, that such Liens were in existence prior
---------
to the contemplation of such acquisition and do not extend
to any other U.S. Fixed Assets of the Company or any
Subsidiary of the Company;
(vi) Liens securing Indebtedness permitted by clauses
(vii), (viii) and (ix) of Section 4.10(b), provided, that
---------
such Liens do not extend to any U.S. Fixed Assets other than
the Center for Technology in the case of clause (vii), the
applicable aluminum smelter or smelters and related
facilities in the case of clause (viii) and the applicable
fabrication plant or plants and related facilities in the
case of clause (ix), and, in each case, together with any
Improvements thereto or thereon and any proceeds thereof;
(vii) Liens securing Indebtedness permitted by clause
(e) of the definition of Permitted Indebtedness;
(viii) Liens securing the Indebtedness permitted by
clauses (iii), (iv) or (v) of Section 4.10(b) provided that
---------
such Liens do not extend to any U.S. Fixed Assets other than
(a) Permitted Collateral (in which case the principal amount
of such Indebtedness shall be included in the calculation of
the Maximum Secured Amount for purposes of clause (i) of
this paragraph and such Liens shall only be permitted if the
requirements of clause (i) are satisfied) and (b) the
Capital Stock and assets of Alpart, KJC and AJI in the case
of clause (iii), the Capital Stock and assets of KAAC in the
case of clause (iv), and the Capital Stock and assets of
VALCO in the case of clause (v), plus, in each case, the
proceeds thereof;
(ix) Liens securing Indebtedness consisting of
Capitalized Lease Obligations, mortgage financings,
industrial revenue bonds or other monetary obligations, in
each case incurred for the purpose of financing all or any
part of the purchase price or cost of construction or
installation of U.S. Fixed Assets used in the business of
the Company and its Subsidiaries, or repairs, additions or
Improvements to such U.S. Fixed Assets, provided, that such
---------
Liens (a) secure Indebtedness in an amount not in excess of
the original purchase price or the original cost of any such
U.S. Fixed Assets or repair, addition or Improvement thereto
(plus an amount equal to the reasonable fees and expenses in
connection with the Incurrence of such Indebtedness), (b) do
not extend to any other U.S. Fixed Assets (other than
Improvements thereto or thereon and any proceeds thereof) of
the Company or any Subsidiary of the Company (and, in the
case of a repair, addition or Improvement, such Lien extends
only to the U.S. Fixed Assets (and Improvements thereto or
thereon) repaired, added to or improved), and (c) secure
Indebtedness incurred no later than 180 days after the
acquisition or final completion of such construction,
repair, addition or Improvement;
51
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(x) Liens securing any Refinancings (in whole or in
part) of any Indebtedness secured by the Liens described in
clauses (ii), (iv), (v), (vi), (viii) or (ix) of this
paragraph, and any successive Refinancings of any thereof
(together with any increased amount of such Indebtedness
specifically permitted pursuant to Section 4.10(b) to cover
the reasonable fees and expenses incurred in connection with
a Refinancing)), provided that each such Lien (unless
---------
otherwise permitted by this paragraph) does not extend to
any additional U.S. Fixed Assets (other than Improvements
thereto or thereon and any proceeds thereof);
(xi) Liens on U.S. Fixed Assets securing Indebtedness
in an aggregate principal amount not to exceed $10,000,000;
and
(xii) Liens on any U.S. Fixed Assets consisting of
easements, covenants, restrictions, exceptions, reservations
and similar matters which do not materially impair the use
of such U.S. Fixed Assets for the uses for which it is held
and which Liens are granted to secure Indebtedness secured
by Liens permitted by the foregoing clauses (i) through
(xi).
(c) For purposes of this Section 4.11, the Notes will
be considered equally and ratably secured on a senior basis with
any other Lien if the Lien securing the Notes is of at least
equal priority and covers the same U.S. Fixed Assets as such
other Lien, provided, that if the Indebtedness secured by such
--------
other Lien is expressly subordinated in right and priority of
payment by its terms to the Notes, the Lien securing the Notes
will be senior to such other Lien.
(d) For the purpose of determining compliance with
this Section 4.11, in the event that any Lien is permitted
pursuant to more than one clause of Section 4.11(b), such Lien
shall not limit any other Lien otherwise permitted, and shall not
be required to be included under more than one such clause.
SECTION 4.12. Subsidiary guarantees, etc.
----------------------------
(a) If the Company or any Subsidiary Guarantor shall
transfer or cause to be transferred, in one or a series of
related transactions, any property or assets (including, without
limitation, businesses, divisions, real property, assets or
equipment) to any Subsidiary of the Company or to any Non-
Affiliate Joint Venture of the Company, the Company shall cause
such transferee Subsidiary or Non-Affiliate Joint Venture to (i)
execute and deliver to the Trustee a supplemental indenture in
form and substance reasonably satisfactory to the Trustee
pursuant to which such transferee Subsidiary or Non-Affiliate
Joint Venture shall be named as an additional Subsidiary
Guarantor and (ii) deliver to the Trustee an Opinion of Counsel
reasonably satisfactory to the Trustee that such supplemental
indenture has been duly executed and delivered by such Person.
(b) The provisions set forth in the immediately preceding
paragraph shall not apply to the following transfers of property
or assets by the Company or any Subsidiary Guarantor:
(A) transfers of property or assets (other than cash)
to Subsidiaries of the Company and Non-Affiliate Joint
Ventures, provided that such transfer is made in exchange
--------
for cash in an amount equal to the Fair Market Value of such
property or assets;
(B) transfers of property or assets to Subsidiary
Guarantors;
(C) the use of the proceeds of Indebtedness described
in Sections 4.10(b)(iii), (iv), (v), (viii) and (ix);
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(D) transfers to Alpart of the proceeds of
Indebtedness described in Section 4.10(a) to the extent that
Alpart is an obligor or guarantor of such Indebtedness;
(E) the provision of, and the payment for, goods and
services, working capital and technology to Subsidiaries of
the Company and Non-Affiliate Joint Ventures in each case in
the ordinary course of the businesses in which the Company
or its Subsidiaries or its Non-Affiliate Joint Ventures were
engaged on the date of this Indenture or reasonably related
extensions thereof;
(F) transfers of assets to a Subsidiary of the Company
immediately prior to the sale of such Subsidiary;
(G) transfers of cash or Cash Equivalents to Non-
Affiliate Joint Ventures engaged or to be engaged in the
business of bauxite mining and/or alumina refining and/or
aluminum smelting and/or fabrication and/or reasonably
related extensions thereof;
(H) transfers of cash, Cash Equivalents, property or
other assets to a Permitted Entity in exchange for Permitted
Entity Securities of such Permitted Entity if, immediately
after giving effect to such transfer, such Permitted Entity
remains a Permitted Entity;
(I) transfers of Capital Stock or other equity
interests to the issuer of such Capital Stock or other
equity interests such that immediately after giving effect
to such transfer and related transfers, the proportional
beneficial ownership by the transferor of the class of
Capital Stock or equity interests so transferred is not
reduced; and
(J) other transfers of assets, provided that the
--------
aggregate amount thereof (if other than cash, such amount
shall be the Fair Market Value of such asset at the time of
such transfer), less the aggregate amount of such assets
returned to the Company or any Subsidiary Guarantor (if
returned other than in cash, the amount of such assets shall
be the Fair Market Value of such assets at the time so
returned), does not exceed, in the aggregate, the greater of
(i) $25,000,000 or (ii) 5% of the Company's Consolidated Net
Worth, calculated after giving effect to such transfers and
returns.
(c) If any of the Company's existing or future Subsidiaries
(other than a Bank Guarantor) or existing or future Non-Affiliate
Joint Ventures shall guarantee, directly or indirectly, or become
a direct obligor with respect to, Indebtedness under the Credit
Agreement or any Refinancings thereof, the Company shall cause
each such Subsidiary or Non-Affiliate Joint Venture to (A)
execute and deliver to the Trustee a supplemental indenture in
form and substance reasonably satisfactory to the Trustee
pursuant to which such Subsidiary or Non-Affiliate Joint Venture
shall be named as an additional Subsidiary Guarantor for as long
as such Subsidiary or Non-Affiliate Joint Venture is so obligated
with respect to such Indebtedness and (B) deliver to the Trustee
an Opinion of Counsel reasonably satisfactory to the Trustee that
such supplemental indenture has been duly executed and delivered
by such Person.
(d) Sections 4.12(a) and (b) shall not apply to any
Restricted Investment or Restricted Payment otherwise permitted
by Section 4.09.
(e) The Company shall not permit any Permitted Entity to
cease to be a Permitted Entity except:
(i) pursuant to a liquidation or dissolution of such
Permitted Entity or a transfer of all or substantially all
of the properties and assets of such Permitted Entity to its
Equity Owners in
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proportion to their interests, including by way of merger or
consolidation of such Permitted Entity with or into its sole
Equity Owner;
(ii) pursuant to a sale in compliance with Section
4.14 of all of the Permitted Entity Securities of such
Permitted Entity held directly or indirectly by the Company
or any Subsidiary Guarantor; or
(iii) if such Permitted Entity becomes a Subsidiary
Guarantor.
(f) Notwithstanding anything in this Section 4.12 to the
contrary, VALCO shall be permitted to merge with or into, or
distribute substantially all of its assets and liabilities to, a
Permitted Entity, provided that, at the time of such merger or
--------
distribution, such Permitted Entity has no more than $50,000 of
assets other than Capital Stock or other similar interests in
VALCO. Upon the consummation of any transaction contemplated by
this clause (f), the entity surviving such merger or distribution
shall not be required (i) to become a Subsidiary Guarantor
pursuant to this Section 4.12 or (ii) if such entity has no
assets except as contemplated in this clause (f) or meets the
conditions of clause (e) of this Section 4.12, to remain a
Permitted Entity pursuant to the this Section 4.12.
SECTION 4.13. Limitation on dividends and other payment
------------------------------------------
restrictions affecting Subsidiaries. The Company shall not, and
- -----------------------------------
shall not permit its Subsidiaries to, create or otherwise suffer
to exist any consensual encumbrances or restrictions on the
ability of any Subsidiary to pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness owed
to the Company or any Subsidiaries of the Company or to make
loans or advances or transfer any of its assets to the Company or
any Subsidiary of the Company; provided, however that this
-------- -------
Section 4.13 shall not prohibit Permitted Dividend Encumbrances.
SECTION 4.14. Limitation on Asset Sales.
--------------------------
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate any Asset Sale unless at least 75% of
the consideration therefor received by the Company or such
Subsidiary (exclusive of indemnities) is in the form of cash or
Cash Equivalents, provided that this sentence shall not apply to
--------
the sale or disposition of assets as a result of a foreclosure
(or a secured party taking ownership of such assets in lieu of
foreclosure) or as a result of an involuntary proceeding in which
the Company cannot, directly or through its Subsidiaries, direct
the type of proceeds received. The amount of (i) any liabilities
of the Company or any Subsidiary of the Company that are actually
assumed by the transferee in such Asset Sale, or for which the
Company and its Subsidiaries are fully released, shall be deemed
to be cash for purposes of determining the percentage of cash
consideration received by the Company or its Subsidiaries and
(ii) any notes or other obligations received by the Company or
any Subsidiary of the Company from such transferee that are
immediately converted (or are converted within thirty days of the
related Asset Sale) by the Company or such Subsidiary into cash
shall be deemed to be cash for purposes of determining the
percentage of cash consideration received by the Company or its
Subsidiaries.
(b) The Company shall apply any Net Cash Proceeds received
after the date of this Indenture to (A) the prepayment of
Indebtedness in respect of or under the Credit Agreement and any
other Indebtedness of the Company (other than the Notes) entitled
to receive payment pursuant to the terms thereof (excluding
Indebtedness that is subordinated by its terms to the Notes or
the Guarantee thereof) (the "Specified Pari Passu Indebtedness"),
unless the holders thereof elect not to receive such prepayment
and (B) an offer to purchase (an "Asset Sale Offer") the then
outstanding Notes, on any Business Day occurring no later than
175 days after the receipt by the Company (or any of its
Subsidiaries, if
54
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applicable) of such Net Cash Proceeds (the "Asset Sale Purchase
Date," which date shall be deferred to the extent necessary to
permit the Asset Sale Offer to remain open for the period
required by applicable law), at a price (the "Asset Sale Purchase
Price") equal to 100% of the principal amount thereof together
with accrued interest, if any, to but not including the Asset
Sale Purchase Date pursuant to the provisions set forth below.
Such Asset Sale Offer with respect to the Notes shall be in an
aggregate principal amount (the "Asset Sale Offer Amount") equal
to the Net Cash Proceeds (rounded down to the nearest $1,000)
from the Asset Sales to which the Asset Sale Offer relates
multiplied by a fraction, the numerator of which is the principal
amount of the Notes outstanding (determined as of the close of
business on the day immediately preceding the date notice of such
Asset Sale Offer is mailed) and the denominator of which is the
principal amount of the Notes outstanding plus the aggregate
principal amount of Indebtedness under the Credit Agreement and
the Specified Pari Passu Indebtedness outstanding (determined as
of the close of business on the day immediately preceding the
date notice of such Asset Sale Offer is mailed). If (x) no
Indebtedness is outstanding in respect of or under the Credit
Agreement or the Specified Pari Passu Indebtedness or (y) the
holders of such Indebtedness entitled to receive payment elect
not to receive the payments provided for in the previous
sentence, or (z) the application of such Net Cash Proceeds
results in the complete prepayment of such Indebtedness, then in
each case any remaining portion of such Net Cash Proceeds will be
required to be applied to an Asset Sale Offer to purchase the
Notes.
(c) Notice of an Asset Sale Offer shall be mailed by the
Company to all holders at their last registered address within
145 days of the receipt by the Company or any of its Subsidiaries
of such Net Cash Proceeds. The Asset Sale Offer shall remain
open from the time of mailing until the last Business Day before
the Asset Sale Purchase Date, but in no event for a period less
than twenty-four days or less than that required by applicable
law. The notice shall state:
(1) that the Asset Sale Offer is being made pursuant
to this Section 4.14;
(2) the Asset Sale Offer Amount, the purchase price
and the Asset Sale Purchase Date;
(3) the name and address of the Trustee and that Notes
must be surrendered to the Trustee to collect the purchase
price;
(4) that any Note not tendered or accepted for payment
will continue to accrue interest;
(5) that any Note accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest on and after
the Asset Sale Purchase Date;
(6) that each holder electing to have a Note purchased
pursuant to an Asset Sale Offer will be required to
surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note (the "Asset
Sale Purchase Notice") completed, to the Trustee at the
address specified in the notice at least five Business Days
before the Asset Sale Purchase;
(7) that holders will be entitled to withdraw their
election if the Trustee receives, not later than one
Business Day prior to the Asset Sale Purchase Date, a
telegram, telex, facsimile transmission or letter setting
forth the name of the holder, the principal amount of the
Notes the holder delivered for purchase, the certificate
number of each Note the holder delivered for purchase and a
statement that such holder is withdrawing his, her or its
election to have such Notes purchased;
55
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<PAGE> 64
(8) that if Notes in a principal amount in excess of
the Asset Sale Offer Amount are surrendered pursuant to the
Asset Sale Offer, the Company shall purchase Notes on a pro
----
rata basis (with such adjustments as may be deemed
----
appropriate by the Company so that only Notes in
denominations of $1,000 or integral multiples thereof shall
be acquired); and
(9)(x) that Notes may be purchased in whole or in part
(in denominations of $1,000 or integral multiples thereof)
and (y) that holders whose Notes are purchased only in part
will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On or before the Asset Sale Purchase Date, the Company shall
(i) accept for payment Notes (having denominations of $1,000 or
integral multiples thereof) surrendered pursuant to the Asset
Sale Offer (on a pro rata basis if required pursuant to paragraph
--- ----
(c)(8) above), (ii) deposit by 10:30 a.m. New York City time, on
the Asset Sale Purchase Date, with the Trustee money in
immediately available funds sufficient to pay the Asset Sale
Purchase Price of all Notes or portions thereof so accepted and
(iii) deliver Notes so accepted to the Trustee together with an
Officers' Certificate stating the Notes or portions thereof
accepted for payment by the Company. The Trustee shall promptly
mail or deliver to holders of Notes so accepted payment in an
amount equal to the purchase price, and the Company shall execute
and the Trustee shall promptly authenticate and mail or deliver
to such holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered. Any Notes not so
accepted shall be promptly mailed or delivered to the holder
thereof. The Company will publicly announce the results of the
Asset Sale Offer on, or as soon as practicable after, the Asset
Sale Purchase Date.
Notwithstanding the foregoing, the Company shall not be
required to make an Asset Sale Offer until the aggregate amount
of Net Cash Proceeds so to be applied pursuant to this Section
4.14 exceeds $25,000,000 (the "Twenty-Five Million Threshold")
and then the total amount of such Net Cash Proceeds shall be
required to be so applied in accordance with this Section 4.14.
The Company may credit against its obligation to offer to
repurchase Notes pursuant to this Section 4.14 the principal
amount of Notes acquired or held by the Company subsequent to the
date of the Asset Sale giving rise to such Asset Sale Offer and
surrendered for cancellation or redeemed or called for redemption
subsequent to such date and not previously used to satisfy any
obligation of the Company to redeem or offer to purchase Notes.
In no event shall any Net Cash Proceeds that are applied to an
Asset Sale Offer be required to be applied to more than one Asset
Sale Offer.
(d) Notwithstanding the provisions of clauses (a) and (b)
of this Section 4.14, the Company shall have no obligation to
make an Asset Sale Offer pursuant to this Section 4.14 if, and to
the extent, the Company or any of its Subsidiaries commits within
140 days of the receipt of such Net Cash Proceeds to reinvest
(whether by acquisition of an existing business or expansion,
including, without limitation, capital expenditures) such Net
Cash Proceeds in one or more of the lines of business (including
capital expenditures) in which the Company or its Subsidiaries or
its Non-Affiliate Joint Ventures were engaged on the date of this
Indenture or reasonably related extensions of such lines of
business, provided that such Net Cash Proceeds are substantially
--------
so utilized no later than the last day of the twelfth consecutive
month (or, in the event the amount of such Net Cash Proceeds from
a single Asset Sale or series of related Asset Sales exceeds
$200,000,000, the twenty-fourth consecutive month) following the
month in which such Net Cash Proceeds are received.
(e) Notwithstanding the foregoing, if an Asset Sale
consists of a sale of (i) all or a portion of the property, plant
or equipment of the Company's Gramercy alumina refinery, whether
now owned or hereafter acquired, or any proceeds thereof or
(ii) any U.S. Fixed Assets acquired after the date of this
Indenture which do not constitute Permitted Collateral, the
Company shall make an Asset Sale Offer with the Net Cash Proceeds
received from such Asset Sale (without regard to the Twenty-Five
Million
56
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Threshold) to the extent the Company has not committed within 140
days of the receipt of such Net Cash Proceeds to reinvest
(whether by acquisition of an existing business or expansion,
including, without limitation, capital expenditures) such Net
Cash Proceeds in U.S. Fixed Assets (other than Permitted
Collateral), provided that such Net Cash Proceeds are
substantially so utilized no later than the last day of the
twelfth consecutive month (or, in the event the amount of such
Net Cash Proceeds from a single Asset Sale or series of related
Asset Sales exceeds $200,000,000, the twenty-fourth consecutive
month) following the month in which such Net Cash Proceeds are
received.
ARTICLE FIVE
NOTEHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 5.01. Company to furnish Trustee information as to
---------------------------------------------
names and addresses of noteholders. The Company will furnish or
- -----------------------------------
cause to be furnished to the Trustee:
(a) semi-annually, not more than fifteen days after each
record date for the payment of interest, a list, in such form as
the Trustee may reasonably require, of the names and addresses of
the noteholders as of such record date as the case may be, and
(b) at such other times as the Trustee may request in
writing, within thirty days after the receipt by the Company of
any such request, a list of similar form and content as of a date
not more than fifteen days prior to the time such list is
furnished;
provided, however, that so long as the Trustee is the Note
registrar, no such list shall be required to be furnished. Any
such list may be dated as of a date not more than fifteen days
prior to the time such information is furnished or caused to be
furnished, and need not include information received after such
date.
SECTION 5.02. Preservation and disclosure of lists.
-------------------------------------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and
addresses of the holders of Notes (1) contained in the most
recent list furnished to it as provided in Section 5.01 and (2)
received by it in the capacity of paying agent (if so acting) or
Note registrar.
The Trustee may destroy any list furnished to it as provided
in Section 5.01 upon receipt of a new list so furnished.
(b) In case three or more holders of Notes (hereinafter
referred to as "applicants") apply in writing to the Trustee, and
furnish to the Trustee reasonable proof that each such applicant
has owned a Note for a period of at least six months preceding
the date of such application, and such application states that
the applicants desire to communicate with other holders of Notes
on
required on the part of the Trustee, such Subsidiary Guarantor,
the Company or any holder of the Notes, provided that any
--------
guarantee of such Subsidiary Guarantor with respect to the Credit
Agreement and the Subordinated Notes, and any renewals,
extensions, refundings, replacements, restructurings or
refinancings, amendments and modifications thereof, if any, has
been or is simultaneously released. At the request of the
Company, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.
(d) Upon the release of any Subsidiary Guarantor from its
Guarantee pursuant to any provision of this Indenture, each other
Subsidiary Guarantor not so released shall remain liable for the
full amount of principal of, and interest on, the Notes as and to
the extent provided in this Indenture.
94
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<PAGE> 103
IN WITNESS WHEREOF, each of KAISER ALUMINUM & CHEMICAL
CORPORATION, KAISER ALUMINA AUSTRALIA CORPORATION, ALPART JAMAICA
INC., KAISER FINANCE CORPORATION and KAISER JAMAICA CORPORATION
has caused this Indenture to be signed and acknowledged by its
Chairman of the Board, its President or one of its Vice
Presidents, and its corporate seal to be affixed hereunto, and
the same to be attested by one of its Vice Presidents; and FIRST
TRUST NATIONAL ASSOCIATION has caused this Indenture to be signed
and acknowledged by one of its Vice Presidents or Assistant Vice
Presidents, has caused its corporate seal to be affixed hereunto,
and the same to be attested by one of its Assistant Secretaries,
all as of the day and year first written above.
KAISER ALUMINUM & CHEMICAL CORPORATION
By: __________________________________________
John T. La Duc
Vice President and Chief Financial Officer
[SEAL]
Attest:
___________________
Assistant Secretary
KAISER ALUMINA AUSTRALIA CORPORATION
By: __________________________________________
John T. La Duc
Vice President and Chief Financial Officer
[SEAL]
Attest:
___________________
Assistant Secretary
ALPART JAMAICA INC.
By: __________________________________________
John T. La Duc
Vice President and Chief Financial Officer
[SEAL]
Attest:
___________________
Assistant Secretary
95
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<PAGE> 104
KAISER FINANCE CORPORATION
By: __________________________________________
John T. La Duc
Vice President and Chief Financial Officer
[SEAL]
Attest:
___________________
Assistant Secretary
KAISER JAMAICA CORPORATION
By: __________________________________________
John T. La Duc
Vice President and Chief Financial Officer
[SEAL]
Attest:
___________________
Assistant Secretary
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By: ____________________________
Name:
Title:
[SEAL]
Attest:
___________________
Assistant Secretary
96
<PAGE> 1
EXECUTION COPY
$250,000,000
CREDIT AGREEMENT
dated as of February 15, 1994
between
KAISER ALUMINUM & CHEMICAL CORPORATION,
KAISER ALUMINUM CORPORATION,
CERTAIN FINANCIAL INSTITUTIONS,
and
BANKAMERICA BUSINESS CREDIT, INC.,
as Agent
<PAGE>
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 4
1.2. Use of Defined Terms. . . . . . . . . . . . . . . . . . . . 39
1.3. Cross-References. . . . . . . . . . . . . . . . . . . . . . 39
1.4. Accounting and Financial Determinations and
Other Terms . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE II
COMMITMENTS AND BORROWING PROCEDURES
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . 40
2.1.1. Revolving Commitment . . . . . . . . . . . . . . 40
2.1.2. Swingline Commitment . . . . . . . . . . . . . . 41
2.1.3. Lenders Not Required To Make Loans
or Issue Letters of Credit . . . . . . . . . . . 42
2.1.4. Borrowing Base Determinations. . . . . . . . . . 42
2.2. Reduction of Revolving Commitment Amount. . . . . . . . . . 43
2.3. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . 43
2.4. Agent's Books and Records; Monthly Statements . . . . . . . 44
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST, AND FEES
3.1. Repayments. . . . . . . . . . . . . . . . . . . . . . . . . 45
3.2. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . 45
3.3. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . 46
3.3.1. Prepayment Under, or Cash
Collateralization of, Revolving
Commitment . . . . . . . . . . . . . . . . . . . 46
3.3.2. Cash Dominion. . . . . . . . . . . . . . . . . . 47
3.3.3. Acceleration . . . . . . . . . . . . . . . . . . 47
3.4. Interest Provisions . . . . . . . . . . . . . . . . . . . . 48
3.4.1. Rates. . . . . . . . . . . . . . . . . . . . . . 48
3.4.2. Continuation and Conversion
Elections. . . . . . . . . . . . . . . . . . . . 50
3.4.3. Funding. . . . . . . . . . . . . . . . . . . . . 51
3.4.4. Default Rates. . . . . . . . . . . . . . . . . . 51
3.4.5. Interest Payment Dates . . . . . . . . . . . . . 52
3.5. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.5.1. Commitment Fee . . . . . . . . . . . . . . . . . 52
3.5.2. Audit Fees . . . . . . . . . . . . . . . . . . . 52
3.5.3. Other Fees . . . . . . . . . . . . . . . . . . . 53
i
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PAGE
----
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . 53
4.2. Deposits Unavailable. . . . . . . . . . . . . . . . . . . . 54
4.3. Increased Costs, etc. . . . . . . . . . . . . . . . . . . . 54
4.4. Funding Losses. . . . . . . . . . . . . . . . . . . . . . . 54
4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . 55
4.6. Taxes, etc. . . . . . . . . . . . . . . . . . . . . . . . . 55
4.7. Payments, Computations, etc . . . . . . . . . . . . . . . . 57
4.8. Sharing of Payments . . . . . . . . . . . . . . . . . . . . 59
4.9. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 60
4.11. Change of Lending Office, Replacement of
Lender, etc . . . . . . . . . . . . . . . . . . . . . . . . 60
4.12. Computation of Additional Amounts Due . . . . . . . . . . . 61
ARTICLE V
LETTERS OF CREDIT
5.1. Requests. . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.2. Issuance and Extensions . . . . . . . . . . . . . . . . . . 63
5.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 64
5.4. Other Lenders' Participation. . . . . . . . . . . . . . . . 64
5.5. Disbursements . . . . . . . . . . . . . . . . . . . . . . . 65
5.6. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . 66
5.7. Mandatory Payment to Agent of Letter of Credit
Outstandings. . . . . . . . . . . . . . . . . . . . . . . . 66
5.8. L/C Collateral Account. . . . . . . . . . . . . . . . . . . 66
5.8.1. Deposit. . . . . . . . . . . . . . . . . . . . . 66
5.8.2. Investment . . . . . . . . . . . . . . . . . . . 67
5.8.3. Application of Funds . . . . . . . . . . . . . . 67
5.8.4. Fees . . . . . . . . . . . . . . . . . . . . . . 68
5.9. Nature of Reimbursement Obligations . . . . . . . . . . . . 68
5.10. Indemnification by Lenders. . . . . . . . . . . . . . . . . 69
ARTICLE VI
PARENT GUARANTOR
6.1. Parent Guaranty . . . . . . . . . . . . . . . . . . . . . . 69
6.2. Renewal, etc. of Obligations; Waiver. . . . . . . . . . . . 69
6.3. No Impairment, etc. . . . . . . . . . . . . . . . . . . . . 70
6.4. Reinstatement; Subrogation. . . . . . . . . . . . . . . . . 70
ARTICLE VII
CONDITIONS TO EXTENSIONS OF CREDIT
7.1. Initial Credit Extension. . . . . . . . . . . . . . . . . . 71
7.1.1. Resolutions, etc . . . . . . . . . . . . . . . . 71
7.1.2. Insurance. . . . . . . . . . . . . . . . . . . . 72
7.1.3. Payment of Outstanding
ii
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PAGE
----
Indebtedness; Existing Letters of
Credit . . . . . . . . . . . . . . . . . . . . . 72
7.1.4. Parent Pledge Agreement. . . . . . . . . . . . . 72
7.1.5. Company Pledge Agreement . . . . . . . . . . . . 73
7.1.6. Security Agreements. . . . . . . . . . . . . . . 73
7.1.7. Company Trademark Security
Agreement; Company Patent Security
Agreement. . . . . . . . . . . . . . . . . . . . 74
7.1.8. Company Mortgages; Company Deeds of
Trust. . . . . . . . . . . . . . . . . . . . . . 74
7.1.9. Subsidiary Guaranty. . . . . . . . . . . . . . . 75
7.1.10. Subsidiary Pledge Agreement. . . . . . . . . . . 75
7.1.11. Intercompany Note Pledge Agreement . . . . . . . 76
7.1.12. Opinions of Counsel. . . . . . . . . . . . . . . 76
7.1.13. Closing Fees, Expenses, etc. . . . . . . . . . . 76
7.1.14. Environmental Reports. . . . . . . . . . . . . . 76
7.1.15. Investment Account Letter. . . . . . . . . . . . 76
7.1.16. Sufficient Quantities, etc . . . . . . . . . . . 77
7.1.17. Availability . . . . . . . . . . . . . . . . . . 77
7.1.18. Issuance of Senior Debt and Equity . . . . . . . 77
7.1.19. Cash Management Arrangements . . . . . 77
7.2. All Credit Extensions . . . . . . . . . . . . . . . . . . . 77
7.2.1. Compliance with Warranties, No
Default, etc . . . . . . . . . . . . . . . . . . 78
7.2.2. Credit Request; Borrowing Base
Certificate. . . . . . . . . . . . . . . . . . . 79
7.2.3. Satisfactory Legal Form. . . . . . . . . . . . . 80
7.3. Conditions Subsequent . . . . . . . . . . . . . . . . . . . 80
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1. Organization, etc . . . . . . . . . . . . . . . . . . . . . 80
8.2. Due Authorization, Non-Contravention, etc . . . . . . . . . 81
8.3. Government Approval, Regulation, etc. . . . . . . . . . . . 81
8.4. Validity, etc . . . . . . . . . . . . . . . . . . . . . . . 82
8.5. Financial Information . . . . . . . . . . . . . . . . . . . 82
8.6. No Material Adverse Effect. . . . . . . . . . . . . . . . . 83
8.7. Absence of Default or Violation of Law. . . . . . . . . . . 83
8.8. Litigation, etc . . . . . . . . . . . . . . . . . . . . . . 84
8.9. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 84
8.10. Ownership of Properties . . . . . . . . . . . . . . . . . . 84
8.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.12. Pension and Welfare Plans . . . . . . . . . . . . . . . . . 85
8.13. Environmental Warranties. . . . . . . . . . . . . . . . . . 85
8.14. Regulations G, U, and X . . . . . . . . . . . . . . . . . . 87
8.15. Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.16. Senior Indebtedness . . . . . . . . . . . . . . . . . . . . 87
8.17. Accuracy of Information . . . . . . . . . . . . . . . . . . 88
8.18. Joint Venture Contingent Liabilities. . . . . . . . . . . . 89
8.19. Mortgaged Property. . . . . . . . . . . . . . . . . . . . . 89
iii
<PAGE>
<PAGE> 5
PAGE
----
ARTICLE IX
COVENANTS
9.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . 89
9.1.1. Financial Information, Reports,
Notices, etc. . . . . . . . . . . . . . . . . . 89
9.1.2. Compliance with Laws, etc. . . . . . . . . . . . 92
9.1.3. Maintenance of Properties. . . . . . . . . . . . 93
9.1.4. Insurance. . . . . . . . . . . . . . . . . . . . 93
9.1.5. Books and Records; Audits;
Confidentiality. . . . . . . . . . . . . . . . . 95
9.1.6. Environmental Covenant . . . . . . . . . . . . . 97
9.1.7. Performance of Instruments . . . . . . . . . . . 98
9.1.8. Maintenance of Collateral. . . . . . . . . . . . 98
9.1.9. Collateral Reporting . . . . . . . . . . . . . . 98
9.1.10. Delivery; Further Assurances . . . . . . . . . . 99
9.1.11. Real Property; Title Policies;
Surveys. . . . . . . . . . . . . . . . . . . . .101
9.1.12. Intercompany Demand Notes. . . . . . . . . . . .103
9.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . .103
9.2.1. Business Activities. . . . . . . . . . . . . . .103
9.2.2. Indebtedness . . . . . . . . . . . . . . . . . .103
9.2.3. Liens. . . . . . . . . . . . . . . . . . . . . .107
9.2.4. Financial Condition. . . . . . . . . . . . . . .110
9.2.5. Investments. . . . . . . . . . . . . . . . . . .111
9.2.6. Restricted Payments, etc . . . . . . . . . . . .113
9.2.7. Capital Expenditures.. . . . . . . . . . . . . .116
9.2.8. Rental Obligations . . . . . . . . . . . . . . .117
9.2.9. Take or Pay Contracts. . . . . . . . . . . . . .117
9.2.10. Consolidation, Merger, etc . . . . . . . . . . .117
9.2.11. Asset Dispositions . . . . . . . . . . . . . . .118
9.2.12. Sale or Discount of Receivables. . . . . . . . .119
9.2.13. Restrictions on Actions under
Certain Agreements . . . . . . . . . . . . . . .120
9.2.14. Transactions with Affiliates . . . . . . . . . .121
9.2.15. Negative Pledges, etc. . . . . . . . . . . . . .122
9.2.16. Sale-Leaseback Transactions. . . . . . . . . . .123
9.2.17. Change of Location or Name . . . . . . . . . . .123
9.2.18. Intercompany Transfers of Property . . . . . . .123
9.2.19. Inconsistent Agreements. . . . . . . . . . . . .124
9.2.20. Transfer of Collateral . . . . . . . . . . . . .124
ARTICLE X
EVENTS OF DEFAULT
10.1. Listing of Events of Default. . . . . . . . . . . . . . . .125
10.1.1. Non-Payment of Obligations . . . . . . . . . . .125
10.1.2. Breach of Warranty . . . . . . . . . . . . . . .125
10.1.3. Non-Performance of Certain
Covenants and Obligations. . . . . . . . . . . .125
10.1.4. Non-Performance of Certain
iv
<PAGE>
<PAGE> 6
PAGE
----
Covenants and Obligations. . . . . . . . . . . .125
10.1.5. Non-Performance of Other Covenants
and Obligations. . . . . . . . . . . . . . . . .126
10.1.6. Default on Other Indebtedness. . . . . . . . . .126
10.1.7. Judgments. . . . . . . . . . . . . . . . . . . .126
10.1.8. Pension Plans. . . . . . . . . . . . . . . . . .127
10.1.9. Change in Control. . . . . . . . . . . . . . . .127
10.1.10. Bankruptcy, Insolvency, etc. . . . . . . . . . .127
10.1.11. Subordinated Debt and Senior Debt. . . . . . . .128
10.1.12. Impairment of Certain Documents. . . . . . . . .128
10.2. Action if Bankruptcy. . . . . . . . . . . . . . . . . . . .128
10.3. Action if Other Event of Default. . . . . . . . . . . . . .128
ARTICLE XI
THE ADMINISTRATIVE AGENT
11.1. Appointment; Actions. . . . . . . . . . . . . . . . . . . .129
11.2. Funding Reliance, etc . . . . . . . . . . . . . . . . . . .131
11.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . .132
11.4. Successors. . . . . . . . . . . . . . . . . . . . . . . . .133
11.5. Credit Extensions by the Agent. . . . . . . . . . . . . . .134
11.6. Credit Decisions. . . . . . . . . . . . . . . . . . . . . .134
11.7. Copies, etc . . . . . . . . . . . . . . . . . . . . . . . .134
11.8. Designation of Additional Agents. . . . . . . . . . . . . .135
11.9. Certain Releases. . . . . . . . . . . . . . . . . . . . . .135
11.10. Approval of Loan Documents. . . . . . . . . . . . . . . . .136
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . .136
12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . .138
12.3. Payment of Costs and Expenses . . . . . . . . . . . . . . .138
12.4. Indemnification . . . . . . . . . . . . . . . . . . . . . .139
12.5. Survival. . . . . . . . . . . . . . . . . . . . . . . . . .140
12.6. Severability. . . . . . . . . . . . . . . . . . . . . . . .141
12.7. Headings. . . . . . . . . . . . . . . . . . . . . . . . . .141
12.8. Execution in Counterparts, Effectiveness, etc . . . . . . .141
12.9. Governing Law; Submission to Jurisdiction . . . . . . . . .141
12.10. Successors and Assigns. . . . . . . . . . . . . . . . . . .143
12.11. Sale and Transfer of Credit Extensions and
Commitments; Participations in Credit
Extensions and Commitments. . . . . . . . . . . . . . . . .143
12.11.1. Assignments. . . . . . . . . . . . . . . . . . .143
12.11.2. Participations . . . . . . . . . . . . . . . . .144
12.12. Other Transactions. . . . . . . . . . . . . . . . . . . . .145
12.13. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . .145
12.14. Final Agreement, etc. . . . . . . . . . . . . . . . . . . .145
v
<PAGE>
<PAGE> 7
EXHIBITS
Exhibit A-1(a) Borrowing Request - Revolving Loan Borrowing
Exhibit A-1(b) Borrowing Request - Swingline Borrowings
Exhibit A-2 Continuation/Conversion Notice
Exhibit B Revolving L/C Request
Exhibit C-1 Certificate as to Senior Debt
Exhibit C-2 Certificate as to Parent Guarantor Preferred
Stock
Exhibit D-1 Borrowing Base Certificate
Exhibit D-2 Compliance Certificate
Exhibit E-1 Parent Pledge Agreement
Exhibit E-2 Parent Security Agreement
Exhibit F-1 Company Pledge Agreement
Exhibit F-2 Company Security Agreement
Exhibit F-3 Company Patent Security Agreement
Exhibit F-4 Company Trademark Security Agreement
Exhibit G Collection Bank Agreement
Exhibit H Concentration Bank Agreement
Exhibit I-1 Company Deed of Trust
Exhibit I-2 Company Mortgage
Exhibit J Subsidiary Guaranty
Exhibit K-1 Subsidiary Pledge Agreement
Exhibit K-2 Subsidiary Security Agreement
Exhibit K-3 Intercompany Note Pledge Agreement
Exhibit L-1 Opinion of Outside Counsel to Company
Exhibit L-2 Opinion of Inside Counsel to Company
Exhibit L-3 Opinion of Special Patent Counsel to Company
Exhibit L-4 Opinions of Local Counsel
Exhibit L-5 Opinion of Counsel to Agent
Exhibit M Assignee Agreement to be bound
Exhibit N Investment Account Letter
Exhibit O-1 Intercompany Demand Note
Exhibit O-2 Intercompany Demand Note
Exhibit O-3 Intercompany Demand Note
Exhibit 0-4 Intercompany Demand Note
Exhibit 0-5 Intercompany Demand Note
Exhibit P-1 Equity Proceeds Note
Exhibit P-2 Equity Proceeds Note
Exhibit Q Form of Confidentiality Agreement
Exhibit R Form of RTZ Aluminum Holdings Limited Letter
Exhibit S Form of Flood Plain Status Letter
SCHEDULES
Schedule I Pledged Subsidiaries and Joint Venture Affiliates
(Company Pledge Agreement)
Schedule II Mortgaged Real Property (Company Mortgage and Deed
of Trust)
Schedule III Subsidiaries executing the Subsidiary Guaranty
Schedule IV Subsidiaries executing the Subsidiary Pledge
Agreement and the Subsidiary Security Agreement
Schedule V Pledged Subsidiaries (Subsidiary Pledge Agreement)
vii
<PAGE>
<PAGE> 8
Schedule VI Intercompany Demand Notes (Subsidiary Pledge
Agreement)
Schedule VII Subsidiaries executing Intercompany Note Pledge
Agreement
Schedule VIII Intercompany Demand Notes (Intercompany Note
Pledge Agreement)
Schedule IX Existing Letters of Credit
Schedule X Local Counsel
Schedule XI Other Material Subsidiaries
Schedule XII Existing Investments
Schedule XIII Certain Intercompany Debt
viii
<PAGE>
<PAGE> 9
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 15, 1994,
is between KAISER ALUMINUM & CHEMICAL CORPORATION, a Delaware
corporation (the "Company"), KAISER ALUMINUM CORPORATION, a
-------
Delaware corporation (the "Parent Guarantor"), the various
----------------
financial institutions that are or may from time to time become
parties hereto pursuant to the terms hereof (collectively, the
"Lenders" and, individually, a "Lender"), and BANKAMERICA
------- ------
BUSINESS CREDIT, INC., a Delaware corporation, as agent (in such
capacity, together with its successors and assigns in such
capacity, the "Agent") for the Lenders.
-----
W I T N E S S E T H:
WHEREAS, the Company, a direct Subsidiary of the Parent
Guarantor, is engaged, directly and through its various
Subsidiaries and Joint Venture Affiliates, in the business of the
mining of bauxite, the refining of bauxite into alumina, the
production of primary aluminum and semi-fabricated and fabricated
aluminum products, and the sale of bauxite, alumina, primary
aluminum, and semi-fabricated and fabricated aluminum products to
direct customers and distributors; and
WHEREAS, the Company desires to obtain Commitments from
the Lenders pursuant to which Loans and other Credit Extensions,
in a maximum aggregate principal amount at any one time
outstanding not to exceed $250,000,000, will be made to or for
the account of the Company from time to time prior to the
Revolving Commitment Termination Date; and
WHEREAS, each Lender, severally and for itself alone,
is willing, on the terms and subject to the conditions
hereinafter set forth (including Article VII), to extend its
-----------
Commitments and make its Loans and other Credit Extensions to or
for the account of the Company; and
WHEREAS, the proceeds of any Loans made on the Initial
Borrowing Date will be applied by the Company, together with
other funds, to make payment in full of all Indebtedness of the
Company identified in Item 1 ("Indebtedness to be Paid") of the
------ -----------------------
Disclosure Schedule; and
WHEREAS, in order to induce the Lenders to enter into
this Agreement and to extend their respective Commitments and
make the Loans and other Credit Extensions, the Parent Guarantor
has agreed to unconditionally guarantee all obligations of the
Company hereunder and under the other Loan Documents; and
WHEREAS, on the terms and subject to the conditions
hereof, on or prior to the Initial Borrowing Date, the following
transactions shall occur as provided below:
<PAGE>
<PAGE> 10
(a) as security for the Company's Obligations, the
Company shall execute and deliver to the Agent, on behalf of the
Secured Lenders:
(i) the Company Security Agreement, granting to
the Agent, on behalf of the Secured Lenders, a security
interest in the Company's personal property described
therein;
(ii) the Company Pledge Agreement, pledging to
the Agent, on behalf of the Secured Lenders;
(A) all of the issued and outstanding shares
of capital stock of each first-tier, Domestic
Subsidiary of the Company listed on Schedule I
----------
hereto;
(B) the percentage of the issued and
outstanding shares of capital stock of each first-
tier, non-Domestic Subsidiary or Joint Venture
Affiliate of the Company listed on such Schedule I
----------
set forth opposite the name of such Subsidiary or
Joint Venture Affiliate;
(C) the KT Note; and
(D) all other promissory notes or other debt
instruments held by the Company; and
(iii) the Company Mortgages and Company Deeds of
Trust, mortgaging to the Agent (or one or more trustees
therefor) and granting to the Agent (or one or more
trustees therefor), on behalf of the Secured Lenders, a
security interest in all real property of the Company
listed on Schedule II hereto.
-----------
(b) as security for the Parent Guarantor's Obligations
under the Parent Guaranty, the Parent Guarantor shall
execute and deliver to the Agent, on behalf of the Secured
Lenders:
(i) the Parent Security Agreement, granting to
the Agent, on behalf of the Secured Lenders, a security
interest in the Parent Guarantor's personal property
described therein; and
(ii) the Parent Pledge Agreement, pledging to the
Agent, on behalf of the Secured Lenders:
(A) all of the issued and outstanding shares
of capital stock of the Company held by the Parent
Guarantor; and
(B) all promissory notes or other debt
2
<PAGE>
<PAGE> 11
instruments (other than the Equity Proceeds Notes)
held by the Parent Guarantor;
(c) each Subsidiary of the Company listed on
Schedule III hereto shall execute and deliver to the Agent,
------------
the Subsidiary Guaranty, guaranteeing the Company's
Obligations and each other such Subsidiary's Obligations
under the Subsidiary Guaranty;
(d) as security for such Subsidiary's Obligations
under the Subsidiary Guaranty, each Subsidiary of the
Company listed on Schedule IV hereto shall execute and
-----------
deliver to the Agent, on behalf of the Secured Lenders, the
Subsidiary Pledge Agreement, pledging to the Agent, on
behalf of the Secured Lenders:
(i) all of the issued and outstanding shares of
capital stock of each first-tier, Domestic Subsidiary
of such Subsidiary listed on Schedule V hereto;
----------
(ii) the percentage of the issued and outstanding
shares of capital stock of each first-tier, non-
Domestic Subsidiary of such Subsidiary listed on such
Schedule V set forth opposite the name of such
----------
Subsidiary;
(iii) any Intercompany Demand Note held by such
Subsidiary listed on Schedule VI hereto; and
-----------
(iv) all other promissory notes or other debt
instruments held by such Subsidiary;
(e) as security for such Subsidiary's Obligations
under the Subsidiary Guaranty, each Subsidiary of the
Company listed on Schedule IV hereto shall execute and
-----------
deliver to the Agent the Subsidiary Security Agreement,
granting to the Agent, on behalf of the Secured Lenders, a
security interest in such Subsidiary's personal property
described therein; and
(f) each Subsidiary of the Company listed on Schedule
--------
VII hereto which is not otherwise a party to the
---
Subsidiary Pledge Agreement shall execute and deliver
to the Agent, on behalf of the Secured Lenders, the
Intercompany Note Pledge Agreement, pledging to the
Agent, on behalf of the Secured Lenders, any
Intercompany Demand Note held by such Subsidiary listed
on Schedule VIII hereto;
-------------
NOW, THEREFORE, the parties hereto agree as follows:
3
<PAGE>
<PAGE> 12
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms when
-------------
used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the
singular and plural forms thereof):
"Account" means any present or future right to payment for
-------
goods sold or leased or for services rendered, whether due or to
become due, whether now existing or hereafter arising and whether
or not it has been earned by performance.
"Account Debtor" means each Person obligated in any way on
--------------
an Account.
"Adjusted Capital Expenditures" means, for any period,
-----------------------------
(a) Capital Expenditures for such period (exclusive of
capitalized interest)
minus
- -----
(b) that portion of Capital Expenditures for such
period (exclusive of capitalized interest) attributable to
any Subsidiary of the Company which is equal to (i) the
proportionate direct or indirect ownership of Persons other
than the Company and its Subsidiaries of the voting stock
of, or partnership interest in, such Subsidiary or (ii) if
the economic burden of such Capital Expenditures is borne or
to be borne by minority owners of such Subsidiary (other
than the Company and its Subsidiaries) in a proportion other
than the proportion of their direct or indirect ownership of
the voting stock of, or partnership interest in, such
Subsidiary, the proportionate share of the economic burden
of such Capital Expenditures borne or to be borne by such
minority owners.
"Affected Lender" is defined in Section 4.11(b).
--------------- ---------------
"Affiliate" means, with respect to any Person, any other
---------
Person which, directly or indirectly, controls, is controlled by,
or is under common control with such Person (excluding any
trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses,
directly or indirectly, power to
(a) vote 20% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election
of a majority of directors or managing general partners;
4<PAGE>
<PAGE> 13
(b) vote sufficient securities of any class to control
the election of one or more directors or managing general
partners; or
(c) direct or cause the direction of the management
and policies of such Person, whether by contract or
otherwise.
"Agent" is defined in the preamble.
----- --------
"Agreement" means, on any date, this Credit Agreement as
---------
originally in effect on the Effective Date and as thereafter from
time to time amended, supplemented, amended and restated, or
otherwise modified and in effect on such date.
"AJI" means Alpart Jamaica Inc., a Delaware corporation.
---
"ALPART" means Alumina Partners of Jamaica, a Delaware
------
general partnership.
"Anglesey" means Anglesey Aluminium Limited, a United
--------
Kingdom corporation.
"Asset Disposition" means any sale, transfer, lease which is
-----------------
accounted for as a sale under GAAP, contribution, conveyance, or
other disposition (other than the grant of a Lien), in any case
made after the Initial Borrowing Date, of any Property of the
Company or any of its Subsidiaries to any Person.
"Assignee Agreement to be Bound" means an Assignee Agreement
------------------------------
to be Bound in substantially the form of Exhibit M attached
---------
hereto.
"Assignee Lender" is defined in Section 12.11.1.
--------------- ---------------
"Authorized Officer" means, with respect to any Obligor,
------------------
those of its officers whose signatures and incumbency shall have
been certified to the Agent and the Lenders pursuant to
Section 7.1.1(a).
- ----------------
"Bank of America" means Bank of America National Trust and
---------------
Savings Association, a national banking association, in its
individual capacity.
"Bank of America Rate" is defined in "Reference Rate".
-------------------- --------------
"Borrowing" means the Revolving Loans made by all Lenders on
---------
the same Business Day pursuant to the same Borrowing Request in
accordance with Section 2.1.1 or the Swingline Loan made by
-------------
Business Credit pursuant to a Borrowing Request in accordance
with Section 2.1.3.
-------------
5
<PAGE>
<PAGE> 14
"Borrowing Base" means, at any time,
--------------
(a) an amount equal to 85% of the Net Amount of
Eligible Accounts as at such time
plus
- ----
(b) the lesser of (i) $175,000,000 and (ii) 65% of all
Eligible Inventory as at such time
minus
- -----
(c) all reserves, including any reserves for sales,
excise or similar taxes in respect of Eligible Accounts and
any reserves for rental expenses, processing fees or other
expenses relating to Eligible Inventory located at premises
not owned by the Company or KAII, which the Agent, after
consultation with the Company, in its commercially
reasonable discretion deems necessary or desirable to
maintain with respect to the Company's account, including
any amounts which the Agent may be obligated to pay in the
future for the account of the Company;
provided, however, that (i) the Net Amount of Eligible Accounts
- -------- -------
of KAII included in the Borrowing Base shall at no time exceed
20% of the Net Amount of Eligible Accounts included in the
Borrowing Base, (ii) the Net Amount of Eligible Accounts of the
Company owed by Foreign Account Debtors included in the Borrowing
Base shall at no time exceed 5% of the Net Amount of Eligible
Accounts of the Company included in the Borrowing Base and (iii)
Convertor Inventory that is located on the premises of a third
party included in the Borrowing Base shall at no time exceed 5%
of Eligible Inventory included in the Borrowing Base; and
provided further that the limitation set forth in clause (i) may,
- -------- ------- ----------
to the extent approved by the Agent in its sole discretion, be
increased by the amount, expressed in dollars, of any unused
amount of the Net Amount of Eligible Accounts of the Company owed
by Foreign Account Debtors permitted to be included in the
Borrowing Base under clause (ii).
-----------
"Borrowing Base Calculation Date" means, with respect to the
-------------------------------
delivery date of any Borrowing Base Certificate, the last day of
the preceding month or the last day of the next preceding month,
as the case may be.
"Borrowing Base Certificate" means a certificate duly
--------------------------
executed on behalf of the Company by a Financial Authorized
Officer of the Company in substantially the form of Exhibit D-1
-----------
attached hereto.
"Borrowing Request" means a loan request and certificate
-----------------
duly executed by an Authorized Officer of the Company, (a) in
respect of any Borrowing of Revolving Loans, in substantially the
form of Exhibit A-1(a) attached hereto, or (b) in respect of any
--------------
6
<PAGE>
<PAGE> 15
Borrowing of Swingline Loans, in substantially the form of
Exhibit A-1(b) attached hereto.
- --------------
"Business Credit" means BankAmerica Business Credit, Inc., a
---------------
Delaware corporation.
"Business Day" means any day which is
------------
(a) neither a Saturday or Sunday nor a legal holiday on
which banks are authorized or required to be closed in New York,
New York or in San Francisco, California; and
(b) relative to the making, continuing, converting,
prepaying, or repaying of any LIBO Rate Loans, also a day on
which dealings in Dollars are carried on in the London interbank
market.
"Canadian Subsidiaries" means Kaiser Aluminum & Chemical
---------------------
Canada Investment Limited, an Ontario corporation, and Kaiser
Canada.
"Capital Expenditures" means, for any period, the aggregate
--------------------
expenditures of the Company and its Subsidiaries on a
consolidated basis for fixed or capital assets made during such
period which, in accordance with GAAP, would be classified as
capital expenditures (including the aggregate amount of all
Capitalized Lease Liabilities incurred during such period);
provided, however, that any repurchase or leaseback by the
- -------- -------
Company of a facility sold by the Company in connection with the
issuance of industrial revenue bonds by a state, municipality or
other subdivision of the United States of America or any
department, agency, public corporation or other instrumentality
thereof shall not in any event be deemed to be a Capital
Expenditure.
"Capitalized Lease Liabilities" means all monetary
-----------------------------
obligations of the Company or any of its Subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP,
would be classified as a capitalized lease, and, for purposes of
this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined
in accordance with GAAP, and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
--------------------------
(a) any evidence of Indebtedness, maturing not more
than one year after such time, issued or guaranteed by the
United States Government;
(b) any certificate of deposit or bankers' acceptance,
maturing not more than one year after such time, which is
7
<PAGE>
<PAGE> 16
issued or accepted by either
(i) a commercial banking institution that is a
member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less
than $500,000,000;
(ii) any Lender; or
(iii) with respect to certificates of deposit
that do not exceed $10,000,000 in the aggregate
outstanding at any time, any other commercial banking
institution;
(c) commercial paper rated A-1 or better by Standard &
Poor's Corporation or Prime-1 or better by Moody's Investors
Service, Inc.;
(d) repurchase agreements with respect to any of the
foregoing, with any bank or trust company referred to above
in clause (b) or with any nationally recognized securities
----------
dealer having total capital and surplus and undivided
profits of not less than $500,000,000; or
(e) investments in the Goldman, Sachs & Co.
Institutional Liquid Assets fund and other money market
funds which have substantially similar investment policies.
"CERCLA" means the Comprehensive Environmental Response,
------
Compensation and Liability Act of 1980, as amended or otherwise
modified from time to time.
"CERCLIS" means the Comprehensive Environmental Response
-------
Compensation Liability Information System List.
"Change in Control" means the occurrence of any of the
-----------------
following events: (a) MAXXAM not owning (other than by reason of
the existence of a Lien or other encumbrance but including by
reason of the foreclosure of or other realization upon a Lien or
other encumbrance) direct or indirect sole beneficial ownership
(as defined under Regulation 13d-3 of the Securities Exchange Act
of 1934 as in effect on the date of this Agreement) of at least
51% of the total common equity, on a fully diluted basis, of the
Parent Guarantor or the Company; or (b) MAXXAM, through direct
representation or through persons nominated by it, not
controlling a majority of the Board of Directors of the Parent
Guarantor or the Company necessary to effectuate any actions by
the Board of Directors of the Parent Guarantor or the Company; or
(c) any person or group (as defined in Section 13(d)(3) of the
----------------
Securities Exchange Act of 1934 as in effect on the date of this
Agreement), directly or indirectly, owning more of the total
voting power entitled to vote generally in the election of
directors of the Parent Guarantor or the Company than MAXXAM; or
(d) Charles Hurwitz, members of his immediate family and trusts
8
<PAGE>
<PAGE> 17
for the benefit thereof (each such person, including Mr. Hurwitz
and any trustee of such trusts, being herein called a
"Beneficiary") not having (other than by reason of death,
-----------
incapacity, bankruptcy, reorganization, insolvency or similar
proceeding or in connection with the resolution of any litigation
outstanding as of the date of the Subordinated Indenture or any
similar litigation or the existence of a Lien but including by
reason of the foreclosure of or other realization upon a Lien or
other encumbrance) direct or indirect sole beneficial ownership
(as defined under Regulation 13d-3 of the Securities Exchange Act
of 1934 as in effect on the date of this Agreement) of at least
the Minimum Percentage (defined below) of the total equity of
MAXXAM, other than as a result of new issuances of equity
securities by MAXXAM to third parties (other than to a third
party who is not a Beneficiary and who controls MAXXAM).
"Minimum Percentage" means that percentage obtained by
------------------
multiplying (i) the percentage of the total equity of MAXXAM,
directly or indirectly, beneficially owned by the Beneficiaries
as of the date of the Subordinated Indenture and (ii) 80%.
"Code" means the Internal Revenue Code of 1986, as amended,
----
reformed, or otherwise modified from time to time.
"Collateral" means all Property and rights on or in which a
----------
Lien is granted to the Agent (or to any agent, trustee, or other
Person acting on the Agent's behalf) pursuant to this Agreement,
any of the Collateral Documents, or any other Instruments
provided for herein or therein or delivered or to be delivered
hereunder or thereunder or in connection herewith or therewith,
as any of the foregoing may be amended, supplemented, restated,
or otherwise modified from time to time in accordance with the
provisions hereof or thereof.
"Collateral Documents" means, collectively, the Parent
--------------------
Collateral Documents, the Company Collateral Documents, the
Subsidiary Collateral Documents, the Collection Bank Agreements,
the Concentration Bank Agreement, and each other Instrument or
document pursuant to which a Lien is granted to the Agent (or
perfected in favor of the Agent) (or to or in favor of any agent,
trustee, or other Person acting on the Agent's behalf) as
security for any of the Obligations, as any of the foregoing may
be amended, supplemented, restated, or otherwise modified from
time to time in accordance with the provisions hereof or thereof.
"Collection Bank" means any bank at which the Company
---------------
maintains a collection or lockbox account or other similar
collection arrangement.
"Collection Bank Agreement" means any agreement between the
-------------------------
Company, the Agent, and any Collection Bank and delivered
pursuant to Section 7.1.19, in substantially the form of
--------------
Exhibit G attached hereto, as any such agreement may be amended,
- ---------
supplemented, restated, or otherwise modified from time to time
in accordance with the provisions hereof or thereof, including
9
<PAGE>
<PAGE> 18
pursuant to Section 7.3.
-----------
"Collection Deposit Account" has the meaning set forth in
--------------------------
the Collection Bank Agreement.
"Commitment" means, as the context may require, a Lender's
----------
Revolving Commitment, or Business Credit's Swingline Commitment.
"Commitment Termination Event" means
----------------------------
(a) any Event of Default described in clauses (a)
-----------
through (e) of Section 10.1.10 with respect to the Company
--- ---------------
shall have occurred; or
(b) any other Event of Default shall have occurred and
be continuing and the Agent, acting at the direction of the
Majority Lenders, gives written notice to the Company
pursuant to clause (a) of Section 10.3 that the Commitments
---------- ------------
have been terminated.
"Company" is defined in the preamble.
------- --------
"Company Collateral Documents" means the Company Pledge
----------------------------
Agreement, the Company Security Agreement, the Company Patent
Security Agreement, the Company Trademark Security Agreement,
each Company Deed of Trust, each Company Mortgage, and the
Louisiana Security Documents.
"Company Deed of Trust" means any deed of trust executed and
---------------------
delivered by the Company pursuant to Section 7.1.8, each in
-------------
substantially the form of Exhibit I-1 attached hereto, as
-----------
amended, supplemented, restated, or otherwise modified from time
to time in accordance with the provisions hereof or thereof.
"Company Mortgage" means any mortgage executed and delivered
----------------
by the Company pursuant to Section 7.1.8, each in substantially
-------------
the form of Exhibit I-2 attached hereto, as amended,
-----------
supplemented, restated, or otherwise modified from time to time
in accordance with the provisions hereof or thereof.
"Company Patent Security Agreement" means the patent
---------------------------------
security agreement executed and delivered by the Company pursuant
to Section 7.1.7, in substantially the form of Exhibit F-3
------------- -----------
attached hereto, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions
hereof or thereof.
"Company Pledge Agreement" means the pledge agreement
------------------------
executed and delivered by the Company pursuant to Section 7.1.5,
-------------
in substantially the form of Exhibit F-1 attached hereto, as
-----------
amended, supplemented, restated, or otherwise modified from time
to time in accordance with the provisions hereof or thereof.
"Company Security Agreement" means the security agreement
--------------------------
10
<PAGE>
<PAGE> 19
executed and delivered by the Company pursuant to Section 7.1.6,
-------------
in substantially the form of Exhibit F-2 attached hereto, as
-----------
amended, supplemented, restated, or otherwise modified from time
to time in accordance with the provisions hereof or thereof.
"Company Trademark Security Agreement" means the trademark
------------------------------------
security agreement executed and delivered by the Company pursuant
to Section 7.1.7, in substantially the form of Exhibit F-4
------------- -----------
attached hereto, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions
hereof or thereof.
"Compliance Certificate" means a certificate of the Company
----------------------
duly executed by a Financial Authorized Officer of the Company,
in substantially the form of Exhibit D-2 attached hereto, with
-----------
such changes as the Agent and the Company may from time to time
agree upon for purposes of monitoring the Company's compliance
herewith.
"Concentration Account" is defined in the Concentration Bank
---------------------
Agreement.
"Concentration Bank Agreement" means an agreement between
----------------------------
the Company, the Agent, and Bank of America, as concentration
bank, and delivered pursuant to Section 7.1.19, in substantially
--------------
the form of Exhibit H attached hereto, as amended, supplemented,
---------
restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof, including pursuant to
Section 7.3.
- -----------
"Confidential Information" is defined in clause (c) of
------------------------ ----------
Section 9.1.5.
- -------------
"Contingent Liability" means any agreement, undertaking, or
--------------------
arrangement by which any Person guarantees, endorses, agrees to
purchase, or otherwise becomes or is contingently liable upon (by
direct or indirect agreement, contingent or otherwise, to provide
funds for payment, to supply funds to, or otherwise to invest in,
a debtor, or otherwise to assure a creditor against loss) the
debt, obligation, or other liability of any other Person (other
than by endorsements of Instruments in the course of collection),
or guarantees the payment of dividends or other distributions
upon the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum outstanding principal amount, if
larger) of the debt, obligation, or other liability guaranteed
thereby.
"Continuation/Conversion Notice" means a notice of
------------------------------
continuation or conversion and certificate duly executed by an
Authorized Officer of the Company, in substantially the form of
Exhibit A-2 attached hereto.
- -----------
11
<PAGE>
<PAGE> 20
"Controlled Group" means all members of a controlled group
----------------
of corporations and all members of a controlled group of trades
or businesses (whether or not incorporated) under common control
which, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Convertor Inventory" means raw materials, work-in-process
-------------------
or other goods delivered to a third party pursuant to a bailment
arrangement with such third party under which such Inventory is
to be processed, improved or otherwise altered by such third
party.
"Credit Extension" means
----------------
(a) any disbursement of Revolving Loans by the
Lenders;
(b) any disbursement of Swingline Loans by Business
Credit; or
(c) any issuance or extension by an Issuer Bank of a
Letter of Credit.
"Credit Request" means any Borrowing Request or Revolving
--------------
L/C Request.
"Deconsolidation Tax Allocation Agreement" means the Tax
----------------------------------------
Allocation Agreement dated June 30, 1993 between the Company and
the Parent Guarantor a copy of which has been delivered to the
Agent and the Lenders prior to the date hereof, as amended from
time to time with the written consent of the Agent.
"Default" means any Event of Default or any condition,
-------
occurrence, or event which, after notice or lapse of time or
both, would constitute an Event of Default.
"Disbursement" means any payment or disbursement made under
------------
a Letter of Credit by the Issuer Bank thereof to the beneficiary
thereunder.
"Disbursement Date" is defined in clause (a) of Section 5.5.
----------------- ---------- -----------
"Disclosure Schedule" means the Disclosure Schedule dated as
-------------------
of February 15, 1994 delivered by the Company to the Agent and
each Lender prior to the execution and delivery of this
Agreement, as it may be amended, supplemented, or otherwise
modified from time to time by the Company with the prior written
consent of the Agent.
"Distributions" is defined in clause (a) of Section 9.2.6.
------------- ---------- -------------
"Dollar" and the sign "$" mean lawful money of the United
------
States.
12
<PAGE>
<PAGE> 21
"Domestic Office" means, with respect to any Lender, the
---------------
office of such Lender designated as such below its signature
hereto, or designated in the Assignee Agreement to be Bound
pursuant to which such Lender became a party hereto, or such
other office of a Lender (or any successor or assign of such
Lender) within the United States as may be designated from time
to time by written notice from such Lender, as the case may be,
to each other Person party hereto.
"Domestic Subsidiary" means a Subsidiary that is created or
-------------------
organized in or under the laws of the United States, any state
thereof, or the District of Columbia.
"EBITDA" means, for any Fiscal Quarter, an amount equal to:
------
(a) Net Income for such Fiscal Quarter (including
extraordinary gains and extraordinary losses, in each case
as determined in accordance with GAAP);
plus
- ----
(b) the aggregate amount deducted, in determining Net
Income for such Fiscal Quarter, in respect of all foreign,
federal, state, and local income taxes of the Company and
its Subsidiaries, calculated on a consolidated basis in
accordance with GAAP;
plus
- ----
(c) the aggregate amount of interest expense
(excluding amortization of deferred financing costs and, to
the extent not paid in cash, interest on the PIK Note and
the Equity Proceeds Notes) of the Company and its
Subsidiaries for such Fiscal Quarter, calculated on a
consolidated basis in accordance with GAAP, minus the amount
-----
of interest income of the Company and its Subsidiaries which
was included in the calculation of Net Income for such
Fiscal Quarter in accordance with GAAP;
plus
- ----
(d) the aggregate amount of depreciation expense of
the Company and its Subsidiaries for such Fiscal Quarter,
calculated on a consolidated basis in accordance with GAAP;
plus
- ----
(e) the aggregate amount of amortization expense of
the Company and its Subsidiaries for such Fiscal Quarter,
calculated on a consolidated basis in accordance with GAAP;
plus
- ----
(f) the aggregate amount of the noncash portion of the
13
<PAGE>
<PAGE> 22
FAS 106 charge of the Company and its Subsidiaries
calculated on a consolidated basis in accordance with GAAP;
minus
- -----
(g) that portion of the amounts set forth in
clauses (b), (c), (d), (e), and (f) above attributable to
----------- --- --- --- ---
(i) the proportionate direct or indirect ownership of
Persons other than the Company and its Subsidiaries of the
voting stock of, or partnership interest in, any Subsidiary
or (ii) if the economic burden of the amounts set forth in
clauses (b), (c), (d), (e) and (f) above is borne or to be
----------- --- --- --- ---
borne by minority owners of such Subsidiary (other than the
Company and its Subsidiaries) in a proportion other than the
proportion of their direct or indirect ownership of the
voting stock of, or partnership interest in, such
Subsidiary, the proportionate share of the economic burden
of such amounts borne or to be borne by such minority
owners.
"Effective Date" is defined in Section 12.8.
-------------- ------------
"Eligible Account" means, at any time, all Accounts of the
----------------
Company and KAII that are not ineligible as the basis for Credit
Extensions, based on the following criteria and on such other
criteria as the Agent may, after consultation with the Company,
from time to time establish in its commercially reasonable
discretion. Without intending to limit the Agent's discretion to
establish other criteria of eligibility pursuant to the preceding
sentence, Eligible Accounts shall not include any Account:
(a) which, except in the case of Product Swaps, does
not represent a bona fide sale or lease and delivery of
goods of or rendition of services by the Company or KAII in
the ordinary course of the Company's or KAII's business, as
the case may be, or which is not for a liquidated amount
payable by the Account Debtor thereon on the terms set forth
in the invoice therefor;
(b) which represents a Progress Billing other than
Progress Billings in an amount not to exceed $5,000,000 in
the aggregate;
(c) which represents a sale on a bill-and-hold,
guaranteed sale, sale and return, sale on approval,
consignment, repurchase or return basis, other than, in each
case, a Product Swap or an Account that represents the
balance of an Account Debtor's minimum annual purchase
commitment to the Company provided that the documents
relating to such Account provide that title to the Inventory
purchased by the Account Debtor and held by the Company has
passed to the Account Debtor;
(d) which is evidenced by a promissory note or other
14
<PAGE>
<PAGE> 23
instrument or by chattel paper;
(e) with respect to which more than 90 days, in the
case of an Account as to which National Southwire is the
Account Debtor, have elapsed since the date of the original
invoice therefor or with respect to which more than 65 days,
in the case of all other Accounts, have elapsed since the
date of the original invoice therefor;
(f) which is not evidenced by an invoice rendered to
the Account Debtor, which is evidenced by an invoice dated
more than 60 days after the date of shipment to the Account
Debtor or which is evidenced by an invoice dated more than
60 days after the date of performance of the relevant
service for the Account Debtor;
(g) owed by an Account Debtor which is a director,
officer, shareholder, employee or Affiliate of the Company
or KAII;
(h) if the aggregate dollar amount of all Accounts
owed by the Account Debtor thereon exceeds 5% (15% in
respect of Accounts owed by the Account Debtors identified
in Item 11 ("Major Account Debtors") of the Disclosure
---------------------
Schedule, as such Item may be amended from time to time by
the Agent, in its commercially reasonable judgment, after
consultation with the Company, to add or delete Account
Debtors) of the aggregate amount of all Accounts at such
time, but only to the extent of such excess;
(i) which is owed by an Account Debtor which, at the
time of any determination of Eligible Accounts, owes any
amount with respect to any Account that has been outstanding
more than 60 days past the due date, other than amounts
which in total do not exceed 20% of the aggregate of all
Accounts owing by such Account Debtor and which are the
subject of bona fide disputes between such Account Debtor
---------
and the Company or KAII;
(j) which are owed by the government of the United
States of America, or any department, agency, public
corporation, or other instrumentality thereof, unless the
Federal Assignment of Claims Act of 1940, as amended, and
any other steps necessary to perfect the Agent's Security
Interest therein, have been complied with to the Agent's
reasonable satisfaction with respect to such Account;
(k) which is owed by any state, municipality, or other
political subdivision of the United States of America, or
any department, agency, public corporation, or other
instrumentality thereof and as to which the Agent determines
that the Agent's Security Interest therein is not or cannot
be perfected;
15
<PAGE>
<PAGE> 24
(l) except as provided in clause (j) above, as to
----------
which either the perfection, enforceability, or validity of
the Security Interest in such Account, or the Agent's right
or ability to obtain direct payment to the Agent of the
Proceeds of such Account, is governed by any federal, state,
or local statutory requirements other than those of the
Uniform Commercial Code;
(m) with respect to which, in whole or in part, a
check, promissory note, draft, trade acceptance or other
instrument for the payment of money has been received,
presented for payment and returned uncollected for any
reason;
(n) which is owed by an Account Debtor to which the
Company or KAII is indebted in any way unless the Account
Debtor has entered into an agreement acceptable to the Agent
in its commercially reasonable judgment to waive setoff
rights; or if the Account Debtor thereon has disputed
liability, asserted a right of setoff or made any claim with
respect to such Account; but in each such case only to the
extent of such indebtedness, setoff, dispute, or claim;
(o) as to which any one or more of the following
events has occurred with respect to the Account Debtor on
such Account: death or judicial declaration of incompetency
of an Account Debtor who is an individual; the filing by or
against the Account Debtor of a request or petition in a
proceeding that is then pending for liquidation,
reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, winding-up, or other relief
under the bankruptcy, insolvency, or similar laws of the
United States, any state or territory thereof, or any
foreign jurisdiction, now or hereafter in effect; the making
of any general assignment by the Account Debtor for the
benefit of creditors in a proceeding that is then pending;
the appointment of a receiver or trustee for the Account
Debtor or for any of the assets of the Account Debtor,
including the appointment of or taking possession by a
"custodian," as defined in the Federal Bankruptcy Code in a
proceeding that is then pending; the institution by or
against the Account Debtor of any other type of insolvency
proceeding (under the bankruptcy laws of the United States
or otherwise) or of any formal or informal proceeding for
the dissolution or liquidation of, settlement of claims
against, or winding up of affairs of, the Account Debtor in
a proceeding that is then pending; the nonpayment generally
by the Account Debtor of its debts as they become due; or
the cessation of the business of the Account Debtor as a
going concern;
(p) if the Agent believes in its commercially
reasonable judgment that the prospect of collection of such
Account is impaired or that the Account may not be paid by
16
<PAGE>
<PAGE> 25
reason of the Account Debtor's financial inability to pay;
(q) which is owed by an Account Debtor which the
Agent, in its commercially reasonable judgment, otherwise
deems to be uncreditworthy;
(r) which is owed by a Foreign Account Debtor; except
to the extent that such Account (i) is secured or payable by
a letter of credit or acceptance, (ii) insured under foreign
credit insurance, on terms and conditions satisfactory to
the Agent in its commercially reasonable discretion, or
(iii) is owed by an Account Debtor identified in Item 12
-------
("Major Foreign Account Debtors") of the Disclosure
-----------------------------
Schedule, as such Item may be amended from time to time by
the Agent, in its commercially reasonable judgment, after
consultation with the Company, to add or delete Account
Debtors;
(s) which is not payable in the United States other
than Accounts in an aggregate amount not to exceed
$2,000,000 payable in the United Kingdom;
(t) which is not payable in Dollars, other than
Accounts in an aggregate amount not to exceed $2,000,000
payable in Pounds Sterling, unless the Company or KAII, as
the case may be, has executed an appropriate Hedging
Agreement acceptable to the Agent with respect thereto;
(u) which represents a rebilling of an Account
Debtor for a discount or other adjustment
inappropriately applied to an Account by such Account
Debtor; and
(v) which has arisen from Inventory which, at the time
of the determination of Eligible Accounts, constituted
Eligible Inventory.
"Eligible Assignee" is defined in Section 4.11(b).
----------------- ---------------
"Eligible Inventory" means, at any time, any Inventory of
------------------
the Company arising in the ordinary course of the Company's
business that:
(a) is not, in the reasonable opinion of the Agent,
obsolete or unmerchantable;
(b) is located in the United States or in route to the
United States; provided that such Inventory is insured in
accordance with the Company's normal practice and to the
reasonable satisfaction of the Agent, title to such
Inventory has passed to the Company and, in the case of
Inventory in route to the United States, is evidenced by a
negotiable bill of lading that has been delivered to the
Agent;
17
<PAGE>
<PAGE> 26
(c) upon which the Agent has a first priority
perfected Security Interest;
(d) is not stores Inventory, Tolling Inventory, repair
and maintenance Inventory, or Inventory delivered to the
Company on consignment;
(e) is not ineligible as the basis for Credit
Extensions based on such other criteria as the Agent may,
after consultation with the Company, from time to time
establish in its commercially reasonable discretion; and
(f) has not given rise to any Account which, at the
time of the determination of Eligible Inventory, constituted
an Eligible Account.
"Environmental Laws" means all applicable federal, state, or
------------------
local statutes, laws, ordinances, codes, rules, regulations,
requirements, and guidelines (including consent decrees and
administrative orders to which the Company, any of its
Subsidiaries, or any Obligor is subject) relating to protection
of the environment or human health or imposing liability or
standards of conduct concerning any Hazardous Material, as any of
the foregoing may be from time to time amended or supplemented.
"Environmental Reports" means the "Environmental
---------------------
Assessments" report, dated January, 1994, prepared by
Kennedy/Jenks/Chilton, copies of which have been delivered to the
Agent and each Lender prior to the date hereof.
"Equity Proceeds Notes" means the Amended and Restated
---------------------
Senior Subordinated Intercompany Note dated June 30, 1993, in the
principal amount of $37,796,752.50, issued by the Company in the
form of Exhibit P-1 attached hereto, the Senior Subordinated
Intercompany Note of the Company, dated the Initial Borrowing
Date, in substantially the form of Exhibit P-2 attached hereto,
and one or more Senior Subordinated Intercompany Notes issued by
the Company after the Initial Borrowing Date, in substantially
the form of Exhibit P-3 attached hereto, in an aggregate
principal amount not to exceed 50% of the net proceeds of all
offerings of securities of the Parent Guarantor consummated after
the Initial Borrowing Date if the net proceeds of such offerings
are loaned to, contributed to, or used to purchase the stock of,
the Company, as each such promissory note may be amended or
otherwise modified from time to time in accordance with the
provisions hereof.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA also
refer to any successor sections.
"Event of Cash Dominion" means (a) the occurrence of a
----------------------
18
<PAGE>
<PAGE> 27
Default and the continuance of such Default for five consecutive
days after delivery by the Agent, in its sole discretion or at
the request of the Majority Lenders, of written notice thereof to
the Company or (b) the occurrence of any of the following events
and the delivery by the Agent as required under Section 11.1(e)
of written notice thereof to the Company: (i) the Revolving
Commitment Availability is less than $40,000,000 at any time or
(ii) the Revolving Commitment Availability is less than
$50,000,000 for three consecutive Business Days. An Event of
Cash Dominion shall terminate, provided no Default shall have
occurred and be continuing, if the Revolving Commitment
Availability is greater than $50,000,000 for each day during a
period of three consecutive months and the Agent delivers written
notice as required under Section 11.1(e) of such termination to
the Company.
"Event of Default" is defined in Section 10.1.
---------------- ------------
"Executive Officers" means, with respect to any corporation,
------------------
such corporation's chairman, president, chief financial officer,
treasurer, any vice president, any attorney in the office of the
Company's general counsel, and any officer who performs a similar
policy-making function for such corporation.
"Existing Letters of Credit" means the letters of credit
--------------------------
listed on Schedule IX hereto.
-----------
"Federal Funds Rate" means, for any period, a fluctuating
------------------
interest rate per annum equal (for each day during such period)
to
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which
is a Business Day, the average of the quotations for such
day on such transactions received by Bank of America from
three federal funds brokers of recognized standing selected
by it.
"Fee Letter" is defined in Section 3.5.3.
---------- -------------
"Financial Authorized Officer" means, with respect to any
----------------------------
Obligor, those of its Authorized Officers who occupy the offices
of chief financial officer, chief accounting officer, controller,
assistant controller, treasurer, or assistant treasurer.
"Fiscal Quarter" means any quarter of a Fiscal Year.
--------------
"Fiscal Year" means any period of twelve consecutive
-----------
calendar months ending on the last day of December; references to
19
<PAGE>
<PAGE> 28
a Fiscal Year with a number corresponding to any calendar year
(e.g., the "1994 Fiscal Year") refer to the Fiscal Year ending on
----
the last day of December of such calendar year. The current
fiscal year of the Company will end on December 31, 1994.
"Foreign Account Debtor" means an Account Debtor which (i)
----------------------
does not maintain its chief executive office and principal place
of business in the United States; or (ii) is not organized under
the laws of the United States or any state thereof; or (iii) is
the government of any foreign country or sovereign state, or of
any state, province, municipality, or other political subdivision
thereof, or of any department, agency, public corporation, or
other instrumentality thereof.
"F.R.S. Board" means the Board of Governors of the Federal
------------
Reserve System or any successor thereto.
"Fundamental Loan Documents" means this Agreement, the
--------------------------
Company Collateral Documents, the Subsidiary Guaranty, the
Subsidiary Collateral Documents, the Parent Guaranty and the
Parent Collateral Documents.
"Furukawa" means Furukawa Kaiser Forged Products Company, a
--------
corporation organized under the laws of Japan.
"GAAP" means generally accepted accounting principles as set
----
forth in the opinions and pronouncements of the Securities and
Exchange Commission and the Accounting Principles Board of the
American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting
Standards Board and in such other statements and pronouncements
by such other Person as may be approved by a significant segment
of the accounting profession and concurred in by the independent
certified public accountants certifying the relevant audited
financial statement.
"Hazardous Material" means
------------------
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous,
dangerous, or toxic chemical, material, or substance
regulated under or within the meaning of any other
Environmental Law.
"Hedging Agreement" means (a) any interest rate swap, cap,
-----------------
or collar agreement or similar arrangement entered into by any
Person and any financial institution to protect such Person
20
<PAGE>
<PAGE> 29
against interest rate risk and (b) any agreement or arrangement
entered into by any Person and any financial institution to
protect such Person against fluctuations in currency exchange
rates.
"Hedging Obligations" means, with respect to any Person, all
-------------------
liabilities of such Person under any Hedging Agreement or other
interest rate or currency swap agreements, interest rate or
currency cap agreements, and interest rate or currency collar
agreements, and all other agreements or arrangements designed to
protect such Person against interest rate risk or fluctuations in
currency exchange rates.
"herein", "hereof", "hereto", "hereunder", and similar terms
------ ------ ------ ---------
contained in this Agreement or any other Loan Document refer to
this Agreement or such other Loan Document, as the case may be,
as a whole and not to any particular Section, paragraph, or
provision of this Agreement or such other Loan Document.
"Highest Lawful Rate" is defined in clause (b) of
------------------- ----------
Section 3.4.6.
- -------------
"Impermissible Qualification" means, with respect to the
---------------------------
opinion or certification of any independent public accountant as
to any financial statement of any Obligor, any qualification,
emphasis point, or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination
of matters relevant to such financial statement; or
(c) which relates to the treatment or classification
of any item in such financial statement and which, as a
condition to its removal, would require an adjustment to
such item the effect of which would be to cause such Obligor
to be in default of any of its obligations under
Section 9.2.4.
-------------
"including" means including without limiting the generality
---------
of any description preceding such term, and, for purposes of this
Agreement and each other Loan Document, the parties hereto agree
that the rule of ejusdem generis shall not be applicable to limit
------- -------
a general statement which is followed by or referable to an
enumeration of specific matters to matters similar to the matters
specifically mentioned.
"Indebtedness" means, with respect to any Person, without
------------
duplication:
(a) all obligations of such Person in respect of
principal for borrowed money, all obligations of such Person
in respect of principal (including the principal amount of
any obligation incurred in lieu of the cash payment of
21
<PAGE>
<PAGE> 30
interest) evidenced by bonds, debentures, notes, or other
similar instruments and all obligations of such Person in
respect of interest on borrowed money or obligations
evidenced by bonds, debentures, notes, or other similar
instruments to the extent accrued and unpaid for a period
exceeding seven months;
(b) all obligations, contingent or otherwise, relative
to the face or stated amount (as reduced from time to time)
of all letters of credit (including the Letters of Credit),
whether or not drawn, and bankers' acceptances issued and
outstanding for the account of such Person;
(c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with
GAAP, recorded as Capitalized Lease Liabilities;
(d) net liabilities of such Person in respect of
Hedging Obligations which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance
sheet of such Person as of the date at which Indebtedness is
to be determined;
(e) all obligations of such Person to pay the deferred
purchase price of Property (except trade accounts payable
and other current liabilities arising in the ordinary course
of business);
(f) all obligations listed in clauses (a) through (e)
----------- ---
secured by a Lien on Property owned or being purchased by
such Person (including Indebtedness arising under
conditional sales or other title retention agreements),
whether or not such Indebtedness shall have been assumed by
such Person or is limited in recourse;
(g) any Redeemable Stock issued by such Person;
(h) all Contingent Liabilities of such Person in
respect of any Indebtedness of any other Person; and
(i) all advance payments to such Person of more than
$5,000,000 in the aggregate from any single customer of such
Person relating to the delivery of goods or the performance
of services by such Person (other than advance payments to
the extent held in segregated accounts), but only to the
extent that such payments originally were received more than
six months before the date on which such Person was required
to deliver such goods or perform such services, and which
have not yet been earned by such delivery or performance;
provided, however, the obligations of any Person arising from the
- -------- -------
honoring by a bank or other financial institution of a check,
draft, or similar Instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the
22
<PAGE>
<PAGE> 31
ordinary course of business shall not constitute Indebtedness;
provided that such obligations are extinguished within two
- --------
Business Days of their incurrence (or, in the case of foreign
overdrafts, within five Business Days of their incurrence) unless
covered by an overdraft credit line.
"Indemnified Liability" and "Indemnified Liabilities" are
--------------------- -----------------------
defined in Section 12.4.
------------
"Indemnified Parties" is defined in Section 12.4.
------------------- ------------
"Indemnified Persons" is defined in clause (b) of
------------------- ----------
Section 11.1.
- ------------
"Initial Borrowing Date" means the date on which the initial
----------------------
Credit Extensions are made.
"Instrument" means any contract, agreement, indenture,
----------
mortgage, document, or writing (whether by formal agreement,
letter or otherwise) under which any obligation is evidenced,
assumed, or undertaken, or any Lien (or right or interest
therein) is granted or perfected.
"Intercompany Demand Note" means an intercompany demand
------------------------
revolving note, in substantially the form, with appropriate
insertions, of (i) Exhibit O-1 attached hereto, in the case of
-----------
any such note issued by the Company in favor of any Person other
than KAAC or KFC, (ii) Exhibit 0-2 attached hereto, in the case
---
of any such note issued by the Company in favor of KAAC, (iii)
Exhibit 0-3 attached hereto, in the case of any such note issued
---
by the Company in favor of KFC, and (iv) Exhibit O-4 attached
---
hereto, in the case of any such note issued in favor of KFC by
any Subsidiary of the Company, or (v) Exhibit O-5 attached
---
hereto, in the case of any such note issued by KFC in favor of
KAAC, in each case, endorsed, pledged, and delivered by the
Person in whose favor such promissory note was written to the
Agent, on behalf of the Secured Lenders, pursuant to the
Subsidiary Pledge Agreement or the Intercompany Note Pledge
Agreement, as each such promissory note may be amended, endorsed,
or otherwise modified from time to time in accordance with the
provisions hereof, and also means any other promissory note
accepted from time to time in substitution therefor or renewal
thereof, in accordance with the provisions hereof.
"Intercompany Note Pledge Agreement" means the intercompany
----------------------------------
note pledge agreement executed and delivered by certain
Subsidiaries of the Company pursuant to Section 7.1.11 or 9.1.12,
-------------- ------
as the case may be, in substantially the form of Exhibit K-3
-----------
attached hereto, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions
hereof or thereof.
"Interest Coverage Ratio" means, for any period, the ratio
-----------------------
of
23
<PAGE>
<PAGE> 32
(a) (i) the sum of EBITDA for all of the Fiscal
Quarters comprising such period minus (ii) the aggregate
-----
Adjusted Capital Expenditures for all of the Fiscal Quarters
comprising such period
to
- --
(b) (i) the aggregate amount of interest expense
(excluding amortization of deferred financing costs and, to
the extent not paid in cash, interest on the PIK Note and
the Equity Proceeds Notes) of the Company and its
Subsidiaries for all of the Fiscal Quarters comprising such
period, calculated on a consolidated basis in accordance
with GAAP, minus (ii) the amount of interest income of the
-----
Company and its Subsidiaries which was included in the
calculation of Net Income, in accordance with GAAP, for all
of the Fiscal Quarters comprising such period, minus (iii)
-----
that portion of the amount set forth in clause (i) above
----------
attributable to (A) the proportionate direct or indirect
ownership of Persons other than the Company and its
Subsidiaries of the voting stock of, or partnership interest
in, any Subsidiary or (B) if the economic burden of the
amount set forth in clause (i) above is borne or to be borne
----------
by minority owners of such Subsidiary (other than the
Company and its Subsidiaries) in a proportion other than the
proportion of their direct or indirect ownership of the
voting stock of, or partnership interest in, such
Subsidiary, the proportionate share of the economic burden
of such amount borne or to be borne by such minority owners.
"Interest Period" means, with respect to any LIBO Rate Loan,
---------------
the period beginning on (and including) the date on which such
LIBO Rate Loan is made or continued as, or converted into, a LIBO
Rate Loan pursuant to Section 2.3 or 3.4.2 and ending on (but
----------- -----
excluding, for purposes of determining accrued interest) the day
which numerically corresponds to such date one, two, three, or
six months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), as
the Company may select in its relevant notice pursuant to
Section 2.3 or 3.4.2; provided, however, that
- ----------- ----- -------- -------
(a) no more than seven different Interest Periods may
be in effect at one time with respect to all Revolving
Loans;
(b) if such Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall
end on the next following Business Day (unless such next
following Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end
on the Business Day next preceding such numerically
corresponding day); and
(c) no Interest Period may end later than the date set
24
<PAGE>
<PAGE> 33
forth in clause (a) of the definition of "Stated Maturity
---------- ---------------
Date".
----
"Inventory" means goods (whether consisting of whole goods,
---------
spare parts or components), merchandise, and other personal
property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work-in-
process, finished goods, returned goods, and materials and
supplies of any kind, nature or description which are or might be
used or consumed in the Company's business or used in connection
with the manufacture, packing, shipping, advertising, selling, or
finishing of such goods, merchandise, and such other personal
property, and all documents of title or other documents
representing them.
"Investment" means, with respect to any Person,
----------
(a) any loan or advance made by such Person to any
other Person (excluding commission, travel, relocation, and
similar advances) and any purchase or other acquisition made
by such Person of any bond, debenture, note, or similar
instrument of any other Person; and
(b) any ownership or similar interest held by such
Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof less all returns of principal or equity
thereon (and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the
transfer or exchange of Property other than cash, be deemed to
have been made in an original principal or capital amount equal
to the fair market value of such Property.
"Issuer Bank" means any Affiliate, office, branch, or agency
-----------
of Bank of America, or any other Lender, which has agreed to
issue and has issued one or more Letters of Credit at the request
(such request to be made with the consent of the Company, which
consent shall not be unreasonably delayed or withheld) of the
Agent.
"Issuer Party" and "Issuer Parties" are defined in
------------ --------------
Section 5.10.
- ------------
"Joint Venture Affiliate" means QAL, KJBC, Anglesey,
-----------------------
Furukawa, and any other Person (a) which is not a Subsidiary of
the Company, (b) in which the Company or its Subsidiaries own an
equity interest of more than 5% (and in which no Restricted
Affiliate has an equity interest, other than through a direct or
indirect ownership interest in the Company), and (c) which
supplies or processes bauxite, alumina, or aluminum to or for the
Company or any of its Subsidiaries or sells to third parties
bauxite, alumina, aluminum or aluminum products purchased from
the Company or any of its Subsidiaries.
25
<PAGE>
<PAGE> 34
"KAII" means Kaiser Aluminium International, Inc., a
----
Delaware corporation.
"KATSI" means Kaiser Aluminum Technical Services, Inc., a
-----
California corporation.
"KBC" means Kaiser Bauxite Company, a Nevada corporation.
---
"KEC" means Kaiser Export Company, a Delaware corporation.
---
"KFC" means Kaiser Finance Corporation, a Delaware
---
corporation.
"Kaiser Canada" means Kaiser Aluminum & Chemical of Canada
-------------
Limited, an Ontario corporation.
"KJBC" means Kaiser Jamaica Bauxite Company, a Jamaica
----
partnership.
"KAAC" means Kaiser Alumina Australia Corporation, a
----
Delaware corporation.
"KJC" means Kaiser Jamaica Corporation, a Delaware corpora
---
tion.
"KT Note means the promissory note dated December 21, 1989,
-------
as amended by Amendment dated as of July 1, 1993, executed by the
Parent Guarantor and delivered to the Company, a copy of which
has been delivered to the Agent and each Lender prior to the date
hereof, and endorsed, delivered, and pledged to the Agent, on
behalf of the Secured Lenders, pursuant to the Company Pledge
Agreement or the Subsidiary Pledge Agreement, as such promissory
note may be amended, endorsed, or otherwise modified from time to
time in accordance with the provisions hereof, and also means any
other promissory note accepted from time to time in substitution
therefor or renewal thereof, in accordance with the provisions
hereof.
"L/C Collateral Account" is defined in Section 5.8.1.
---------------------- -------------
"Lenders" is defined in the preamble.
------- --------
"Letter of Credit" is defined in Section 5.1 and includes
---------------- -----------
the Existing Letters of Credit.
"Letter of Credit Outstandings" means, at any time, an
-----------------------------
amount equal to the sum of
(a) the then aggregate amount which is undrawn and
available under all issued and outstanding Letters of Credit
plus
- ----
(b) the then aggregate amount of all unpaid and
26
<PAGE>
<PAGE> 35
outstanding Reimbursement Obligations with respect to issued
and outstanding Letters of Credit.
"LIBO Rate" means, relative to any Interest Period, the rate
---------
of interest determined by the Agent to be the rate per annum at
which Dollar deposits in immediately available funds are offered
to Bank of America in the London interbank market as at or about
11:00 a.m., London time, two Business Days prior to the beginning
of such Interest Period for delivery on the first day of such
Interest Period, and in an amount approximately equal to the
amount of each LIBO Rate Loan to which such Interest Period
applies and for a period equal to such Interest Period.
"LIBO Rate Loan" means all or any portion of a Loan bearing
--------------
interest, at all times during an Interest Period applicable to
such Loan or portion thereof, at a fixed rate determined by
reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any
----------------------------
Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined pursuant to the following
formula:
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for each LIBO Rate Loan to
which such Interest Period applies will be determined by the
Agent.
"LIBOR Office" means, with respect to any Lender, the
------------
office, if any, of such Lender designated as such below its
signature hereto, or designated in the Assignee Agreement to be
Bound pursuant to which such Lender became a party hereto, or
such other office of a Lender as designated from time to time by
written notice from such Lender to the Company and the Agent,
whether or not outside the United States, which shall be making
or maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest
------------------------
Period, a percentage (expressed as a decimal) equal to the daily
average during such Interest Period of the percentages in effect
on each day of such Interest Period, as prescribed by the F.R.S.
Board, for determining the maximum aggregate reserve requirements
(including any emergency, supplemental, or other marginal reserve
requirement) applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other applicable regulation issued from time
to time by the F.R.S. Board which prescribes reserve requirements
applicable to "Eurocurrency Liabilities" as currently defined in
Regulation D having a term approximately equal or comparable to
such Interest Period.
27
<PAGE>
<PAGE> 36
"Lien" means any security interest, mortgage, pledge,
----
hypothecation, assignment for security purposes, deposit
arrangement for security purposes, encumbrance, lien (statutory
or other), or other similar arrangement of any kind or nature.
"Loan" means, as the context may require, a Revolving Loan
----
of any type, or a Swingline Loan.
"Loan Document" means this Agreement, all Letters of Credit,
-------------
each Credit Request, the Subsidiary Guaranty, the Collateral
Documents, and each other agreement, document, or Instrument
executed and delivered or to be executed and delivered by the
Parent Guarantor, the Company, or any Subsidiary of the Parent
Guarantor or the Company in connection with this Agreement, as
any and all of the foregoing may be amended, supplemented,
restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof, but excluding, however,
the Intercompany Demand Notes, the KT Note and the Equity
Proceeds Notes.
"Majority Lenders" means, at any time, Lenders having at
----------------
least 51% of the Revolving Commitments.
"Materially Adverse Effect" means, relative to any
-------------------------
occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental
investigation or proceeding), a materially adverse effect on:
(a) the assets of or the then-existing or projected
business, revenues, financial condition, or operations, of
the Parent Guarantor, the Company, any other Obligor which
is a Significant Subsidiary, any Joint Venture Affiliate
(other than KJBC), ALPART, or VALCO; or
(b) the ability of the Parent Guarantor, the Company,
or any other Obligor which is a Significant Subsidiary to
perform any of its payment or other material obligations
under this Agreement or any other Loan Document to which it
is a party.
"MAXXAM" means MAXXAM Inc., a Delaware corporation (formerly
------
known as MCO Holdings, Inc.).
"Minimum Net Worth" means $410,000,000 plus 50% of Net
-----------------
Income (but not loss) for each Fiscal Quarter of the Company
commencing with the Fiscal Quarter ending March 31, 1997.
"Net Amount of Eligible Accounts" means the gross amount of
-------------------------------
Eligible Accounts less the sum of (a) all returns, discounts,
claims, credits, and allowances of any nature at any time issued
in respect thereof, (b) all unapplied advance payments or
deposits in respect thereof, (c) and all credits relating to
Accounts of National Southwire with respect to which more than 90
days have elapsed since the date of the original issuance of the
28
<PAGE>
<PAGE> 37
credit memo therefor and all credits relating to Accounts of all
other Account Debtors with respect to which more than 65 days
have elapsed since the date of the original issuance of the
credit memo therefor.
"Net Disposition Proceeds" means, with respect to any Asset
------------------------
Disposition by the Company or any Subsidiary of the Company, the
excess of
(a) the sum of
(i) the gross cash proceeds received by the
Company or such Subsidiary from such disposition
plus
----
(ii) immediately upon receipt thereof by the
Company or such Subsidiary, the gross cash proceeds in
respect of principal from or in respect of any
promissory note or deferred payment obligations or
other security taken in connection with such
disposition (including as a result of any sale or other
disposition of any such note, obligations, or security,
or as a result of any financing with respect thereto)
minus
-----
(b) the sum of
(i) all legal, consulting, brokerage, investment
banking, and accounting fees and disbursements and all
governmental fees incurred (or reasonably expected to
be incurred) in connection with such sale that, in any
case, except for payments for legal fees and expenses
to a law firm of which an Affiliate of the Company is a
member, are not payable to Affiliates of the Company
plus
----
(ii) all taxes actually paid or to be paid in
connection with such sale
plus
----
(iii) to the extent the proceeds described in
clause (a) are applied (or to be applied with
----------
reasonable promptness) in payment thereof, all
Indebtedness secured, directly or indirectly (i.e.,
----
such disposition is permitted by the terms of the
Instruments evidencing or applicable to such
Indebtedness, or by the terms of a consent granted
thereunder, only on the condition that the proceeds of
such disposition be applied to such Indebtedness), by
such Property.
29
<PAGE>
<PAGE> 38
"Net Income" means, for any period, all amounts which, in
----------
conformity with GAAP, would be included under net income on a
consolidated income statement of the Company and its Subsidiaries
for such period; provided that there shall be excluded (a) the
--------
income (or loss) of any Person (other than a Subsidiary of the
Company) in which any other Person (other than the Company or any
of its Subsidiaries) has a joint interest, except to the extent
of the amount of dividends or other distributions actually paid
to the Company or any of its Subsidiaries by such Person during
such period, (b) the income (or loss) of any Person accrued prior
to the date it becomes a Subsidiary of the Company or is merged
into or consolidated with the Company or any of its Subsidiaries
or that Person's assets are acquired by the Company or any of its
Subsidiaries, (c) the income of any Subsidiary of the Company to
the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary, and (d)
any after-tax gains or losses attributable to Asset Dispositions
or returned surplus assets of any Pension Plan.
"Net Worth" means the consolidated net worth of the Company
---------
and its Subsidiaries, calculated in accordance with GAAP;
provided, however, that (a) the cumulative effect, in an amount
- -------- -------
not to exceed $508,000,000, of the changes in accounting
principles attributable to the adoption of FAS 106, 109 and 112
recorded in the first Fiscal Quarter of the 1993 Fiscal Year,
shall be excluded, and (b) the effect of any issuance after the
Initial Borrowing Date of any class of the capital stock of the
Company or any of its Subsidiaries shall be excluded.
"Nonrecourse Indebtedness" means, with respect to any
------------------------
Person, Indebtedness that is nonrecourse to the credit of such
Person.
"Non-United States Person" means a Person who is not (a) a
------------------------
citizen or resident of the United States, (b) a corporation,
partnership, or other entity created or organized under the laws
of the United States, or (c) an estate or trust the income of
which is subject to United States federal income taxation
regardless of its source.
"Obligations" means all obligations (monetary or otherwise)
-----------
of the Company and each other Obligor arising under or in
connection with this Agreement, the Letters of Credit, and each
other Loan Document.
"Obligor" means the Parent Guarantor, the Company and each
-------
of their Subsidiaries obligated under any Loan Document.
"Organic Document" means, with respect to any Obligor, its
----------------
articles or certificate of incorporation, its by-laws, and all
shareholder agreements, voting trusts, and similar arrangements
30
<PAGE>
<PAGE> 39
applicable to any of its authorized shares of capital stock.
"Parent Collateral Documents" means the Parent Pledge
---------------------------
Agreement and the Parent Security Agreement.
"Parent Guarantor Preferred Stock" means preferred stock of
--------------------------------
any class or series issued by the Parent Guarantor.
"Parent Guarantor" is defined in the preamble.
---------------- --------
"Parent Guaranty" is defined in Section 6.1.
--------------- -----------
"Parent Pledge Agreement" means the pledge agreement
-----------------------
executed and delivered by the Parent Guarantor pursuant to
Section 7.1.4, in substantially the form of Exhibit E-1 attached
- ------------- -----------
hereto, as amended, supplemented, restated, or otherwise modified
from time to time in accordance with the provisions hereof or
thereof.
"Parent Security Agreement" means the security agreement
-------------------------
executed and delivered by the Parent Guarantor pursuant to
Section 7.1.6, in substantially the form of Exhibit E-2 attached
- ------------- -----------
hereto, as amended, supplemented, restated, or otherwise modified
from time to time in accordance with the provisions hereof or
thereof.
"Participant" is defined in Section 12.11.2.
----------- ---------------
"PBGC" means the Pension Benefit Guaranty Corporation and
----
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is
------------
defined in section 3(2) of ERISA, which is subject to Title IV of
ERISA (other than a multiemployer plan as defined in section
4001(a)(3) of ERISA), of which the Company or any corporation,
trade, or business that is, along with the Company, a member of a
Controlled Group, is a contributing sponsor, as such term is
defined in section 4001(a)(13) of ERISA, or to which any
Controlled Group member has a reasonable possibility of any
liability by reason of having been a substantial employer within
the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Percentage" means, with respect to any Lender, the
----------
percentage set forth opposite its name on the signature pages of
this Agreement, or set forth in the Assignee Agreement to be
Bound pursuant to which such Lender became a party hereto, as
such percentage may be adjusted from time to time pursuant to
Assignee Agreement(s) to be Bound executed by such Lender and its
Assignee Lender(s) and delivered pursuant to Section 12.11.1.
---------------
"Person" means any natural person, corporation, firm,
------
association, government, governmental agency, or any other
31
<PAGE>
<PAGE> 40
entity, whether acting in an individual, fiduciary, or other
capacity.
"PIK Note" means the Senior Subordinated Intercompany Note
--------
of the Company dated December 15, 1992, as amended on the Initial
Borrowing Date, executed by the Company in the original principal
amount of $2,500,000, a copy of which has been delivered to the
Agent and each Lender prior to the date hereof, as such
promissory note may be amended or otherwise modified from time to
time in accordance with the provisions hereof .
"Plan" means any Pension Plan or Welfare Plan.
----
"Pledge Agreement(s)" means, individually, the Parent Pledge
-------------------
Agreement, the Company Pledge Agreement, the Intercompany Note
Pledge Agreement, or the Subsidiary Pledge Agreement, as the
context may require, and, collectively, the Parent Pledge
Agreement, the Company Pledge Agreement, the Intercompany Note
Pledge Agreement, and the Subsidiary Pledge Agreement.
"Preferred Stock (USWA)" means shares of the Company's
----------------------
Cumulative (1985 Series A) Preference Stock and shares of the
Company's Cumulative (1985 Series B) Preference Stock which have
been or may in the future be issued in connection with the Kaiser
Aluminum USWA Employee Stock Ownership Plan or the Kaiser
Aluminum Salaried Employee Stock Ownership Plan.
"Proceeds" means all products and proceeds (as defined in
--------
the Uniform Commercial Code) of any Collateral, and all proceeds
of such proceeds and products, including all cash and credit
balances, all payments under any indemnity, warranty, or guaranty
payable with respect to any Collateral, all awards for taking by
eminent domain, all proceeds of fire or other insurance, and all
money and other Property obtained as a result of any claims
against third parties or any legal action or proceeding with
respect to Collateral.
"Product Swap" means an agreement by the Company or KAII to
------------
deliver bauxite, alumina or aluminum products to or on behalf of
an Account Debtor in exchange for (i) an agreement by such
Account Debtor to deliver like or related products to or on
behalf of the Company or KAII, as the case may be, and (ii) the
payment of cash in the ordinary course of business on ordinary
trade terms.
"Progress Billing" means any invoice for goods sold or
----------------
leased or services rendered under a contract or agreement
pursuant to which the Account Debtor's obligation to pay such
invoice is conditioned upon the completion of any further
performance by the Company or KAII under the contract or
agreement.
"Property" means any interest in any kind of property or
--------
asset, whether real, personal or mixed or tangible or intangible.
32
<PAGE>
<PAGE> 41
"QAL" means Queensland Alumina Limited, a Queensland,
---
Australia corporation.
"Quarterly Payment Date" means the last day of each March,
----------------------
June, September, and December or, if any such day is not a
Business Day, the next succeeding Business Day.
"Redeemable Stock" means any equity security or option or
----------------
warrant related thereto that by its terms or otherwise is
required to be purchased or redeemed, or is redeemable at the
option of the holder thereof, in either case at any time prior to
March 31, 1999.
"Reference Rate" means the higher of (a) the Federal Funds
--------------
Rate plus one-half of one percent (1/2%) and (b) the rate of
interest (the "Bank of America Rate") publicly announced from
--------------------
time to time by Bank of America in San Francisco, California, as
its reference rate. The Bank of America Rate is a rate set by
Bank of America based upon various factors including Bank of
America's cost and desired return, general economic conditions,
and other factors, and is used as a reference point for pricing
some loans, which loans may be priced at, above, or below the
Bank of America Rate. Any change in the Bank of America Rate
shall take effect at the opening of business on the day specified
in the public announcement of such change.
"Reference Rate Loan" means all or any portion of a Loan
-------------------
bearing interest at a fluctuating rate determined by reference to
the Reference Rate.
"Reimbursement Obligation" is defined in Section 5.6.
------------------------ -----------
"Release" means a "release", as such term is defined in
-------
CERCLA.
"Required Lenders" means, at any time, Lenders having at
----------------
least 67% of the Revolving Commitments.
"Restated Certificate of Incorporation" means the restated
-------------------------------------
certificate of incorporation of the Company dated July 25, 1989.
"Restricted Affiliate" means the Parent Guarantor, MAXXAM,
--------------------
and any Affiliate of either thereof (in each case other than the
Company, its Subsidiaries which are not Restricted Subsidiaries,
any Joint Venture Affiliate, and any Subsidiary of a Joint
Venture Affiliate in which neither the Parent Guarantor, MAXXAM,
nor any Affiliate of either thereof (other than the Company, its
Subsidiaries which are not Restricted Subsidiaries, or any Joint
Venture Affiliate) has any equity interest other than through a
direct or indirect ownership interest in the Company).
"Restricted Subsidiary" means any Subsidiary of the Company
---------------------
in which a Restricted Affiliate has an interest, other than
through such Restricted Affiliate's direct or indirect ownership
33
<PAGE>
<PAGE> 42
interest in the Company.
"Revolving Commitment" is defined in clause (b) of
-------------------- ----------
Section 2.1.1.
- -------------
"Revolving Commitment Amount" is defined in clause (b) of
--------------------------- ----------
Section 2.1.1.
- -------------
"Revolving Commitment Availability" means, at any time, the
---------------------------------
excess of
(a) the lesser of (i) the Revolving Commitment Amount
at such time and (ii) the Borrowing Base as in effect at
such time
over
- ----
(b) the Revolving Credit Outstandings at such time.
"Revolving Commitment Termination Date" means the earliest
-------------------------------------
of
(a) March 31, 1994 (unless the Initial Borrowing Date
shall have occurred before the close of business, San
Francisco time, on such date);
(b) February 15, 1999;
(c) the date on which the Revolving Commitment Amount
is reduced to zero pursuant to Section 2.2; and
-----------
(d) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clause (a), (b),
---------- ---
(c), or (d), the Revolving Commitment of each Lender and the
- --- ---
Swingline Commitment of Business Credit shall terminate
automatically and without any further action.
"Revolving Credit Outstandings" means, at any time, the sum
-----------------------------
of (a) the aggregate outstanding principal amount of all
Revolving Loans at such time, (b) the aggregate outstanding
principal amount of all Swingline Loans at such time, and (c) the
Letter of Credit Outstandings at such time.
"Revolving L/C Request" means a request and certificate,
---------------------
duly executed by an Authorized Officer of the Company, in
substantially the form of Exhibit B attached hereto, which
---------
request shall include a duly completed application for the
issuance or extension of a standby or commercial letter of credit
in the form specified from time to time by the proposed Issuer
Bank of a Letter of Credit, as such application may be amended,
supplemented, restated, or otherwise modified from time to time.
Each Revolving L/C Request shall specify, among other things, the
34
<PAGE>
<PAGE> 43
date on which the proposed Letter of Credit is to be issued and
whether such Letter of Credit shall be transferable in whole or
in part. All Revolving L/C Requests and all documents submitted
by the Company in support of Revolving L/C Requests shall be in
form and substance satisfactory to the relevant Issuer Bank.
"Revolving Loans" is defined in clause (a)(i) of
--------------- -------------
Section 2.1.1.
- -------------
"Secured Lenders" means the Agent, each Lender and each
---------------
Issuer Bank, together with any successors and assigns thereto.
"Security Agreement(s)" means, individually, the Parent
---------------------
Security Agreement, the Company Security Agreement, or the
Subsidiary Security Agreement, as the context may require, and,
collectively, the Parent Security Agreement, the Company Security
Agreement, and the Subsidiary Security Agreement.
"Security Interest" means, collectively, the Liens granted
-----------------
to the Agent, on behalf of the Secured Lenders, in the Collateral
pursuant to the Collateral Documents.
"Senior Debt" means Indebtedness of the Company or any of
-----------
its Subsidiaries under the Senior Notes, the Senior Indenture, or
any guaranty of such Indebtedness.
"Senior Debt Instruments" means the Senior Notes, the Senior
-----------------------
Indenture, and all other Instruments and agreements executed and
delivered by the Company or any of its Subsidiaries in connection
therewith.
"Senior Indenture" means the indenture dated as of
----------------
February 17, 1994 between the Company, and KFC, KAAC, AJI and
KJC, as Subsidiary Guarantors, and First Trust National
Association, as trustee, pursuant to which the Senior Notes were
issued, as amended, supplemented, restated, or otherwise modified
from time to time in accordance with the terms of such indenture
and this Agreement.
"Senior Notes" means the 9-7/8% Senior Notes due 2002 in a
------------
principal amount not exceeding $225,000,000 issued by the Company
pursuant to the Senior Indenture, as amended, supplemented,
restated or otherwise modified from time to time in accordance
with the terms of the Senior Indenture and this Agreement and all
other promissory notes accepted from time to time in substitution
therefor or renewal thereof in accordance with the terms of the
Senior Indenture and this Agreement.
"Significant Subsidiary" means each Subsidiary of the
----------------------
Company that
(a) is designated with an asterisk in Item 2
------
("Existing Subsidiaries") of the Disclosure Schedule;
---------------------
35
<PAGE>
<PAGE> 44
(b) accounted for at least 5% of consolidated revenues
of the Company and its Subsidiaries from sales to third
parties for the four Fiscal Quarters of the Company ending
on the last day of the last Fiscal Quarter of the Company
immediately preceding the date as of which any such
determination is made; or
(c) has assets (other than assets which are eliminated
in consolidation) which represent at least 5% of the
consolidated assets of the Company and its Subsidiaries as
of the last day of the last Fiscal Quarter of the Company
immediately preceding the date as of which any such
determination is made,
all of which, with respect to clauses (b) and (c), shall be as
----------- ---
included in the consolidated financial statements of the Company
for the period, or as of the date, in question.
"Solvent" means, with respect to any Person at any time, a
-------
condition under which
(a) the fair saleable value of such Person's assets
is, at such time, greater than the total amount of such
Person's liabilities (including contingent and unliquidated
liabilities) at such time;
(b) such Person is able to pay all of its liabilities
as such liabilities mature; and
(c) such Person does not have unreasonably small
capital with which to conduct its business.
For purposes of this definition
(i) the amount of a Person's contingent or
unliquidated liabilities at any time shall be that
amount which, in light of all the facts and
circumstances then existing, represents the amount
which can reasonably be expected to become an actual or
matured liability;
(ii) the "fair saleable value" of an asset shall
be the amount which may be realized within a reasonable
time either through collection or sale of such asset at
its regular market value; and
(iii) the "regular market value" of an asset
shall be the amount which a capable and diligent
business person could obtain for such asset from an
interested buyer who is willing to purchase such asset
under ordinary selling conditions.
"Stated Amount" of each Letter of Credit means the "stated
-------------
amount" or "face amount" (or other similar term) of such Letter
36
<PAGE>
<PAGE> 45
of Credit, as defined therein.
"Stated Expiry Date" is defined in clause (b)(ii) of
------------------ --------------
Section 5.1.
- -----------
"Stated Maturity Date" means (a) in the case of any
--------------------
Revolving Loan, February 15, 1999, and (b) in the case of any
Swingline Loan, the earlier of (i) the seventh calendar day
following the date such Swingline Loan is made or
(ii) February 15, 1999.
"Subordinated Debt" means Indebtedness of the Company or any
-----------------
of its Subsidiaries under the Subordinated Notes, the
Subordinated Indenture, or any guaranty of such Indebtedness.
"Subordinated Debt Instruments" means the Subordinated
-----------------------------
Notes, the Subordinated Indenture, and all other Instruments and
agreements executed and delivered by the Company or any of its
Subsidiaries in connection therewith.
"Subordinated Indenture" means the indenture dated as of
----------------------
February 1, 1993 between the Company, and KAAC, AJI and KJC, as
Subsidiary Guarantors, and The First National Bank of Boston, as
trustee, pursuant to which the Subordinated Notes were issued, as
supplemented to make KFC an additional Subsidiary Guarantor (as
such term is defined therein), and as the same may be further
amended, supplemented, restated, or otherwise modified from time
to time in accordance with the terms of such indenture and this
Agreement.
"Subordinated Notes" means the 12 3/4% Senior Subordinated
------------------
Notes due 2003 in a principal amount not exceeding $400 million
issued by the Company pursuant to the Subordinated Indenture, as
amended, supplemented, restated, or otherwise modified from time
to time in accordance with the terms of the Subordinated
Indenture and this Agreement and all other promissory notes
accepted from time to time in substitution therefor or renewal
thereof in accordance with the terms of the Subordinated
Indenture and this Agreement.
"Subsidiary" means, with respect to any Person, any
----------
corporation of which more than 50% of the outstanding capital
stock having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence
of any contingency), or any other entity of which more than 50%
of the equity securities or other ownership interest, is or are
at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries of such Person, or by
one or more other Subsidiaries of such Person. Any determination
of whether a Subsidiary is directly or indirectly "wholly-owned"
by any Person shall be made after disregarding (a) any shares of
such Subsidiary held by the officers, employees, or directors of
37
<PAGE>
<PAGE> 46
such Subsidiary and (b) any shares of such Subsidiary held by
Restricted Affiliates.
"Subsidiary Collateral Documents" means the Subsidiary
-------------------------------
Pledge Agreement, the Subsidiary Security Agreement, and the
Intercompany Note Pledge Agreement.
"Subsidiary Guaranty" means the guaranty executed and
-------------------
delivered by any Subsidiary of the Company pursuant to
Section 7.1.9, in substantially the form of Exhibit J attached
- ------------- ---------
hereto, as amended, supplemented, restated, or otherwise modified
from time to time in accordance with the provisions hereof or
thereof.
"Subsidiary Pledge Agreement" means the pledge agreement
---------------------------
executed and delivered by any Subsidiary of the Company pursuant
to Section 7.1.10, in substantially the form of Exhibit K-1
-------------- -----------
attached hereto, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions
hereof or thereof.
"Subsidiary Security Agreement" means the security agreement
-----------------------------
executed and delivered by any Subsidiary of the Company pursuant
to Section 7.1.6, in substantially the form of Exhibit K-2
------------- -----------
attached hereto, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions
hereof or thereof.
"Swingline Commitment" is defined in Section 2.1.2.
-------------------- -------------
"Swingline Loans" is defined in Section 2.1.2.
--------------- -------------
"Tax Allocation Agreement" means the Tax Allocation
------------------------
Agreement dated December 21, 1989, between the Company and
MAXXAM, a copy of which has been delivered to the Agent and the
Lenders prior to the date hereof, as amended from time to time
with the prior written consent of the Agent.
"Taxes" is defined in clause (a) of Section 4.6.
----- ---------- -----------
"Tolling Inventory" means raw materials, work-in-process or
-----------------
other goods delivered to the Company by a third person pursuant
to a bailment arrangement with the Company under which such
Inventory is to be processed, improved, or otherwise altered by
the Company.
"Transfer Agreement" means the Transfer Agreement dated as
------------------
of December 21, 1989, between the Parent Guarantor and the
Company, a copy of which has been delivered to the Agent and the
Lenders prior to the date hereof, as amended, supplemented,
restated, or otherwise modified from time to time with the prior
written consent of the Agent.
"type" means, relative to any Revolving Loan, the portion
----
38
<PAGE>
<PAGE> 47
thereof, if any, being maintained as a Reference Rate Loan or a
LIBO Rate Loan.
"Uniform Commercial Code" means the Uniform Commercial Code
-----------------------
(or any successor statute) of the State of New York or, to the
extent relevant to the perfection or enforcement of security
interests, the Uniform Commercial Code (or any successor statute)
of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue
- -------------
of perfection or enforcement of security interests.
"United States" or "U.S." means the United States of
------------- ----
America, its fifty States, and the District of Columbia.
"VALCO" means Volta Aluminium Company Limited, a Ghanaian
-----
corporation.
"Welfare Plan" means a "welfare plan", as such term is
------------
defined in section 3(1) of ERISA.
SECTION 1.2. Use of Defined Terms. Unless otherwise
--------------------
defined or the context otherwise requires, terms for which
meanings are provided in this Agreement shall have such meanings
when used in the Disclosure Schedule and in each Credit Request,
Continuation/Conversion Notice, Borrowing Base Certificate,
Compliance Certificate, Loan Document, notice, and other
communication delivered from time to time in connection with this
Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified,
----------------
references in this Agreement and in each other Loan Document to
any Article or Section are references to such Article or Section
of this Agreement or such other Loan Document, as the case may
be, and, unless otherwise specified, references in any Article,
Section, or definition to any clause are references to such
clause of such Article, Section, or definition.
SECTION 1.4. Accounting and Financial Determinations and
-------------------------------------------
Other Terms. Unless otherwise specified, all accounting terms
- -----------
used herein or in any other Loan Document shall be interpreted,
all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements required
to be delivered hereunder or thereunder shall be prepared in
accordance with GAAP applied on a basis consistent with those
used in the preparation of the financial statements for the
period ending December 31, 1993 to be furnished to the Lenders
under this Agreement; provided, however, that if there is any
-----------------
change in GAAP subsequent to December 31, 1993 the Agent and the
Company shall each have the right to notify the other party that
the Required Lenders or the Company, as the case may be, wish to
incorporate the effect of any such change in GAAP on the
operation of any covenant contained in Article IX or on the
Borrowing Base, the Interest Coverage Ratio for purposes of
Section 3.4.1 or any other provision hereof. In the event that
- -------------
39
<PAGE>
<PAGE> 48
the party receiving such notice agrees with such request to
incorporate the effect of any such change, thereafter the
Company's compliance with such covenant, the Borrowing Base, the
Interest Coverage Ratio and all other calculations in respect of
any other provision hereof will be determined on the basis of
GAAP including such change.
ARTICLE II
COMMITMENTS AND BORROWING PROCEDURES
SECTION 2.1. Commitments. On the terms and subject to the
-----------
conditions of this Agreement (including Article VII), each
-----------
Lender, severally and for itself alone, agrees to make Revolving
Loans and other Credit Extensions, and Business Credit agrees to
make Swingline Loans, pursuant to the Commitments described in
this Section 2.1.
-----------
SECTION 2.1.1. Revolving Commitment.
--------------------
(a) From time to time on any Business Day occurring
during the period commencing on the Initial Borrowing Date, and
continuing to (but not including) the Revolving Commitment
Termination Date, each Lender will
(i) make Loans (relative to such Lender, its
"Revolving Loans") to the Company equal to such
---------------
Lender's Percentage of the aggregate amount of
Revolving Loans requested by the Company pursuant to
Section 2.3(a) to be made on such Business Day, and
--------------
(ii) (A) in the case of any Issuer Bank, issue Letters
of Credit for the account of the Company, for the benefit of
the Company or any Subsidiary of the Company, or (B) in the
case of each other Lender, participate in such Letters of
Credit, in each case in accordance with Article V.
---------
(b) The Revolving Credit Outstandings at any time
shall not exceed the lesser of (x) $250,000,000 (such amount, as
it may be reduced from time to time pursuant to Section 2.2,
-----------
being herein called the "Revolving Commitment Amount") and (y)
---------------------------
the Borrowing Base as then in effect. The Commitment of each
Lender to make Revolving Loans and to issue or participate in
Letters of Credit is herein referred to as its "Revolving
---------
Commitment".
- ----------
(c) On the terms and subject to the conditions hereof,
the Company may from time to time (i) borrow, prepay, and
reborrow Revolving Loans and (ii) request the issuance of Letters
of Credit, allow Letters of Credit to expire undrawn or, if drawn
upon, repay Reimbursement Obligations relative thereto and
request the issuance of new Letters of Credit.
40
<PAGE>
<PAGE> 49
SECTION 2.1.2. Swingline Commitment.
--------------------
(a) From time to time on any Business Day occurring
during the period commencing on the Initial Borrowing Date, and
continuing to (but not including) the Revolving Commitment
Termination Date, Business Credit will make a portion of the
Revolving Commitment available to the Company by making Loans
("Swingline Loans") to the Company in an aggregate amount not to
---------------
exceed $25,000,000 outstanding at any one time, notwithstanding
the fact that such Borrowings may exceed Business Credit's
Revolving Commitment. The Commitment of Business Credit to make
Swingline Loans from time to time is herein referred to as its
"Swingline Commitment."
--------------------
(b) Business Credit at any time in its sole and
absolute discretion may require each other Lender on one Business
Day's notice to make a Revolving Loan in an amount equal to such
Lender's Percentage of the aggregate amount of Swingline Loans
outstanding on the date notice is given. In the event that
Revolving Loans are made by Lenders other than Business Credit
under the immediately preceding sentence, each such Lender shall
deposit with the Agent same day funds in an amount equal to such
Lender's Percentage of such Revolving Loans. Such deposit will
be made to an account which the Agent shall specify from time to
time by written notice to the Lenders. The proceeds of such
Revolving Loans shall be immediately applied to repay the
outstanding Swingline Loans and the Company authorizes the Agent
to charge its account with Bank of America (up to the amount
available in such account) in order to immediately pay Business
Credit the amount of such Swingline Loans to the extent amounts
received from other Lenders are not sufficient to repay in full
the outstanding Swingline Loans. If any portion of any such
amount paid to Business Credit should be recovered by or on
behalf of the Company from Business Credit in bankruptcy, by
assignment for the benefit of creditors, or otherwise, the loss
of the amount so recovered shall be ratably shared among all
Lenders in the manner contemplated by Section 4.8.
-----------
(c) Each Lender's obligation to make the Revolving
Loans referred to in clause (b) shall be absolute and
----------
unconditional and shall not be affected by any circumstance,
including (i) any set-off, counterclaim, recoupment, defense or
other right which such Lender may have against Business Credit,
the Company, or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default; (iii) any
adverse change in the condition (financial or otherwise) of the
Company; (iv) any breach of this Agreement by the Company or any
other Lender; or (v) any other circumstance, happening, or event
whatsoever, whether or not similar to any of the foregoing.
(d) Interest on each Swingline Loan shall accrue to
Business Credit from the date of making such Swingline Loan to
and including the earlier of (i) the date prior to the day on
which payment of such Swingline Loan is made by the Company or
41
<PAGE>
<PAGE> 50
(ii) the date prior to the day of receipt by the Agent from any
Lender of its Percentage of any Revolving Loans made to repay
such Swingline Loan; provided that, from and after the date of
--------
the making of any such Revolving Loans, interest shall accrue on
such Lender's Percentage of any such Revolving Loans for the
account of such Lender.
SECTION 2.1.3 Lenders Not Required To Make Loans or Issue
-------------------------------------------
Letters of Credit.
- -----------------
(a) No Lender shall be required to make any Revolving
Loan or issue (in the case of the relevant Issuer Bank) any
Letter of Credit and Business Credit shall not be required to
make any Swingline Loan, if, after giving effect thereto, the
Revolving Credit Outstandings would exceed the lesser of (x) the
Borrowing Base as then in effect and (y) the Revolving Commitment
Amount as then in effect; and
(b) the Issuer Bank shall not be required to issue any
Letter of Credit if, after giving effect thereto, the Letter of
Credit Outstandings would exceed $125,000,000.
SECTION 2.1.4. Borrowing Base Determinations.
-----------------------------
(a) Except during the continuance of an Event of Cash
Dominion, the Company will furnish to the Agent, on or before the
12th Business Day of each month and on the date of the delivery
of (i) any Borrowing Request requesting the making of Revolving
Loans, or (ii) any Revolving L/C Request, a Borrowing Base
Certificate setting forth the Company's calculation of the
Borrowing Base (with supporting calculations in reasonable
detail) as of the last day of the preceding calendar month (or,
if the Credit Request described in clause (i) or (ii) is
---------- ----
delivered on or after the first day of any month but before the
12th Business Day of such month (or, if earlier, the date the
Borrowing Base Certificate required to be delivered during such
month is actually delivered), as of the last day of the next
preceding calendar month) and certifying
(A) that the information contained in such
Borrowing Base Certificate is true and complete in all
material respects,
(B) that, except as is disclosed in such Borrowing
Base Certificate, the Company has no reason to believe that
there has been a material reduction in the Borrowing Base
from the Borrowing Base Calculation Date for such Borrowing
Base Certificate to the date on which such Borrowing Base
Certificate is delivered,
(C) if a Credit Request is being delivered in
connection with the delivery of such Borrowing Base
Certificate, that as of the date of such Borrowing Base
Certificate, the Revolving Credit Outstandings do not (and,
42
<PAGE>
<PAGE> 51
after giving effect to the making of all Loans, or the issuance
of all Letters of Credit, if any, being requested in conjunction
with the delivery of such Borrowing Base Certificate, will not)
exceed the Borrowing Base which was in effect on the Borrowing
Base Calculation Date for such Borrowing Base Certificate, and
(D) as to such other matters as the Agent may
reasonably request,
(b) During the continuance of an Event of Cash
Dominion, the Company will furnish to the Agent at least weekly,
on or before the third day of each week, a collateral summary
report duly executed on behalf of the Company by a Financial
Authorized Officer of the Company setting forth sales, credit
memos, collections, discounts and outstanding Loans as of the
most recent practicable date.
During the continuance of an Event of Cash Dominion, the
Borrowing Base will be determined by the Agent, after
consultation with the Company, each day on the basis of such
relevant information as the Agent deems appropriate to consider
in calculating the actual Borrowing Base, including the
collateral summary reports and such other information regarding
the Accounts of the Company and KAII and the Inventory of the
Company as the Agent shall obtain from the Company and KAII
pursuant to Section 9.1.9 or otherwise.
-------------
SECTION 2.2. Reduction of Revolving Commitment Amount. The
----------------------------------------
Company may, from time to time on any Business Day occurring
after the Initial Borrowing Date, voluntarily reduce the
unutilized portion of the Revolving Commitment Amount; provided,
--------
however, that (a) all such reductions that involve prepayments of
- -------
LIBO Rate Loans shall require at least three Business Days prior
notice to the Agent, (b) all other reductions, including any such
reductions that involve prepayments of Reference Rate Loans,
shall require at least one Business Days prior notice to the
Agent, (c) each such reduction shall be permanent, and (d) any
such partial reduction of the Revolving Commitment Amount that
involves prepayments of LIBO Rate Loans shall be in an amount of
not less than $5,000,000. All notices referred to in the
foregoing sentence shall be given prior to 10:00 a.m., San
Francisco time, on the day of such notice.
SECTION 2.3. Borrowing Procedure.
-------------------
(a) By delivering a Borrowing Request to the Agent on
or before 10:00 a.m., San Francisco time, on a Business Day, the
Company, on advance notice of at least (i) three Business Days,
in the case of any disbursement of LIBO Rate Loans, or (ii) one
Business Day, in the case of any disbursement of Reference Rate
Loans, but in no case more than five Business Days, may from time
to time request that the Lenders make a disbursement of Revolving
Loans. Each request for a disbursement of Reference Rate Loans
43
<PAGE>
<PAGE> 52
shall specify an aggregate principal amount of at least
$1,000,000 and integral multiples of $1,000,000 in excess
thereof, and each request for a disbursement of LIBO Rate Loans
shall specify an aggregate principal amount of at least
$5,000,000 and integral multiples of $1,000,000 in excess
thereof. On the terms and subject to the conditions of this
Agreement, each Borrowing shall be comprised of the Loans of the
type(s) and Interest Period(s) specified in such Borrowing
Request and shall be made on the Business Day specified in such
Borrowing Request. The Agent shall promptly notify each Lender
by telephone (promptly confirmed in writing) of any such
Borrowing Request on the day such Borrowing Request is received
by the Agent. Subject to Section 2.1.3, prior to 9:30 a.m., San
-------------
Francisco time, on the Business Day specified in such Borrowing
Request, each Lender shall deposit with the Agent same day funds
in an amount equal to such Lender's Percentage of the requested
Borrowing. Such deposit will be made to an account which the
Agent shall specify from time to time by written notice to the
Lenders. To the extent funds are received from the Lenders by
9:30 a.m., San Francisco time, on any Business Day, the Agent
shall deposit such funds into the Company's account number 12339-
11101 at Bank of America not later than 10:30 a.m., San Francisco
time, on such Business Day. No Lender's obligation to make any
Loan shall be affected by any other Lender's failure to make any
Loan.
(b) By delivering a Borrowing Request to the Agent on
or before 1:00 p.m., San Francisco time, on a Business Day, the
Company may from time to time request that Business Credit make a
disbursement of a Swingline Loan. Each request for a
disbursement of a Swingline Loan shall specify an aggregate
principal amount of at least $500,000 and integral multiples of
$10,000 in excess thereof. All Swingline Loans shall be
Reference Rate Loans and no Swingline Loan may be outstanding for
more than seven calendar days. Business Credit shall deposit
same day funds in an amount equal to the requested Swingline Loan
into the Company's account number 12339-11101 at Bank of America
not later than 3:00 p.m., San Francisco time, on such Business
Day.
(c) In lieu of delivering the above-described
Borrowing Requests, the Company may give the Agent telephone
notice by the required time of any proposed Borrowing; provided
that such notice shall be promptly confirmed in writing by
delivery of a Borrowing Request on or prior to the proposed
borrowing date. Each telephone request for a Revolving Loan or a
Swingline Loan shall be conclusively presumed to be made by a
Person authorized by the Company to do so and crediting a
Revolving Loan or a Swingline Loan to the Company's deposit
account shall conclusively establish the obligation of the
Company to repay such Revolving Loan or Swingline Loan as
provided herein.
SECTION 2.4. Agent's Books and Records; Monthly Statements.
---------------------------------------------
44
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<PAGE> 53
The Agent will charge all Revolving Loans, Swingline Loans and,
as and when they become due and payable, other monetary
Obligations to a loan account of the Company maintained by the
Agent. All fees, commissions, costs, expenses, and other charges
under or pursuant to the Loan Documents not paid when due may, at
the Agent's option, be charged as Revolving Loans to the
Company's loan account as of the date due from the Company or the
date paid or incurred by the Agent, as the case may be. The
Company agrees that the Agent's books and records showing the
monetary Obligations and the transactions pursuant to this
Agreement and the other Loan Documents shall be admissible in any
action or proceeding arising therefrom, and shall constitute
prima facie proof thereof, irrespective of whether any Obligation
- ----- -----
is also evidenced by a promissory note or other instrument. The
Agent will provide to the Company a monthly statement of Loans,
payments, and other transactions pursuant to this Agreement.
Such statement shall be deemed correct, accurate, and binding on
the Company and as an account stated (except for reversals and
reapplications of payments made as provided in Section 4.7 and
-----------
corrections of errors discovered by the Agent), unless the
Company notifies the Agent in writing to the contrary within 60
days after such statement is rendered. In the event a timely
written notice of objection is given by the Company, only the
items to which exception is expressly made will be considered to
be disputed by the Company.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST, AND FEES
SECTION 3.1. Repayments. The Company shall repay in full
----------
the unpaid principal amount of each Loan upon the Stated Maturity
Date therefor.
SECTION 3.2. Voluntary Prepayments. Prior to repayment in
---------------------
full of each Loan pursuant to Section 3.1, and except during the
-----------
continuance of an Event of Cash Dominion, the Company may, from
time to time on any Business Day, make a voluntary prepayment, in
whole or in part, without premium or penalty (except as may be
required by Section 4.4), of the outstanding principal amount of
-----------
the Loans; provided, however, that
-------- -------
(a) if any such prepayment of any LIBO Rate Loan is
made on any day other than the last day of the Interest
Period for such Loan the Company shall comply with the
provisions of Section 4.4;
-----------
(b) all such voluntary partial prepayments of LIBO
Rate Loans (i) shall be in an aggregate amount of not less
than $5,000,000 and integral multiples of $1,000,000 in
excess thereof, unless such prepayment is a prepayment of
the entire outstanding principal amount of LIBO Loans of all
45
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<PAGE> 54
Lenders, and (ii) shall be applied pro rata to such LIBO
--- ----
Rate Loans of all Lenders;
(c) all such voluntary partial prepayments of
Reference Rate Loans shall be, in the case of Revolving
Loans, in an aggregate amount of not less than $1,000,000
and integral multiples of $1,000,000 in excess thereof,
unless such prepayment is a prepayment of the entire
outstanding principal amount of Reference Rate Loans of all
Lenders, and, in the case of Swingline Loans, in an
aggregate amount of not less than $250,000 and integral
multiples of $10,000 in excess thereof, unless such
prepayment is a prepayment of the entire outstanding
principal amount of Swingline Loans;
(d) all such voluntary partial prepayments of
Reference Rate Loans shall be applied first to Swingline
Loans and then pro rata to the Reference Rate Loans of all
--- ----
Lenders;
(e) all such voluntary prepayments of LIBO Rate Loans
shall require at least five Business Days prior written
notice to the Agent;
(f) all such voluntary prepayments of Reference Rate
Loans that are Revolving Loans shall require at least one
but no more than five Business Days prior written notice to
the Agent; and
(g) all such voluntary prepayments of Reference Rate
Loans that are Swingline Loans may be made without any prior
written notice.
SECTION 3.3. Mandatory Prepayments. Prior to repayment in
---------------------
full of each Loan pursuant to Section 3.1, the Company shall make
-----------
mandatory prepayments, without premium or penalty (except as may
be required by Section 4.4), in accordance with this Section 3.3.
----------- -----------
SECTION 3.3.1. Prepayment Under, or Cash Collateralization
-------------------------------------------
of, Revolving Commitment. Except during the continuance of an
- ------------------------
Event of Cash Dominion, the Company shall, on the second Business
Day after the date of delivery of any Borrowing Base Certificate
indicating that the Revolving Credit Outstandings on the date of
such Borrowing Base Certificate exceed the Borrowing Base as
shown on such Certificate, make a mandatory prepayment of the
then aggregate outstanding principal amount of all Swingline
Loans and, if all Swingline Loans have been prepaid, shall make a
mandatory prepayment of the then aggregate outstanding principal
amount of all Revolving Loans (or a repayment of outstanding
Reimbursement Obligations with respect to Letters of Credit),
and, if all Revolving Loans and such Reimbursement Obligations
have been prepaid or repaid, shall furnish cash collateral with
respect to undrawn and outstanding Letters of Credit, in an
aggregate amount equal to such excess. If the Company shall fail
46
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<PAGE> 55
to deliver a Borrowing Base Certificate when due hereunder and
the Agent determines that the Revolving Credit Outstandings on
the date such Borrowing Base Certificate was due exceeded the
Borrowing Base, as of the last day of the preceding month, the
Company shall on the second Business Day after receipt of notice
from the Agent, make a mandatory prepayment of the then aggregate
outstanding principal amount of all Swingline Loans and, if all
Swingline Loans have been prepaid, shall make a mandatory
prepayment of the then aggregate outstanding principal amount of
all Revolving Loans (or a repayment of outstanding Reimbursement
Obligations with respect to Letters of Credit), and, if all
Revolving Loans have been prepaid, shall furnish cash collateral
with respect to Letters of Credit, in an aggregate amount equal
to such excess. On the terms and subject to the conditions
hereof, the Company may reborrow amounts applied to the
prepayment of Swingline Loans and Revolving Loans pursuant to
this Agreement.
SECTION 3.3.2. Cash Dominion. During the continuance of an
-------------
Event of Cash Dominion (a) all collected funds on deposit in the
Concentration Account pursuant to the Concentration Bank
Agreement shall be applied on a daily basis to the prepayment of
the then aggregate outstanding principal amount of all Swingline
Loans and, if all Swingline Loans have been prepaid, to the
prepayment of the then aggregate outstanding principal amount of
all Revolving Loans; (b) on any day on which Revolving Credit
Outstandings exceed the Borrowing Base, as calculated as of such
date, the Company shall make a mandatory prepayment of the then
aggregate outstanding principal amount of all Swingline Loans,
and, if all Swingline Loans have been prepaid, shall make a
mandatory prepayment of the then aggregate outstanding principal
amount of all Revolving Loans (or a repayment of outstanding
Reimbursement Obligations with respect to Letters of Credit),
and, if all Revolving Loans have been prepaid, shall furnish cash
collateral with respect to Letters of Credit, in an aggregate
amount equal to such excess; and (c) the Company shall deposit,
or cause to be deposited in the Concentration Account (unless
deposited in a Collection Deposit Account or remitted or paid
directly to the Agent) (i) all remittances and payments received
by the Company in respect of Accounts (except Accounts payable by
Subsidiaries and Joint Venture Affiliates paid by accounting
entries), Instruments (other than Intercompany Demand Notes), and
sales of Inventory for cash and all prepayments, deposits, and
other advance payments in respect of sales of Inventory; (ii) all
Net Disposition Proceeds received from any Asset Disposition; and
(iii) all tax refunds, insurance proceeds and other amounts
received from third parties. On the terms and subject to the
conditions hereof, the Company may reborrow amounts applied to
the prepayment of Swingline Loans and Revolving Loans pursuant to
this Agreement.
SECTION 3.3.3. Acceleration. The Company shall,
------------
immediately upon any acceleration of the Stated Maturity Date of
any Loans pursuant to Section 10.2 or Section 10.3, repay all
------------ ------------
47
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<PAGE> 56
Loans which are so accelerated.
SECTION 3.4. Interest Provisions. Interest on the
-------------------
outstanding principal amount of Loans shall accrue and be payable
in accordance with this Section 3.4, in each case computed on the
-----------
basis of the actual number of days elapsed in a 360-day year.
SECTION 3.4.1. Rates. The Company shall pay interest on
-----
the unpaid principal amount of each Revolving Loan and Swingline
Loan made to the Company from time to time outstanding as
follows:
(a) if any portion of the unpaid principal amount of
such Loan is a Reference Rate Loan, the Company shall pay
interest on such portion at a rate per annum equal to the
sum of (i) the Reference Rate from time to time in effect
and (ii) a margin of 1-1/2%; and
(b) if any portion of the unpaid principal amount of
such Loan is a LIBO Rate Loan, during each Interest Period
applicable thereto, the Company shall pay interest on such
portion at a rate per annum equal to the sum of (i) the LIBO
Rate (Reserve Adjusted) for such Interest Period and (ii) a
margin of 3-1/4%;
provided, however, that,
- -------- -------
(i) so long as no Default shall have occurred and be
continuing, if as of the last day of any Fiscal Quarter,
commencing with the second Fiscal Quarter of the 1995 Fiscal
Year, the Interest Coverage Ratio for the four Fiscal
Quarter period ended on such last day is greater than or
equal to 1.25 to 1.00 but less than 1.50 to 1.00, and the
Agent receives a Compliance Certificate pursuant to
clause (c) of Section 9.1.1 to such effect, then, for each
---------- -------------
day during the Fiscal Quarter in which such Compliance
Certificate is required to be delivered, the margins set
forth in clauses (a) and (b) above and any fees payable
----------- ---
pursuant to clause (a)(ii) of Section 5.3 (in each case
-------------- -----------
without giving effect to any previous increase or reduction
pursuant to this proviso) shall each be reduced by 1/2 of 1%
per annum; and
(ii) so long as no Default shall have occurred and be
continuing, if as of the last day of any Fiscal Quarter,
commencing with the second Fiscal Quarter of the 1995 Fiscal
Year, the Interest Coverage Ratio for the four Fiscal
Quarter period ended on such last day is greater than or
equal to 1.50 to 1.00 but less than 2.00 to 1.00, and the
Agent receives a Compliance Certificate pursuant to
clause (c) of Section 9.1.1 to such effect, then, for each
---------- -------------
day during the Fiscal Quarter in which such Compliance
Certificate is required to be delivered, the margins set
forth in clauses (a) and (b) above and any fees payable
----------- ---
48
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<PAGE> 57
pursuant to clause (a)(ii) of Section 5.3 (in each case
-------------- -----------
without giving effect to any previous increase or reduction
pursuant to this proviso) shall each be reduced by 1% per annum;
and
(iii) so long as no Default shall have occurred and be
continuing, if as of the last day of any Fiscal Quarter,
commencing with the second Fiscal Quarter of the 1995 Fiscal
Year, the Interest Coverage Ratio for the four Fiscal
Quarter period ended on such last day is greater than or
equal to 2.00 to 1.00, and the Agent receives a Compliance
Certificate pursuant to clause (c) of Section 9.1.1 to such
---------- -------------
effect, then, for each day during the Fiscal Quarter in
which such Compliance Certificate is required to be
delivered, the margins set forth in clauses (a) and (b)
----------- ---
above and any fees payable pursuant to clause (a)(ii) of
--------------
Section 5.3 (in each case without giving effect to any
-----------
previous increase or reduction pursuant to this proviso)
shall each be reduced by 1-1/2% per annum.
Prior to the date in any Fiscal Quarter on which the Agent
receives the Compliance Certificate which is required to be
delivered during such Fiscal Quarter, the interest margin and
letter of credit fees shall be the same as were applicable to the
immediately preceding Fiscal Quarter. If such Compliance
Certificate shall indicate that such interest margin or letter of
credit fees should be increased pursuant to this proviso, the
Company shall, on the date of delivery of such Compliance
Certificate, pay to the Agent for the account of those Lenders
which received underpayment thereof an amount equal to the
difference between (A) the aggregate amount of interest and
letter of credit fees which would theretofore have been payable
during such Fiscal Quarter had such increase been made on the
first day of such Fiscal Quarter and (B) the amounts of interest
and letter of credit fees which were actually paid during such
Fiscal Quarter. If such Compliance Certificate shall indicate
that the Company paid more interest or letter of credit fees than
would have been required if any reduction therein required by
this proviso had commenced on the first day of such Fiscal
Quarter, any such excess payment shall be credited to future
payments of interest or letter of credit fees, as the case may
be, payable to those Lenders which received over-payments thereof
and, if the Company shall not have received full credit for any
such excess payment from any Lender at the time when such
Lender's Commitments hereunder terminate and all monetary
Obligations owing to such Lender are paid in full, then such
Lender shall pay to the Company any such excess payment, without
interest, at such time.
In the event that any accountant's report delivered pursuant
to clause (b)(iii) of Section 9.1.1 shall indicate any
--------------- -------------
miscomputation of the Interest Coverage Ratio in any Compliance
Certificate, if such accountant's report shall indicate that the
interest margin or letter of credit fees should have been
49
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<PAGE> 58
increased pursuant to this proviso for any Fiscal Quarter during
the relevant Fiscal Year, the Company shall, within ten Business
Days after such accountant's report is delivered, pay the Agent,
for the account of the Lenders, additional interest on the Loans
and letter of credit fees for the Letters of Credit in an
aggregate amount equal to the excess of (A) the aggregate amount
of interest which would have been payable on the Loans and letter
of credit fees which would have been payable on the Letters of
Credit for any period of time if the Compliance Certificate in
respect of the Fiscal Quarter in question had shown the same
Interest Coverage Ratio for the four Fiscal Quarter period ended
on the last day of such Fiscal Quarter as did such accountant's
report, over (B) the aggregate of the interest which was actually
paid on the Loans and the letter of credit fees which were
actually paid on the Letters of Credit in respect of such period
of time. If such accountant's report shall indicate that the
Company paid more interest or letter of credit fees than would
have been required if any reduction therein had commenced on the
first day of any Fiscal Quarter during the relevant Fiscal Year,
any such excess payment shall be credited to future payments of
interest or letter of credit fees, as the case may be, payable to
those Lenders which received over-payments thereof and, if the
Company shall not have received full credit for any such excess
payment from any Lender at the time when such Lender's
Commitments hereunder terminate and all monetary Obligations
owing to such Lender are paid in full, then such Lender shall pay
to the Company any such excess payment, without interest, at such
time.
Upon termination of the Lenders' Commitments hereunder, no
further retroactive adjustments shall be made to the interest or
letter of credit fees paid during the term of this Agreement.
All LIBO Rate Loans shall bear interest from (and including)
the first day of the applicable Interest Period to (but
excluding) the last day of such Interest Period at the interest
rate determined as applicable to such LIBO Rate Loan; provided,
--------
however, that any margin reduction or increase resulting from the
- -------
Interest Coverage Ratio test set forth in this Section 3.4.1
-------------
shall become effective at any time during any Interest Period.
SECTION 3.4.2. Continuation and Conversion Elections. By
-------------------------------------
delivering a Continuation/Conversion Notice to the Agent on or
before 10:00 a.m., San Francisco time, on a Business Day, the
Company may from time to time irrevocably elect, on
(a) not less than three nor more than five Business
Days notice (in the case of continuations of or conversions
into LIBO Rate Loans), or
(b) not less than one nor more than five Business Days
notice (in the case of conversions into Reference Rate
Loans)
50
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<PAGE> 59
that all or any portion of any outstanding Revolving Loan be (i)
converted into a LIBO Rate Loan, (ii) converted into a Reference
Rate Loan, or (iii) continued as a LIBO Rate Loan. All
conversions of Revolving Loans that are Reference Rate Loans
shall be made pro rata among all such Reference Rate Loans of all
--- ----
Lenders. All conversions or continuations of Revolving Loans
that are LIBO Rate Loans shall be made pro rata among all such
--- ----
LIBO Rate Loans of all Lenders. In the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan
within the time periods specified above before the last day of
the then current Interest Period with respect thereto, such LIBO
Rate Loan shall, on such last day, automatically convert to a
Reference Rate Loan. No portion of the outstanding principal
amount of any Revolving Loan may be continued as, or be converted
into, a LIBO Rate Loan during the continuation of any Event of
Default. No Swingline Loans may be converted into a LIBO Rate
Loan.
SECTION 3.4.3. Funding. Each Lender may, if it so elects,
-------
fulfill its obligation to make, continue, or convert any LIBO
Rate Loan hereunder by causing one of its foreign branches or
Affiliates (or an international banking facility created by such
Lender) to make or maintain such LIBO Rate Loan; provided,
--------
however, that such LIBO Rate Loan shall nonetheless be deemed to
- -------
have been made and to be held by such Lender, and the obligation
of the Company to repay such LIBO Rate Loan shall nevertheless be
to such Lender for the account of such foreign branch, Affiliate,
or international banking facility. In addition, the Company
hereby consents and agrees that, for purposes of any
determination to be made for purposes of Section 4.2, 4.3, or
----------- ---
4.4, it shall be conclusively assumed that each Lender elected to
- ---
fund all LIBO Rate Loans by purchasing Dollar deposits in the
London interbank eurodollar market.
SECTION 3.4.4. Default Rates. During the continuation of
-------------
any Event of Default,
(a) the Company shall pay interest (after as well as
before judgment) on the principal amount of all Loans
outstanding to it at a rate per annum which is determined by
increasing each of the interest rates set forth in
clauses (a) and (b) of Section 3.4.1 by 2% per annum;
----------- --- -------------
(b) the letter of credit fees payable pursuant to
clause (a)(ii) of Section 5.3 shall be increased by 2% per
-------------- -----------
annum for all Letters of Credit; and
(c) the Company shall pay interest on any other
Obligations which are then due and payable (other than
Reimbursement Obligations which are accruing interest
pursuant to Section 5.5) to the extent permitted by
-----------
applicable law, at a rate per annum equal to the Reference
Rate plus 3-1/2%.
51
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<PAGE> 60
SECTION 3.4.5. Interest Payment Dates. Interest accrued on
----------------------
each Loan shall be payable
(a) with respect to Reference Rate Loans, in arrears on
the first day of each month;
(b) with respect to LIBO Rate Loans, (i) except during
the continuance of any Event of Default, on the last day of
each applicable Interest Period and, if such Interest Period
shall exceed three months, on the day which numerically
corresponds to the first day of such Interest Period and
falls in the third month thereafter (or, if there is no such
numerically corresponding date, on the last Business Day of
such third month) and (ii) during the continuance of an
Event of Default, in arrears on the first day of each month;
and
(c) on that portion of any Loan the Stated Maturity
Date of which is accelerated pursuant to Section 10.2 or
------------
Section 10.3, immediately upon such acceleration.
------------
Interest accrued on Loans or other monetary Obligations arising
under this Agreement or any other Loan Document after the date
such amount is due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise) shall be payable upon
demand.
SECTION 3.5. Fees. The Company and the Parent Guarantor,
----
jointly and severally, agree to pay the fees set forth in this
Section 3.5.
- -----------
SECTION 3.5.1. Commitment Fee. The Company and the Parent
--------------
Guarantor, jointly and severally, agree to pay to the Agent for
the account of each Lender, for the period (including any portion
thereof when any of its Commitments are suspended by reason of
the Company's inability to satisfy any condition of Article VII)
-----------
commencing on the Effective Date and continuing through the
Revolving Commitment Termination Date, a commitment fee at the
rate of 1/2 of 1% per annum on such Lender's Percentage of the
sum of the average daily unused portion of the Revolving
Commitment Amount. Such commitment fees shall be payable by the
Company in arrears on each Quarterly Payment Date, commencing
with the first such day following the Effective Date, and on the
Revolving Commitment Termination Date.
SECTION 3.5.2. Audit Fees. The Company and the Parent
----------
Guarantor, jointly and severally, agree to pay to the Agent an
audit fee equal to $500 per day per auditor (whether or not such
auditor is an employee of the Agent) for each audit of the
Collateral undertaken pursuant to Section 9.1.5 and to pay all
-------------
out-of-pocket expenses of each auditor incurred in connection
with such Collateral audits; provided, however, that, except
-------- -------
during the continuance of an Event of Cash Dominion, the Company
and the Parent Guarantor shall not be required to pay for more
52
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<PAGE> 61
than one collateral audit during any 180-day period and, during
the continuance of an Event of Cash Dominion, shall not be
required to pay for more than one collateral audit during any 90-
day period.
SECTION 3.5.3. Other Fees. The Company and the Parent
----------
Guarantor, jointly and severally, agree to pay to the Agent
certain other fees set forth in clause (iii) of the confidential
------------
letter dated January 24, 1994 from Bank of America to the Company
(the "Fee Letter") for retention by the Agent as set forth in the
----------
Fee Letter.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. Illegality.
----------
(a) If any Lender shall determine (which determination
shall, upon written notice thereof to the Company and the
other Lenders, be conclusive and binding on the Company)
that the introduction of or any change in (or in the
interpretation of) any law makes it unlawful, or any central
bank or other governmental authority asserts that it is
unlawful, for such Lender to make, continue, or maintain any
Loan as, or to convert any Loan into, a LIBO Rate Loan, the
obligations of all Lenders to make, continue, maintain, or
convert any such Loans shall, upon such determination,
forthwith be suspended until such Lender shall notify the
Agent that the circumstances causing such suspension no
longer exist, and all LIBO Rate Loans shall automatically
convert into Reference Rate Loans at the end of the then
current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
(b) If any Lender shall determine (which determination
shall, upon written notice thereof to the Company and the
other Lenders, be conclusive and binding on the Company)
that the introduction of or any change in (or in the
interpretation of) any law makes it unlawful, or any central
bank or other governmental authority asserts that it is
unlawful, for such Lender to issue or amend (in the case of
an Issuer Bank) or to participate in (in the case of each
other Lender) any additional Letters of Credit, the
obligations of all Lenders so to issue, amend, or
participate in additional Letters of Credit shall, upon such
determination, forthwith terminate, and the Agent shall, by
written notice to the Company and each Lender, declare that
such obligations have so terminated. If circumstances
subsequently change so that such affected Lender shall
determine that it is no longer so affected, such obligations
shall, upon such determination (and telephonic notice
thereof immediately confirmed in writing to the Agent, each
other Lender, and the Company), forthwith be reinstated, and
53
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<PAGE> 62
the Agent shall, by written notice to the Company and each
Lender, declare that such obligations have been so
reinstated.
SECTION 4.2. Deposits Unavailable. If the Agent shall have
--------------------
reasonably determined that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to Bank of
America in the relevant market; or
(b) by reason of circumstances affecting Bank of
America's relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO
Rate Loans,
then, upon written notice from the Agent to the Company and the
Lenders, the obligations of all Lenders under Section 2.3 and
-----------
Section 3.4.2 to make or continue any Loans as, or to convert any
- -------------
Loans into, LIBO Rate Loans shall forthwith be suspended until
the Agent shall notify the Company and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 4.3. Increased Costs, etc. The Company agrees to
--------------------
reimburse each Lender for any increase in the cost to such Lender
of, or any reduction in the amount of any sum receivable by such
Lender in respect of, issuing, maintaining, or participating in
the Letters of Credit, or making, continuing, or maintaining (or
of its obligation to make, continue, or maintain) any Loans as,
or of converting (or of its obligation to convert) any Loans
into, LIBO Rate Loans. Such Lender shall promptly notify the
Agent and the Company in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons
therefor and the additional amount required fully to compensate
such Lender for such increased cost or reduced amount as well as
the calculation of such additional amount. Such additional
amounts shall be payable by the Company directly to such Lender
within 15 days of its receipt of such notice, and such notice
shall, in the absence of manifest error, be conclusive and
binding on the Company.
SECTION 4.4. Funding Losses. In the event any Lender shall
--------------
incur any loss or expense (including any loss or expense incurred
by reason of the liquidation or reemployment of deposits or other
funds acquired by such Lender to make, continue, or maintain any
portion of the principal amount of any Loan as, or to convert any
portion of the principal amount of any Loan into, a LIBO Rate
Loan) as a result of
(a) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than
the scheduled last day of the Interest Period applicable
thereto, whether pursuant to Section 3.1, 3.2, 3.3, or 3.4.2
----------- --- --- -----
or otherwise,
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<PAGE> 63
(b) any Loans not being made as LIBO Rate Loans in
accordance with the Borrowing Request therefor (other than
as a result of a determination pursuant to Section 4.1 or
-----------
4.2), or
---
(c) any Loans not being continued as, or converted
into, LIBO Rate Loans in accordance with the Continuation/
Conversion Notice therefor (other than as a result of a
determination pursuant to Section 4.1 or 4.2),
----------- ---
then, upon the written notice of such Lender to the Company (with
a copy to the Agent), the Company shall, within 15 days of its
receipt thereof, pay directly to such Lender such amount as will
(in the reasonable determination of such Lender) reimburse such
Lender for such loss or expense. Such written notice (which
shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on the
Company.
SECTION 4.5. Increased Capital Costs. If any change in, or
-----------------------
the introduction, adoption, effectiveness, interpretation,
reinterpretation, or phase-in of, any law or regulation,
directive, guideline, decision, or request (whether or not having
the force of law) of any court, central bank, regulator, or other
governmental authority affects or would affect the amount of
capital required or expected to be maintained by any Lender or
any Person controlling such Lender, and such Lender determines
(in its sole and absolute discretion) that the rate of return on
its or such controlling Person's capital as a consequence of its
Commitments or the Credit Extensions (including the disbursement
of Loans and the issuance of or participation in Letters of
Credit) made by such Lender is reduced to a level below that
which such Lender or such controlling Person could have achieved
but for the occurrence of any such circumstance, then, in any
such case upon written notice from time to time by such Lender to
the Company, with a copy to the Agent, the Company shall, within
15 days of its receipt of such notice, pay directly to such
Lender additional amounts sufficient to compensate such Lender or
such controlling Person for such reduction in rate of return. A
statement of such Lender as to any such additional amount or
amounts (including calculations thereof in reasonable detail)
shall, in the absence of manifest error, be conclusive and
binding on the Company. In determining such amount, such Lender
may use any method of averaging and attribution that it (in its
sole and absolute discretion) shall deem applicable, subject in
each case to Section 4.12.
------------
SECTION 4.6. Taxes, etc.
----------
(a) All payments by the Company and each other Obligor
to the Agent or any Lender in respect of any Obligation
shall be made without any setoff or counterclaim, and free
and clear of and without deduction or withholding for or on
account of, any present or future Taxes now or hereafter
55
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<PAGE> 64
imposed on the Agent or any Lender with respect to such payments
by any governmental or other authority, except to the extent that
such deduction or withholding is compelled by law. As used
herein, the term "Taxes" shall include all
-----
excise and other taxes of whatever nature imposed on the
Agent or any Lender with respect to, or arising out of, such
payments or the transactions contemplated hereby (other than
taxes generally assessed on the net income of the Agent or
any Lender, as the case may be, by the government of the
country, or any political subdivision or taxing authority
thereof or therein, in which the Agent or such Lender is
incorporated or in which such Lender's Domestic Office or
such Lender's LIBOR Office is located) as well as all
levies, imposts, duties, charges, or fees of whatever
nature. If any Obligor is compelled by law to make any such
deduction or withholding it will:
(i) pay to the relevant authorities the full
amount required to be so withheld or deducted;
(ii) (except to the extent that such deduction or
withholding results from the breach, by the recipient
of a payment, of its agreement contained in clause (b)
----------
below, or would not be required if such recipient's
representation and warranty contained in clause (b)
----------
below were true) pay such additional amounts as may be
necessary in order that the net amount received by the
Agent and each Lender, after such deduction or
withholding (including any required deduction or
withholding on such additional amounts) shall equal the
amount such payee would have received had no such
deduction or withholding been made; and
(iii) promptly forward to the Agent (for delivery
to such payee) an official receipt or other
documentation satisfactory to the Agent evidencing such
payment to such authorities.
Moreover, if any Taxes are directly asserted against the
Agent or any Lender with respect to any payment made in
respect of, or arising out of, any Obligation, such payee
may pay such Taxes, and each Obligor which is obligated to
pay such Obligation agrees promptly to pay such additional
amount (including any penalties, interest or expenses) as
may be necessary in order that the net amount received by
such payee after the payment of such taxes (including any
Taxes on such additional amount) shall equal the amount such
payee would have received had no such Taxes been asserted
(except to the extent that such Taxes result from the
breach, by such payee, of its agreement contained in
clause (b) below or would not be asserted if such payee's
----------
representation and warranty contained in clause (b) below
----------
were true). For purposes of this Section 4.6, a
-----------
distribution hereunder by the Agent or any Lender to or for
56
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<PAGE> 65
the account of any Lender shall be deemed to be a payment by
the applicable Obligor.
(b) Each Lender which is a Non-United States Person
agrees (to the extent it is permitted to do so under the
laws and any applicable double taxation treaties of the
United States, the jurisdiction of such Lender's
incorporation, and the jurisdictions in which such Lender's
Domestic Office and such Lender's LIBOR Office are located)
to execute and deliver to the Agent for delivery to the
Company, before the first scheduled payment date in each
year, either (i) three United States Internal Revenue
Service Forms 1001 or (ii) three United States Internal
Revenue Service Forms 4224 together with three United States
Internal Revenue Service Forms W-9, or any successor forms,
as appropriate, properly completed and claiming complete or
partial, as the case may be, exemption from withholding and
deduction of United States federal Taxes. Each Lender which
is a Non-United States Person represents and warrants to
each Obligor and to the Agent that, at the date of this
Agreement, (i) its Domestic Office and its LIBOR Office are
entitled to receive payments of principal, interest,
Reimbursement Obligations, and fees hereunder and under the
other Loan Documents without deduction or withholding for or
on account of any Taxes imposed by the United States or any
political subdivision thereof and (ii) it is permitted to
take the actions described in the preceding sentence under
the laws and any applicable double taxation treaties of the
jurisdictions specified in the preceding sentence. Each
Lender which is a Non-United States Person further agrees
that, to the extent any form claiming complete or partial
exemption from withholding and deduction of United States
federal Taxes delivered under this clause (b) is found to be
----------
incomplete or incorrect in any material respect, such Lender
shall (to the extent it is permitted to do so under the laws
and any double taxation treaties of the United States, the
jurisdiction of its incorporation, and the jurisdictions in
which its Domestic Office and its LIBOR Office are located)
execute and deliver to the Agent a complete and correct
replacement form.
(c) Each Lender agrees to use reasonable efforts to
change its Domestic Office or LIBOR Office to avoid or to
minimize any amounts otherwise payable under clause (a) of
----------
this Section 4.6, in each case solely if such change can be
-----------
made in a manner so that such Lender, in its sole
determination, suffers no legal, economic, or regulatory
disadvantage.
SECTION 4.7. Payments, Computations, etc.
---------------------------
(a) Unless otherwise expressly provided, all payments
by the Company pursuant to this Agreement or any other Loan
Document shall be made by the Company to the Agent for the
57
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<PAGE> 66
pro rata account of the Lenders entitled to receive such
--- ----
payment. Except for Proceeds received directly by the
Agent, all such payments required to be made to the Agent
shall be made, without setoff, deduction or counterclaim,
not later than 9:30 a.m., San Francisco time, or, with
respect to payments which are to be funded by other Credit
Extensions, 10:30 a.m., San Francisco time, in either case
on the date due, in same day or immediately available funds,
to such account as the Agent shall specify from time to time
by written notice to the Company. Funds received after that
time shall be deemed to have been received by the Agent on
the next succeeding Business Day. The Agent shall promptly
remit to each Lender such Lender's share, if any, of such
payments received by the Agent not later than 9:30 a.m.,
San Francisco time, or 10:30 a.m., San Francisco time, as
applicable, for the account of such Lender in same day funds
on the day received. If the Agent fails so to remit such
funds to such Lender, the Agent shall pay to such Lender
interest on the amount of such Lender's share of such
payments at the daily average Federal Funds Rate for each
day on which such failure continues excluding the day on
which such remittance is made. All interest and commitment
fees shall be computed on the basis of the actual number of
days (including the first day but excluding the last day)
occurring during the period for which such interest or fee
is payable over a year comprised of 360 days. Whenever any
payment to be made shall otherwise be due on a day which is
not a Business Day, such payment shall (except as otherwise
required by clause (b) of the definition of the term
----------
"Interest Period" with respect to LIBO Rate Loans) be made
---------------
on the next succeeding Business Day and such extension of
time shall be included in computing interest, if any, in
connection with such payment.
(b) If after receipt of any payment of, or Proceeds
applied to the payment of, all or any part of the
Obligations, the Lenders, the Issuer Bank, or the Agent is
for any reason compelled to surrender such payment or
Proceeds to any Person, because such payment or Proceeds is
invalidated, declared fraudulent, set aside, determined to
be void or voidable as a preference, impermissible set off,
or a diversion of trust funds, or for any other reason, the
Obligations or part thereof intended to be satisfied shall
be revived and continue and this Agreement shall continue in
full force as if such payment or Proceeds had not been
received by the Lenders, the Issuer Bank, or the Agent; and
the Company shall be liable to the Lenders, the Issuer Bank,
and the Agent, and hereby does indemnify the Lenders, the
Issuer Bank, and the Agent and hold the Lenders, the Issuer
Bank, and the Agent harmless for, the amount of such payment
or Proceeds surrendered. The provisions of this Section 4.7
-----------
shall be and remain effective notwithstanding any contrary
action which may have been taken by the Lenders, the Issuer
Bank, and the Agent in reliance upon such payment or
58
<PAGE>
<PAGE> 67
Proceeds, and any such contrary action so taken shall be
without prejudice to the rights of the Lenders, the Issuer
Bank, and the Agent under this Agreement and shall be deemed
to have been conditioned upon such payment or Proceeds
having become final and irrevocable.
SECTION 4.8. Sharing of Payments. If any Lender shall
-------------------
obtain any payment or other recovery (whether voluntary,
involuntary, by application of setoff, or otherwise) on account
of any Letter of Credit it has issued or in which it is a
participant, or on account of any Loan (other than pursuant to
the terms of Sections 4.3, 4.4, 4.5, and 4.6) in each case in
------------ --- --- ---
excess of its pro rata share of payments then or therewith
--- ----
obtained by all Lenders, such Lender shall purchase from the
other Lenders such participations in the Letters of Credit in
which they have participated or they have issued, or in Loans
made by them, as the case may be, as shall be necessary to cause
such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided, however, that if
-------- -------
all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Lender, the purchase
shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the
purchase price to the ratable extent of such recovery together
with an amount equal to such selling Lender's ratable share
(according to the proportion of
(a) the amount of such selling Lender's required
repayment to the purchasing Lender
to
- --
(b) the total amount so recovered from the purchasing
Lender)
of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. The Company
agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 4.8 may, to the fullest extent
-----------
permitted by law, exercise all its rights of payment (including
pursuant to Section 4.9) with respect to such participation as
-----------
fully as if such Lender were the direct creditor of the Company
in the amount of such participation. If under any applicable
bankruptcy, insolvency, or other similar law, any Lender receives
a secured claim in lieu of a setoff to which this Section 4.8
-----------
applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this
Section 4.8 to share in the benefits of any recovery on such
- -----------
secured claim.
SECTION 4.9. Setoff. Each Lender shall, with the prior
------
written consent of the Required Lenders, during the continuance
of any Event of Default, have the right to appropriate and apply
59
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<PAGE> 68
to the payment of the Obligations owing to it (whether or not
then due), and (as security for such Obligations) the Company
hereby grants to each Lender a continuing security interest in,
any and all balances, credits, deposits, accounts, or moneys of
the Company then or thereafter maintained with such Lender,
excluding any specifically designated trust account; provided,
--------
however, that any such appropriation and application shall be
- -------
subject to the provisions of Section 4.8. Each Lender agrees
-----------
promptly to notify the Company and the Agent after any such
setoff and application made by such Lender; provided, however,
-------- -------
that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each
Lender under this Section 4.9 are in addition to other rights and
-----------
remedies (including other rights of setoff under applicable law
or otherwise) which such Lender may have.
SECTION 4.10. Use of Proceeds. The Company shall apply the
---------------
proceeds of each Loan and shall use each Letter of Credit in
accordance with the fourth recital and for general corporate and
------ -------
working capital purposes of the Company and its Subsidiaries. No
proceeds of any Loan and no Letter of Credit will be used to
purchase or carry (a) any equity security not issued by the
Company of a class which is registered pursuant to Section 12 of
----------
the Securities Exchange Act of 1934, or (b) any "margin stock",
as defined in F.R.S. Board Regulation U.
SECTION 4.11. Change of Lending Office, Replacement of
----------------------------------------
Lender, etc.
- -----------
(a) Each Lender agrees that, upon the occurrence of
any event giving rise to the operation of Section 4.1, 4.3,
----------- ---
or 4.5 with respect to such Lender, it will, if requested by
---
the Company and to the extent permitted by law or by the
relevant governmental authority, in consultation with the
Agent, for a period of thirty days use reasonable efforts in
good faith to avoid the illegality or to avoid or minimize
the increase in costs or reduction in payments resulting
from such event (including using reasonable efforts to
change its Domestic Office or LIBOR Office); provided that
--------
such avoidance or minimization can be made in such a manner
so that such Lender, in its sole determination, suffers no
legal, economic, or regulatory disadvantage.
(b) If any Lender (an "Affected Lender") shall
---------------
make a determination under Section 4.1 or shall make a
-----------
demand for payment under Section 4.3, 4.5, or 4.6, and
----------- --- ---
the Company shall find a Lender or other entity capable
of being an Assignee Lender under Section 12.11.1 (an
---------------
"Eligible Assignee") which offers in writing to
-----------------
(i) purchase all, but not less than all, Loans of
and Reimbursement Obligations owed (directly or by way
of participation) to such Affected Lender,
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<PAGE> 69
(ii) purchase a 100% participation in all
obligations of such Affected Lender in respect of all
Letters of Credit issued or participated in by such
Affected Lender, and
(iii) assume all the Commitments of such Affected
Lender,
in each case without recourse for the full amount thereof on
a specified date, together with accrued and unpaid interest
and commitment fees thereon to the date of purchase, and all
other amounts owing to such Affected Lender hereunder and
under the other Loan Documents, and such Eligible Assignee
tenders the purchase price of such amounts on such specified
date, and if, in the sole determination of such Affected
Lender, its acceptance of such offer would be permitted by
law and all relevant governmental authorities and would not
result in any legal, economic, or regulatory disadvantage to
such Affected Lender, then the Company shall be excused from
the payment of any increased costs claimed by such Affected
Lender under any of such Sections accruing after the first
interest payment date pursuant to Section 3.4.5 for each
-------------
Loan of such Affected Lender on or following such specified
date, if the Affected Lender demanding payment under any
such Section declines such purchase offer. If such Affected
Lender shall accept such purchase offer, upon consummation
of such purchase in accordance with Section 12.11.1, such
---------------
Affected Lender shall cease to be a Lender hereunder. Any
reasonable expenses actually incurred by such Affected
Lender or the Agent under this Section 4.11 shall be paid by
------------
the Company upon delivery to the Company of a certificate as
to the amount of such expenses, which certificate shall in
the absence of manifest error be conclusive and binding.
SECTION 4.12. Computation of Additional Amounts Due. In
-------------------------------------
determining any additional amounts due from the Company under
Section 4.3, 4.4, or 4.5 hereof, each Lender shall act reasonably
- ----------- --- ---
and in good faith and will, to the extent that the increased
costs or reductions in amounts received or receivable relate to
such Lender's loans generally and are not specifically
attributable to the Loans hereunder, use averaging and
attribution methods which are reasonable and equitable and which
cover all loans similar to the Loans made by such Lender whether
or not the loan documentation for such other loans permits such
Lender to receive increased costs of the type described in such
Sections of this Agreement.
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ARTICLE V
LETTERS OF CREDIT
SECTION 5.1. Requests.
--------
(a) By delivering to the Agent and the relevant Issuer
Bank one or more Revolving L/C Requests on or before 10:00
a.m., San Francisco time, at least three (or such shorter
period as may be agreed among the Company, the Agent, and
such Issuer Bank), but not more than eight, Business Days
before the proposed date of issuance, the Company may
request that such Issuer Bank issue, on any Business Day on
or after the Initial Borrowing Date and prior to the
Revolving Commitment Termination Date, irrevocable standby
or commercial letters of credit for its account (each such
letter of credit, as it may be amended, supplemented,
extended, restated, or modified from time to time, a "Letter
------
of Credit"). Each Letter of Credit and Revolving L/C
---------
Request shall be acceptable as to form, substance,
beneficiary, and purpose to the Agent and such Issuer Bank
in their sole and absolute discretion, and each Letter of
Credit shall be used by the Company in each case solely for
the purposes described in Section 4.10.
------------
(b) Upon receipt of a Revolving L/C Request under
clause (a), the Agent shall promptly notify the Lenders in
----------
writing thereof. The Issuer Bank is under no obligation to
issue any Letter of Credit if
(i) any order, judgment or decree of any
governmental authority shall by its terms purport to
enjoin or restrain the Issuer Bank from issuing such
Letter of Credit; or any law applicable to the Issuer
Bank or any request or directive from any governmental
authority with jurisdiction over the Issuer Bank shall
prohibit or request that the Issuer Bank refrain from
the issuance of letters of credit generally or such
Letter of Credit in particular;
(ii) the Stated Amount thereof (A) when added to
the Letter of Credit Outstandings immediately prior to
the issuance of such Letter of Credit, would exceed
$125,000,000;
(iii) such Letter of Credit is not stated to
expire on a date (its "Stated Expiry Date") no later
------------------
than the tenth Business Day immediately preceding
February 15, 1999;
(iv) such Letter of Credit requires the Issuer
Bank thereof to make payment to any beneficiary thereof
prior to the third Business Day after a conforming
demand for payment is made thereunder; or
62
<PAGE>
<PAGE> 71
(v) such Letter of Credit does not provide for the
presentation of drafts payable at sight; and
(c) The Issuer Bank will make available to the
beneficiary thereunder (with a copy to the Agent) the
original of each Letter of Credit which it issues in
accordance with the Revolving L/C Request therefor and will
notify the beneficiary thereof (with a copy to the Agent) of
any extension of the Stated Expiry Date thereof pursuant to
Section 5.2.
-----------
(d) On the Initial Borrowing Date, the Existing
Letters of Credit shall automatically be deemed to be
Letters of Credit and shall be subject to all the terms and
conditions of this Agreement and the Company's reimbursement
obligations in respect of the Existing Letters of Credit
shall automatically be deemed to have been satisfied by the
incurrence of its Reimbursement Obligations, pursuant to
this Article V, in respect of the Letters of Credit;
provided that the Agent shall have received satisfactory
--------
evidence that each issuer of the Existing Letters of Credit
shall have consented to the termination of such
reimbursement obligations in respect of the Existing Letters
of Credit.
SECTION 5.2. Issuance and Extensions.
-----------------------
(a) Subject to the terms and conditions of this
Agreement (including Article VII), each Issuer Bank shall
-----------
issue Letters of Credit in accordance with the Revolving L/C
Requests made therefor. By delivery to an Issuer Bank and
the Agent of a Revolving L/C Request at least three Business
Days but not more than 45 days prior to the Stated Expiry
Date of any Letter of Credit, the Company may request such
Issuer Bank to extend the Stated Expiry Date of such Letter
of Credit for an additional period. Unless otherwise
directed by the Agent in accordance with Section 7.2, no
-----------
Issuer Bank shall issue, or extend the Stated Expiry Date
of, any Letter of Credit if it shall have received from any
Obligor, the Agent, or any Lender actual notice of a then-
continuing Default or of any other failure to satisfy any of
the conditions precedent to Credit Extensions set forth in
Article VII.
-----------
(b) Notwithstanding any provision of any Revolving L/C
Request to the contrary, it is understood that in the event
of any conflict between the terms of any such Revolving L/C
Request and the terms of this Agreement, the terms of this
Agreement shall control with respect to events of default,
representations and warranties, and covenants, except that
such Revolving L/C Request may provide for further
warranties and covenants relating specifically to the
transaction or affairs underlying the relevant Letter of
Credit. The terms and conditions of this Agreement shall be
63
<PAGE>
<PAGE> 72
deemed to be incorporated by reference into each Revolving
L/C Request regardless of whether expressly so stated in
such Revolving L/C Request.
SECTION 5.3. Fees and Expenses.
-----------------
(a) The Company agrees to pay to the Agent with
respect to each Letter of Credit,
(i) for the account of the Issuer Bank, a fronting
fee equal to three-eighths of 1% per annum on the
average daily aggregate Letter of Credit Outstandings
(excluding, however, in the case of fees payable under
this clause (a)(i), that portion of Letter of Credit
-------------
Outstandings constituting Reimbursement Obligations
accruing interest pursuant to Section 5.5), and
-----------
(ii) for the account of the Lenders, pro rata
--- ----
according to their respective Percentages, a letter of
credit fee of 3% per annum (subject to adjustment as
provided in Section 3.4.1 and 3.4.4) on the average daily
------------- -----
aggregate Letter of Credit Outstandings (excluding, however,
in the case of fees payable under this clause (a)(ii), that
--------------
portion of Letter of Credit Outstandings constituting
Reimbursement Obligations accruing interest pursuant to
Section 5.5) under or with respect to all Letters of Credit
-----------
accruing, as to each Letter of Credit (other than the
Existing Letters of Credit), from and including the date of
issuance thereof to and excluding the earlier of the date
such Letter of Credit is drawn in full, expires, or is
terminated and the Revolving Commitment Termination Date
and, as to each Existing Letter of Credit, from and
including the Initial Borrowing Date to and excluding the
earlier of the date such Existing Letter of Credit is drawn
in full, expires, or is terminated and the Revolving
Commitment Termination Date.
(b) Such fronting and letter of credit fees shall be
computed for the actual number of days elapsed on the basis
of a 360-day year and shall be payable in arrears on each
Quarterly Payment Date for the period ending on (but
excluding) such Quarterly Payment Date and on the Revolving
Commitment Termination Date. The Company further agrees to
pay to the Agent for the account of each Issuer Bank all
customary administrative fees and expenses of such Issuer
Bank in connection with the issuance and maintenance of each
Letter of Credit issued by it.
SECTION 5.4. Other Lenders' Participation. Concurrently
----------------------------
with the issuance of each Letter of Credit in accordance with the
terms and conditions of this Agreement, and on the Initial
Borrowing Date with respect to the Existing Letters of Credit,
the Issuer Bank thereof shall be deemed to have sold and
64
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<PAGE> 73
transferred to each other Lender, and each other Lender shall be
deemed irrevocably and unconditionally to have purchased and
received from such Issuer Bank, without recourse, representation,
or warranty, an undivided interest and participation, to the
extent of such other Lender's Percentage, in such Letter of
Credit and the Company's Reimbursement Obligations with respect
thereto, and each Lender shall, to the extent of its Percentage,
be entitled to receive from the Agent a ratable portion of the
letter of credit fees received by the Agent pursuant to
clause (a)(ii) of Section 5.3 with respect to each Letter of
- -------------- -----------
Credit. Each Lender shall, to the extent of its Percentage, be
responsible to reimburse promptly such Issuer Bank for
Reimbursement Obligations which have not been reimbursed by the
Company in accordance with Section 5.5. Each Lender's obligation
-----------
to reimburse the Issuer Bank under this Section shall be absolute
and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or other right which
such Lender may have against the Issuer Bank, the Company or any
other Person or, subject to Section 7.2, the occurrence or
continuance of a Default or an Event of Default; provided,
--------
however, that nothing herein shall adversely affect the right of
- -------
any Lender to commence any proceeding against an Issuer Bank for
any wrongful Disbursement made by such Issuer Bank under a Letter
o Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of the Issuer Bank.
SECTION 5.5. Disbursements.
-------------
(a) Each Issuer Bank will notify the Company and the
Agent in writing promptly of the presentment of any demand
for payment under any Letter of Credit issued by such Issuer
Bank, together with notice of the date (the "Disbursement
------------
Date") such payment shall be made. On the terms and subject
----
to the conditions of such Letter of Credit and this
Agreement, the Issuer Bank shall make such payment to the
beneficiary (or its designee) of such Letter of Credit.
Prior to 10:30 a.m., San Francisco time, on the Disbursement
Date, the Company will reimburse such Issuer Bank for all
amounts which it has disbursed or is required to disburse
under such Letter of Credit on such Disbursement Date. To
the extent such Issuer Bank is not reimbursed in full in
accordance with the foregoing sentence of this clause (a),
----------
the Company's Reimbursement Obligation shall accrue interest
at a rate per annum equal to the Reference Rate from time to
time in effect plus a margin of 3-1/2% per annum, payable on
demand.
(b) Upon notice by the Issuer Bank to the Company of
any Disbursement pursuant to clause (a) of this Section 5.5,
---------- -----------
the Lenders (including such Issuer Bank) shall, upon
satisfaction by the Company of the conditions in Section 7.2
-----------
or the waiver of the conditions of Section 7.2 by the Agent
-----------
as permitted therein, and to the extent that the Revolving
Commitment is then available, fund the Reimbursement
65
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Obligation therefor by making Revolving Loans as provided in
Section 2.1.1 (without giving effect to such Reimbursement
-------------
Obligation for purposes of determining the Revolving
Commitment Availability).
SECTION 5.6. Reimbursement. The Company's obligation (a
-------------
"Reimbursement Obligation") under Section 5.5 to reimburse an
------------------------ -----------
Issuer Bank with respect to each Disbursement (including interest
thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim, or
defense to payment which the Company may have or have had against
a beneficiary or transferee of any Letter of Credit (or any
Person or Persons for whom any such transferee may be acting) or
against the Agent or any Lender, including any defense based upon
the failure of any Disbursement to conform to the terms of the
applicable Letter of Credit (if, in the Issuer Bank's good faith
opinion, such Disbursement is determined to be appropriate) or
any non-application or misapplication by the beneficiary of the
proceeds of such Disbursement or the legality, validity, form,
regularity, or enforceability of such Letter of Credit; provided,
--------
however, that nothing herein shall adversely affect the right of
- -------
the Company to commence any proceeding against an Issuer Bank for
any wrongful Disbursement made by such Issuer Bank under a Letter
of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of such Issuer Bank.
SECTION 5.7. Mandatory Payment to Agent of Letter of Credit
----------------------------------------------
Outstandings. The Company agrees that, upon the occurrence of
- ------------
any event described in Section 10.2 or any termination of the
------------
Commitments pursuant to Section 10.3, it will immediately, upon
------------
written notice from the Agent, acting at the direction of the
Majority Lenders, pay to the Agent in Dollars and in immediately
available funds an amount equal to the then aggregate Letter of
Credit Outstandings. Any amounts so received by the Agent
pursuant to the provisions of the foregoing sentence, after
application against outstanding Reimbursement Obligations, shall
be deposited by the Agent into the L/C Collateral Account
pursuant to Section 5.8.1.
-------------
SECTION 5.8. L/C Collateral Account.
----------------------
SECTION 5.8.1. Deposit. The Agent shall deposit all funds
-------
paid by the Company to the Agent pursuant to Section 3.3.1 as
-------------
cash collateral and Section 5.7 (to the extent required to be
-----------
deposited in the L/C Collateral Account) to the credit of a
deposit account owned by the Agent (the "L/C Collateral
--------------
Account"). As security for the payment of all Obligations, the
- -------
Company hereby grants, conveys, assigns, pledges, sets over, and
transfers to the Agent, and creates in the Agent's favor a lien
on and security interest in, all money, instruments, and
securities at any time held in or acquired in connection with the
L/C Collateral Account, together with all proceeds thereof, for
the benefit of the Secured Lenders. The Company shall not have
any right to withdraw or to cause the Agent to withdraw any funds
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deposited in the L/C Collateral Account. At any time and from
time to time, upon the Agent's request, the Company promptly
shall execute and deliver any and all such further instruments
and documents (including financing statements and bond powers
executed in blank) as may be necessary, appropriate, or desirable
in the Agent's judgment to obtain the full benefits (including
perfection and priority) of the security interest created or
intended to be created by this Section 5.8.1 and of the rights
-------------
and powers herein granted. The Company shall not create or
suffer to exist any Lien on any amounts or investments held in
the L/C Collateral Account other than the Lien granted under this
Section 5.8.1.
- -------------
SECTION 5.8.2. Investment. The Company, no more than three
----------
times in any calendar month, may direct the Agent to invest the
funds held in the L/C Collateral Account (so long as the
aggregate amount of such funds exceeds any relevant minimum
investment requirement) in one or more certificates of deposit
issued by the Person which is then acting as Agent or by Bank of
America, with such maturities as the Company may specify, pending
application of such funds on account of Reimbursement Obligations
or on account of other Obligations, as the case may be. In the
absence of any such direction from the Company, the Agent shall
invest the funds held in the L/C Collateral Account in one or
more certificates of deposit issued by the Person which is then
acting as Agent or by Bank of America with maturities not to
exceed 30 days, unless the aggregate amount of such funds which
are not then otherwise invested is less than the smallest
certificate of deposit offered by such Person, in which case the
Agent shall have no obligation to invest such funds. All such
investments shall be made in the Agent's name. The Company
recognizes that any losses or taxes with respect to such
investments shall be borne solely by the Company, and the Company
agrees to hold the Agent and the Lenders harmless from any such
losses or taxes. Unless the Company otherwise makes direct
payment, the Agent shall liquidate any investment held in the L/C
Collateral Account in order to apply the proceeds of such
investment on account of Reimbursement Obligations (or on account
of other Obligations, as the case may be) without regard to
whether such investment has matured and without liability for any
penalties or other fees incurred (with respect to which the
Company hereby fully indemnifies the Agent) as a result of such
application.
SECTION 5.8.3. Application of Funds. The Agent shall apply
--------------------
funds in the L/C Collateral Account (a) on account of
Reimbursement Obligations when the same become due and payable if
and to the extent that the Company fails directly to pay such
Reimbursement Obligations, (b) if there are Letter of Credit
Outstandings, and the balance of the L/C Collateral Account
exceeds the aggregate Letter of Credit Outstandings for five
consecutive Business Days, on account of the Obligations (other
than Reimbursement Obligations) in such order as the Agent may
elect to the extent of such excess on the day of application, and
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<PAGE> 76
(c) after the date on which all Letters of Credit shall have
expired and the Company finally shall have paid in full all
outstanding Reimbursement Obligations, on account of the other
Obligations in such order as the Agent may elect if the Agent
shall have received actual notice of the occurrence of an Event
of Default on or before such date which is continuing on such
date. Except in the case described in clause (c) above, the
----------
Agent shall release all funds and transfer all investments
remaining in the L/C Collateral Account to the Company within
five Business Days after the date on which all Letters of Credit
shall have expired and the Company finally shall have paid in
full all outstanding Reimbursement Obligations. If the Agent
resigns, the outgoing Agent and the new Agent shall effect a
transfer to the new Agent of all of the outgoing Agent's right,
title, and interest in and to the L/C Collateral Account
concurrently with the effectiveness of such resignation.
SECTION 5.8.4. Fees. The Company shall pay to the Agent
----
fees customarily charged by the Agent with respect to the
maintenance of accounts similar to the L/C Collateral Account.
SECTION 5.9. Nature of Reimbursement Obligations. The
-----------------------------------
Company shall assume all risks of the acts, omissions, or misuse
of any Letter of Credit by the beneficiary thereof. Neither any
Issuer Bank nor the Agent or any Lender (except to the extent of
its own gross negligence or willful misconduct) shall be
responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness, or legal effect of any Letter of Credit or any
document submitted by any party in connection with the
application for and issuance of a Letter of Credit, even if
it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent, or forged;
(b) the form, validity, sufficiency, accuracy,
genuineness, or legal effect of any Instrument transferring
or assigning or purporting to transfer or assign a Letter of
Credit or the rights or benefits thereunder or proceeds
thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a
Letter of Credit;
(d) errors, omissions, interruptions, or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise; or
(e) any loss or delay in the transmission or otherwise
of any document or draft required in order to make a
Disbursement under a Letter of Credit or of the proceeds
thereof.
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None of the foregoing shall affect, impair, or prevent the
vesting of any of the rights or powers granted any Issuer Bank,
the Agent, or any Lender hereunder. In furtherance and extension
and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by such Issuer Bank in good
faith shall be binding upon the Company and each Lender and shall
not put such Issuer Bank under any resulting liability to the
Company or any Lender, except to the extent incurred by such
Issuer Bank's gross negligence or willful misconduct.
SECTION 5.10. Indemnification by Lenders. The Lenders
--------------------------
severally agree to indemnify each Issuer Bank (acting in its
capacity as such) and each officer, director, employee, agent,
and Affiliate of each Issuer Bank (collectively, the "Issuer
------
Parties" and individually, an "Issuer Party"), ratably according
- ------- ------------
to their respective Percentages, to the extent not reimbursed by
the Company, from and against any and all actions, causes of
action, suits, losses, liabilities, damages, and expenses which
may at any time (including at any time following the payment of
any of the Reimbursement Obligations) be imposed on, incurred by,
or asserted against such Issuer Party in any way relating to or
arising out of the issuance of, transfer of, or payment or
failure to pay under any Letter of Credit issued in accordance
with the terms of this Agreement or the use of proceeds of any
payment made under any Letter of Credit issued in accordance with
the terms of this Agreement; provided, that no Lender shall be
--------
liable for the payment to such Issuer Party of any portion of
such actions, causes of action, suits, losses, liabilities,
damages, and expenses which have arisen by reason of such Issuer
Party's gross negligence or willful misconduct.
ARTICLE VI
PARENT GUARANTOR
SECTION 6.1. Parent Guaranty. In consideration for the
---------------
Lenders extending the Commitments, the Parent Guarantor hereby
unconditionally guarantees, as primary obligor and not merely as
surety, the due and punctual payment and performance of all
Obligations of the Company when due according to their terms
(whether by required prepayment, declaration, demand, or
otherwise). The foregoing guaranty is herein referred to as the
"Parent Guaranty".
---------------
SECTION 6.2. Renewal, etc. of Obligations; Waiver. The
------------------------------------
Parent Guarantor agrees that the Obligations of the Company may
be extended or renewed, in whole or in part, without notice to or
further assent from the Parent Guarantor and that it will remain
bound upon the Parent Guaranty notwithstanding any extension,
renewal, or other alteration of any Obligation. The Parent
Guarantor waives presentation to, demand of, payment from, and
protest of any Obligation to the Company and also waives notice
of protest for nonpayment. The obligations of the Parent
69
<PAGE>
<PAGE> 78
Guarantor under the Parent Guaranty shall not be affected by
(a) the failure of the Agent, any Lender, any Issuer
Bank, or any other holder of any Obligation of the Company:
(i) to assert any claim or demand, or to enforce
any right or remedy against the Company under the
provisions of this Agreement or any other Loan Document
or otherwise; or
(ii) to exercise any right or remedy against any
other guarantor of any Obligations;
(b) any extension or renewal of any thereof;
(c) any rescission, waiver, amendment, or modification
of any of the terms or provisions of this Agreement or any
other Transaction Document; or
(d) the release of any of the security held by any
Lender for any Obligations.
The Parent Guarantor further agrees that the Parent Guaranty
constitutes a guaranty of payment when due and not of collection
and waives any right to require that any resort be had by the
Agent, any Lender, any Issuer Bank, or any other holder of any
Obligation of the Company to any of the security held for payment
of any Obligation or to any balance of any deposit account or
credit on its books in favor of the Company or any other Person.
SECTION 6.3. No Impairment, etc. The obligations of the
------------------
Parent Guarantor under the Parent Guaranty shall not be subject
to any reduction, limitation, impairment, or termination for any
reason, including any claim of waiver, release, surrender,
alteration, or compromise, and shall not be subject to any
defense or setoff, counterclaim, recoupment, or termination
whatsoever by reason of the invalidity, illegality, or
unenforceability of the Obligations of the Company or otherwise.
Without limiting the generality of the foregoing, the obligations
of the Parent Guarantor under the Parent Guaranty shall not be
discharged or impaired or otherwise affected by the failure of
the Agent, any Lender, or any other holder of any Obligation of
the Company to assert any claim or demand or to enforce any
remedy under this Agreement or any other Transaction Document, by
any waiver or modification of any thereof, by any default,
failure, or delay, willful or otherwise, in the performance of
the Obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of the Parent Guarantor, or
would otherwise operate as a discharge of the Parent Guarantor as
a matter of law or equity.
SECTION 6.4. Reinstatement; Subrogation. The Parent
--------------------------
Guarantor agrees that the Parent Guaranty shall continue to be
70
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<PAGE> 79
effective or be reinstated, as the case may be, if, at any time
payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by the
Agent, any Lender, or any other holder of any Obligation of the
Company upon the bankruptcy or reorganization of any Obligor or
otherwise. The Parent Guarantor hereby expressly waives, to the
fullest extent permitted by law, all rights of the Parent
Guarantor against the Company, arising out of any payment by the
Parent Guarantor under the Parent Guaranty, or any exercise of
remedies under the Parent Pledge Agreement or the Parent Security
Agreement, whether arising by way of any right of subrogation,
contribution, reimbursement, indemnity, or otherwise and agrees
that, if, and to the extent that, any such rights may not be
waived under applicable law, it will contribute such rights to
the Company as a capital contribution concurrently with the
arising of such rights.
ARTICLE VII
CONDITIONS TO EXTENSIONS OF CREDIT
SECTION 7.1. Initial Credit Extension. The obligations of
------------------------
the Lenders and the Issuer Bank to make Credit Extensions on the
Initial Borrowing Date shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set
forth in this Section 7.1.
-----------
SECTION 7.1.1. Resolutions, etc. The Agent shall have
----------------
received from each Obligor:
(a) a certificate, in form and substance satisfactory
to the Agent and the Lenders, dated the Initial Borrowing
Date, of its Secretary or Assistant Secretary as to
(i) resolutions of its Board of Directors then in
full force and effect authorizing the execution,
delivery and performance of this Agreement and each
other Loan Document to be executed by it;
(ii) the incumbency and signatures of those of
its officers authorized to act with respect to this
Agreement, and each other Loan Document to be executed
by it; and
(iii) each of its Organic Documents, certified in
a manner satisfactory to the Agent,
upon which certificate the Agent and each Lender may
conclusively rely until it shall have received a further
certificate of the Secretary or Assistant Secretary of such
Obligor canceling or amending such prior certificate;
(b) a good standing certificate (or other equivalent
71
<PAGE>
<PAGE> 80
document or certificate satisfactory to the Agent and the
Lenders) certified by the secretary of state (or other
appropriate government official) in the jurisdiction of such
Obligor's incorporation; and
(c) such other documents (certified, if requested) as
the Agent or any Lender (acting through the Agent) may
reasonably request with respect to any Organic Document.
SECTION 7.1.2. Insurance. The Agent shall have received a
---------
letter dated as of a recent date from Alexander & Alexander
comparing the insurance coverage currently maintained by the
Parent Guarantor, the Company and its Subsidiaries to the
insurance coverage described in the "Insurance Program Review"
dated October 1989, prepared by Tillinghast, a copy of which has
been delivered to the Agent and each Lender prior to the date
hereof. The Agent shall have received evidence in the form of a
certificate of the Company, executed by an Authorized Officer,
that all insurance policies and coverages required pursuant to
Section 9.1.4, Section 7(j) of each Security Agreement and
- ------------- ------------
Section 1.7 of each Company Mortgage and Company Deed of Trust
- -----------
are in effect, together with certificates of insurance in form
and substance satisfactory to the Agent, including evidence
satisfactory to the Agent that the Agent has been named as loss
payee under such policies as and to the extent required by each
Security Agreement and each Company Mortgage and Company Deed of
Trust and the insurance coverage described in such certificates
shall be satisfactory to the Agent.
SECTION 7.1.3. Payment of Outstanding Indebtedness;
------------------------------------
Existing Letters of Credit. Each item of Indebtedness of the
- --------------------------
Company identified in Item 1 ("Indebtedness to be Paid") of the
------ -----------------------
Disclosure Schedule, together with all interest accrued thereon
and all prepayment premiums and other amounts payable in
connection therewith, shall have been paid in full or fully
defeased. Each other item of Indebtedness of the Company or of
the Parent Guarantor shall have been disclosed in Item 4
------
("Ongoing Indebtedness") of the Disclosure Schedule or shall
--------------------
otherwise be permitted by Section 9.2.2, and each holder whose
-------------
Indebtedness is secured shall be designated in such Item 4 with
------
an asterisk.
In addition, the Agent shall have received evidence, satisfactory
to the Agent, that each issuer of the Existing Letters of Credit
shall have consented to the termination of the Company's
reimbursement obligations in respect of the Existing Letters of
Credit.
SECTION 7.1.4. Parent Pledge Agreement. The Agent shall
-----------------------
have received the Parent Pledge Agreement, dated the Initial
Borrowing Date, duly executed by the Parent Guarantor and the
Agent, and the Agent shall have received
(a) the certificates evidencing all of the issued and
72
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<PAGE> 81
outstanding shares of capital stock of the Company owned by
the Parent Guarantor (accompanied by undated stock powers
duly executed in blank) and
(b) any promissory notes or other debt instruments
required to be delivered pursuant to the Parent Guarantor
Pledge Agreement, endorsed (which endorsement may be on an
allonge) to the order of the Agent.
-------
SECTION 7.1.5. Company Pledge Agreement. The Agent shall
------------------------
have received the Company Pledge Agreement, dated the Initial
Borrowing Date, duly executed by the Company and the Agent, and
the Agent shall have received
(a) the certificates evidencing (i) all of the issued
and outstanding shares of capital stock of each Domestic
Subsidiary of the Company which is listed on Schedule I
----------
attached hereto, and (ii) the percentage of the issued and
outstanding shares of capital stock of each corporation
listed on such Schedule I which is not a Domestic Subsidiary
----------
set forth opposite the name of such corporation, which
certificates shall in each case be accompanied by undated
stock powers duly executed in blank;
(b) the KT Note, duly executed by the Parent Guarantor
and endorsed to the order of the Agent; and
(c) all promissory notes or other debt instruments
held by the Company which have a face amount in excess of
$100,000, in each case endorsed (which endorsement may be on
an allonge) to the order of the Agent.
-------
SECTION 7.1.6. Security Agreements. The Agent shall have
-------------------
received the Parent Security Agreement, duly executed by the
Parent Guarantor and the Agent, the Company Security Agreement,
duly executed by the Company and the Agent, and the Subsidiary
Security Agreement, duly executed by each Subsidiary of the
Company which is listed on Schedule IV hereto and the Agent, in
-----------
each case dated the Initial Borrowing Date, and the Agent shall
have received
(a) duly executed financing statements (Form UCC-1),
naming the Parent Guarantor, the Company, or such
Subsidiary, as the case may be, as the debtor and the Agent
as the secured party, or other similar instruments or
documents, suitable for filing under the Uniform Commercial
Code of all jurisdictions as may be necessary or, in the
reasonable opinion of the Agent, desirable to perfect the
security interests of the Agent in the Collateral granted
pursuant to the Security Agreements (other than fixtures
which are not attached to the real property covered by a
Company Mortgage or Company Deed of Trust) to the extent
that perfection may be accomplished by filing under the
Uniform Commercial Code in any state in the United States or
73
<PAGE>
<PAGE> 82
the District of Columbia; and
(b) with such exceptions as may have been approved by
the Agent, certified copies of Requests for Information or
Copies (Form UCC-11) (or similar search reports certified by
a party reasonably acceptable to the Agent), dated a date
reasonably near the Initial Borrowing Date, listing all
effective financing statements which name the Parent
Guarantor, the Company, or any such Subsidiary (under any
present name and any previous names) as debtor and which are
filed in the jurisdictions in which filings were or are to
be made pursuant to clause (a), together with copies of such
----------
financing statements.
SECTION 7.1.7. Company Trademark Security Agreement;
-------------------------------------
Company Patent Security Agreement. The Agent shall have received
- ---------------------------------
the Company Trademark Security Agreement and the Company Patent
Security Agreement, in each case duly executed by the Company and
the Agent and dated the Initial Borrowing Date.
SECTION 7.1.8. Company Mortgages; Company Deeds of Trust.
-----------------------------------------
The Agent shall have received Company Mortgages or Company Deeds
of Trust, as required by the Agent, duly executed by the Company,
with respect to the real property listed on Schedule II hereto,
-----------
together with
(a) evidence of the completion of all recordings and
filings of the Company Mortgages and the Company Deeds of
Trust as may be necessary or, in the reasonable opinion of
the Agent, desirable to effectively create a valid,
perfected, first-priority mortgage or deed of trust Lien on,
and security interest in, the properties purported to be
covered thereby (or evidence that provision entirely
satisfactory to the Agent and its counsel for the recording
and filing thereof and for the payment of all fees, taxes,
and other expenses in connection therewith has been made);
(b) with respect to each piece of real property
covered by a Company Mortgage or a Company Deed of Trust,
one ALTA (except with respect to real property in Texas
which shall be governed by a TLTA policy) lender's form
title insurance policy in form reasonably satisfactory to
the Agent, insuring that on the Effective Date, the Company
owns a fee interest in the real property and that the
Company Mortgage or Company Deed of Trust, as the case may
be, is a valid, perfected, first-priority Lien on the real
property, which policies shall be issued to the Agent in
amounts reasonably satisfactory to the Agent by a title
insurance company reasonably satisfactory to the Agent in an
aggregate amount of $125,000,000 for all such policies
covering all such properties, which amount shall be
allocated to such properties as set forth on Schedule II
-----------
hereto, and each reinsured in amounts and with insurance
companies as reasonably required by the Agent, subject to no
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<PAGE> 83
exceptions other than such exceptions as are acceptable to
the Agent, and containing endorsements in form and substance
satisfactory to the Agent; provided, however, during the
-------- -------
term of the Loan, the Agent and the Required Lenders may
require other endorsements to the title insurance policies
as may reasonably be required by any amendments to this
Agreement, in connection with any release of any real
property from the Lien of any Company Mortgage or Company
Deed of Trust or any surrender of any Company Mortgage or
Company Deed of Trust;
(c) legible copies of all recorded documents noted as
exceptions in such title insurance policies;
(d) certified copies of all leases (including ground
leases) and, as to certain properties identified by the
Agent, other contracts materially affecting such real
property, as requested by the Agent;
(e) certified rent rolls as to each property in a form
and scope satisfactory to the Agent;
(f) certified copies of all licenses, approvals, and
permits (including certificates indicating that certificates
of occupancy were issued) from federal, state, local, and
other governmental authorities materially affecting such
real property that are reasonably requested by the Agent or
any Lender (acting through the Agent);
(g) affidavits from the Company satisfactory to title
insurers; and
(h) such other approvals, consents, waivers, opinions
(including opinions of local counsel to the Company as to
the compliance of the mortgaged properties with zoning
restrictions or documents as the Agent or any Lender (acting
through the Agent) may reasonably request.
SECTION 7.1.9. Subsidiary Guaranty. The Agent shall have
-------------------
received the Subsidiary Guaranty, dated the Initial Borrowing
Date, duly executed by each Subsidiary of the Company which is
listed on Schedule III hereto.
------------
SECTION 7.1.10. Subsidiary Pledge Agreement. The Agent
---------------------------
shall have received the Subsidiary Pledge Agreement, dated the
Initial Borrowing Date, duly executed by each Subsidiary of the
Company listed on Schedule IV hereto and by the Agent, and the
-----------
Agent shall have received
(a) the certificates evidencing all of the shares of
capital stock required to be pledged pursuant to the
Subsidiary Pledge Agreement, which certificates shall in
each case be accompanied by undated stock powers duly
executed in blank;
75
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(b) each Intercompany Demand Note held by each such
Subsidiary, endorsed to the order of the Agent by such
Subsidiary; and
(c) all promissory notes or other debt instruments
held by each such Subsidiary which have a face amount in
excess of $100,000, in each case endorsed (which endorsement
may be on an allonge) to the order of the Agent.
-------
SECTION 7.1.11. Intercompany Note Pledge Agreement. The
----------------------------------
Agent shall have received the Intercompany Note Pledge Agreement,
dated the Initial Borrowing Date, duly executed by each
Subsidiary of the Company listed on Schedule VII hereto which is
------------
not otherwise a party to the Subsidiary Pledge Agreement and by
the Agent, and the Agent shall have received each Intercompany
Demand Note held by each such Subsidiary, endorsed to the order
of the Agent.
SECTION 7.1.12. Opinions of Counsel. The Agent shall have
-------------------
received opinions, dated the Initial Borrowing Date and addressed
to the Agent and all Lenders, from
(a) Kramer, Levin, Naftalis, Nessen, Kamin & Frankel,
special outside counsel to the Obligors, in substantially
the form of Exhibit L-1 attached hereto;
-----------
(b) Anthony R. Pierno Esq., general counsel of the
Company, in substantially the form of Exhibit L-2 attached
-----------
hereto;
(c) Andrew Barlay, Esq., special patent and trademark
counsel to the Obligors, in substantially the form of
Exhibit L-3 attached hereto;
-----------
(d) the local counsel listed in Schedule X hereto, in
----------
substantially the forms set forth in Exhibit L-4 attached
-----------
hereto; and
(e) O'Melveny & Myers, counsel to the Agent, in
substantially the form of Exhibit L-5 attached hereto.
-----------
SECTION 7.1.13. Closing Fees, Expenses, etc. The Agent
---------------------------
shall have received for its own account all fees, costs, and
expenses due and payable pursuant to Sections 3.5.3 and 12.3, if
-------------- ----
then invoiced.
SECTION 7.1.14. Environmental Reports. The Agent shall
---------------------
have received the Environmental Reports, in form, scope and
substance satisfactory to all Lenders, with respect to
substantially all of the domestic real property owned by the
Company or any of its Subsidiaries.
SECTION 7.1.15. Investment Account Letter. The Agent shall
-------------------------
have received a letter, in substantially the form of Exhibit N
---------
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<PAGE> 85
attached hereto, with such changes as may be approved by the
Agent, duly executed by each Person with which the Company or the
Parent Guarantor maintains any account for investment in Cash
Equivalent Investments permitted hereunder.
SECTION 7.1.16. Sufficient Quantities, etc. The Agent shall
--------------------------
have received duly executed multiple original counterparts of
each Loan Document required to be executed and delivered pursuant
to this Section 7.1 (other than financing or termination
-----------
statements, stock certificates or stock powers, and such other
documents where the Agent has not required delivery of
counterparts) for the Agent and each Lender together with such
additional executed counterparts as the Agent may reasonably
request for filing or recordation purposes.
SECTION 7.1.17. Availability. Following the making of the
------------
initial Loans on the Initial Borrowing Date, the Revolving
Commitment Availability (calculated as though the Existing
Letters of Credit were issued on the Initial Borrowing Date)
shall be at least $180,000,000.
SECTION 7.1.18. Issuance of Senior Debt and Equity. The
----------------------------------
Company shall have issued the Senior Debt and the Parent
Guarantor shall have issued Parent Guarantor Preferred Stock, the
aggregate gross proceeds of which shall be at least $250,000,000.
In addition, the Parent Guarantor shall have made a capital
contribution to the Company, purchased shares of capital stock of
the Company or made an intercompany loan to the Company, or any
combination thereof, in an aggregate amount equal to the cash
proceeds received by the Parent Guarantor from the issuance of
such Parent Guarantor Preferred Stock, net of all underwriting
discounts and commissions and all legal, accounting and other
fees and expenses incurred in connection with the public offering
of such Parent Guarantor Preferred Stock. The Agent shall have
received certificates in substantially the form of Exhibit C-1
-----------
and C-2 attached hereto, dated the Initial Borrowing Date, of an
---
Authorized Officer of the Company as to the satisfaction of the
conditions set forth in this Section 7.1.18.
--------------
SECTION 7.1.19. Cash Management Arrangements. The Agent
----------------------------
shall have received each Collection Bank Agreement and the
Concentration Bank Agreement, duly executed by the Company, and,
respectively, each Collection Bank, and Bank of America, as
concentration bank, together with such other documents, releases,
and agreements as reasonably required by the Agent or any Lender
(acting through the Agent) in connection with perfecting its Lien
in the accounts established thereby.
SECTION 7.2. All Credit Extensions. The obligation of each
---------------------
Lender to fund any Loan on the occasion of any Borrowing
(including the initial Borrowing), the obligation of Business
Credit to fund any Swingline Loan, and the obligation of any
Issuer Bank to issue any Letter of Credit, as the case may be,
shall, except as provided in Section 2.1.3(b), be subject to the
----------------
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prior or concurrent satisfaction (or waiver) of each of the
conditions precedent set forth in this Section 7.2.
-----------
Notwithstanding the foregoing, the Lenders acknowledge and agree
that during the continuance of an Event of Cash Dominion, unless
and until the Agent receives written instructions from the
Majority Lenders during the continuance of an Event of Cash
Dominion to cease making Swingline Loans and Revolving Loans and
instructing Issuer Banks to issue Letters of Credit (a) the
Agent, acting in its sole and absolute discretion, pursuant to
Section 12.1(b), may waive the conditions of this Section 7.2 and
- --------------- -----------
continue to make Revolving Loans and Swingline Loans, provided
that the Revolving Credit Outstandings after giving effect to
such Loans do not exceed the Borrowing Base, and instruct the
applicable Issuer Bank to issue Letters of Credit notwithstanding
the existence of a Default and (b) if the Agent, acting in its
sole and absolute discretion, has determined that it is in the
best interests of the Lenders to continue to fund, the Lenders
shall be obligated to continue to make Revolving Loans and to
reimburse the Agent for Swingline Loans and shall be deemed to
have purchased and received an undivided interest in Letters of
Credit made or issued.
SECTION 7.2.1. Compliance with Warranties, No Default, etc.
-------------------------------------------
Both immediately before and immediately after giving effect to
any Credit Extension (but, if any default of the nature referred
to in Section 10.1.5 shall have occurred with respect to any
--------------
other Indebtedness, without giving effect to the application,
directly or indirectly, of the proceeds of such Credit Extension)
the following statements shall be true and correct:
(a) the representations and warranties set forth in
Article VIII (excluding, however, in the case of Borrowings
------------
other than the Borrowing made on the Initial Borrowing Date,
those contained in Sections 8.8 and 8.13 and the last
------------ ----
sentence of Section 8.12) and in each of the other Loan
------------
Documents shall be true and correct in all material respects
with the same effect as if then made (unless stated to
relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in
all material respects as of such earlier date), except that
after the Initial Borrowing Date, for purposes of this
clause (a), the words "has a reasonable possibility of
----------
having a Materially Adverse Effect" which appear in
Sections 8.7 and 8.10 shall be deemed to read "could
------------ ----
reasonably be expected to have a Materially Adverse Effect"
and the words "has no reasonable possibility of having a
Materially Adverse Effect" which appear in Section 8.1 shall
-----------
be deemed to read "could not reasonably be expected to have
a Materially Adverse Effect";
(b) except as disclosed by the Company to the Agent
and the Lenders in Item 3 ("Litigation") or Item 8
------ ---------- ------
("Environmental Matters") of the Disclosure Schedule or in
---------------------
the Environmental Reports
78
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(i) no labor controversy, litigation, arbitration,
or governmental proceeding, or governmental
investigation known to the Company's Executive Officers
(including any litigation or governmental proceeding or
such governmental investigation with respect to any
environmental matter) shall be pending or, to the
knowledge of the Company's Executive Officers, after
due inquiry, threatened against the Parent Guarantor,
the Company, or any of their Subsidiaries which has a
reasonable possibility of having a Materially Adverse
Effect or which purports to affect the legality,
validity, or enforceability of this Agreement, or any
other Transaction Document; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration, or
governmental proceeding, or governmental investigation
known to the Company's Executive Officers (including
any litigation or governmental proceeding or such
governmental investigation with respect to any
environmental matter) disclosed in Item 3
------
("Litigation") or Item 8 ("Environmental Matters") of
---------- ------ ---------------------
the Disclosure Schedule or in the Environmental Reports
which has a reasonable possibility of having a
Materially Adverse Effect;
provided, however, that after the Initial Borrowing Date,
-------- -------
the words "has a reasonable possibility of having a
Materially Adverse Effect" which appear in clauses (i) and
-----------
(ii) of this clause (b) shall be deemed to read "could
--- ----------
reasonably be expected to have a Materially Adverse Effect";
and
(c) no Default shall have then occurred and be
continuing; and neither the Parent Guarantor, the Company,
any of their Subsidiaries, nor any other Obligor shall be in
violation of any law, governmental regulation, or court
order or decree where such violation has a reasonable
possibility of having a Materially Adverse Effect; provided,
--------
however, that after the Initial Borrowing Date, the words
-------
"has a reasonable possibility of having a Materially Adverse
Effect" which appear in this clause (c) shall be deemed to
----------
read "could reasonably be expected to have a Materially
Adverse Effect".
SECTION 7.2.2. Credit Request; Borrowing Base Certificate.
------------------------------------------
The Agent shall have received a Credit Request, and, in
connection with any request for any Revolving Loan or the
issuance of any Letter of Credit other than during the
continuance of an Event of Cash Dominion, a Borrowing Base
Certificate delivered pursuant to Section 2.4.1 for such Credit
-------------
Extension. The delivery of a Credit Request and the acceptance
by the Company of the proceeds of such Credit Extension shall
constitute a representation and warranty by the Company that, on
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the date of such Credit Extension (both immediately before and
after giving effect to such Credit Extension and the application
of the proceeds thereof), except as contemplated by the last
sentence of Section 7.2, the statements made in Section 7.2.1 are
----------- -------------
true and correct.
SECTION 7.2.3. Satisfactory Legal Form. All documents
-----------------------
executed or submitted pursuant hereto by or on behalf of the
Parent Guarantor, the Company, any of the Company's Subsidiaries,
or any other Obligor shall be reasonably satisfactory in form and
substance to the Agent and its counsel and the Agent and its
counsel shall have received all information, approvals, opinions,
documents, or instruments as the Agent or its counsel may
reasonably request.
SECTION 7.3. Conditions Subsequent. Within 60 days of the
---------------------
Initial Borrowing Date, the Collection Bank Agreements and the
Concentration Bank Agreement shall be amended to provide for such
procedures and protections as the Agent reasonably requests
related to the occurrence of an Event of Cash Dominion and the
Company, each Collection Bank and Bank of America shall have
executed such other documents, releases, and agreements as
reasonably required by the Agent.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into
this Agreement, and to induce the Lenders to extend their
Commitments and to make Credit Extensions hereunder, the Parent
Guarantor represents and warrants (and the Company, to the extent
that any such representation and warranty shall be applicable to
the Company, its Subsidiaries, or any of its or their Properties,
also represents and warrants) unto the Agent and each Lender as
set forth in this Article VIII.
------------
SECTION 8.1. Organization, etc. Each of the Obligors, the
-----------------
Canadian Subsidiaries, VALCO, QAL, Anglesey, ALPART, KJBC, and
each other Significant Subsidiary of the Company is a corpora-
tion, partnership, or other entity validly organized and existing
and (in the case of non-Domestic Subsidiaries and Joint Venture
Affiliates, to the extent that "good standing" is recognized
under applicable law) in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case
may be; is duly qualified to do business and (in the case of non-
Domestic Subsidiaries and Joint Venture Affiliates, to the extent
that "good standing" is recognized under applicable law) in good
standing as a foreign corporation, partnership, or other entity
in each jurisdiction where the nature of its business or
activities requires such qualification; and has full corporate,
partnership, or other organizational power and authority and
holds all requisite governmental licenses, permits, and other
80
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<PAGE> 89
approvals to own, lease, and operate its Properties and to
conduct its business substantially as now being operated and
conducted, except where the failure to be so qualified and in
good standing or to have such power, authority, licenses,
permits, and other approvals has no reasonable possibility of
having a Materially Adverse Effect. The Parent Guarantor, the
Company, each Subsidiary of the Company, and each Obligor (a) has
full corporate power and authority to enter into and perform its
respective obligations under this Agreement, and the other Loan
Documents and (b) holds all requisite governmental licenses,
permits, and other approvals to enter into and perform its
respective obligations under this Agreement, and the other Loan
Documents.
SECTION 8.2. Due Authorization, Non-Contravention, etc.
-----------------------------------------
The execution, delivery, and performance by each Obligor of the
Loan Documents to which such Obligor is a party are within such
Obligor's corporate powers, have been duly authorized by all
necessary corporate action, and do not
(a) contravene such Obligor's Organic Documents;
(b) contravene any contractual restriction where such
a contravention has a reasonable possibility of having a
Materially Adverse Effect, or contravene any law or
governmental regulation or court decree or order binding on
or affecting such Obligor; or
(c) result in, or require the creation or imposition
of, any Lien on any of such Obligor's properties, other than
pursuant to the Loan Documents.
SECTION 8.3. Government Approval, Regulation, etc. No
------------------------------------
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or
other Person is required for the due execution, delivery, or
performance by any Obligor of any Loan Document to which it is a
party, except for the filing or recording of financing
statements, the Company Mortgages, Company Deeds of Trust,
Company Patent Security Agreement, Company Trademark Security
Agreement, any actions required outside of the United States
(with respect to Collateral located outside of the United States
or Collateral consisting of stock of foreign issuers), notations
on documents of title, and actions required under the Federal
Assignment of Claims Act of 1940 in order to perfect the security
interests of the Agent in the Collateral. None of the Parent
Guarantor, the Company, or any of their Subsidiaries is subject
to regulation as an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or is a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
81
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SECTION 8.4. Validity, etc. This Agreement, and all other
-------------
Loan Documents executed by the Company will, on the due execution
and delivery hereof and thereof by all parties hereto and
thereto, constitute the legal, valid, and binding obligations of
the Company enforceable against the Company in accordance with
their respective terms; this Agreement and each other Loan
Document executed by the Parent Guarantor will, on the due
execution hereof and thereof by all parties hereto and thereto,
constitute the legal, valid, and binding obligations of the
Parent Guarantor enforceable against the Parent Guarantor in
accordance with their respective terms; and each Loan Document
executed pursuant hereto by each other Obligor will, on the due
execution and delivery thereof by such Obligor and by all other
parties thereto, constitute the legal, valid, and binding
obligation of such Obligor enforceable against such Obligor in
accordance with its terms; in each case, however, except as
enforceability may be limited by bankruptcy, insolvency, or other
similar laws of general application relating to or affecting the
enforcement of creditors' rights generally, and by general
principles of equity.
SECTION 8.5. Financial Information.
---------------------
(a) The consolidated balance sheet of the Company and
its Subsidiaries as of December 31, 1992 and the related
statements of consolidated income and consolidated cash
flows for the year then ended present fairly the financial
position of the Company and its Subsidiaries at December 31,
1992 and the results of their operations and their cash
flows for the year then ended in conformity with GAAP. The
consolidated balance sheet of the Company and its
Subsidiaries as of September 30, 1993 and the related
statements of consolidated income and consolidated statement
of cash flows for the nine months then ended present fairly
(subject to normal year-end adjustments) the financial
position of the Company and its Subsidiaries at September
30, 1993 and the results of their operations and their cash
flows for the nine months then ended in conformity with GAAP
for interim financial information.
(b) The consolidated balance sheet of the Parent
Guarantor and its Subsidiaries as of December 31, 1992 and
the related statements of consolidated income and
consolidated cash flows for the year then ended present
fairly the financial position of the Parent Guarantor and
its Subsidiaries at December 31, 1992 and the results of
their operations and their cash flows for the year then
ended in conformity with GAAP. The consolidated balance
sheet of the Parent Guarantor and its Subsidiaries as of
September 30, 1993 and the related statements of
consolidated income and consolidated statement of cash flows
for the nine months then ended present fairly (subject to
normal year-end adjustments) the financial position of the
Parent Guarantor and its Subsidiaries at September 30, 1993
82
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<PAGE> 91
and the results of their operations and their cash flows for
the nine months then ended in conformity with GAAP for
interim financial information.
(c) The financial statements and projections of the
Company dated December 28, 1993 and January 26, 1994 were
prepared on the basis of the estimates and assumptions
stated therein and represented, at each such date, the
Company's good faith forecasts and projections of its future
financial performance prepared after duly diligent
investigations; such estimates, assumptions, projections,
and forecasts were fair and reasonable, and reflected the
Company's estimates of the most likely future financial
results and condition of the Company, in the light of
business conditions existing at the date thereof; and any
such estimates, assumptions, projections, and forecasts, if
prepared as of the date of this Agreement, would contain
estimates of the future financial performance of the Company
which would not materially and adversely differ from the
respective estimates contained in the financial projections
and forecasts. As of the date hereof and, in connection
with the initial Credit Extension, as of the Initial
Borrowing Date, no material developments have occurred since
January 26, 1994 which would lead the Company to believe
that such projections and forecasts, taken as a whole, are
not reasonably attainable, subject to the uncertainties and
approximations inherent in any projections. It is
understood by the Agent and the Lenders that all of the
estimates and assumptions on which such projections and
forecasts are based may not prove to be correct, that actual
future financial performance may vary from that projected,
and that nothing contained in this clause (c) shall be
----------
construed as a warranty, or guarantee, of future financial
performance.
SECTION 8.6. No Material Adverse Effect.
--------------------------
(a) For purposes of Credit Extensions to be made on
the Initial Borrowing Date, no event or events have occurred
since September 30, 1993 which, individually or in the
aggregate, have had or have a reasonable possibility of
having a Materially Adverse Effect.
(b) For purposes of Credit Extensions requested to be
made after the Initial Borrowing Date, no event or events
have occurred since the Initial Borrowing Date which,
individually or in the aggregate, have had or could
reasonably be expected to have a Materially Adverse Effect.
SECTION 8.7. Absence of Default or Violation of Law. No
--------------------------------------
Obligor nor any Subsidiary thereof is (a) in default in the
payment of (or in the performance of any material obligation
applicable to) any Indebtedness outstanding in a principal amount
exceeding $10,000,000 or (b) in violation of any law,
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<PAGE> 92
governmental regulation, or court decree or order where such
violation has a reasonable possibility of having a Materially
Adverse Effect.
SECTION 8.8. Litigation, etc. There is no pending or, to
---------------
the knowledge, after due inquiry, of the Executive Officers of
the Parent Guarantor or the Company, threatened labor
controversy, litigation, action, or proceeding affecting the
Parent Guarantor, the Company, or any of their Subsidiaries or
Joint Venture Affiliates, or any of their respective Properties,
or revenues, which has a reasonable possibility of having a
Materially Adverse Effect or which purports to affect the
legality, validity, or enforceability of this Agreement, or any
other Loan Document, except as disclosed in Item 3 ("Litigation")
------ ----------
or Item 8 ("Environmental Matters") of the Disclosure Schedule or
------ ---------------------
in the Environmental Reports.
SECTION 8.9. Subsidiaries.
------------
(a) The Parent Guarantor has no Subsidiaries except
the Company and its Subsidiaries. The Company has no
Subsidiaries, except those Subsidiaries
(i) which are identified in Item 2 ("Existing
------ --------
Subsidiaries") of the Disclosure Schedule; or
------------
(ii) which have been formed or acquired in
accordance with Section 9.2.5 or 9.2.10.
------------- ------
(b) Other than as set forth in Schedule XI hereto, as
-----------
of the Initial Borrowing Date neither the Parent Guarantor
nor the Company has any Subsidiaries having total assets
greater than $1,000,000 (exclusive of assets eliminated in
consolidation) other than those Subsidiaries set forth in
Schedules III, IV and VII hereto.
------------- -- ---
SECTION 8.10. Ownership of Properties.
-----------------------
(a) The Parent Guarantor, the Company, and each
of their Subsidiaries owns good title to all of its
Properties, of any nature whatsoever, which are material to
the Parent Guarantor, the Company, and their Subsidiaries as
a whole or which, in the case of Properties owned by the
Company or any of its Significant Subsidiaries, are material
to the Company or such Significant Subsidiary, in each case
free and clear of all Liens or material claims except for
"Permitted Exceptions" (as defined in the Company Mortgages
and Company Deeds of Trust) or as permitted pursuant to
Section 9.2.3.
-------------
(b) The Parent Guarantor, the Company, and each of
their Subsidiaries owns (or is licensed to use) and
possesses all such patents, trademarks, trade names, service
marks, and copyrights as the Parent Guarantor and the
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Company consider necessary for the conduct of its business
and the business of its Subsidiaries as now conducted
without, individually or in the aggregate, any infringement
or alleged infringement upon rights of other Persons which
has a reasonable possibility of having a Materially Adverse
Effect.
SECTION 8.11. Taxes. The Parent Guarantor, the Company, and
-----
each of their Domestic Subsidiaries and their other Significant
Subsidiaries have filed all federal, state, and all other
material tax returns and reports required by law to have been
filed by it and have paid or caused to be paid all material taxes
and governmental charges thereby shown to be owing, except any
such taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP have been set aside on its
books.
SECTION 8.12. Pension and Welfare Plans. During the twelve-
-------------------------
consecutive-month period prior to the date of the execution and
delivery of this Agreement and prior to the date of each Credit
Extension hereunder, no actions have been taken by the Parent
Guarantor, the Company, any member of their Controlled Groups, or
any other Person (with the requisite authority to act) to
terminate any Pension Plan that has insufficient assets to
satisfy all benefit liabilities thereunder (within the meaning of
Section 4001(a)(16) of ERISA), and no contribution failure has
- -------------------
occurred with respect to any Pension Plan sponsored or maintained
by any Controlled Group member sufficient to give rise to a Lien
on assets of any Controlled Group member under section 302(f) of
ERISA, which failure has not been cured within 30 days of the
applicable due date. With respect to any Pension Plan, neither
the Parent Guarantor, the Company, nor any of their Subsidiaries
has failed in any material respect to comply with applicable
provisions of ERISA and the Code and any regulations, rulings, or
notices issued thereunder. Item 7 ("Employee Benefit Plans") of
------ ----------------------
the Disclosure Schedule lists all Welfare Plans of the Parent
Guarantor, the Company, or any of their Domestic Subsidiaries and
sets forth the Company's estimate of the expected aggregate
contributions of the Parent Guarantor, the Company, and their
Domestic Subsidiaries to Pension Plans for the 1992 and 1993
Fiscal Years and the aggregate expected costs of the Parent
Guarantor, the Company and their Domestic Subsidiaries for
medical benefits for the 1992 and 1993 Fiscal Years under Welfare
Plans.
SECTION 8.13. Environmental Warranties. Except as set forth
------------------------
in Item 8 ("Environmental Matters") of the Disclosure Schedule or
------ ---------------------
in the Environmental Reports:
(a) all facilities and Property (including underlying
groundwater) owned, operated, or leased by the Parent
Guarantor, the Company, or any of their Subsidiaries have
been, and continue to be, owned, operated, or leased by the
85
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<PAGE> 94
Parent Guarantor, the Company, and their Subsidiaries in material
compliance with all Environmental Laws;
(b) there are no pending or, to the knowledge of the
Parent Guarantor's or the Company's Executive Officers,
after due inquiry, threatened
(i) claims, complaints, notices, or requests for
information received by the Parent Guarantor, the
Company, or any of their Subsidiaries, from any
federal, state, or local governmental agency or
authority, or from any Person which has commenced a
legal proceeding against the Parent Guarantor, the
Company, or any of their respective Subsidiaries, with
respect to any alleged violation of any Environmental
Law, or
(ii) complaints, notices, or inquiries to the
Parent Guarantor, the Company, or any of their
Subsidiaries, from any federal, state, or local
governmental agency or authority, or from any Person
which has commenced a legal proceeding against the
Parent Guarantor, the Company, or any of their
respective Subsidiaries, regarding potential liability
under any Environmental Law;
(c) there have been no Releases of Hazardous Materials
at, on, into or under any Property now or previously owned,
operated, or leased by the Parent Guarantor, the Company, or
any of their Subsidiaries that, singly or in the aggregate,
have a reasonable possibility of having a Materially Adverse
Effect;
(d) the Parent Guarantor, the Company, and their
Subsidiaries have been issued and are in material compliance
with all permits, certificates, approvals, licenses, and
other authorizations relating to environmental matters and
necessary for their businesses;
(e) no Property now or previously owned, operated, or
leased by the Parent Guarantor, the Company, or any of their
Subsidiaries is listed or, to the knowledge of the Parent
Guarantor's or the Company's Executive Officers, after due
inquiry, proposed for listing (with respect to owned
Property only) on the National Priorities List pursuant to
CERCLA or on the CERCLIS or, to the best knowledge and
belief of the Parent Guarantor's and the Company's Executive
Officers, on any similar state list of sites requiring
investigation or clean-up;
(f) there are no underground storage tanks (as defined
in 40 C.F.R. Section 280.1, as the same may be amended,
modified, supplemented, or replaced from time to time),
active or abandoned, including petroleum storage tanks, on
or under
86<PAGE>
<PAGE> 95
any Property now or previously owned or leased by the Parent
Guarantor, the Company, or any of their Subsidiaries that,
singly or in the aggregate, have a reasonable possibility of
having a Materially Adverse Effect;
(g) none of the Parent Guarantor, the Company, or
any of their Subsidiaries has, to the best knowledge
and belief of each Executive Officer of the Company,
transported or arranged for the transportation of any
Hazardous Material to any location which is listed or
proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar
state list or which is the subject of federal, state,
or local enforcement actions or other investigations
which has a reasonable possibility of leading to
material claims against the Parent Guarantor, the
Company or such Subsidiary thereof for any remedial
work, damage to natural resources, or personal injury,
including claims under CERCLA; and
(h) there are no polychlorinated biphenyls or
friable asbestos present at any real property now or
previously owned or leased by the Parent Guarantor, the
Company, or any of their Subsidiaries that, singly or
in the aggregate, have a reasonable possibility of
having a Materially Adverse Effect.
SECTION 8.14. Regulations G, U, and X. No Obligor is
-----------------------
engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock, and no proceeds of
any Credit Extension will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board
Regulation G, U, or X. Terms for which meanings are
provided in F.R.S. Board Regulation G, U, or X or any
regulations substituted therefor, as from time to time in
effect, are used in this Section 8.14 with such
------------
meanings.
SECTION 8.15. Solvency. On and as of the date of each
--------
Credit Extension, both before and after giving effect to
(a) all Indebtedness (including the Loans and the
Letters of Credit) being incurred, assumed, or
guaranteed, and
(b) Liens created by the Company in connection
therewith,
but in no case regarding the KT Note as an asset of the
Company, the Company and the Parent Guarantor will each be
Solvent.
SECTION 8.16. Senior Indebtedness.
-------------------
(a) The monetary Obligations of the Company
hereunder and under the other Loan Documents constitute
"Senior Indebtedness" of the Company under clause (i)
---------
of the
87
<PAGE>
<PAGE> 96
definition of the term "Senior Indebtedness" and, to the
extent that such monetary Obligations constitute
"Obligations" (as defined in the Subordinated Indenture),
"Specified Senior Debt" described in clause
------
(i)(A) of the definition of such term under the terms
------
of the Subordinated Indenture; the monetary Obligations of
KFC, KAAC, AJI and KJC under the Loan Documents constitute
"Senior Indebtedness" of such corporations under clause (i)
----------
of the definition of the term "Senior Indebtedness" and, to
the extent that such monetary Obligations constitute
"Obligations" (as defined in the Subordinated Indenture),
"Guarantor Specified Senior Debt" described in clause (i)(A)
-------------
of the definition of such term of such corporations under
the terms of the Subordinated Indenture; the subordination
provisions of the Subordinated Indenture are enforceable
against the holders of the Subordinated Debt; and the Agent
and the Lenders will be entitled to the benefits of such
subordination provisions.
(b) The monetary Obligations of the Company hereunder
and under the other Loan Documents constitute "Senior
Indebtedness of the Company" (as defined in the PIK Note)
under the terms of the PIK Note; the subordination
provisions of the PIK Note are enforceable against the
holder of the PIK Note; and the Agent and the Lenders will
be entitled to the benefits of such subordination provisions
of the PIK Note.
(c) The monetary Obligations of the Company hereunder
and under the other Loan Documents constitute (or, in the
case of any Equity Proceeds Note issued after the date
hereof, will constitute) "Senior Indebtedness of the
Company" (as defined in each Equity Proceeds Note) under the
terms of each Equity Proceeds Note; the subordination
provisions of each Equity Proceeds Note are enforceable (or,
in the case of any Equity Proceeds Notes issued after the
date hereof, will be enforceable) against the holder of such
note; and the Agent and the Lenders will be entitled to the
benefits of such subordination provisions of each Equity
Proceeds Note.
SECTION 8.17. Accuracy of Information. All factual
-----------------------
information heretofore or contemporaneously furnished by or on
behalf of any Obligor in writing to the Agent or any Lender for
purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other such factual
information hereafter furnished in writing by or on behalf of any
Obligor to the Agent or any Lender pursuant to or in connection
with any Loan Document will be, true and accurate in every
material respect on the date as of which such information is
dated or certified, and such information is not, or shall not be,
as the case may be, incomplete by omitting to state any material
fact necessary to make such information not misleading in light
of the circumstances then prevailing.
88
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SECTION 8.18. Joint Venture Contingent Liabilities. Item 11
------------------------------------ -------
("Joint Venture Contingent Liabilities") of the Disclosure
------------------------------------
Schedule contains a fair summary of the types of the material
Contingent Liabilities of the Company and its Subsidiaries in
respect of the businesses, operations, and financial obligations
of VALCO, ALPART, Anglesey, KJBC, and QAL.
SECTION 8.19. Mortgaged Property. The real property and
------------------
improvements which are mortgaged by the Company Mortgages and
Company Deeds of Trust, as the case may be, constitute, as of the
date of this Agreement, all of the real property and improvements
owned or leased by the Company or any of its Subsidiaries which
comprise, or are part of, or are used in the operations of, or
are located contiguous to, the respective plants of the Company
which are located at the locations listed on Schedule II hereto,
-----------
except for certain unimproved property which is located
contiguous to the Company's facilities at Newark, Ohio, Mead,
Washington and Greenwood County, South Carolina, but will not be
so mortgaged. Such unimproved property (a) is not a part of or
used in the operations of the Company's plants in Newark, Ohio,
Mead, Washington or Greenwood County, South Carolina which are to
be mortgaged to the Agent, and (b) does not have any material
structures or improvements located on it.
ARTICLE IX
COVENANTS
SECTION 9.1. Affirmative Covenants. The Parent Guarantor
---------------------
agrees (and the Company, to the extent that any such agreement of
the Parent Guarantor shall be applicable to the Company, any of
its Subsidiaries, or any of its or their properties, also agrees)
with the Agent and each Lender that, until all Commitments have
terminated, no Letters of Credit are outstanding, and all
outstanding monetary Obligations have been paid in full:
SECTION 9.1.1. Financial Information, Reports, Notices,
---------------------------------------
etc. The Company will furnish, or will cause to be furnished, to
- ---
the Agent, for itself and for delivery to the Lenders, copies of
the following financial statements, reports, notices, and
information:
(a) within 50 days after the end of each of the first
three Fiscal Quarters of each Fiscal Year of the Company,
consolidated and consolidating balance sheets of the Company
and its Subsidiaries as of the end of such Fiscal Quarter
and consolidated and consolidating statements of income of
the Company and its Subsidiaries for such Fiscal Quarter and
for the period commencing at the end of the previous Fiscal
Year and ending with the end of such Fiscal Quarter and a
consolidated statement of cash flows of the Company and its
Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal
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Quarter, certified (subject to normal year-end adjustments)
on behalf of the Company by a Financial Authorized Officer
of the Company;
(b) within 95 days after the end of each Fiscal Year
of the Company, (i) a copy of the annual audit report for
such Fiscal Year for the Company and its Subsidiaries,
including therein a consolidated balance sheet as at the
close of such Fiscal Year, and related consolidated
statements of income and cash flows for such Fiscal Year, of
the Company and its Subsidiaries, in each case audited
(without any Impermissible Qualification) by Arthur Andersen
& Co. or other independent public accountants acceptable to
the Agent and the Required Lenders, (ii) a consolidating
balance sheet at the close of such Fiscal Year, and a
related consolidating statement of income for such Fiscal
Year, of the Company and its Subsidiaries, certified on
behalf of the Company by a Financial Authorized Officer of
the Company, and (iii) a report from the accountants
referred to in clause (i), containing a computation prepared
----------
by the Company of each of the financial covenants contained
in Section 9.2.4 as at the end of such Fiscal Year, and,
-------------
commencing with the 1995 Fiscal Year, of the Interest
Coverage Ratio as of the end of each Fiscal Quarter of such
Fiscal Year (except the first Fiscal Quarter of the 1995
Fiscal Year), which report shall specify that it has been
prepared using the procedures specified in the letter dated
February 14, 1994 from Arthur Andersen & Co. to the Agent, a
copy of which has been delivered to each Lender, and
reporting that, in making the audit necessary for the
signing of such annual report by such accountants, they have
not become aware of any material miscomputation by the
Company of such financial covenants, or of the Interest
Coverage Ratio as of the end of each of such Fiscal
Quarters, or of any Default or Event of Default that has
occurred and is continuing, or, if they have become aware of
such miscomputation, Default, or Event of Default,
describing such miscomputation, Default, or Event of
Default;
(c) as soon as available and in any event within 50
days (or, in the case of the fourth Fiscal Quarter of any
Fiscal Year, 95 days) after the end of each Fiscal Quarter,
(i) a Compliance Certificate, executed on behalf of the
Company by a Financial Authorized Officer of the Company,
showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory
to the Agent) compliance with the financial covenants set
forth in Section 9.2.4 and, commencing with the second
-------------
Fiscal Quarter of the 1995 Fiscal Year, the calculation of
the Interest Coverage Ratio for the four Fiscal Quarter
Period ended on the last day of such Fiscal Quarter and (ii)
a detail schedule of Inventory by site (in substantially the
form currently produced by the Company, with such changes as
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to which the Agent may consent, such consent not to be
unreasonably withheld);
(d) as soon as possible and in any event within three
Business Days after an Executive Officer of the Parent
Guarantor or the Company shall have become aware of the
occurrence of
(i) any Default, a statement on behalf of the
Company by the chief financial Authorized Officer of
the Company setting forth details of such Default and
the action which the Company and/or the relevant other
Obligor has taken and proposes to take with respect
thereto, or
(ii) any
(A) default or event of default (however
denominated) under any Subordinated Debt
Instrument
(B) default or event of default (however
denominated) under any Senior Debt Instrument or
(C) default or event of default (however
denominated) under any agreement relating to any
Joint Venture Affiliate, ALPART, or VALCO or any
other material document or agreement to which the
Company or any of its Significant Subsidiaries is
a party, in each case where such a default or
event of default has a reasonable possibility of
having a Materially Adverse Effect,
notice and a description in reasonable detail thereof;
(e) as soon as possible and in any event within three
Business Days after (i) the occurrence of any material
adverse development with respect to any labor controversy,
litigation, action, or proceeding described in Section 8.8
-----------
or (ii) the commencement of any labor controversy,
litigation, action, or proceeding of the type described in
Section 8.8, written notice thereof and copies of all
-----------
material documentation relating thereto;
(f) promptly after the sending or filing thereof,
copies of all publicly available reports which the Parent
Guarantor or the Company sends to any of its security
holders, and all publicly available reports and registration
statements which the Parent Guarantor or the Company or any
of their Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange;
(g) as soon as possible and in any event within three
Business Days after an Executive Officer of the Parent
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Guarantor or the Company shall have become aware of the
taking of any action by the Company or any other Person to
terminate any Pension Plan that has insufficient assets to
satisfy all benefit liabilities thereunder (within the
meaning of Section 4001(a)(16) of ERISA), or the failure to
make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien against assets
of any Controlled Group member under section 302(f) of
ERISA, or the taking of any action with respect to a Pension
Plan which could reasonably be expected to result in the
requirement that the Company or any Controlled Group member
furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event relating to any Pension
Plan with respect to which there is a reasonable possibility
of the incurrence by the Company, the Parent Guarantor or
any of their Subsidiaries of any liability, fine, or penalty
which would have a Materially Adverse Effect, or any
material increase in the contingent liability of the Company
with respect to any post-retirement Welfare Plan benefit
excluding liabilities occurring solely by operation of any
generally applicable law enacted after the date of this
Agreement, written notice thereof and copies of all material
documentation relating thereto;
(h) (i) promptly upon receipt thereof, a copy of all
notices, documents, or other Instruments received by the
Company pursuant to any Subordinated Debt Instrument or any
Senior Debt Instrument and not otherwise required to be
delivered hereunder and (ii) concurrently with the delivery
thereof, a copy of all notices, documents, or other
Instruments delivered by the Company pursuant to any
Subordinated Debt Instrument or any Senior Debt Instrument
and not otherwise required to be delivered hereunder;
(i) no later than five Business Days after the
approval thereof by the Company's Board of Directors, a copy
of the annual business plan, budget, and updated business
projections of the Company and its Subsidiaries, and upon
the delivery to the Agent of any financial statements
relating to a Fiscal Quarter included in such plan, budget,
or projections, a summary comparing the Company's actual
financial performance during such Fiscal Quarter to that
provided in such plan, budget, or projections; and
(j) such other information respecting the condition or
operations, financial or otherwise, of the Parent Guarantor,
the Company, or any of their Subsidiaries as any Lender
(acting through the Agent) may from time to time reasonably
request.
SECTION 9.1.2. Compliance with Laws, etc. The Parent
-------------------------
Guarantor and the Company will, and will cause each of their
Subsidiaries to, comply in all respects with all applicable laws,
rules, regulations, and orders (except for such noncompliance
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which could not reasonably be expected to have a Materially
Adverse Effect), including (and subject to the foregoing
exception):
(a) subject to Section 9.2.10, the maintenance and
--------------
preservation of its corporate existence under the laws of
its jurisdiction of incorporation or organization, as the
case may be, and its qualification as a foreign corporation,
partnership, or other entity in each jurisdiction where the
nature of its business requires such qualification; and
(b) the payment, before the same become delinquent, of
all taxes, assessments, and governmental charges imposed
upon it or upon its Property, except to the extent being
contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP have been
set aside on its books.
SECTION 9.1.3. Maintenance of Properties. The Parent
-------------------------
Guarantor and the Company will, and will cause each of their
Significant Subsidiaries to, maintain, preserve, protect, and
keep their material properties in good repair, working order, and
condition (ordinary wear and tear excepted), and make necessary
and proper repairs, renewals, and replacements so that their
business carried on in connection therewith may be properly
conducted at all times unless the Parent Guarantor or the Company
determines in the exercise of its good faith business judgment
that the continued maintenance of any such properties is no
longer economically desirable.
SECTION 9.1.4. Insurance.
---------
(a) The Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with
financially sound and reputable insurance companies
(including, consistent with past practice, insurance
companies affiliated with the Company, insurance with
respect to their Properties and business (including business
interruption insurance, fire insurance and public liability
insurance) in such amounts, of such character and against
such risks as are usually maintained by companies engaged in
the same or similar business or having comparable
properties, and in any case having a coverage which is not
materially less than the insurance of such type maintained
by the Company and its Subsidiaries on the date of this
Agreement, provided, that to the extent that any of the
--------
insurance required by this clause (a) ceases to be available
----------
at commercially reasonable rates, the Company may effect
substitute insurance coverage therefor in accordance with
prudent standards then being followed by other companies
engaged in the same or similar business or having comparable
properties. In addition, the Company will maintain flood
insurance on each Property subject to a Company Deed of
Trust or Company Mortgage to the extent such Property is
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eligible for the National Flood Insurance Program. In the
event that the Company wishes to effect substitute coverage
pursuant to the foregoing proviso, it will (i) notify the
-------
Agent of such intent as soon as reasonably practicable, and
(ii) in any event not less than three Business Days prior to
the termination of the coverage for which substitution is to
be made, furnish the Agent with a report of the Company
describing in reasonable detail the nature of such
substitute coverage and the reasons why the Company believes
that such substitute coverage is appropriate.
(b) The Company will cause:
(i) the Agent and the Lenders to be named as an
additional insured, for a total coverage of $10,000,000
for all such Persons, under the public liability
policies of the Company and its Subsidiaries; and
(ii) the Agent to be named as loss payee under
all insurance policies of the Company and its
Subsidiaries that have executed the Subsidiary Security
Agreement covering loss of or damage to Property
(pursuant to loss payable clauses satisfactory to the
Agent),
and will,
(A) as soon as practicable after effecting any
insurance policies of the Company or any of its
Subsidiaries (other than ALPART or VALCO) (and, with
respect to any such policies which are replacements for
other insurance policies which are required hereby, and
which are terminating, in any event within three
Business Days after such termination), furnish the
Agent with an insurance broker's certificate or binder
in respect of such policies or replacement policies;
(B) if a replacement insurance policy for an
insurance policy which is required hereby and which is
terminating has not been effected prior to the third
Business Day before such termination, furnish the Agent
on such third Business Day a report of the Company
describing in reasonable detail the status of such
replacement policies;
(C) upon request of the Agent, furnish to the
Agent copies of all insurance policies at any time
maintained by the Parent Guarantor, the Company and
each Subsidiary of the Company executing a Security
Agreement and furnish to the Agent with copies for each
Lender, on or prior to the 15th day of July of each
year, a certificate of an Authorized Officer of the
Company setting forth the nature and extent of all
insurance maintained by the Company, and its
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Significant Subsidiaries in accordance with this
Section 9.1.4 (and which, in the case of a certificate
-------------
of a broker, were placed through such broker); and
(D) furnish to the Agent with copies for each
Lender, on or prior to the 15th day of July of each
year, a letter dated as of a recent date from the
Company's insurance broker or brokers comparing the
insurance coverage then maintained by the Parent
Guarantor, the Company and its Subsidiaries to the
insurance coverage described in the most recent such
letter delivered pursuant to this clause (D) or
----------
pursuant to Section 7.1 (in the case of the first such
-----------
delivery).
SECTION 9.1.5. Books and Records; Audits; Confidentiality.
------------------------------------------
(a) Each of the Parent Guarantor and the Company will,
and will cause each of its Significant Subsidiaries to,
maintain at all times proper and complete (in all material
respects) books, records and accounts, in which complete and
timely (in all material respects) entries are made, which
reflect all of its business affairs and transactions in
accordance with GAAP. The Company will and will cause KAII
to maintain at all times books and records pertaining to the
Collateral in such detail, form and scope as the Agent shall
reasonably require, including records, to the extent
normally maintained in accordance with accepted accounting
principles, of (i) all payments received and all credits and
extensions granted with respect to the Accounts, (ii) the
return, rejection, repossession, stoppage in transit, loss,
damage or destruction of any Inventory, and (iii) all other
dealings affecting the Collateral.
(b) Each of the Parent Guarantor and the Company will
permit the Agent, and any Lender who wishes to accompany the
Agent, or any representatives thereof, at all reasonable
times and intervals (and at any time during the continuance
of an Event of Default or an Event of Cash Dominion), on
reasonable notice during ordinary business hours, to have
access to examine, audit, make extracts from and inspect the
Company's and KAII's records, files, and books of account
and the Collateral and to discuss the Company's and KAII's
affairs with the Company's and KAII's officers and
management and the independent public accountant for the
Company, KAII, and the Parent Guarantor (and each of the
Parent Guarantor and the Company hereby authorizes such
independent public accountant to discuss the Parent
Guarantor's, the Company's, or KAII's financial matters with
the Agent and with each Lender or its representatives). The
Company will, and will cause KAII to, deliver to the Agent,
to the extent reasonably requested, any instrument necessary
for the Agent to obtain records from any service bureau
maintaining records for the Company or KAII. The Agent may,
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at the Company's expense, make copies of all of the
Company's and KAII's books and records, or require the
Company or KAII to deliver such copies to the Agent. The
Agent may, without expense to the Agent, use such of the
Company's and KAII's personnel, supplies, and premises as
may be reasonably necessary for maintaining or enforcing the
Security Interest. In addition, subject to the provisions
of Section 3.5.2, the Parent Guarantor and the Company shall
-------------
pay the reasonable fees of any independent public accountant
incurred in connection with the Agent's exercise of its
rights pursuant to this Section 9.1.5.
-------------
(c) Subject to the provisions of the next paragraph,
the Agent, each Lender, and each prospective purchaser of or
participant in any part of any Loan, Commitment, or any
other interest under this Agreement, each severally and for
itself alone, agrees to maintain all Confidential
Information (as defined below) obtained by it in connection
with its rights under this Agreement or the other Loan
Documents, including its rights of access contained in this
Section 9.1.5 and information supplied pursuant to
-------------
Section 9.1.1, confidential and not disclose the same to
any Person who is not an officer, director, employee, legal
counsel, or authorized agent or advisor of the Agent, or
any such Lender or any purchaser or prospective purchaser
of or participant in all or any part of any Loan,
Commitment, or any other interest under this Agreement
pursuant to the provisions of Section 12.11.2 who shall
---------------
agree, by executing a letter agreement substantially in the
form attached hereto as Exhibit Q, to be bound by the
---------
provisions of this clause (c). The Agent, each Lender, and
----------
each other Person bound hereby shall not use any
Confidential Information except for purposes relating to
this Agreement, the other Loan Documents, or otherwise in
connection with its status as a creditor or potential
creditor of the Company pursuant to the transactions
contemplated hereby or thereby. The term "Confidential
------------
Information" shall mean information specifically labelled
-----------
or identified as "Confidential" furnished by or on behalf
of the Company to the Agent, any Lender, or other Person
exercising rights hereunder and any information or
documents (whether or not specifically labeled or
identified as "Confidential") obtained pursuant to
Section 9.1.5(b) by the Agent, any Lender or other Person
----------------
exercising rights hereunder, but shall not include any such
information which (a) has become or hereafter becomes
available to the public other than as a result of a
disclosure by the Agent, any Lender, or other Person
exercising rights hereunder or required to be bound hereby,
or (b) was or became available to the Agent, any Lender, or
other Person exercising rights hereunder or required to be
bound hereby on a non-confidential basis prior to its
disclosure by the Company, its representatives, or its
agents, or (c) becomes available to the Agent, any Lender,
or other Person exercising rights hereunder or required to
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be bound hereby on a non-confidential basis from a source
other than the Company, its representatives, or its agents
or another Lender or other Person exercising rights
hereunder or required to be bound hereby.
The restrictions set forth in the preceding paragraph
shall not prevent the disclosure by the Agent, any Lender,
or any other Person required to be bound hereby of any such
information
(i) with the prior written consent of the Company
or as expressly contemplated by this Agreement or any
other Loan Document;
(ii) upon order of any court or administrative
agency of competent jurisdiction, to the extent
required by such order and not effectively stayed on
appeal or otherwise, or as otherwise required by law;
(iii) in connection with any litigation or other
legal proceeding at law, in equity, or in bankruptcy to
which the Parent Guarantor or the Company or any
Subsidiary of either thereof and the Agent, such
Lender, or other Person are parties; or
(iv) to any Affiliate of any Lender who shall
agree, by executing a letter agreement substantially in
the form attached hereto as Exhibit Q, to be bound by
---------
the provisions of this clause (c);
----------
provided, however, that, in the case of any intended
-------- -------
disclosure under clause (ii), the Agent, the relevant
-----------
Lender, or other Person shall (unless otherwise required by
applicable law) give the Company not less than five Business
Days prior notice (or such shorter period as may be
reasonable or required by any court or agency under the
circumstances), specifying the Confidential Information
involved and stating such Person's intention to disclose
such Confidential Information (including the manner and
extent of such disclosure) in order to allow the Company an
opportunity to seek an appropriate protective order.
SECTION 9.1.6. Environmental Covenant. The Parent
----------------------
Guarantor and the Company will, and will cause each of their
Subsidiaries to,
(a) use and operate all of their respective facilities
and properties in material compliance with all Environmental
Laws, keep all necessary permits, approvals, certificates,
licenses, and other authorizations relating to environmental
matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
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(b) (i) as soon as possible and in any event no
later than 15 Business Days after an Executive
Officer of the Company shall have become aware of
the receipt thereof, notify the Agent and provide
copies of all written claims, complaints, notices,
or inquiries by a governmental or regulatory
authority, or any Person which has commenced a
legal proceeding against the Parent Guarantor, the
Company, or any of their Subsidiaries, relating to
compliance by the Company or its Subsidiaries
with, or potential liability of the Company or its
Subsidiaries under, Environmental Laws; and
(ii) with reasonable diligence cure all
environmental defects and conditions which are the
subject of any actions and proceedings against the
Parent Guarantor, the Company, or any of their
Subsidiaries relating to compliance with
Environmental Laws, except to the extent that such
actions and proceedings (or the obligation of the
Parent Guarantor, the Company, or any such
Subsidiary to cure such defects and conditions)
are being contested by the Parent Guarantor, the
Company or any of their Subsidiaries in good faith
by appropriate proceedings; and
(c) provide such information, access, and
certifications which the Agent may reasonably request from
time to time to evidence compliance with this Section 9.1.6.
-------------
SECTION 9.1.7. Performance of Instruments. Each of the
--------------------------
Parent Guarantor and the Company will, and will cause each of
their Subsidiaries to, perform promptly and faithfully all of
their Obligations under each Loan Document to which it is or is
to be a party, subject to any applicable grace periods.
SECTION 9.1.8. Maintenance of Collateral. The Parent
-------------------------
Guarantor and the Company will, and will cause their Subsidiaries
having an interest in any Property which is, or is intended to
be, Collateral to,
(a) acquire and maintain such Property in a manner
that will enable the Parent Guarantor, the Company, or such
Subsidiary, as the case may be, to cause such Property to be
subject to the Liens of the Collateral Documents; and
(b) obtain the consent or approval of any Person whose
consent or approval is required for the grant of Liens by
the Parent Guarantor, the Company, or any such Subsidiary in
any such Property.
SECTION 9.1.9. Collateral Reporting. Except during the
--------------------
continuance of an Event of Cash Dominion, the Company will, and
will cause KAII to, provide the Agent with the following
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documents, in form and scope satisfactory to the Agent, on a
monthly basis: (a) an accounts receivable summary aging report
together with a reconciliation to the previous month's accounts
receivable summary aging report; (b) a reconciliation of the
account receivable summary aging report to the accounts
receivable general ledger; (c) a monthly listing of delinquent
accounts in excess of $100,000 that are thirty days past the due
date or sixty-five days past the invoice date, (d) monthly
inventory summary reports by category in respect of the Inventory
of the Company, (e) monthly inventory summary reports by location
in respect of the Inventory of the Company; and (f) certificates
of an officer of the Company certifying on behalf of the Company
as to the foregoing. During the continuance of an Event of Cash
Dominion, the Company will, and will cause KAII to, continue to
provide the Agent with the documents described in clauses (a)
-----------
through (f) above. In addition, the Company will, and will cause
- -----------
KAII to, provide the Agent with the following documents
immediately upon any written request therefor by the Agent: (a)
copies of shipping and delivery documents; (b) copies of
invoices, customer statements, credit memos, remittance advises
and reports, and deposit slips; (c) copies of purchase orders,
invoices, and delivery documents for Inventory of the Company
acquired by the Company; and (d) such other reports as to the
Collateral as the Agent shall request from time to time. If any
of the Company's or KAII's records or reports of the Collateral
are prepared by an accounting service or other agent, the Company
hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Agent.
SECTION 9.1.10. Delivery; Further Assurances. The Parent
----------------------------
Guarantor and the Company will, and will cause each of their
wholly owned Subsidiaries to, at the expense of the Company,
(a) without any request by the Agent, within 10
Business Days after the receipt thereof, deliver or cause to
be delivered to the Agent, in due form for transfer (i.e.,
----
endorsed in blank or, if appropriate, accompanied by duly
executed blank stock or bond powers), all equity securities
having a value, and all debt instruments (other than the
Equity Proceeds Notes, which shall not constitute
Collateral) having face amounts, in excess of $100,000, at
any time representing all or any of the Collateral, in due
form for transfer (i.e., endorsed in blank or, if
---
appropriate, accompanied by duly executed blank bond
powers);
(b) upon forming or acquiring any Subsidiary,
immediately notify the Agent of such formation or
acquisition, and if requested by the Agent at the request of
the Required Lenders, unless such Subsidiary is acquired or
formed by a Subsidiary of the Company which is not a
Domestic Subsidiary,
(i) pledge and deliver to the Agent pursuant to
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the Company Pledge Agreement or the Subsidiary Pledge
Agreement, as the case may be, certificates evidencing all
of the issued and outstanding capital stock of such
Subsidiary owned directly or indirectly by the Company (or,
if such Subsidiary is not a Domestic Subsidiary, 65% of such
capital stock) accompanied by undated stock powers duly
executed in blank or pledge to the Agent pursuant to the
Company Pledge Agreement, the Subsidiary Pledge Agreement,
the Company Security Agreement, or the Subsidiary Security
Agreement, as the case may be, all of the Company's or such
Subsidiary's general or limited partnership interest in such
Subsidiary;
(ii) if such pledgor is a Subsidiary of the
Company, cause such pledgor to execute and deliver to
the Agent a counterpart of the Subsidiary Guaranty and
such other items of documentation as shall be necessary
in order for such pledgor to assume the obligations
under the Subsidiary Guaranty (and such pledgor, if a
Subsidiary of the Company, may thereupon become a
"Subsidiary Guarantor" (under and as defined in the
Subordinated Indenture or the Senior Indenture) if and
to the extent required to become a "Subsidiary
Guarantor" by Section 5.12(c) of the Subordinated
---------------
Indenture or Section 4.10(b)(ii) of the Senior
-------------------
Indenture); and
(iii) cause such Subsidiary to deliver to the
Agent such evidence of due execution, and such other
information with respect to its Organic Documents and
contractual obligations, and as to the Collateral in
which it has an interest, as the Agent may request, and
to take all action necessary or as the Agent may request to
create, preserve, perfect, confirm, and validate the Liens
created or purported to be created by such Collateral Documents;
(c) if any Subsidiary of the Company is required to
grant a Lien to the Agent over any interest in real property
pursuant to clause (b) of Section 9.1.11, and if requested
---------- --------------
by the Agent at the request of the Required Lenders,
(i) cause such Subsidiary to execute and
deliver to the Agent a counterpart of the Subsidiary
Guaranty and such other items of documentation as shall
be necessary in order for such Subsidiary to assume the
obligations under the Subsidiary Guaranty (and such
Subsidiary may thereupon become a "Subsidiary
Guarantor" (under and as defined in the Subordinated
Indenture or the Senior Indenture) if and to the extent
required to become a "Subsidiary Guarantor" by
Section 5.12(c) of the Subordinated Indenture or
---------------
Section 4.10(b)(ii) of the Senior Indenture),
-------------------
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(ii) cause such Subsidiary to execute and
deliver to the Agent counterparts of the Subsidiary
Security Agreement, the Subsidiary Pledge Agreement,
and such other items of documentation as shall be
necessary in order for such Subsidiary to assume the
obligations under the Subsidiary Security Agreement and
the Subsidiary Pledge Agreement, and
(iii) cause such Subsidiary to deliver to the
Agent such evidence of due execution, and such other
information with respect to its Organic Documents and
contractual obligations, and as to the Collateral in
which it has an interest, as the Agent may request, and
to take all action necessary or as the Agent may
request to create, preserve, perfect, confirm, and
validate the Liens created or purported to be created
by such Collateral Documents;
(d) upon the opening of any account for investment in
Cash Equivalent Investments permitted hereunder by the
Company or any Obligor which has executed the Subsidiary
Security Agreement, promptly notify the Agent thereof and
promptly deliver a letter, in substantially the form of one
of the letters contained in Exhibit N attached hereto, with
---------
such changes as the Agent may approve, duly executed by the
Person with which the Company or such Subsidiary maintains
such account;
(e) upon request of the Agent, furnish or cause to be
furnished to the Agent such opinions of counsel, and other
documents with respect to the Collateral as the Agent may
reasonably specify; and
(f) upon request of the Agent, forthwith execute and
deliver or cause to be executed and delivered to the Agent,
in due form for filing or recording (and pay the cost of
filing or recording the same in all public offices deemed
necessary by the Agent), such assignments, security
agreements, pledge agreements, consents, waivers, financing
statements, stock or bond powers, and other documents, and
do such other acts and things, all as the Agent may from
time to time request, to establish and maintain to the
satisfaction of the Agent valid perfected Liens in all
Collateral (free of all other Liens, claims, and rights of
third parties whatsoever, except for Liens, claims, and
rights permitted by Section 9.2.3), provided, that the
------------- --------
Company shall not be required to register itself in Ghana or
the United Kingdom for this purpose.
SECTION 9.1.11. Real Property; Title Policies; Surveys. As
--------------------------------------
further security for the payment of the Obligations, the Parent
Guarantor and the Company will, and will cause their Subsidiaries
to:
101
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<PAGE> 110
(a) obtain and maintain the consent or approval of any
Person whose consent or approval is required to the granting
of a Lien on any interest in real property which is, or is
required by the terms of this Agreement to be, subject to a
mortgage or deed of trust in favor of the Agent; and
(b) concurrently with or promptly after the purchase
or acquisition by the Company or any such Subsidiary of, or
the formation or acquisition by the Company or any such
Subsidiary of any Subsidiary with an interest in, any real
property (including all improvements) which is located in
the United States and which is structurally related to, or
which is located contiguous to, real property upon which
there is an existing Lien in favor of the Agent pursuant to
a Company Mortgage or Company Deed of Trust,
(i) execute, acknowledge, and deliver to the
Agent a mortgage or deed of trust (or, if appropriate,
an amendment or supplement to an existing mortgage or
deed of trust), in such form and substance, and in such
number of counterparts, as the Agent may reasonably
require, mortgaging and granting a security interest in
such interest in real property;
(ii) obtain, with respect to each such interest
in real property, a title insurance policy (in amounts
reasonably satisfactory to the Agent) with respect to,
a survey of, and such other documents relating to, such
real property, in each case conforming to the
requirements of Section 7.1.8;
-------------
(iii) cause such mortgage or deed of trust to be
duly recorded or filed to create a valid, perfected,
first-priority mortgage or deed of trust lien on, and security
interest in the property purported to be covered thereby, and pay
all fees, taxes, and other expenses in connection therewith; and
(iv) deliver to the Agent such other items of
documentation with respect to any of the foregoing as
the Agent shall reasonably request (including
certificates as to incumbency, resolutions, and
opinions of counsel in all relevant jurisdictions).
At the request of the Agent, the Company will cause (and, in any
event, the Company shall be permitted to cause) any real property
which is required to be mortgaged pursuant to clause (b) of this
----------
Section 9.1.11 and which is owned by a Subsidiary of the Company,
- --------------
to be transferred to the Company prior to the execution and
delivery of such mortgage or deed of trust, as applicable. The
Agent and the Required Lenders shall have the right, in their
sole and absolute discretion, to accept or reject any such real
property interest offered pursuant to this Section 9.1.11.
--------------
102
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<PAGE> 111
SECTION 9.1.12. Intercompany Demand Notes. Within 60 days
-------------------------
after the last day of any Fiscal Quarter as of which the
aggregate outstanding Indebtedness of the Company to any wholly
owned Domestic Subsidiary of the Company exceeds $10,000,000, the
Company will, if the same has not previously been done, (a)
execute and deliver to such Subsidiary an Intercompany Demand
Note payable to such Subsidiary, and (b) cause such Subsidiary to
execute and deliver the Intercompany Note Pledge Agreement and to
pledge such note to the Agent pursuant to the Intercompany Note
Pledge Agreement.
SECTION 9.2. Negative Covenants. The Parent Guarantor
------------------
agrees (and the Company, to the extent that any such agreement of
the Parent Guarantor shall be applicable to the Company, any of
its Subsidiaries, or any of its or their properties, also agrees)
with the Agent and each Lender that, until all Commitments have
terminated, no Letters of Credit are outstanding, and all
outstanding monetary Obligations have been paid in full:
SECTION 9.2.1. Business Activities. The Parent Guarantor
-------------------
will not engage in any other business activity other than
ownership of the Company and such activities as may be incidental
or related thereto including the offering and sale of securities
of the Parent Guarantor. The Company will not, and will not
permit any of its Subsidiaries to, engage in any business
activity, except those described in the first recital, those in
-------------
which the Company and its Subsidiaries are engaged on the
Effective Date, and such activities as may be incidental or
related thereto or reasonably related extensions thereof.
SECTION 9.2.2. Indebtedness. The Parent Guarantor and the
------------
Company will not, and will not permit any of their Subsidiaries
to, create, incur, assume, or suffer to exist or otherwise become
or be liable in respect of any Indebtedness, other than the
following:
(a) In the case of the Parent Guarantor, the Company,
and their Subsidiaries,
(i) Indebtedness in respect of this Agreement and
the other Loan Documents;
(ii) Indebtedness identified in Item 1
------
("Indebtedness to be Paid") of the Disclosure Schedule,
-----------------------
provided that the conditions set forth in Section 7.1.3
-------------
in respect of payment of such Indebtedness shall be
satisfied on the Initial Borrowing Date; and
(iii) Indebtedness existing as of the Effective
Date which is identified in Item 4 ("Ongoing
------ -------
Indebtedness") of the Disclosure Schedule;
------------
103
<PAGE>
<PAGE> 112
(b) In the case of the Company and its Subsidiaries,
(i) Indebtedness of the Company in respect of the
Senior Debt, and Contingent Obligations of AJI, KJC,
KFC and KAAC as a "Subsidiary Guarantor" (under and as
defined in the Senior Indenture) in respect of the
Senior Debt;
(ii) subject to Section 9.2.18, Indebtedness
--------------
owing from (A) the Company to any wholly-owned
Subsidiary of the Company (other than KAAC) which (if
required by Section 9.1.12) is evidenced by an
--------------
Intercompany Demand Note which has been pledged to the
Agent pursuant to the Intercompany Note Pledge
Agreement or the Subsidiary Pledge Agreement, (B) any
wholly-owned Subsidiary of the Company to the Company,
provided that such Indebtedness is not evidenced by any
--------
instrument, (C) any wholly-owned Subsidiary of the
Company to any other wholly-owned Subsidiary of the
Company, provided that with respect to any such
--------
Indebtedness to KFC or any such Indebtedness of KFC to
KAAC, such Indebtedness is evidenced by an Intercompany
Demand Note which has been pledged to the Agent
pursuant to the Subsidiary Pledge Agreement or the
Intercompany Note Pledge Agreement, and provided,
--------
further, that with respect to any such Indebtedness
-------
other than to KFC (or of KFC to KAAC), such
Indebtedness is not evidenced by any instrument, (D)
VALCO or ALPART to the Company, its Subsidiaries, or
Persons (other than the Company, its Subsidiaries or
any Restricted Affiliate) having an equity interest in
VALCO or ALPART, as the case may be, (E) the Company or
its Subsidiaries to VALCO or ALPART, or (F) the Company
to KAAC, provided that any such Indebtedness (other
--------
than Indebtedness in respect of accounts payable and
other current liabilities, in each case arising in the ordinary
course of business out of the purchase by the Company of alumina
from KAAC) shall be evidenced by an Intercompany Demand Note
which has been pledged to the Agent pursuant to the Subsidiary
Pledge Agreement and Indebtedness in respect of such accounts
payable and other current liabilities shall not be evidenced by
any instrument;
(iii) Indebtedness of the Company, KJC, AJI and
KAAC (including, without duplication, Contingent
Liabilities in respect of Indebtedness) in an aggregate
amount (excluding any such Indebtedness identified in
Item 4 ("Ongoing Indebtedness") of the Disclosure
------ --------------------
Schedule) not to exceed $150,000,000 in respect of
ALPART, $75,000,000 in respect of QAL and $25,000,000
in respect of VALCO; provided, however, that for
-------- -------
purposes of calculating the aggregate amount of
Indebtedness of the Company and its Subsidiaries
104
<PAGE>
<PAGE> 113
outstanding pursuant to this clause (b)(iii), there
---------------
shall be subtracted from the total amount of
Indebtedness of non-wholly-owned Subsidiaries an amount
equal to (A) that portion of such Indebtedness
attributable to the proportionate direct or indirect
ownership of Persons other than the Company and its
Subsidiaries of the voting stock of, or partnership
interest in, such Subsidiary or (B) if the economic
burden of such Indebtedness is borne or to be borne by
minority owners of such Subsidiary (other than the
Company and its Subsidiaries) in a proportion other
than the proportion of their direct or indirect
ownership of the voting stock of, or partnership
interest in, such Subsidiary, the proportionate share
of the economic burden of such Indebtedness borne or to
be borne by such minority owners;
(iv) Indebtedness incurred by the Company in
connection with the purchase, redemption, retirement,
or other acquisition by the Company of the Preferred
Stock (USWA) outstanding on the date hereof (plus
additional shares of such Preferred Stock (USWA) issued
as dividends thereon or on such shares issued as
dividends) to the extent the purchase, redemption,
retirement, or acquisition thereof is required by the
Code and such Indebtedness is issued to the then
holders of or beneficial owners of such shares of
Preferred Stock (USWA);
(v) Indebtedness of the Company in an amount not
exceeding $5,000,000 at any time outstanding in respect
of the guaranty by the Company of the obligations of
National Refractories & Minerals Corporation under the
Revolving Credit and Term Loan Agreement dated as of
April 30, 1985 (as the same has been and may hereafter
be amended, modified, supplemented, restated, confirmed
or replaced from time to time) among Congress Financial
Corporation (Western), National Refractories & Minerals
Corporation, National Refractories & Minerals, Inc. and
National Refractories Holding Co.;
(vi) the obligation of the Company to make
advances not exceeding $2,500,000 to National
Refractories & Minerals Corporation under the Standby
Revolving Credit and Security Agreement and Guaranty
dated as of April 30, 1985 (as the same has been and
may hereafter be amended, modified, supplemented,
restated, confirmed or replaced from time to time)
among the Company, National Refractories & Minerals
Corporation, National Refractories & Minerals, Inc. and
National Refractories Holding Co.;
(vii) the guaranty by the Company of the payment
of certain shutdown, supplemental unemployment,
105
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<PAGE> 114
pension, and retiree health and life insurance benefits
as provided under the Agreement dated February 2, 1989
(as the same has been or may be amended, supplemented,
restated, modified, confirmed, or replaced from time to
time) between the Company and the United Steelworkers
of America relating to the sale by the Company of its
smelter and rolling mill in Ravenswood, West Virginia,
to Ravenswood Acquisition Corporation;
(viii) the obligations of the Company and any of
its Subsidiaries to purchase or sell goods, services,
or technology utilized in their bauxite, alumina, and
aluminum business and related extensions thereof,
including on a take-or-pay basis, pursuant to
agreements entered into the ordinary course of business
consistent with past practice;
(ix) the obligations of QAL in respect of
charters of vessels;
(x) Indebtedness of the Company in respect of
unsecured Hedging Obligations;
(xi) Indebtedness of the Company and its
Subsidiaries (other than KAAC, AJI, KJC and KAII) in
respect of letters of credit (including any such
letters of credit identified in Item 4 ("Ongoing
------ -------
Indebtedness") of the Disclosure Schedule) in an
------------
aggregate amount not to exceed $15,000,000 at any one
time outstanding issued for the account of the Company
or any of its Subsidiaries in support of certain self-
insurance and reinsurance obligations;
(xii) Indebtedness of the Company in respect of
the Redeemable Stock referred to in clause (i) or (ii)
---------- ----
of Section 9.2.6(a);
----------------
(xiii) Indebtedness of the Company under the
Equity Proceeds Notes;
(xiv) Nonrecourse Indebtedness of Subsidiaries of
the Company that are not Obligors, the proceeds of
which are used to finance the construction, acquisition
or retrofitting of aluminum smelters, alumina
refineries, or fabrication plants, including, in either
case, related facilities or interests therein;
(xv) Indebtedness of the Company in an aggregate
principal amount not to exceed $25,000,000 outstanding
at any one time (excluding any such Indebtedness
identified in Item 4 ("Ongoing Indebtedness") of the
------ --------------------
Disclosure Schedule) incurred in connection with one or
more industrial revenue bond financings;
106
<PAGE>
<PAGE> 115
(xvi) Indebtedness of KAAC in the form of Liens
on assets of KAAC and its Subsidiaries securing the
obligations of QAL; and
(xvii) other Indebtedness of the Company and its
Subsidiaries (other than KAAC, AJI, KJC and KAII) in an
aggregate principal amount not to exceed $30,000,000
outstanding at any one time; and
(c) in the case of the Parent Guarantor, Indebtedness
arising under the KT Note and Contingent Liabilities of the
Parent Guarantor in respect of any Indebtedness of the
Company incurred pursuant to clause (b) (other than
----------
subclause (xv) thereof) above.
SECTION 9.2.3. Liens. The Parent Guarantor will not
-----
create, incur, assume, or suffer to exist any Lien over any of
its Properties, revenues, or assets, whether now owned or
hereafter acquired, except for Liens of the type described in
clauses (a), (b), (e), and (h) of this Section 9.2.3. The
- ----------- --- --- --- -------------
Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume, or suffer to exist any Lien upon any of
its Properties, revenues, or assets, whether now owned or
hereafter acquired, other than the following:
(a) Liens securing payment of the Obligations granted
pursuant to any Loan Document;
(b) Until the Initial Borrowing Date, Liens securing
payment of Indebtedness of the type permitted and described
in clause (a)(ii) of Section 9.2.2;
-------------- -------------
(c) Liens granted prior to the Effective Date and
identified in Item 5 ("Ongoing Liens") of the Disclosure
------ -------------
Schedule;
(d) Liens granted to secure payment of Indebtedness
permitted by clause (b)(xvii) of Section 9.2.2 on any
---------------- -------------
Property (other than Accounts and Inventory) created at the
time of the acquisition of such Property in order to secure
payment of the purchase price thereof or in order to secure
any loan incurred for the purpose of financing such
acquisition, and any Lien to which any Property is subject
at the time of its acquisition (including Property of a
Subsidiary at the time it becomes a Subsidiary), provided
that the principal amount of the Indebtedness secured by any
such Lien does not exceed 80% of the cost of such Property
(except in the case of Liens on the Property of a Subsidiary
at the time it becomes a Subsidiary) and that no such Lien
may extend to other property, together with refundings or
extensions of the foregoing for amounts not exceeding the
principal amount of the Indebtedness so refunded or extended
and secured only by the Property theretofore securing the
same;
107
<PAGE>
<PAGE> 116
(e) Liens for taxes, assessments, or other
governmental charges or levies to the extent that payment
thereof shall not at the time be required in accordance with
the provisions of Section 9.1.2;
-------------
(f) Liens of carriers, warehousemen, mechanics,
workmen, repairmen, vendors, materialmen, and landlords and
other similar Liens incurred in the ordinary course of
business for sums not overdue or being contested in good
faith by appropriate proceedings, and deposits or Liens to
obtain the release of any such Lien;
(g) Liens and deposits incurred or made in the
ordinary course of business in connection with worker's
compensation, unemployment insurance, or other forms of
governmental insurance or benefits, or in connection with,
or to secure performance of, bids, tenders, statutory
obligations, and leases (other than, in each of such cases,
for borrowed money or the obtaining of advances or credit)
entered into in the ordinary course of business, or to
secure obligations on surety or appeal bonds, and other
Liens and deposits for purposes of like nature in the
ordinary course of business;
(h) judgment Liens or similar awards in existence less
than 15 days after the entry thereof or with respect to
which execution has been stayed, or the payment of which is
covered (subject to a customary deductible) by insurance;
(i) mineral leases, easements, covenants,
restrictions, exceptions, or reservations in any Property of
the Company or any Subsidiary of the Company which do not
materially impair the use of such Property for the purposes
for which it is held;
(j) zoning laws and ordinances, and rights reserved to
or vested in any municipality or government or proper
authority to control or regulate any Property of the Company
or its Subsidiaries, or to use such Property in any manner
which does not materially impair the use of such Property
for the purposes for which it is held by the Company or such
Subsidiary;
(k) undetermined or inchoate Liens incident to
construction, maintenance, or current operations and Liens
and charges incident to such construction, maintenance, or
operations which have been filed of record but which are
being contested in good faith by appropriate proceedings;
(l) Liens reserved in leases for rent and to assure
compliance with the lease terms covering solely Property
kept at the leased premises and rights of lessees to
Property being leased from the Company or any of its
Subsidiaries;
108
<PAGE>
<PAGE> 117
(m) Liens on any Property in which the Company or any
of its Subsidiaries has a leasehold estate, easement, right
of way, or similar interest and to which such interest is or
may become subject, and the rights reserved to the lessors
or grantors thereof, and to their successors and assigns,
under applicable law or the instrument creating such
interest;
(n) Liens on the Company's or any of its Subsidiary's
rights under agreements with respect to spot, forward,
future and option transactions, entered into in the ordinary
course of business, involving (or, in the case of futures
and options, for or relating to) the purchase and sale of
aluminum, alumina, or bauxite or on the transaction accounts
in which such transactions are effected securing the
Company's or such Subsidiary's obligations under such
agreements;
(o) minor defects and irregularities in the title to
any Property which do not in the aggregate materially impair
the use of such Property for the purposes for which it is
held;
(p) Liens on Property of ALPART securing Indebtedness
in respect of ALPART permitted by clause (b)(iii) of
---------------
Section 9.2.2 and Liens on Property of VALCO securing
-------------
Indebtedness in respect of VALCO permitted by
clause (b)(iii) of Section 9.2.2;
--------------- -------------
(q) Liens on Property of KAAC or its Subsidiaries
securing Indebtedness of KAAC in respect of QAL permitted by
clause (b)(iii) of Section 9.2.2;
--------------- -------------
(r) Liens on Property of Subsidiaries of the Company
that are not Obligors securing Nonrecourse Indebtedness;
provided, however, that no such Lien may extend to Property
-------- -------
other than the Property constructed, acquired or retrofitted
with the proceeds of such Nonrecourse Indebtedness or the
capital stock of entities formed to hold such interests;
(s) Liens on cash securing letters of credit in an
amount not to exceed $15,000,000 at any one time
outstanding;
(t) Liens on Property (other than Accounts and
Inventory) of the Company securing Indebtedness permitted by
Section 9.2.2(b)(xv);
--------------------
(u) Liens covering portions of the proceeds of Asset
Dispositions, which are held in escrow in connection with
such Asset Dispositions;
(v) Liens on Property (other than Accounts and
Inventory) of the Company securing Indebtedness permitted by
109
<PAGE>
<PAGE> 118
clause (b)(iv) of Section 9.2.2; and
-------------- -------------
(w) other Liens on Property (other than Accounts and
Inventory) of the Company and its Subsidiaries incidental to
the conduct of the business of the Company and its
Subsidiaries or the ownership of their Property which were
not incurred in connection with borrowed money or the
obtaining of advances or credit and which do not in the
aggregate materially detract from the value of their
Property or materially impair the use thereof in the
operation of their business and which, in any event, do not
secure obligations aggregating in excess of $5,000,000.
SECTION 9.2.4. Financial Condition. The Company will not
-------------------
permit:
(a) Net Worth. The Company shall not permit Net Worth
as of the end of any Fiscal Quarter set forth below to be
less than the correlative amount indicated:
Fiscal Quarter Net Worth
-------------- ---------
First Fiscal Quarter of 1994 $450,000,000
Second Fiscal Quarter of 1994 $433,000,000
Third Fiscal Quarter of 1994 $416,000,000
Fourth Fiscal Quarter of 1994 $400,000,000
First Fiscal Quarter of 1995 $396,000,000
Second Fiscal Quarter of 1995 $392,000,000
Third Fiscal Quarter of 1995 $388,000,000
Fourth Fiscal Quarter of 1995 $385,000,000
First Fiscal Quarter of 1996 $391,000,000
Second Fiscal Quarter of 1996 $397,000,000
Third Fiscal Quarter of 1996 $404,000,000
Fourth Fiscal Quarter of 1996 $410,000,000
First Fiscal Quarter of 1997 Minimum Net Worth
and each Fiscal Quarter thereafter
(b) Interest Coverage Ratio. The Company shall not
permit the Interest Coverage Ratio (i) for the one Fiscal
Quarter period ending March 31, 1996 to be less than 1.1 to
1.0, (ii) for the two Fiscal Quarter period ending June 30,
1996 to be less than 1.2 to 1.0, (iii) for the three Fiscal
Quarter period ending September 30, 1996 to be less than 1.3
to 1.0, and (iv) for the four Fiscal Quarter period ending
on the last day of each of the Fiscal Quarters set forth
below to be less than the correlative ratio indicated:
Date Ratio
---- -----
Fourth Fiscal Quarter of 1996 1.4 to 1.0
First Fiscal Quarter of 1997 1.5 to 1.0
Second Fiscal Quarter of 1997 1.7 TO 1.0
Third Fiscal Quarter of 1997 1.8 to 1.0
Fourth Fiscal Quarter of 1997 2.0 to 1.0
110
<PAGE>
<PAGE> 119
and each Fiscal Quarter thereafter
SECTION 9.2.5. Investments. The Parent Guarantor will not
-----------
make, incur, assume, or suffer to exist any Investment except for
its ownership or purchase of the shares of capital stock of the
Company, Cash Equivalent Investments, and Equity Proceeds Notes.
The Company will not, and will not permit any of its Subsidiaries
to, make, incur, assume, or suffer to exist any Investment in any
other Person, other than the following:
(a) Investments existing on the Effective Date and
identified in Item 6 ("Ongoing Investments") of the Disclosure
------ -------------------
Schedule;
(b) Cash Equivalent Investments;
(c) subject to Section 9.2.18, without duplication,
--------------
Indebtedness which is an Investment permitted by
clause (b)(ii) of Section 9.2.2;
-------------- -------------
(d) Investments made pursuant to the arrangements
described in clauses (b)(v) and (b)(vi) of Section 9.2.2, and
-------------- ------- -------------
deposits permitted by clause (g) of Section 9.2.3;
---------- -------------
(e) subject to Section 9.2.18, Investments in the
--------------
ordinary course of business in the Company and its
Subsidiaries (other than Investments made prior to October 1,
1993 by any Obligor (other than KBC and KEC) in KBC, KEC or
any Subsidiary of the Company that is not an Obligor);
(f) provided no Default or Event of Default under
Section 10.1.1 shall have occurred and be continuing,
--------------
Investments made after September 30, 1993 in the ordinary
course of business in QAL, Anglesey, KJBC and Furukawa;
(g) Investments which are Capital Expenditures permitted
by Section 9.2.7;
-------------
(h) Investments of cash held in escrow accounts required
pursuant to the terms of any contract or agreement between the
Parent Guarantor, the Company, or any of its Subsidiaries and
any Person as in effect on the Effective Date (including
escrows in existence on the Effective Date) which are listed
on Schedule XII hereto;
------------
(i) Investments received in connection with Asset
Dispositions, and Investments in escrows established in
connection with Asset Dispositions which are permitted hereby;
(j) trade credit extended in the ordinary course of
business (including such credit represented by any bond, note,
debenture, or similar instrument) and advance payments, made
in the ordinary course of business, under contracts for the
111
<PAGE>
<PAGE> 120
purchase of goods or the receipt of services, and loans and
advances made to any Person in connection with the purchase of
assets by such Person for lease by such Person to the Company
or any of its Subsidiaries to the extent that such leases are
otherwise permitted hereunder;
(k) Investments in the form of advance payments in
connection with spot, forward, future and option
transactions, entered into in the ordinary course of
business, involving (or, in the case of futures and
options, for or relating to) the purchase and sale of
aluminum, alumina, or bauxite;
(l) Investments acquired in the settlement or other
resolution of disputes with any Person or of debts;
(m) Investments of any Person which are in
existence at the time such Person becomes a Subsidiary of
the Company and which, in the case of any such
Investments which would breach any provision of this
Agreement if made directly by the Company,
(i) were not entered into in contemplation of
such Person becoming a Subsidiary of the Company,
and
(ii) do not constitute more than 20% of the
assets of such Person at the time such Person
becomes a Subsidiary of the Company;
(n) any Investments (other than Investments in
MAXXAM or any Affiliate (other than the Company, its
Subsidiaries which are not Restricted Subsidiaries, or
any Joint Venture Affiliate) of MAXXAM) not otherwise
permissible hereunder in an aggregate amount not to
exceed $20,000,000 at any time outstanding;
(o) provided (i) no Default or Event of Default
shall have occurred and be continuing (or would occur
after giving effect to such Investment) and (ii) that the
Interest Coverage Ratio is greater than 2.0 to 1,
Investments in Subsidiaries and Joint Venture Affiliates
not otherwise permissible hereunder in an aggregate
amount not to exceed
(A) the sum of:
(1) 50% of Net Income (or, if Net Income
for any such period shall be a deficit, minus 100%
of such deficit) accrued on a cumulative basis for
the period (taken as one accounting period) from
January 1, 1994 to the end of the Company's most
recently ended Fiscal Quarter, and
(2) the aggregate net proceeds, including
the fair market value of Property other than cash,
received by the Company as capital contributions
(other than from
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<PAGE> 121
a Joint Venture Affiliate or a Subsidiary of the
Company) to the Company after December 31, 1993, or
from the issue or sale (other than to a Joint
Venture Affiliate or to a Subsidiary of the
Company), after December 31, 1993, of capital stock
other than Redeemable Stock (including capital
stock, other than Redeemable Stock, issued upon the
conversion of, or in exchange for, Indebtedness or
Redeemable Stock, and including upon exercise of
warrants or options or other rights to purchase such
capital stock, issued after December 31, 1993), or
from the issue or sale, after December 31, 1993 of
any debt or other security of the Company
convertible or exercisable into such capital stock
that has been so converted or exercised;
minus
-----
(B) the aggregate amount of Investments then
outstanding pursuant to clause (n); and
----------
(p) extensions and renewals of Investments
permitted by clauses (a), (h), (i), (j), (l) and (m) of
----------- --- --- --- --- ---
this Section 9.2.5,
-------------
provided that the principal amount thereof is not increased.
SECTION 9.2.6. Restricted Payments, etc.
------------------------
(a) The Company and the Parent Guarantor will not
declare, pay, or make any dividend or distribution (in cash,
Property, or obligations) on any shares of any class of
capital stock (now or hereafter outstanding) of the Company or
the Parent Guarantor or on any warrants, options, or other
rights with respect to any shares of any class of capital
stock (now or hereafter outstanding) of the Company or the
Parent Guarantor (excluding dividends or distributions payable
in its common stock (other than Redeemable Stock) or warrants
to purchase its common stock or splitups or reclassifications
of its common stock into additional or other shares of its
common stock) or apply, or permit any of their respective
Subsidiaries to apply, any of its funds, or Property to the
purchase, redemption, sinking fund, or other retirement, or
agree, or permit any of their respective Subsidiaries to
agree, to purchase or redeem, any shares of any class of
capital stock (now or hereafter outstanding) of the Company or
the Parent Guarantor, or warrants, options, or other rights
with respect to any shares of any class of capital stock (now
or hereafter outstanding) of the Company or the Parent
Guarantor (all of the foregoing non-excluded dividends,
distributions, application of funds or Property, purchases,
redemption and similar payments collectively being herein
called "Distributions") except that
-------------
(i) the Company shall be permitted to purchase,
redeem, retire, or otherwise acquire and to declare, pay,
or make dividends or other distributions on its 4-1/8%
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<PAGE> 122
Preference Stock, par value $100 per share, 4-3/4%
Preference Stock (1957 Series), par value $100 per share,
4-3/4% Preference Stock (1959 Series), par value $100 per
share, and 4-3/4% Preference Stock (1966 Series), par
value $100 per share, in each case only in accordance
with the terms of the Restated Certificate of
Incorporation, and in each case unless (A) an Event of
Default shall have occurred and be continuing and (B) the
Company shall have been instructed by the Agent in
writing not to make any such Distribution;
(ii) the Company shall be permitted to purchase,
redeem, retire, or otherwise acquire and to declare, pay,
or make dividends or other distributions on any shares of
the Preferred Stock (USWA), in each case unless (A) an
Event of Default shall have occurred and be continuing
and (B) the Company shall have been instructed by the
Agent in writing not to make any such Distribution;
(iii) the Company shall be permitted to pay for the
benefit of, or to reimburse, the Parent Guarantor for
the reasonable out-of-pocket expenses actually incurred
(and documented as such) by the Parent Guarantor for
services rendered to the Parent Guarantor by Persons who
are not Affiliates or employees of the Parent Guarantor,
MAXXAM, the Company or any of their respective
Subsidiaries (provided that payments of legal fees and
expenses to a law firm of which an Affiliate of the
Company is a member shall be permitted) in connection
with the registration, issuance or sale of securities of
the Parent Guarantor to the extent that the net proceeds
of such issuance or sale are used by the Parent Guarantor
to make a loan or capital contribution to, or purchase
securities of, the Company;
(iv) the Company shall be permitted to make
Distributions to the Parent Guarantor of all or a portion
of the KT Note and accrued interest thereon;
(v) provided no Default shall have occurred and be
continuing (or will have occurred and be continuing
immediately following such Distribution), the Company
shall be permitted to make Distributions to the Parent
Guarantor in each Fiscal Quarter in an aggregate amount
not exceeding the dividends payable by the Parent
Guarantor during such Fiscal Quarter in respect of all
then outstanding shares of the Parent Guarantor Preferred
Stock minus the amount of any payments made during such
-----
Fiscal Quarter on the Equity Proceeds Notes;
(vi) the Parent Guarantor shall be permitted to
make Distributions to the holders of any outstanding
shares of the Parent Guarantor Preferred Stock (or
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<PAGE> 123
depositary shares in respect thereof) in an amount not to
exceed the payments received or receivable from time to
time by the Parent Guarantor from the Company under
clause (v) of this Section 9.2.6(a) and in respect of the
---------- ----------------
Equity Proceeds Notes; and
(vii) the Parent Guarantor shall be permitted to
convert shares of the Parent Guarantor Preferred Stock
(or depositary shares in respect thereof) into the common
stock of the Parent Guarantor or redeem shares of the
Parent Guarantor Preferred Stock (or depositary shares in
respect thereof) in exchange for the common stock of the
Parent Guarantor plus an amount in cash equal to all
----
amounts payable by the Parent Guarantor in respect of
accrued and unpaid dividends in connection with such
conversion or redemption, in each case in accordance with
the Certificate of Designations governing such shares of
Parent Guarantor Preferred Stock (or the Depositary
Agreement in respect of such depositary shares).
(b) The Company will not, and will not permit any of its
Subsidiaries to,
(i) make any payment or prepayment of principal of,
or any prepayment of interest on, any Subordinated Debt
(including pursuant to Section 4.05, 4.06, or 4.07 of the
------------------ ----
Subordinated Indenture) or make any payment of interest
on, or any payment in respect of, any Subordinated Debt
which would violate the subordination provisions of such
Subordinated Debt;
(ii) subject to Section 9.2.18, make any prepayment
--------------
of principal of, or any prepayment of interest on, any
other Indebtedness (other than Indebtedness owing from
the Company or any Subsidiary to any Subsidiary not
listed on Schedule XIII hereto or to any Joint Venture
-------------
Affiliate); provided, however, that the Company may
-------- -------
prepay the principal of or interest on Indebtedness in
respect of this Agreement, the Company may repay
Indebtedness in connection with the refinancing of all or
substantially all of such Indebtedness and the Company
may prepay Indebtedness in an amount not to exceed
$10,000,000 in the aggregate (such $10,000,000 to be
computed, as of any time, based on prepayments made prior
to such time which, if made at such time, would be
prepayments);
(iii) make any payment or prepayment of principal
of, or interest on, the PIK Note; provided, however, that
-------- -------
if no Event of Cash Dominion shall have occurred and be
continuing (or will have occurred immediately following
such payment) and provided no Default shall have occurred
and be continuing (or would occur as a result of such
payment) the Company may repay the PIK Note at or after
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<PAGE> 124
the maturity thereof;
(iv) redeem, purchase, or defease any Subordinated
Debt, any Senior Debt, the PIK Note or any Equity
Proceeds Note;
(v) make any payment or prepayment of principal of,
or interest on, the Equity Proceeds Notes except that the
Company may pay principal and interest from time to time
on the Equity Proceeds Notes in accordance with the
provisions of the Equity Proceeds Notes, subject to the
subordination provisions thereof; provided, however, that
-------- -------
if any Equity Proceeds Note is issued in connection with
the issuance of Parent Guarantor Preferred Stock that is
convertible into shares of the common stock of the Parent
Guarantor, immediately upon the conversion of all of such
shares of the Parent Guarantor Preferred Stock (or
depositary shares in respect thereof) into shares of the
common stock of the Parent Guarantor pursuant to the
Certificate of Designations governing such shares of the
Parent Guarantor Preferred Stock (or the Depositary
Agreement in respect of such depositary shares), (A) the
Company shall, after the payment of all amounts payable
by the Parent Guarantor in respect of accrued and unpaid
dividends in connection with such conversion and in
accordance with the terms of such Equity Proceeds Note,
defer further principal and interest payments on such
Equity Proceeds Note until such time as no Senior
Indebtedness of the Company (as defined in such Equity
Proceeds Note) under or in connection with this Agreement
or the other Loan Documents or any refinancing of such
Senior Indebtedness of the Company is then outstanding
and (B) the Parent Guarantor shall, after all amounts
payable by the Parent Guarantor in respect of accrued and
unpaid dividends in connection with such conversion have
been paid, if requested by the Agent, with the written
consent of the Required Lenders, deliver such Equity
Proceeds Note to the Company as a capital contribution
and the Company shall immediately cancel such Equity
Proceeds Note; or
(vi) make any payment of principal of or interest on
the Indebtedness listed on Schedule XIII hereto.
-------------
(c) The Company and the Parent Guarantor will not, and
will not permit any of their respective Subsidiaries to, make
any deposit for any of the foregoing purposes.
SECTION 9.2.7. Capital Expenditures. The Company will not,
--------------------
and will not permit any of its Subsidiaries to, make Adjusted
Capital Expenditures in any Fiscal Year set forth below in an
aggregate amount in excess of the sum of (a) the Base Amount set
forth below opposite such Fiscal Year plus (b) in the case of each
----
Fiscal Year commencing with the 1995 Fiscal Year the Carryover
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<PAGE> 125
Amount applicable to such Fiscal Year:
Fiscal Year Base Amount
----------- -----------
1994 $60,000,000
1995 $70,000,000
1996 $75,000,000
1997 $80,000,000
1998 $90,000,000
The "Carryover Amount" applicable to any Fiscal Year is equal to
----------------
(i) the sum of the Base Amounts applicable to all periods set forth
which end prior to the Fiscal Year for which the Carryover Amount
is being calculated minus (ii) the aggregate amount of Adjusted
Capital Expenditures which were actually made by the Company and
its Subsidiaries during the 1994 Fiscal Year and during each Fiscal
Year thereafter prior to the Fiscal Year for which such Carryover
Amount is being calculated; provided, however, that the Carryover
-------- -------
Amount shall not exceed $10,000,000 for the 1995 Fiscal Year,
$20,000,000 for the 1996 Fiscal Year and $30,000,000 for any Fiscal
Year thereafter.
SECTION 9.2.8. Rental Obligations. The Company will not,
------------------
and will not permit any of its Subsidiaries to, enter into at any
time any arrangement which does not create a Capitalized Lease
Liability and which involves the leasing by the Company or any of
its Subsidiaries for terms which exceed, or when added to the term
of any extension which may be made at the sole option of the
Company or any such Subsidiary might exceed, one year from any
lessor of any Property (or any interest therein), except such
arrangements which, together with all other such arrangements which
shall then be in effect, will not require the payment of an
aggregate amount of rentals by the Company and its Subsidiaries on
a consolidated basis (excluding escalations resulting from a rise
in the consumer price or similar index) in excess, for any Fiscal
Year of $35,000,000; provided, however, that any calculation made
-------- -------
for purposes of this Section 9.2.8 shall exclude any amounts
-------------
required to be expended for maintenance and repairs, insurance,
taxes, assessments, and other similar charges.
SECTION 9.2.9. Take or Pay Contracts. The Company will not,
---------------------
and will not permit any of its Subsidiaries to, enter into or be a
party to any arrangement for the purchase of materials, supplies,
other Property, or services if such arrangement by its express
terms requires that payment be made by the Company or such
Subsidiary regardless of whether such materials, supplies, other
Property, or services are delivered or furnished to it, except
those set forth in Item 9 ("Take or Pay and Similar Contracts") of
------ ---------------------------------
the Disclosure Schedule.
SECTION 9.2.10. Consolidation, Merger, etc. The Parent
--------------------------
Guarantor and the Company will not, and will not permit any of
their Subsidiaries to, liquidate or dissolve, consolidate with, or
merge into or with, any other corporation, except that if no
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<PAGE> 126
Default or Event of Default shall occur and be continuing or shall
exist at the time of any such merger or consolidation or
immediately thereafter and after giving effect thereto,
(a) any Subsidiary of the Company may liquidate or
dissolve into or may merge or consolidate with or into the
Company if the Company is the surviving corporation;
(b) any Subsidiary of the Company may liquidate or
dissolve into or may merge or consolidate with or into any
wholly-owned Subsidiary of the Company that is an Obligor if
the Obligor is the surviving corporation;
(c) any Subsidiary of the Company that is not an Obligor
may liquidate or dissolve or merge or consolidate with or into
any other Subsidiary of the Company that is not an Obligor;
(d) the Parent Guarantor may, with the prior written
consent of the Required Lenders, merge with and into the
Company and, provided that the Parent Guarantor shall assume
all of the Obligations of the Company under this Agreement and
the other Loan Documents, the Company may, with the prior
written consent of the Required Lenders, merge with and into
the Parent Guarantor; and
(e) the Company and its Subsidiaries may engage in Asset
Dispositions permitted by Section 9.2.11.
--------------
Notwithstanding the foregoing, neither the Company nor any
Subsidiary may engage in any such transaction unless at least five
(or, in the case of any such transaction involving the Company or
any other Obligor, 30) Business Days prior thereto, or such shorter
period as shall be acceptable to the Agent, the Company shall have
delivered to the Agent a description of the proposed transaction,
in reasonable detail, and a certificate signed by an Authorized
Officer certifying that such transaction will not result in a
Default or an Event of Default.
SECTION 9.2.11. Asset Dispositions. The Company will not,
------------------
and will not permit any of its Subsidiaries to, make any Asset
Disposition, other than the following:
(a) the Company and its Subsidiaries may dispose of cash
or Cash Equivalent Investments;
(b) subject to Section 9.2.18, the Company or any
--------------
wholly-owned Subsidiary of the Company may dispose of its
assets to the Company or any wholly-owned Subsidiary of the
Company;
(c) the Company and its Subsidiaries may dispose of
Inventory in the ordinary course of business;
(d) the Company and its Subsidiaries may license
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<PAGE> 127
technology or know-how on a nonexclusive basis in the ordinary
course of business;
(e) ALPART or VALCO may dispose of any of their
respective assets for fair value;
(f) subject to Section 9.2.2(xv) the Company may dispose
of a facility that is subsequently repurchased or leased by
the Company in connection with the issuance of industrial
revenue bonds by a state, municipality or other subdivision of
the United States of America or any department, agency, public
corporation or other instrumentality thereof;
(g) the Company and its Subsidiaries may dispose of
assets with a fair market value of less than $250,000 (in a
single transaction or related series of transactions) in the
ordinary course of business;
(h) the Company may dispose of any of its assets in
connection with the leaseback of such assets by the Company or
any of its Subsidiaries, provided that such leaseback is
otherwise permitted hereunder and such Asset Disposition
occurs not later than twelve months after such assets are
placed in service;
(i) transfers of Property permitted by Section 9.2.12
--------------
and Section 9.2.18; and
--------------
(j) if no Default or Event of Default shall have
occurred and be continuing or shall occur after giving effect
thereto, the Company and its Subsidiaries may dispose of
assets, in addition to those dispositions permitted in
clauses (a) through (h) above; provided the fair market value
----------- --- --------
of the assets disposed of pursuant to this Section 9.2.11(g)
-----------------
does not exceed $25,000,000 in any Fiscal Year.
Notwithstanding the foregoing, the Company will not, and will not
permit any of its Subsidiaries to, take any action which would
require an "Asset Sale Offer" (under and as defined in the
Subordinated Indenture) to be made pursuant to Section 5.16(b) of
---------------
the Subordinated Indenture or to violate the provisions of
Section 5.12 of the Subordinated Indenture or Section 4.12 of the
- ------------ ------------
Senior Indenture. In addition, notwithstanding the foregoing, the
Company will not, and will not permit any of its Subsidiaries, to
make any Asset Disposition of Accounts (other than pursuant to
Section 9.2.12) or any Asset Disposition of any other Property if,
- --------------
after giving effect to such Asset Disposition, the Revolving Credit
Outstandings immediately following such Asset Disposition will
exceed the Borrowing Base.
SECTION 9.2.12. Sale or Discount of Receivables. The Company
-------------------------------
will not, and will not permit any of its Subsidiaries to, directly
or indirectly, sell, sell with recourse, discount or otherwise sell
for less than the face value thereof, any of its notes or accounts
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<PAGE> 128
receivable; provided, however, that the Company and its
-------- -------
Subsidiaries may sell, sell with recourse, discount or otherwise
sell for less than the face value thereof, to any Lender or
Lenders, (a) any accounts receivable arising in connection with any
sale of product for delivery outside the United States which
accounts receivable are secured by a letter of credit provided the
discount on such accounts receivable secured by a letter of credit
is not greater than that necessary to reflect the time value of
money and (b) any notes or accounts receivable arising in
connection with any sale of product for delivery in the
Commonwealth of Independent States provided the aggregate amount of
all such accounts receivable does not exceed $10,000,000 in any
calendar month.
SECTION 9.2.13. Restrictions on Actions under Certain
-------------------------------------
Agreements. Neither the Parent Guarantor nor the Company will
- ----------
(a) consent to any amendment, supplement, or other
modification of any of the terms or provisions contained in,
or applicable to, any document or instrument evidencing or
governing any Subordinated Debt or any Senior Debt, the PIK
Note or any Equity Proceeds Note other than any amendment,
supplement, or other modification which extends the date or
reduces the amount of any required repayment or any amendment,
supplement or modification of the PIK Note or any Equity
Proceeds Note that is consented to in writing by the Agent;
(b) designate any other Indebtedness as "Specified
Senior Debt" under the Subordinated Indenture or designate or
permit any Subsidiary of the Company to designate any other
Indebtedness of such Subsidiary as "Guarantor Specified Senior
Debt" under the Subordinated Indenture;
(c) take, or permit any of its Subsidiaries to take any
action, or permit, or allow any of its Subsidiaries to permit,
to exist any condition, which in any such case would require
(i) the Company to cause any of its present or future
Subsidiaries (other than KAAC, AJI, KFC and KJC, and except as
otherwise provided in clauses (b) and (c) of Section 9.1.10
----------- --- --------------
and clause (b)(i) of Section 9.2.2), or which would directly
------------- -------------
require any such Subsidiary, to guarantee or otherwise become
liable in respect of any Subordinated Debt or Senior Debt, or
(ii) the Company or any Subsidiary of the Company to provide
collateral security in respect of any Subordinated Debt or
Senior Debt;
(d) make any offer to prepay, redeem, defease or
repurchase any Subordinated Debt or Senior Debt;
(e) fail to deliver any certificate and opinion
permitted to be given to the trustee under clauses (a) and (b)
----------- ---
of Section 16.14 of the Subordinated Indenture with respect to
-------------
any "Subsidiary Guarantor" (under and as defined in the
Subordinated Indenture) or to deliver any certificate and
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<PAGE> 129
opinion permitted to be given to the trustee under clauses (a)
-----------
and (b) of Section 15.05 of the Senior Indenture with respect
--- -------------
to any "Subsidiary Guarantor" (under and as defined in the
Senior Indenture); and
(f) consent to any amendment, supplement or other
modification of any of the terms or provisions contained in,
or applicable to, any document or instrument evidencing or
governing the Parent Guarantor Preferred Stock (or depositary
shares in respect thereof) if such amendment, supplement or
other modification would have a Materially Adverse Effect.
SECTION 9.2.14. Transactions with Affiliates. The Company
----------------------------
will not, and will not permit any of its Subsidiaries to, enter
into, or cause, suffer, or permit to exist any transaction,
arrangement, or contract with any Affiliate of the Company (other
than the Company, its Subsidiaries which are not Restricted
Subsidiaries, Joint Venture Affiliates, and any Subsidiary of a
Joint Venture Affiliate in which neither the Parent Guarantor,
MAXXAM nor any Affiliate of either thereof (other than the Company,
its Subsidiaries which are not Restricted Subsidiaries, or any
Joint Venture Affiliate) has any equity interest other than through
a direct or indirect ownership interest in the Company) requiring,
constituting or involving any payments or other transfers of
Property to be made by the Company or any Subsidiary to or for the
benefit of, or pursuant to which the Company or any of its
Subsidiaries incurs a Contingent Liability in respect of any
obligation of, or incurs a contractual obligation for the benefit
of, any Affiliate of the Company (other than Persons described in
the previous parenthetical of this sentence).
Notwithstanding the foregoing provisions of this
Section 9.2.14, (a) directors, officers, and employees of the
- --------------
Company and its Subsidiaries may render services to the Company and
its Subsidiaries which are not Restricted Subsidiaries for
compensation and other benefits comparable to those generally paid
by corporations engaged in the same or similar businesses for the
same or similar services; (b) the transactions provided for in, and
the loan evidenced by, the KT Note shall be permitted; (c) the
performance of the Tax Allocation Agreement, the Deconsolidation
Tax Allocation Agreement and the Transfer Agreement shall be
permitted, except that the Company shall not be permitted to make
any cash payments to MAXXAM or any other Affiliate pursuant to the
Tax Allocation Agreement but MAXXAM may offset amounts owing to it
under the Tax Allocation Agreement against amounts owed by MAXXAM
under the Tax Allocation Agreement and the Company may make cash
payments to MAXXAM pursuant to the Tax Allocation Agreement if such
payments are required as a result of any audit of the tax returns
of MAXXAM and such payments do not exceed the payments made by
MAXXAM to the Company, subsequent to the date hereof, pursuant to
the Tax Allocation Agreement; (d) the Company may make payments to
MAXXAM for any Fiscal year in respect of (i) services actually
rendered to the Company during such Fiscal Year by employees of
MAXXAM, and (ii) the Company's allocable share of MAXXAM's overhead
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<PAGE> 130
expenses during such Fiscal Year which are attributable to
employees of the Company who are located at MAXXAM's corporate
headquarters, provided that the charges for such services are fully
--------
documented and that the aggregate amount of such payments made by
the Company to MAXXAM for any Fiscal Year does not exceed the
aggregate amount of payments made to the Company by MAXXAM for
similar purposes for any Fiscal Year by more than $1,500,000; (e)
subject to Section 9.2.10, a merger or other combination between
--------------
the Company and the Parent Guarantor shall be permitted; (f)
Distributions permitted by Section 9.2.6 shall be permitted; (g)
-------------
transactions between ALPART or VALCO and Persons who own an equity
interest in ALPART or VALCO shall be permitted; (h) continuation of
performance under agreements entered into with Persons who were not
then Affiliates shall be permitted (but excluding, however, any
renegotiation, extension, or modification of such agreements after
such Person has become, or is anticipated to become, an Affiliate),
provided that such agreement was not entered into in connection
- --------
with or in anticipation of such Person becoming an Affiliate of the
Company; (i) payments of legal fees and expenses to a law firm of
which an Affiliate of the Company is a member shall be permitted;
(j) the Company may provide services and facilities to the Parent
Guarantor in connection with activities of the Parent Guarantor
that are permitted by the first sentence of Section 9.2.1 in
-------------
exchange for payment of its actual costs (allocated in good faith
where appropriate) of providing such services and facilities; (k)
any amendment to the KT Note that extends the maturity thereof or
reduces the interest rate thereon shall be permitted; (l)
performance of the PIK Note and any Equity Proceeds Note in
accordance with the provisions of Section 9.2.6 shall be permitted;
-------------
and (m) the issuance of any Equity Proceeds Note shall be
permitted.
For purposes of this Section 9.2.14, the term "Affiliate"
--------------
shall not be deemed to include employee benefit plans, and trusts
in connection therewith, for the benefit of employees of the
Company and its Subsidiaries.
SECTION 9.2.15. Negative Pledges, etc. The Parent Guarantor
---------------------
and the Company will not, and will not permit any of their
Subsidiaries (other than ALPART and VALCO) to, enter into any
agreement (excluding this Agreement, any other Loan Document, and
any agreement governing any Indebtedness permitted either by
clause (a)(iii) of Section 9.2.2 as in effect on the Effective
- --------------- -------------
Date, or by clause (b)(xv) of Section 9.2.2 as to the assets
-------------- -------------
financed with the proceeds of such Indebtedness) (a) prohibiting
the creation or assumption of any Lien securing the Obligations of
the Company and its Subsidiaries upon its Properties, revenues, or
assets which constitute Collateral, or over any properties,
revenues, or assets which, if acquired after the Effective Date
would be required to be subjected to a Lien in favor of the Agent
pursuant to Section 9.1.10 or 9.1.11 or over any other real
-------------- ------
property owned in fee by the Company or any such Subsidiary on the
Effective Date, or (b) specifically prohibiting the Parent
Guarantor, the Company, or any other Obligor from amending or
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<PAGE> 131
otherwise modifying this Agreement or any other Loan Document to
which it is a party; provided, however, that the execution and
-------- -------
delivery of the Senior Indenture shall not be deemed to breach
clause (a) of this Section 9.2.15.
- ---------- --------------
SECTION 9.2.16. Sale-Leaseback Transactions. The Company
---------------------------
will not, and will not permit any of its Subsidiaries to, directly
or indirectly, become liable as lessee or guarantor or other surety
with respect to any lease (whether an operating or capital lease)
of any Property, whether now owned or hereafter acquired, (a) which
the Company or any of its Subsidiaries has sold or transferred or
is to sell or transfer to any other Person or (b) which the Company
or any of its Subsidiaries intends to use for substantially the
same purpose as any other Property which has been or is to be sold
or transferred by the Company or such Subsidiary to any Person in
connection with such lease, except (i) any Capitalized Lease
Liabilities permitted under Section 9.2.2 or (ii) any consolidated
-------------
lease expense resulting therefrom that would be permitted under
Section 9.2.8.
- -------------
SECTION 9.2.17. Change of Location or Name. Each of the
--------------------------
Parent Guarantor and the Company will not, nor will either permit
any of its Subsidiaries listed on Schedule IV hereto to, change
-----------
(a) the location of its principal place of business,
chief executive office, major executive office, chief place of
business, or its records concerning its business and financial
affairs; or
(b) its name or the name under or by which it conducts
its business,
in each case without first giving the Agent at least 30 days, or
such shorter period as shall be acceptable to the Agent, prior
written notice thereof and taking any and all actions which the
Agent may request to maintain and preserve all Liens in favor of
the Agent granted pursuant to the Collateral Documents; provided,
--------
however, that notwithstanding the foregoing, each of the Parent
- -------
Guarantor and the Company will not, and will not permit any such
Subsidiary to, change the location of its principal place of
business, chief executive office, chief place of business, or its
records concerning its business and financial affairs
(i) to Louisiana or Tennessee, or
(ii) from the contiguous continental United States to
any place outside the contiguous continental United States.
SECTION 9.2.18. Intercompany Transfers of Property. The
----------------------------------
Parent Guarantor and the Company will not, and will not permit any
Obligor (other than KBC or KEC) to, transfer or cause to be
transferred, in one or a series of related transactions any
Property of the Parent Guarantor, the Company or any such
Subsidiary to any Subsidiary of the Company or to any Joint Venture
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<PAGE> 132
Affiliate, except:
(i) any Obligor may transfer, and pay for, goods,
services, working capital and technology (other than Accounts)
to Subsidiaries of the Company and Joint Venture Affiliates in
the ordinary course of business and may license technology or
know-how to Subsidiaries of the Company and Joint Venture
Affiliates in the ordinary course of business; provided, in
--------
each case, that after giving effect to such transfer the
Revolving Credit Outstandings immediately following such
transfer will not exceed the Borrowing Base;
(ii) any Obligor may transfer Property (other than cash
and Accounts) to Subsidiaries and Joint Venture Affiliates,
provided that such transfer is made in exchange for cash in an
--------
amount equal to the fair market value of such Property;
(iii) any Obligor may transfer Property (other than
Accounts) to any other Obligor (other than KBC and KEC);
(iv) the use of the proceeds of Indebtedness incurred by
the Company, KJC, AJI and KAAC by ALPART, QAL and VALCO
pursuant to Section 9.2.2(b)(iii);
---------------------
(v) transfers of capital stock or other equity interests
to the issuer of such capital stock or other equity interests
such that immediately after giving effect to such transfer and
related transfers, the proportional beneficial ownership by the
transferor of the class of capital stock or equity interests so
transferred is not reduced;
(vi) Investments permitted by Sections 9.2.5(f) and
-----------------
9.2.5(o); and
--------
(vii) other transfers of Property (other than Accounts);
provided that the aggregate amount thereof (if other than
cash, such amount shall be the fair market value of such asset
at the time of such transfer), less the aggregate amount of
such Property returned to the Company or any Obligor (if
returned other than in cash, the amount of such Property shall
be the fair market value thereof at the time so returned),
does not exceed, in the aggregate, the greater of (A)
$25,000,000 or (B) 5% of the Company's Net Worth, calculated
after giving effect to such transfers and returns.
SECTION 9.2.19. Inconsistent Agreements. The Parent
-----------------------
Guarantor and the Company will not, and will not permit any of its
Subsidiaries to, enter into any material agreement (other than the
Senior Debt Instruments) containing any provision which would be
violated or breached by any Credit Extension or by the performance
by the Parent Guarantor or the Company or any other Obligor of its
obligations hereunder or under any Loan Document.
SECTION 9.2.20. Transfer of Collateral. The Company will
----------------------
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not, and will not permit any of its Subsidiaries to, transfer to
the Company's Gramercy alumina refinery any equipment owned on the
Initial Borrowing Date and not located or used at, or in transit
to, the Company's Gramercy alumina refinery on the Initial
Borrowing Date.
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1. Listing of Events of Default. Each of the
----------------------------
following events or occurrences described in this Section 10.1
------------
shall constitute an "Event of Default".
----------------
SECTION 10.1.1. Non-Payment of Obligations. The Company
--------------------------
shall default in the payment or prepayment when due of any
principal of or interest on any Loan or Reimbursement Obligation;
or the Company shall default (and such default shall continue
unremedied for a period of five days) in the payment when due of
any commitment or letter of credit fee payable hereunder.
SECTION 10.1.2. Breach of Warranty. Any representation,
------------------
warranty, or certification of the Parent Guarantor, the Company, or
any other Obligor made or deemed to be made hereunder or in any
other Loan Document to which it is or is to become a party or any
other writing or certificate furnished by or on behalf of the
Parent Guarantor, the Company, or any other Obligor to the Agent or
any Lender for the purposes of or in connection with this Agreement
or any such other Loan Document (including any certificates
delivered pursuant to Article VII) is or shall be incorrect when
-----------
made in any material respect.
SECTION 10.1.3. Non-Performance of Certain Covenants and
----------------------------------------
Obligations. The Parent Guarantor, the Company, or any Obligor
- -----------
shall default in the due performance and observance of any of its
respective obligations under Sections 3.3.2(b) and (c), 9.2.4,
----------------- --- -----
9.2.6 or 9.2.7 of this Agreement.
- ----- -----
SECTION 10.1.4. Non-Performance of Certain Covenants and
----------------------------------------
Obligations. The Parent Guarantor, the Company, or any other
- -----------
Obligor shall default in the due performance and observance of any
of its respective obligations under
(a) Section 9.2 (other than Sections 9.2.4, 9.2.6 and
-------------------------------------------------
9.2.7), 9.1.4, or 9.1.9 or clause (a) of Section 9.1.5
------------------------------------------------------
of this Agreement,
(b) Section 1.2, 1.4, 1.5, 1.7, 1.10, 1.11, 1.15, 1.17,
----------- --- --- --- ---- ---- ---- ----
1.19, 1.20.1, or 1.21 of any Company Mortgage or Company Deed
---- ------ ----
of Trust,
(c) Section 6(e), 7(h), 7(i), 7(j), 7(l), 7(r), or 10 of
------------ ---- ---- ---- ---- ---- --
the Company Security Agreement,
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(d) Section 7(h), 7(i), 7(j), 7(k) or 10 of the Parent
------------ ---- ---- ---- --
Security Agreement,
(e) Section 7(h), 7(i), 7(j), 7(l) or 10 of the
------------ ---- ---- ---- --
Subsidiary Security Agreement,
(f) Section 4.1 or 4.2 of the Company Pledge Agreement,
----------- ---
the Parent Pledge Agreement, or the Subsidiary Pledge
Agreement, or
(g) Section 4.1 of the Intercompany Note Pledge
-----------
Agreement,
and such default shall continue unremedied for a period of five
days after written notice thereof shall have been given by the
Agent to the Company.
SECTION 10.1.5. Non-Performance of Other Covenants and
--------------------------------------
Obligations. Any Obligor shall default in the due performance and
- -----------
observance of any other agreement contained herein, or in any other
Loan Document to which it is or is to become a party, and such
default shall continue unremedied for a period of 30 days after
written notice thereof shall have been given by the Company to the
Agent or to the Company by the Agent.
SECTION 10.1.6. Default on Other Indebtedness. A default
-----------------------------
shall occur in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any
Indebtedness (other than Indebtedness described in Section 10.1.1)
--------------
of the Parent Guarantor, the Company, any of their Subsidiaries, or
any Joint Venture Affiliate having an aggregate principal amount in
excess of $20,000,000 or, in the case of Indebtedness of Joint
Venture Affiliates, having an aggregate principal amount for which
the Parent Guarantor, the Company, or any of their Subsidiaries is
contingently liable in excess of $20,000,000; or a default shall
occur in the performance or observance of any obligation or
condition with respect to any such Indebtedness if the effect of
such default is to accelerate the maturity of any such Indebtedness
or to permit the holder or holders thereof, or any trustee or agent
for such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity.
SECTION 10.1.7. Judgments. A final judgment which,
---------
together with other outstanding final judgments against the Company
and its Significant Subsidiaries, exceeds an aggregate of
$20,000,000 (to the extent such judgments are not covered by valid
and collectible insurance from solvent unaffiliated insurers) shall
be entered against the Company and/or any of its Significant
Subsidiaries and (a) within 30 days after entry thereof, judgments
exceeding such amount shall not have been discharged, settled,
bonded or execution thereof stayed pending appeal or, within 30
days after the expiration of any such stay, such judgments
exceeding such amount shall not have been discharged, settled,
bonded or execution thereof stayed or (b) an enforcement proceeding
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<PAGE> 135
shall have been commenced (and not discharged, settled, bonded or
execution thereof stayed) by any creditor upon judgments exceeding
such amount.
SECTION 10.1.8. Pension Plans. Any of the following
-------------
events shall occur with respect to any Pension Plan
(a) the taking of any action by the Parent
Guarantor, the Company, any member of their Controlled Groups,
or any other Person (with the requisite authority to act) to
terminate a Pension Plan if, as a result of such termination,
the Parent Guarantor, the Company, or any such member could
reasonably expect to, or in the case of liability arising
under section 4063 or section 4069 of ERISA, there is a
reasonable likelihood that it could be required to, make a
contribution to such Pension Plan, or could reasonably expect
to incur a liability or obligation to such Pension Plan, in
excess of $10,000,000; or
(b) a contribution failure occurs with respect to
any Pension Plan sufficient to give rise to a Lien against
assets of any Controlled Group member under Section 302(f) of
ERISA in an amount in excess of $1,000,000, which failure has
not been completely cured within 30 days of the applicable due
date.
SECTION 10.1.9. Change in Control. Any Change in Control
-----------------
shall occur.
SECTION 10.1.10. Bankruptcy, Insolvency, etc. The Parent
---------------------------
Guarantor, the Company, any Significant Subsidiary, any other
Obligor, or any Joint Venture Affiliate (other than KJBC) shall
(a) become insolvent or generally fail to pay, or admit
in writing its inability or unwillingness to pay, debts as
they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator, or other
custodian for the Parent Guarantor, the Company, any
Significant Subsidiary, any other Obligor, or any such Joint
Venture Affiliate or any Property of any thereof, or make a
general assignment for the benefit of creditors;
(c) in the absence of such application, consent, or
acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator, or other custodian for the
Parent Guarantor, the Company, any Significant Subsidiary, any
other Obligor, or any such Joint Venture Affiliate or for a
substantial part of the Property of any thereof, and, in the
case of any such Person other than the Company, such trustee,
receiver, sequestrator, or other custodian shall not be
discharged within 60 days;
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<PAGE> 136
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up, or liquidation proceeding, in respect
of the Parent Guarantor or of the Company;
(e) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up, or liquidation proceeding, in respect
of any Significant Subsidiary, any other Obligor (other than
the Parent Guarantor or the Company), or any such Joint
Venture Affiliate, and, if such case or proceeding is not
commenced by such Person, such case or proceeding shall be
consented to or acquiesced in by such Person or shall result
in the entry of an order for relief or shall remain for 60
days undismissed; or
(f) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 10.1.11. Subordinated Debt and Senior Debt. The
---------------------------------
Company shall be required, pursuant to the terms of any
Subordinated Debt Instrument or any Senior Debt Instrument, or
shall offer, to redeem, repurchase, prepay, or defease any
Subordinated Debt or any Senior Debt.
SECTION 10.1.12. Impairment of Certain Documents. Except
-------------------------------
as otherwise expressly permitted in any Loan Document, any of the
Fundamental Loan Documents shall terminate or cease in whole or in
part to be the legally valid, binding, and enforceable obligation
of the relevant Obligor, or such Obligor or any Person acting for
or on behalf of such Obligor contests such validity, binding
effect, or enforceability, or purports to revoke any Fundamental
Loan Document, or any asset or item of Property purported to be
secured by any Collateral Document ceases to be so secured and
continues not to be secured for ten Business Days after written
notice thereof has been given to such Obligor by the Agent.
SECTION 10.2. Action if Bankruptcy. If any Event of Default
--------------------
described in clauses (a) through (e) of Section 10.1.10 shall occur
----------- --- ---------------
with respect to the Company, the outstanding principal amount of
all outstanding Loans and all other Obligations shall automatically
be and become immediately due and payable, without notice, demand
or presentment and the Company shall pay to the Agent in Dollars
and immediately available funds an amount equal to the then
aggregate Letter of Credit Outstandings in accordance with
Section 5.7.
- -----------
SECTION 10.3. Action if Other Event of Default. If any Event
--------------------------------
of Default (other than any Event of Default described in
clauses (a) through (e) of Section 10.1.10 with respect to the
- ----------- --- ---------------
Company) shall occur for any reason, whether voluntary or
involuntary, and be continuing,
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<PAGE> 137
(a) the Agent shall, upon the direction of the Majority
Lenders,
(i) by written notice to the Company declare the
Commitments terminated, whereupon the Commitments of each
Lender will thereupon terminate immediately and any fees
payable hereunder shall become due and payable without notice
of any kind;
(ii) by written notice to the Company declare all or any
portion of the outstanding principal amount of the Loans and
other Obligations to be due and payable, whereupon the full
unpaid amount of such Loans and other Obligations which shall
be so declared due and payable shall be and become immediately
due and payable, without further notice, demand, or
presentment and the Company shall pay to the Agent in Dollars
and immediately available funds an amount equal to the then
aggregate Letter of Credit Outstandings in accordance with
Section 5.7; or
-----------
(iii) terminate any Letter of Credit which may be
terminated in accordance with its terms; and
(b) the Agent shall, upon the direction of the Majority
Lenders, and may, in its sole and absolute discretion,
(i) reduce the Revolving Commitment Availability or one
or more of the elements thereof; or
(ii) decline to permit the issuance of additional Letters
of Credit or the extension of the Stated Expiry Date of any
outstanding Letter of Credit.
Each and every right, power, and remedy provided herein or in any
other Loan Document shall be cumulative and shall be in addition to
every other right, power, and remedy provided herein or in any
other Loan Document or provided under applicable law.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.1. Appointment; Actions.
--------------------
(a) Each Lender hereby appoints Business Credit as its
Agent under and for purposes of this Agreement, each of the
other Loan Documents and the Collateral Documents. Each
Lender irrevocably authorizes, and each assignee of any Lender
shall be deemed to authorize, the Agent to act on behalf of
such Lender under this Agreement, each of the other Loan
Documents and the Collateral Documents and, in the absence of
other written instructions received from time to time by the
Agent from the Majority Lenders or, as required by the Credit
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<PAGE>
<PAGE> 138
Agreement, the Required Lenders or all of the Lenders (with
which instructions the Agent agrees that it will comply,
except as otherwise provided in this Section 11.1), each
Lender irrevocably authorizes the Agent to take such actions
on its behalf and to exercise such powers hereunder and
thereunder as are in each case specifically delegated to or
required of the Agent by the terms hereof or thereof, together
with such powers as may be reasonably incidental thereto.
Each Lender agrees that no Lender shall have any right
individually to seek to realize upon the security granted by
or any guaranty provided by any Collateral Document, it being
understood and agreed that such rights and remedies may be
exercised solely by the Agent for the benefit of the Lenders
in accordance with the terms of this Agreement and the
Collateral Documents.
(b) The Agent shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect
of any Lender; and nothing in this Agreement or any other Loan
Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in
respect of this Agreement or any other Loan Document except as
expressly set forth herein or therein. Notwithstanding the
foregoing, the Lenders acknowledge that the Agent is
authorized to exercise its discretion in taking certain
actions and exercising certain powers under this Agreement,
including determining which Accounts and Inventory constitute
Eligible Accounts and Eligible Inventory, determining the
Revolving Commitment Availability pursuant to Section 10.3,
------------
and during the continuance of an Event of Cash Dominion,
continuing to make Credit Extensions in accordance with and
subject to the provisions of Section 7.2. Each Lender hereby
-----------
irrevocably indemnifies and agrees to indemnify (which
indemnity shall survive any termination of this Agreement) the
Agent, and each of its officers, directors, employees and
agents (collectively, the "Indemnified Persons"), pro rata
------------------- --- ----
according to such Lender's Percentage, from and against any
and all liabilities, demands, judgments, obligations, losses,
damages, claims, costs, or expenses of any kind or nature
whatsoever (including those relating to the preparation,
execution, delivery, administration, modification, amendment,
or enforcement (whether through negotiations, legal
proceedings, or otherwise) of this Agreement, and the other
Loan Documents) which may at any time be imposed on, incurred
by, or asserted against, any of the Indemnified Persons in any
way relating to or arising out of this Agreement, or any other
Loan Document, including reasonable attorneys' fees and
allocated costs of in-house counsel, and as to which the Agent
is not reimbursed by the Company; provided, however, that no
-------- -------
Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs, or
expenses of any Indemnified Person which have resulted from
such Indemnified Person's gross negligence or willful
misconduct. The Agent shall not be required to take any
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<PAGE> 139
action, make any inquiry, or request any document hereunder,
or under any other Loan Document, or to prosecute or defend
any suit in respect of this Agreement, or any other Loan
Document, unless (i) if it has requested instructions from the
Lenders as to such action, it shall have received such
instructions from the Required Lenders (or, if required by
this Agreement, all the Lenders or the Majority Lenders, as
the case may be) and (ii) it is indemnified hereunder to its
satisfaction. If any indemnity in favor of the Agent shall be
or become inadequate, in the determination of the Agent, the
Agent may call for additional indemnification from the Lenders
and cease to do the acts indemnified against hereunder until
such additional indemnity is given. The agreements in this
clause (c) shall survive the termination of the Commitments
----------
and the Letters of Credit and the repayment of the Loans and
other Obligations.
(c) The Company hereby requests the Agent to, and each
Lender hereby instructs the Agent to, and the Agent agrees to,
deliver to the Company on the Initial Borrowing Date, for
delivery by the Company to R.T.Z. Aluminum Holdings Limited, a
letter in the form of Exhibit R attached hereto.
---------
(d) The Company hereby requests the Agent to, and each
Lender hereby instructs the Agent to, and the Agent agrees to,
deliver to the Company on the Initial Borrowing Date, a letter
regarding the flood plain status of the properties covered by
the Company Mortgages and the Company Deeds of Trust, in the
form of Exhibit S attached hereto.
---------
(e) The Agent hereby agrees that it will promptly
give the Company notice of the occurrence of either of
the following events: (i) the Revolving Commitment
Availability is less than $40,000,000 at any time or (ii)
the Revolving Commitment Availability is less than
$50,000,000 for three consecutive Business Days and
provided no Default shall have occurred and be
continuing, will promptly give notice to the Company in
the event that, thereafter, the Revolving Commitment
Availability is greater than $50,000,000 for each day
during a period of three consecutive months. In
addition, the Agent hereby agrees to advise the other
Lenders on or prior to the notification of the other
Lenders by the Agent of any Borrowing Request delivered
during the continuance of an Event of Default in the
event that it has determined to waive any of the
conditions of Section 7.2 during the continuance of such
-----------
Event of Default.
SECTION 11.2. Funding Reliance, etc.
---------------------
(a) Unless the Agent shall have been notified by
telephone and such notice shall have been confirmed in writing
by any Lender by 5:00 p.m., San Francisco time, on the
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<PAGE> 140
Business Day prior to a Borrowing that such Lender will not
make available the amount which would constitute its
Percentage of such Borrowing on the date specified therefor,
the Agent may assume that such Lender has made such amount
available to the Agent and, in reliance upon such assumption,
make available to the Company a corresponding amount. If and
to the extent that such Lender shall not have made such amount
available to the Agent, such Lender and the Company severally
agree to repay the Agent forthwith on demand such
corresponding amount together with interest thereon, for each
day from the date the Agent made such amount available to the
Company to the date such amount is repaid to the Agent, at the
interest rate(s) applicable at the time to Loans comprising
such Borrowing in the case of the Company and at the daily
average Federal Funds Rate in the case of any Lender.
(b) Unless the Agent shall have been notified by
telephone and such notice shall have been confirmed in writing
by the Company by 5:00 p.m., San Francisco time, on the day
prior to the due date of any Obligation, that any Obligor will
not make the full amount of all payments scheduled to be made
by it on such due date, the Agent may assume that such Obligor
has made such amount available to the Agent and, in reliance
upon such assumption, make available to the Lenders their
respective pro rata shares of such amount. If the Agent makes
--- ----
any such amount available to any Lender, but such amount was
not in fact made available by or on behalf of such Obligor to
the Agent on such due date, such Lender shall pay to the Agent
on demand the amount previously made available to such Lender,
together with interest on such amount at the daily average
Federal Funds Rate for the number of days from and including
the date on which such Lender received such amount to the date
on which such amount becomes immediately available to the
Agent, and together with such other compensatory amounts as
may be required to be paid by such Lender to the Agent
pursuant to the Rules for Interbank Compensation of the
Council on International Banking or the Clearinghouse
Compensation Committee, as the case may be, as in effect from
time to time. A statement of the Agent submitted to any
Lender with respect to any amounts owing under this paragraph
shall be conclusive, in the absence of manifest error. If
such amount is not in fact made available to the Agent by such
Lender within two Business Days after the date on which such
Lender is (i) informed by the Agent that such amount was not
made available to the Agent by or on behalf of such Obligor,
and (ii) requested by the Agent to refund such amount to the
Agent, then the Agent shall be entitled to recover on demand
an amount calculated in the manner specified in the second
preceding sentence of this clause (b) after substituting the
----------
term "Reference Rate" for the term "Federal Funds Rate".
SECTION 11.3. Exculpation.
-----------
(a) No Indemnified Person shall be liable to any Lender
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for any action taken or omitted to be taken by such
Indemnified Person under this Agreement or any other Loan
Document or in connection herewith or therewith (except for
such Indemnified Person's own willful misconduct or gross
negligence), nor responsible for any recitals, statements,
representations or warranties herein or therein, nor for the
effectiveness, genuineness, enforceability, validity, or due
execution of this Agreement or any other Loan Document, nor
for the creation, perfection, or priority of any Liens
purported to be created by any of the Loan Documents, or the
validity, genuineness, enforceability, existence, condition,
value, or sufficiency of any collateral security, nor to make
any inquiry respecting the performance by any Obligor of its
obligations hereunder or under any other Loan Document. Each
Indemnified Person shall be entitled to rely upon advice of
counsel concerning legal matters and upon any notice, consent,
certificate, statement, or writing which such Indemnified
Person believes to be genuine and to have been presented by a
proper Person, and shall not be liable to any Lender or any
Obligor for the consequences of such reliance.
(b) The Agent shall be deemed not to have knowledge of
the occurrence of a Default or an Event of Default (other
than, in the case of the Agent, an Event of Default arising
under Section 10.1.1), or any breach of any of the Loan
--------------
Documents unless, in each case, it shall have received written
notice thereof from a Lender or from the Company. No
Indemnified Person shall be responsible or liable for any
shortage, discrepancy, damage, loss, or destruction of any
part of the Collateral, wherever the same may be located and
regardless of the cause thereof, unless the same shall happen
through its own gross negligence or willful misconduct. No
Indemnified Person shall, under any circumstances or any event
whatsoever, have any liability for any error or omission or
delivery of any kind made in the settlement, collection, or
payment of any of the Collateral or of any instrument received
in payment therefor or for any damage resulting therefrom
other than as a result of its own gross negligence or willful
misconduct.
SECTION 11.4. Successors. The Agent may resign as such at
----------
any time upon at least 30 days' prior written notice to the Company
and all Lenders. If the Agent at any time shall resign, the
Required Lenders may appoint another Lender or a commercial banking
institution organized under the laws of the United States (or any
state thereof) or a United States branch or agency of a foreign
commercial banking institution, and having a combined capital and
surplus of at least $500,000,000 as a successor Agent which shall
thereupon become the Agent hereunder. If no successor Agent shall
have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the retiring
Agent's giving notice of resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent which shall be
one of the Lenders or one of such commercial banking institutions.
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Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall be entitled to receive
from the retiring Agent such documents of transfer and assignment
as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges,
and duties of the retiring Agent and the retiring Agent shall be
discharged from any further duties and obligations under or in
connection with this Agreement and any Loan Document. In addition,
in the event that Business Credit resigns as the Agent, Bank of
America shall be discharged from any duties and obligations under
or in connection with this Agreement and any Loan Documents that
were delegated to Bank of America by Business Credit in its
capacity as Agent. After the resignation hereunder of a retiring
Agent, the provisions of
(a) this Article XI shall inure to its benefit as to
----------
any actions taken or omitted to be taken by it while it was
the Agent under this Agreement; and
(b) Sections 12.3 and 12.4 shall continue to inure to
------------- ----
its benefit.
SECTION 11.5. Credit Extensions by the Agent. Business
------------------------------
Credit and its successor as Agent shall have the same rights and
powers with respect to (a) the Loans made by it or any of its
Affiliates and (b) Letters of Credit issued (or participated in) by
it or any of its Affiliates as any other Lender and may exercise
the same as if it were not the Agent. The terms "Lender" and
"Lenders" as used herein shall include the Agent in its individual
capacity.
SECTION 11.6. Credit Decisions. Each Lender acknowledges
----------------
that it has, independently of the Agent, and each other Lender, and
based on such Lender's review of the financial information of the
Company and such other documents, information, and investigations
as such Lender has deemed appropriate, made its own credit decision
to extend its Commitments. Each Lender also acknowledges that it
will, independently of the Agent, and each other Lender, and based
on such other documents, information, and investigations as it
shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any
other Loan Document.
SECTION 11.7. Copies, etc. The Agent shall give prompt
-----------
written notice to each Lender of each notice or request required or
permitted to be given to the Agent by any Obligor pursuant to the
terms of this Agreement or any other Loan Document (unless
concurrently delivered to the Lenders by or on behalf of such
Obligor pursuant to the terms hereof). The Agent will promptly
distribute to each Lender each document or instrument received for
its account and copies of all other communications received by the
Agent from the Company for distribution to the Lenders by the Agent
in accordance with the terms of this Agreement and the other Loan
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Documents.
SECTION 11.8. Designation of Additional Agents. Whenever the
--------------------------------
Agent shall deem it necessary or prudent in order either to conform
to any law of any jurisdiction in which all or any part of the
Collateral shall be situated or to make any claim or bring any suit
with respect to the Collateral or the Collateral Documents, or in
the event that the Agent shall have been requested to do so by the
Required Lenders, the Agent and to the extent necessary, the Parent
Guarantor and the Company, shall (and the Company shall cause each
other Obligor to) execute and deliver a supplemental agreement and
all other instruments and agreements necessary or proper to
constitute another bank or trust company, or one or more Persons
approved by the Agent, either to act as Agent or agents with
respect to all or any part of the Collateral, in any such case with
such powers of the Agent as may be provided in such supplemental
agreement, and to vest in such bank, trust company or Person as
such Agent or separate trustee, as the case may be, any Property,
title, right, or power of the Agent deemed necessary or advisable
by the Agent.
SECTION 11.9. Certain Releases.
----------------
(a) To the extent that the Agent becomes concerned that
the exercise of any remedies or any action taken or omitted to
be taken by it in connection with any Collateral shall subject
it to the possibility of any liability, cost, or expense which
it deems to be significant, arising under any law, rules, or
regulations relating to hazardous or toxic wastes or
materials, the Agent may, without liability to any Lender or
other party to this Agreement or any other Loan Document, or
any other Person, decline to accept, abandon, forfeit, or
release such Collateral regardless of any effect such
declination, abandonment, forfeiture, or release may have upon
the Lenders, or otherwise, if either (i) the Agent is
requested to decline to accept, abandon, forfeit, or release
such Collateral by the Required Lenders or (ii) the Agent is
not, within 30 days after making a specific proposal therefor,
specifically indemnified to its satisfaction by the Required
Lenders or insured to its satisfaction by a third party or
parties for any liability, costs, and expenses which might
result therefrom.
(b) In addition, if the Agent becomes concerned that the
inclusion of certain Property in the Collateral is not in the
best interests of the Agent or the Lenders, either because of
potential adverse legal implications (including the potential
effects of California's "one form of action",
"anti-deficiency" and related rules of law which may apply in
connection with real property located in California) or
potential liabilities, costs, or expenses which the Agent
deems to be significant that may be imposed upon a Person
secured by such Collateral, the Agent may, without liability
to any Lender or other party to this Agreement or any other
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<PAGE> 144
Loan Document, or any other Person, decline to accept,
abandon, forfeit, or release such Collateral regardless of any
effect such declination, abandonment, forfeiture, or release
may have upon the Lenders or otherwise unless (i) the Agent is
requested to do otherwise by the Required Lenders and (ii) the
Agent is, within 30 days after making a specific proposal
therefor, specifically indemnified to its satisfaction by the
Required Lenders or insured to its satisfaction by a third
party or parties for any liability, costs, and expenses which
might result therefrom.
SECTION 11.10. Approval of Loan Documents. Each of the
--------------------------
Lenders hereby approves the forms of the Loan Documents
attached as Exhibits to this Agreement and hereby authorizes
the Agent on its behalf to accept from the Company and the
other Obligors, as the case may be, and, authorizes the Agent
to execute and deliver as Agent, the Collateral Documents in
substantially the form of such Exhibits, with such changes,
additions, or deletions as the Agent, in its sole and absolute
discretion, may approve as necessary or appropriate to
accomplish the purposes of such Loan Documents. Each of the
Lenders also authorizes the Agent to accept, or execute and
deliver, such additional documents, in form and substance
satisfactory to the Agent in its sole and absolute discretion,
in connection with the initial Borrowing or any subsequent
Borrowing as the Agent, in its sole and absolute discretion,
may approve as necessary or appropriate to accomplish the
purposes of the Loan Documents. Each of the Lenders further
authorizes the Agent, in its sole and absolute discretion, to
approve the form and content of all certificates, opinions,
collateral, financing statements, and other documents
delivered to it at or in connection with the initial Borrowing
or any subsequent Borrowing as the Agent, in its sole and
absolute discretion, may deem necessary or appropriate.
Whenever the Agent is permitted to consent to any matter
hereunder, the Agent shall have the right, in its sole
discretion, to consult with any or all of the other Lenders
prior to providing or refraining from providing any such
consent.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. Waivers, Amendments, etc.
------------------------
(a) The provisions of this Agreement and of
each other Loan Document may from time to time be
amended or modified, if such amendment or
modification is in writing and consented to by the
Company or the Obligor(s) party thereto (as the case
may be) and the Required Lenders; and the provisions
of this Agreement may be waived by the Required
Lenders or by the Agent acting with the consent of
the Required Lenders; provided, however, that no
such amendment, modification, or waiver which would:
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<PAGE> 145
(i) modify this Section 12.1, change the
------------
definition of "Required Lenders" or "Majority
----------------
Lenders," increase any Revolving Commitment Amount
or modify any requirement hereunder that any
particular action be taken by all the Lenders, the
Required Lenders or the Majority Lenders shall be
effective unless consented to by each Lender;
(ii) increase the Percentage of any Lender,
reduce any fees described in Article III payable to
-----------
any Lender, or extend any Lender's Commitment
Termination Date shall be made without the consent
of such Lender;
(iii) extend the due date for, or reduce the
amount of, any scheduled repayment of principal of
or interest on any Loan or any Reimbursement
Obligation, or reduce the principal amount of or
rate of interest on any Loan or reduce the amount of
any Reimbursement Obligation, shall be made without
the consent of the Lender which made such Loan or
participated in such Letter of Credit, or each
Lender which issued or is participating in the
Letter of Credit with respect to which such
Reimbursement Obligation is owed, as the case may
be;
(iv) release all, substantially all, or any
material portion of the Collateral (except for
releases in connection with dispositions of assets
which are permitted hereunder or under any Loan
Document, and releases which are required by the
Collateral Documents) without the consent of Lenders
holding at least 100% of the then aggregate
outstanding principal amount of the Revolving Credit
Outstandings or, if no such principal amount is then
outstanding, Lenders having at least 100% of the
Revolving Commitments;
(v) affect adversely the interests, rights, or
obligations of the Agent qua Agent, shall be made
---
without the consent of the Agent; or
(vi) modify any Letter of Credit or any
Revolving L/C Request without the consent of the
relevant Issuer Bank.
(b) Notwithstanding the foregoing, during the
continuance of an Event of Cash Dominion, the Agent may, at
any time thereafter, in its sole and absolute discretion,
continue to make Revolving Loans and Swingline Loans and
instruct the applicable Issuer Bank to issue Letters of Credit
in accordance with and subject to the provisions of
Section 7.2.
-----------
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(c) No failure or delay on the part of the Agent, any
Lender, any Issuer Bank, or the holder of any of the
Obligations in exercising any power, right, or remedy under
this Agreement or any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of
any such power, right, or remedy preclude any other or further
exercise thereof or the exercise of any other power, right, or
remedy. No notice to or demand on the Company or any Obligor
in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the
Agent, any Lender, any Issuer Bank, or the holder of any of
the Obligations under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such
waiver or approval, be applicable to subsequent transactions.
No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted
hereunder.
(d) Each of the Parent Guarantor and the Company hereby
waives demand, presentment for payment, protest, notice of
protest, notice of acceleration (except as otherwise provided
herein), or of intention to accelerate the maturity of any of
the Loans, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of
any extensions, renewals, partial payments, or any changes in
any of the terms, provisions, and covenants of this Agreement,
or any other Loan Document, or any releases or substitutions
of any security, or any delay, indulgence, or other act of any
trustee or any other Person under or in connection with this
Agreement, or any other Loan Document whether before or after
maturity.
SECTION 12.2. Notices. Except as otherwise provided herein
-------
or in any other Loan Document, all notices and other communica-
tions provided to any party hereto under this Agreement or any
other Loan Document shall be in writing or by telex or by facsimile
(followed promptly thereby by mailing of such notice or
communication) and addressed, delivered, or transmitted to such
party at its address, telex, or facsimile number set forth below
its signature hereto, or set forth in the Assignee Agreement to be
Bound pursuant to which such party became a party hereto, or at
such other address, telex, or facsimile number as may be designated
by such party in a notice to the other parties. Any notice, if
delivered by hand or if sent by mail or by overnight courier
properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall
be deemed given when transmitted (answerback confirmed in the case
of telexes).
SECTION 12.3. Payment of Costs and Expenses. The Parent
-----------------------------
Guarantor and the Company, jointly and severally, agree to pay on
demand all expenses of the Agent (including the reasonable fees and
out-of-pocket expenses of counsel to the Agent and of local
counsel, if any, who may be retained by counsel to the Agent and
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<PAGE> 147
the allocated costs of in-house counsel) in connection with
(a) the negotiation, preparation, execution, and
delivery of this Agreement and of each other Loan Document,
including schedules and exhibits, and any amendments, waivers,
consents, supplements, or other modifications to this
Agreement or any other Loan Document as may from time to time
hereafter be required, whether or not the transactions
contemplated hereby are consummated,
(b) the filing, recording, refiling, and rerecording of
the Collateral Documents (including financing statements or
similar documentation) and all amendments, supplements, and
modifications to any thereof and any and all other documents
or instruments of further assurance required to be filed,
recorded, refiled, or rerecorded by the terms hereof or of the
Collateral Documents, and
(c) the preparation and review of the form of any
document or instrument relevant to this Agreement or any other
Loan Document.
The Parent Guarantor and the Company, jointly and severally,
further agree to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp, recording, or similar
taxes which may be payable in connection with the execution or
delivery of this Agreement, the Credit Extensions hereunder, the
issuance of the Letters of Credit, or the execution and delivery of
any other Loan Documents. The Parent Guarantor and the Company,
jointly and severally, also agree to reimburse the Agent and each
Lender upon demand for all reasonable out-of-pocket expenses
(including attorneys' fees and legal expenses) incurred by the
Agent or such Lender in connection with the enforcement of any
Obligations and to reimburse the Agent upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and
legal expenses) incurred by the Agent in connection with the
negotiation of any restructuring or "work-out," whether or not
consummated, of any Obligations.
SECTION 12.4. Indemnification. In consideration of the
---------------
execution and delivery of this Agreement by the Agent and each
Lender, and the extension of the Commitments, the Company hereby
indemnifies, exonerates, and holds the Agent (in its capacity as
the Agent) and each Lender and each of their respective officers,
directors, employees, and agents (collectively, the "Indemnified
-----------
Parties") free and harmless from and against any and all actions,
- -------
causes of action, suits, losses, costs, liabilities, and damages,
and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (collectively, the "Indemnified
-----------
Liabilities" and, individually, an "Indemnified Liability"),
- ----------- ---------------------
incurred by the Indemnified Parties or any of them as result of,
arising out of, or relating to
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<PAGE> 148
(a) any transaction or goods financed or to be
financed in whole or in part, directly or indirectly, with the
proceeds of any Credit Extension;
(b) the entering into, issuance, acceptance, or
performance of or participation in this Agreement and any
other Loan Document by any of the Indemnified Parties
(including any unsuccessful action brought by or on behalf of
the Company or any other Obligor as the result of any
determination by the Majority Lenders pursuant to Article VII
-----------
not to make any Credit Extension);
(c) any investigation, litigation, or proceeding related
to any acquisition or proposed acquisition by the Parent
Guarantor, the Company, or any of their Subsidiaries or Joint
Venture Affiliates of all or any portion of the stock or
assets of any Person, whether or not such Indemnified Party is
party thereto;
(d) any investigation, litigation, or proceeding related
to any environmental cleanup, audit, compliance, or other
matter relating to the protection of the environment or the
Release by the Parent Guarantor, the Company or any of their
Subsidiaries or Joint Venture Affiliates of any Hazardous
Material; or
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging, or
releases from, any real property owned or operated by the
Parent Guarantor, the Company, or any of their Subsidiaries or
Joint Venture Affiliates of any Hazardous Material (including
any losses, liabilities, damages, injuries, costs, expenses,
or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the
Company or such Subsidiary,
except for any such Indemnified Liabilities arising for the account
of a particular Indemnified Party by reason of the relevant
Indemnified Party's gross negligence or willful misconduct, and if
and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
Each Indemnified Party, as soon as reasonably practicable, shall
notify the Agent of the commencement of any legal proceeding by any
third Person under which any Indemnified Liability might arise.
The Agent shall notify the Company of any such commencement
promptly after the Agent receives its notice. The Company shall
have the option to participate in the defense of all claims under
which any Indemnified Liability might arise, but the Company shall
not have the option to compel any Indemnified Party to employ
counsel of the Company's choosing.
SECTION 12.5. Survival. The obligations of the Company
--------
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<PAGE> 149
under Sections 4.3, 4.4, 4.5, 4.6, 4.7, 12.3, and 12.4, and the
------------ --- --- --- --- ---- ----
obligations of the Lenders under Sections 4.8, 11.1 and 11.2, shall
------------------ ----
in each case survive any termination of this Agreement. The
representations and warranties made by each Obligor in this
Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan
Document notwithstanding any investigation.
SECTION 12.6. Severability. Any provision of this Agreement
------------
or any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such provision and such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 12.7. Headings. The various headings of this Agree
--------
ment and of each other Loan Document are inserted for convenience
only and shall not affect the meaning or interpretation of this
Agreement or such other Loan Document or any provisions hereof or
thereof.
SECTION 12.8. Execution in Counterparts, Effectiveness, etc.
---------------------------------------------
This Agreement may be executed by the parties hereto in several
counterparts and by the different parties on separate counterparts,
each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This
Agreement shall become effective on the date (the "Effective Date")
--------------
when counterparts hereof executed on behalf of the Parent
Guarantor, the Company, the Agent, and each Lender (or notice
thereof satisfactory to the Agent) shall have been received by the
Agent and notice thereof shall have been given by the Agent to the
Parent Guarantor, the Company, and each Lender.
SECTION 12.9. Governing Law; Submission to Jurisdiction.
------------------------------------------
(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT (EXCEPT
TO THE EXTENT THAT SUCH OTHER LOAN DOCUMENT CONTAINS A
CONTRARY EXPRESS CHOICE OF LAWS PROVISION) SHALL EACH BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT
TO SUCH LAWS RELATING TO CONFLICTS OF LAWS.
(b) THE PARENT GUARANTOR AND THE COMPANY HEREBY SUBMIT
TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL
AND STATE OF NEW YORK COURTS LOCATED IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK, NEW YORK FOR ALL PURPOSES
OF OR IN CONNECTION WITH THIS AGREEMENT, AND ALL OTHER LOAN
DOCUMENTS, PROVIDED, HOWEVER, THAT NOTHING IN THIS
-------- -------
SECTION 12.9 SHALL AFFECT EITHER THE AGENT'S OR ANY LENDER'S
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE PARENT
GUARANTOR, THE COMPANY, OR THEIR RESPECTIVE PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTIONS.
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<PAGE>
<PAGE> 150
(c) UNTIL SUCH TIME AS THE AGENT AND THE LENDERS SHALL
HAVE RECEIVED FINAL PAYMENT OF THE FULL AMOUNT OF ALL
OBLIGATIONS AND PERFORMANCE OF ALL OBLIGATIONS, AND ALL
LETTERS OF CREDIT SHALL HAVE EXPIRED, THE PARENT GUARANTOR AND
THE COMPANY HEREBY IRREVOCABLY DESIGNATE AND APPOINT KRAMER,
LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL, CURRENTLY LOCATED AT
919 THIRD AVENUE, NEW YORK, NEW YORK 10022 (ATTENTION: EZRA
LEVIN), AS THEIR AGENT TO ACCEPT AND ACKNOWLEDGE ON THEIR
BEHALF ANY AND ALL PROCESS WHICH MAY BE SERVED IN CONNECTION
WITH ANY SUIT, ACTION, OR PROCEEDING OF THE NATURE REFERRED TO
IN THE PRECEDING PARAGRAPH. THE PARENT GUARANTOR AND THE
COMPANY EACH HEREBY ACKNOWLEDGE THAT, TO THE FULLEST EXTENT
PERMITTED BY LAW, SUCH SERVICE SHALL BE EFFECTIVE AND BINDING
SERVICE ON IT IN EVERY RESPECT REGARDLESS OF WHETHER IT SHALL
BE DOING OR SHALL HAVE AT ANY TIME DONE BUSINESS IN THE STATE
OF NEW YORK.
(d) THE PARENT GUARANTOR AND THE COMPANY HEREBY AGREE TO
TAKE ANY AND ALL ACTION THAT MAY BE NECESSARY TO ENSURE THAT
AT ALL TIMES DURING THE TERM OF THIS AGREEMENT THERE SHALL BE
AN AGENT IN NEW YORK DESIGNATED AND APPOINTED BY THEM FOR THE
PURPOSE DESCRIBED ABOVE, TO MAINTAIN SUCH DESIGNATION AND
APPOINTMENT OF SUCH AGENT IN FULL FORCE AND EFFECT FOR THE
TERM OF THIS AGREEMENT, AND TO DELIVER PROMPTLY TO THE AGENT
AT SUCH TIMES AS THE AGENT MAY REQUEST EVIDENCE IN WRITING OF
SUCH AGENT'S ACCEPTANCE OF SUCH APPOINTMENT.
(e) THE PARENT GUARANTOR AND THE COMPANY HEREBY CONSENT
TO PROCESS BEING SERVED IN ANY SUIT, ACTION, OR PROCEEDING OF
THE NATURE REFERRED TO ABOVE EITHER (I) BY THE MAILING OF A
COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
RETURN RECEIPT REQUESTED, TO ITS RESPECTIVE ADDRESS SHOWN
BELOW ITS SIGNATURE HERETO OR (II) BY SERVING A COPY THEREOF
UPON THE PERSON SPECIFIED ABOVE AS THE AUTHORIZED AGENT FOR
SERVICE OF PROCESS FOR THE PARENT GUARANTOR AND THE COMPANY
(TO THE EXTENT PERMITTED BY APPLICABLE LAW, REGARDLESS OF
WHETHER THE APPOINTMENT OF SUCH AGENT FOR SERVICE OF PROCESS
FOR ANY REASON SHALL PROVE TO BE INEFFECTIVE OR SUCH AGENT FOR
SERVICE OF PROCESS SHALL ACCEPT OR ACKNOWLEDGE SUCH SERVICE);
PROVIDED, HOWEVER, THAT, TO THE EXTENT LAWFUL AND PRACTICABLE,
-------- -------
WRITTEN NOTICE OF SAID SERVICE UPON SAID AGENT SHALL BE MAILED
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN
RECEIPT REQUESTED, TO THE PARENT GUARANTOR OR THE COMPANY, AS
APPLICABLE, AT ITS RESPECTIVE ADDRESS SHOWN BELOW ITS
SIGNATURE HERETO. THE PARENT GUARANTOR AND THE COMPANY AGREE
THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (I)
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON IT IN ANY SUCH SUIT, ACTION, OR PROCEEDING AND (II) SHALL
BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND
PERSONAL DELIVERY TO IT. NOTHING HEREIN SHALL AFFECT EITHER
THE AGENT'S OR ANY BANK'S RIGHT TO SERVE PROCESS IN OR TO
BRING PROCEEDINGS AGAINST THE PARENT GUARANTOR OR THE COMPANY
IN THE COURTS OF ANY OTHER JURISDICTION.
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SECTION 12.10. Successors and Assigns. This Agreement shall
----------------------
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; provided,
--------
however, that:
- -------
(a) neither the Parent Guarantor nor the Company may
assign or transfer their rights or obligations hereunder
without the prior written consent of the Agent and all
Lenders; and
(b) the rights of sale, assignment, and transfer of the
Lenders are subject to Section 12.11.
-------------
SECTION 12.11. Sale and Transfer of Credit Extensions and
------------------------------------------
Commitments; Participations in Credit Extensions and Commitments.
- ----------------------------------------------------------------
Each Lender may assign, or sell participations in, its Credit
Extensions and Commitments to one or more other Persons in
accordance with this Section 12.11.
-------------
SECTION 12.11.1. Assignments. Any Lender,
-----------
(a) with the written consents of the Company and the
Agent (which consents shall not be unreasonably delayed or
withheld and which consent, in the case of the Company, shall
be deemed to have been given in the absence of a written
notice delivered by the Company to the Agent on or before the
fifth Business Day after receipt by the Company of such
Lender's request for consent, stating, in reasonable detail,
the reasons why the Company proposes to withhold such consent)
may at any time assign and delegate to one or more Affiliates
of such Lender (if such Lender is not to remain liable for the
performance of its Affiliate's obligations hereunder or under
any other applicable Loan Document),
(b) with the written consents of the Company (which
consent shall not be unreasonably delayed or withheld) and the
Agent (which consent may be withheld for any reason) may at
any time assign and delegate to one or more other banks,
savings and loan associations, commercial finance companies
and other similar financial institutions, and
(c) with written notice to the Company and the Agent,
but without the consent of the Company or the Agent, may
assign and delegate to any other Lender or to one or more
Affiliates of such Lender (if such Lender remains liable for
the performance of its Affiliate's obligations hereunder and
under any other applicable Loan Document)
(each Person described in either of the foregoing clauses as being
the Person to whom such assignment and delegation is to be made,
being hereinafter referred to as an "Assignee Lender"), all or any
---------------
fraction of such Lender's total Credit Extensions and Revolving
Commitment (which assignment and delegation shall be of a constant,
and not a varying, percentage of all the assigning Lender's Credit
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Extensions and Commitments); provided, however, that the aggregate
-------- -------
principal amount of the portion of the Revolving Commitment so
assigned to any Assignee Lender shall be not less than $20,000,000,
unless such assignment covers all of such Lender's interests and
obligations hereunder and under the Loan Documents; and provided,
--------
further, that any such Assignee Lender will comply, if applicable,
- -------
with the provisions contained in clause (b) of Section 4.6; and
---------- -----------
provided, further, that the Parent Guarantor, the Company, each
- -------- -------
other Obligor and the Agent shall be entitled to continue to deal
solely and directly with such assigning Lender in connection with
the interests so assigned and delegated to an Assignee Lender until
(i) written notice of such assignment and
delegation, together with payment instructions,
addresses, and related information with respect to such
Assignee Lender, shall have been given to the Company and
the Agent by such Lender and such Assignee Lender,
(ii) such Assignee Lender shall have executed and
delivered to the Company and the Agent an Assignee
Agreement to be Bound, accepted by the Agent, and
(iii) the processing fees described below shall
have been paid.
From and after the date that the Agent accepts such Assignee
Agreement to be Bound (subject to clauses (a) and (b) above),
----------- ---
(A) the Assignee Lender thereunder shall be deemed automatically to
have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such
Assignee Lender pursuant to such Assignee Agreement to be Bound,
shall have the rights and obligations of a Lender hereunder and
under the other Loan Documents, and (B) the assigning Lender, to
the extent that rights and obligations hereunder have been assigned
and delegated by it pursuant to such Assignee Agreement to be
Bound, shall be released from its obligations which are not then
due and payable hereunder and under the other Loan Documents.
Accrued interest, and accrued fees, in respect of the rights and
obligations that have been assigned, shall be paid as provided in
the Assignee Agreement to be Bound. Accrued interest and accrued
fees shall be paid at the same time or times provided in this
Agreement. Such assigning Lender or such Assignee Lender must also
pay a processing fee to the Agent upon delivery of any Assignee
Agreement to be Bound in the amount of $3500. Any attempted
assignment and delegation not made in accordance with this
Section 12.11.1 shall be null and void.
- ---------------
SECTION 12.11.2. Participations. Any Lender may at any
--------------
time sell to one or more financial institutions (each of such
financial institutions being herein called a "Participant")
-----------
participating interests in any of the Credit Extensions,
Commitments, or other interests or obligations of such Lender
hereunder; provided, however, that
-------- -------
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<PAGE> 153
(a) no participation contemplated in this
Section 12.11.2 shall relieve such Lender from its Commitments
---------------
or its other obligations hereunder or under any other Loan
Document,
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations,
(c) the Parent Guarantor, the Company, each other
Obligor, and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the
other Loan Documents, and
(d) no Participant, unless such Participant is an
Affiliate of such Lender, or is itself a Lender, shall be
entitled to require such Lender to take or refrain from taking
any action hereunder or under any other Loan Document.
SECTION 12.12. Other Transactions. Nothing contained herein
------------------
shall preclude the Agent or any Lender from engaging in any debt or
equity transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Company or any of
its Affiliates in which the Company or such Affiliate is not
restricted hereby from engaging with any other Person.
SECTION 12.13. WAIVER OF JURY TRIAL.
--------------------
THE AGENT, THE LENDERS, THE PARENT GUARANTOR, AND THE COMPANY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR OTHER
ACTIONS OF THE AGENT, THE LENDERS, THE PARENT GUARANTOR, OR THE
COMPANY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT. THE PARENT GUARANTOR AND THE COMPANY EACH
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY
OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTATION, OR MODIFICATIONS TO THIS
AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
SECTION 12.14. Final Agreement, etc. This written loan
--------------------
agreement, together with the other Loan Documents, represents the
final agreement between the parties with respect to the subject
matter hereof and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties.
There are no unwritten oral agreements between the parties with
145<PAGE>
<PAGE> 154
respect to the subject matter hereof. The inclusion in this
Agreement or any Loan Document of provisions not included in, or
the deletion of provisions previously included in, prior drafts of
this Agreement or such other Loan Document shall not be considered
in interpreting the final executed version of this Agreement or
such other Loan Document.
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<PAGE>
<PAGE> 155
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
KAISER ALUMINUM & CHEMICAL
CORPORATION
By /s/
Name Printed: John T. La Duc
Title: Vice President
Address: 6177 Sunol Drive
Pleasanton, CA 94566
Attn: Treasurer
With a copy to:
5847 San Felipe
Suite 2600
Houston, Texas 77087
Telephone No.: 713-267-3777
Facsimile No.: 713-267-3710
Telex No.: None
Attention: Treasurer
Sig. 1
<PAGE>
<PAGE> 156
KAISER ALUMINUM CORPORATION
By /s/
Name Printed: John T. La Duc
Title: Vice President
Address: 5847 San Felipe
Suite 2600
Houston, Texas 77087
Telephone No.: 713-267-3777
Facsimile No.: 713-267-3710
Telex No.: None
Attention: Kris Vasan,
Treasurer
Sig. 2
<PAGE>
<PAGE> 157
PERCENTAGE LENDERS
- ---------- -------
30% BANKAMERICA BUSINESS CREDIT, INC.
By /s/
Name Printed: Joyce White
Title: Senior Vice President
Domestic
Office: Two North Lake Avenue
Suite 400
Pasadena, California 91101
Telephone No.: 818-397-1800
Facsimile No.: 818-796-3358
Telex No.: None
Attention: Vice President
LIBOR
Office: Same as domestic
Address for
payments: Two North Lake Avenue
Suite 400
Pasadena, Califorina 91101
Attention: Operations Officer
Ref: Kaiser Aluminum
Sig. 3
<PAGE>
<PAGE> 158
PERCENTAGE CONGRESS FINANCIAL CORPORATION (WESTERN)
- ----------
26%
By /s/
Name Printed: Vicky Balmot
Title: Senior Vice President
Domestic
Office: 225 South Lake Avenue
Office #1000
Pasadena, CA 91101
Attention: William Davis
Senior Vice President
Telephone No.: 818-304-4972
Facsimile No.: 818-304-4969
Telex No.: None
LIBOR
Office: 1133 Avenue of the Americas
New York, NY 10036
Attention: Tony Razon
Address for
payments: Chemical Bank
55 Water Street
New York, New York 10041
(ABA 021-000128)
(#322-020-530)
Ref: Kaiser Aluminum
Sig. 4
<PAGE>
<PAGE> 159
PERCENTAGE LA SALLE NATIONAL BANK
- ----------
6%
By /s/
Name Printed: Douglas C. Colletti
Title: Vice President
Domestic
Office: 120 S. La Salle Street
5th Floor
Chicago, IL 60603
Telephone No.: 312-750-6123
Facsimile No.: 312-750-6450
Telex No.: None
Payments/Settlements:
Telephone No.: 312-781-8424
Facsimile No.: 312-750-6528
LIBOR
Office: Same as domestic
Address for
payments: La Salle National Bank
120 S. La Salle Street
5th Floor
Chicago, IL 60603
ABA 071-000-505
G/L Acct: 1378000
Attention: Carolyn Sanford
Ref: Kaiser Aluminum
Sig. 5
<PAGE>
<PAGE> 160
PERCENTAGE CIT GROUP/BUSINESS CREDIT, INC.
- ----------
6%
By /s/
Name Printed: Steven R. Bellah
Title: Vice President
Domestic
Office: CIT Group/Business
Credit, Inc.
2110 Walnut Hill Lane
Irving, Texas 75038
Telephone No.: 214-580-2763
Facsimile No.: 214-550-9035
Telex No.: None
Attention: Regional Manager
LIBOR
Office: Same as domestic
Address for
payments: Same as domestic
Attention: Regional Manager
Ref: Kaiser Aluminum
Sig. 6
<PAGE>
<PAGE> 161
PERCENTAGE TRANSAMERICA BUSINESS CREDIT CORPORATION
- ----------
8%
By /s/
Name Printed: Laura Cushing
Title: Senior Account Executive
Domestic
Office: Same as Address
for payments
Telephone No.: 312-864-3976
Facsimile No.: 312-380-6169
Telex No.: None
Attention: Laura Cushing
LIBOR
Office: Same as domestic
Address for
payments: 8750 West Bryn Mawr Ave.
Suite 720
Chicago, Illinois 60631
Attention: Keith Mason
Ref: Kaiser Aluminum
Sig. 7
<PAGE>
<PAGE> 162
PERCENTAGE BANK OF AMERICA NATIONAL TRUST AND
- ---------- SAVINGS ASSOCIATION
10%
By /s/
Name Printed: James MacGregor
Title: Vice President
Domestic
Office: 555 California Street
41st Floor
San Francisco, California 94104
Telephone No.: 415-622-8512
Facsimile No.: 415-622-4585
Telex No.: None
LIBOR
Office: Same as domestic
Address for
payments: Bank of America
A/C Administration
Unit 5693
1850 Gateway Boulevard
Concord, California 94520
Attention: Account Administrator
Ref: Kaiser Aluminum
Loan repayment
Sig. 8
<PAGE>
<PAGE> 163
PERCENTAGE HELLER FINANCIAL, INC.
- ----------
8%
By /s/
Name Printed: John Buff
Title: Vice President
Domestic 101 Park Avenue
Office: New York, NY 10178
Telephone No.: 212-880-7174
Facsimile No.: 212-880-2060
Telex No.: None
Attention: Richard Peller
LIBOR
Office: same as domestic
Address for
payments: First National Bank
of Chicago
ABA #71000013
For Credit
to: Heller Business Credit
Account #5298695
Ref: Kaiser
Sig. 9
<PAGE>
<PAGE> 164
PERCENTAGE NATIONAL WESTMINSTER BANK PLC
6%
By /s/
Name Printed: Peter K. Doherty
Title: Vice President
Domestic
Office: National Westminster Bank Plc
North American Mining & Metals
Office
175 Water Street
29th Floor
New York, NY 10038
Telephone No.: 212-602-4327
Facsimile No.: 212-602-4402
Telex No.: None
Attention: Peter K. Doherty
LIBOR
Office: National Westminster
Bank Plc
Nassau Branch
175 Water Street
19th Floor
New York, NY 10038
Address for
payments: National Westminister
Bank Plc
New York Branch
175 Water Street
19th Floor
New York, NY 10038
Attention: Margaret Beardsley
Ref: Kaiser Aluminum - Line 12
Sig. 10
<PAGE>
<PAGE> 165
AGENT
-----
BANKAMERICA BUSINESS CREDIT, INC.
By /s/
Name Printed: Joyce White
Title: Senior Vice President
Office: Two North Lake Avenue
Suite 400
Pasadena, CA 91101
Telephone No.: 818-397-1800
Facsimile No.: 818-796-3358
Telex No.: None
Attention: Vice President
Sig. 11
<PAGE> 1
CERTIFICATE OF DESIGNATIONS
OF
8.255% PRIDES, CONVERTIBLE PREFERRED STOCK
OF
KAISER ALUMINUM CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
Kaiser Aluminum Corporation (the "Corporation"), a
corporation organized and existing under the General Corporation
Law of the State of Delaware, in accordance with the provisions
of Section 103 thereof, hereby certifies that the following
resolutions were duly adopted by the Board of Directors of the
Corporation pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the
Corporation, which authorizes the issuance of up to 20,000,000
shares of Preferred Stock, par value $.05 per share, at a meeting
of the Board of Directors duly held on January 26, 1994:
RESOLVED, that pursuant to the authority vested in the
Board of Directors of the Corporation in accordance with the
provisions of its Restated Certificate of Incorporation and by-
laws, the issue of a series of Preferred Stock, par value $.05
per share, of this Corporation is hereby authorized and the
designation, powers, preferences and relative, participating,
optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof shall
be as follows:
Section 1. Designation and Amount. The series of
----------------------
Preferred Stock shall be designated as "8.255% PRIDES,
Convertible Preferred Stock" (the "PRIDES"). The PRIDES are
Preferred Redeemable Increased Dividend Equity Securities. The
authorized number of shares constituting such series shall be
9,200,000. The shares of PRIDES shall rank on a parity with
the Corporation's Series A Mandatory Conversion Premium Dividend
Preferred Stock (the "Series A Stock") in respect of the payment
of dividends and the distribution of assets upon Liquidation (as
defined in paragraph (a) of Section 5).
Section 2. Dividends.
---------
(a) In respect of the period beginning on and
including February 17, 1994 and ending on and including
December 30, 1997 (the "Preferred Period"), the holders of
outstanding shares of PRIDES will be entitled to receive, subject
------
to the rights of holders of the Series A Stock and holders of
other classes or series of stock which may from time to time be
issued by the Corporation ranking on a parity with or senior to
the PRIDES in respect of dividends, and when, as and if declared
by the Board of Directors out of funds legally available
therefor, cumulative preferential cash dividends at the per share
rate of $.2425 per quarter for each of the quarters ending on
March 30, June 29, September 29 and December 30 of each year and
no more, payable in arrears on each March 31, June 30,
September 30 and December 31, respectively (each such date being
hereinafter referred to as a "Preferred Dividend Payment Date");
provided, however, that, with respect to any dividend period
during which a redemption
<PAGE>
<PAGE> 2
occurs, the Corporation may, at its option, declare accrued
dividends on the shares of PRIDES to (but not including), and pay
such accrued dividends on, the date fixed for redemption, in
which case such dividends shall be payable to the holders of
shares of PRIDES as of the record date for such dividend payment
and shall not be included in the calculation of the related Call
Price (as defined in clause (ii) of paragraph (i) of Section 3).
The first dividend shall be for the period from and including the
first day of the Preferred Period to and including March 30, 1994
and will be paid on March 31, 1994. If any Preferred Dividend
Payment Date shall not be a business day (as defined in clause
(i) of paragraph (i) of Section 3), then the Preferred Dividend
Payment Date shall be on the next succeeding day that is a
business day. Each such dividend will be payable to holders of
record as they appear on the books of the Corporation or any
transfer agent for the shares of PRIDES on such record dates, not
less than 10 nor more than 50 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors. Dividends
on the shares of PRIDES in respect of the Preferred Period shall
accrue on a daily basis commencing on and including the first day
of the Preferred Period and accrued dividends for each quarterly
dividend period or portion thereof shall accumulate, to the
extent not paid, on the Preferred Dividend Payment Date first
following the quarter or portion thereof for which they accrue.
Except as otherwise provided in Section 3(a) or in the first
proviso at the end of Section 3(j)(2), accumulated unpaid
dividends shall not bear interest. Dividends on the shares of
PRIDES shall accrue whether or not the Corporation has earnings,
whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared.
Dividends in arrears for any past quarterly dividend periods may
be declared and paid at any time without reference to any regular
Preferred Dividend Payment Date to holders of record on such
date, not exceeding 50 days preceding the payment date thereof,
as shall be fixed by the Board of Directors. Dividends (or cash
amounts equal to accrued and unpaid dividends) payable on the
shares of PRIDES for any period shorter than a quarterly dividend
period shall be computed on the basis of a 360-day year of twelve
30-day months. Dividends on the shares of PRIDES shall cease to
accrue as of the close of business on the earlier of (i) the last
day of the Preferred Period or, subject to the provisions of the
penultimate sentence of Section 3(b), (ii) the day immediately
prior to their earlier redemption.
(b) So long as any shares of PRIDES or a Deposit
Deficit (as defined in paragraph (a) of Section 3) are
outstanding, except as set forth in the next succeeding sentence
(unless a Deposit Deficit is outstanding), no dividends shall be
declared or paid or set apart for payment on, and no other
distribution shall be ordered or made on (other than dividends or
distributions paid in shares of, or options, warrants or rights
to subscribe for or purchase shares of, stock ranking junior to
the shares of PRIDES in respect of dividends and the distribution
of assets upon Liquidation), nor (except for redemptions or
conversions of the shares of PRIDES pursuant to paragraph (a),
(b) or (c) of Section 3) shall any sum or sums be set aside for,
in a sinking fund or otherwise, or applied to the purchase,
redemption or other acquisition for value of, the shares of
PRIDES, Series A Stock or any other class or series of stock
which may from time to time be issued by the Corporation ranking
on a parity with or junior to the shares of PRIDES in respect of
dividends or the distribution of assets upon Liquidation (or, if
any Deposit Deficit is outstanding, any class or series of stock
of the Corporation), unless all cumulative dividends accumulated
on the shares of PRIDES shall have been or shall
contemporaneously be declared and paid in full or shall be
declared and a sum sufficient for the payment in full thereof set
apart for such payment on the shares of PRIDES (or, if any
Deposit Deficit is outstanding, unless such Deposit Deficit and
all accrued interest thereon shall have been paid in full). When
dividends are not paid in full, as aforesaid, upon the shares of
PRIDES and any other class or series of stock of the Corporation
ranking on a parity with the shares of PRIDES in respect of
dividends, all dividends declared upon shares of PRIDES and any
other stock of the Corporation ranking on a parity with the
shares of PRIDES in respect of dividends (including the Series A
Stock) shall be declared pro rata so that the amount of dividends
declared per share on the shares of PRIDES and such other stock
shall in all cases
2
<PAGE>
<PAGE> 3
bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of PRIDES and such other stock
bear to each other. Holders of shares of PRIDES shall not be
entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends as herein provided.
Section 3. Redemptions or Conversions.
--------------------------
(a) Mandatory Conversion on Mandatory Conversion Date.
-------------------------------------------------
Unless earlier called for redemption or converted in accordance
with the provisions hereof, on December 31, 1997 or, if such date
is not a business day, the next succeeding day that is a business
day (the "Mandatory Conversion Date"), each outstanding share of
PRIDES shall, without additional notice to holders thereof,
convert automatically ("Mandatory Conversion") into:
(i) fully paid and non-assessable shares of
common stock of the Corporation (the "Common Stock") at
the Common Equivalent Rate (as defined herein) in
effect on the Mandatory Conversion Date; plus
(ii) the right to receive an amount in cash
equal to all accrued and unpaid dividends on such share
of PRIDES (other than previously declared dividends
payable to a holder of record as of a prior date) to
and including the last day of the Preferred Period,
whether or not earned or declared, out of funds legally
available therefor.
The "Common Equivalent Rate" shall initially be one
share of Common Stock for each share of PRIDES and shall be
subject to adjustment as set forth in paragraphs (d) and (e) of
this Section 3.
If an amount equal to all accrued and unpaid dividends
on the shares of PRIDES described in clause (ii) above (the
"Required Dividend Amount") is not deposited with a bank or trust
company in accordance with Section 3(j)(2) on or prior to the
Mandatory Conversion Date (the amount, if any, by which the
Required Dividend Amount exceeds the amount so deposited in
respect of the Required Dividend Amount being herein called the
"Deposit Deficit"), the Corporation shall, out of funds legally
available therefor, as promptly as practicable following the
Mandatory Conversion Date, deposit cash with a bank or trust
company in accordance with Section 3(j)(2) in an amount equal to
the Deposit Deficit plus an amount equal to interest at the rate
of 11% per annum on the Deposit Deficit from time to time
outstanding from and including the Mandatory Conversion Date to
but not including the date the Deposit Deficit is reduced to
zero; provided, that so long as a Deposit Deficit is outstanding,
no class or series of stock thereafter issued by the Corporation
shall rank senior to the claims of the holders of the shares of
PRIDES on the Mandatory Conversion Date with regard to the
Required Dividend Amount and interest thereon as and to the
extent provided in the first proviso at the end of Section
3(j)(2).
(b) Right to Call for Redemption. Shares of PRIDES
----------------------------
are not redeemable by the Corporation before December 31, 1996
(the "Initial Redemption Date"). At any time and from time to
time on or after that date until and including the last day of
the Preferred Period, the Corporation shall have the right to
call, in whole or in part, the outstanding shares of PRIDES for
redemption (subject to the notice provisions set forth in
paragraph (j) of this Section 3). On the redemption date, the
Corporation shall deliver to the holders thereof in exchange for
each such share called for redemption the greater of:
3
<PAGE>
<PAGE> 4
(i) a number of fully paid and non-
assessable shares of Common Stock determined by
dividing the Call Price in effect on the redemption
date by the Current Market Price (as defined in
clause (v) of paragraph (d) of this Section 3) per
share of Common Stock determined as of the second
Trading Date (as defined in clause (v) of paragraph (i)
of this Section 3) immediately preceding the Notice
Date (as defined in clause (iv) of paragraph (i) of
this Section 3); or
(ii) .8333 of a share of Common Stock
(subject to adjustment in the same manner as the
Optional Conversion Rate (as defined in paragraph (c)
of this Section 3) is adjusted).
If all shares of Common Stock described in the
preceding sentence are not deposited with a bank or trust company
in accordance with Section 3(j)(2) on or prior to the redemption
date, such redemption shall not be effective. If fewer than all
the outstanding shares of PRIDES are to be called for redemption,
shares to be redeemed shall be selected by the Corporation from
outstanding shares of PRIDES by lot or pro rata (as nearly as may
be practicable without creating fractional shares) or by any
other method determined by the Board of Directors of the
Corporation in its sole discretion to be equitable.
(c) Optional Conversion. Shares of PRIDES are
-------------------
convertible, at the option of the holders thereof ("Optional
Conversion"), at any time or from time to time, before the
Mandatory Conversion Date, unless previously redeemed, into
shares of Common Stock at a rate of .8333 of a share of Common
Stock for each share of PRIDES (the "Optional Conversion Rate"),
subject to adjustment as set forth in paragraphs (d) and (e) of
this Section 3. The right of Optional Conversion of shares of
PRIDES called for redemption shall terminate immediately before
the close of business on the day prior to any redemption date
with respect to such shares.
Optional Conversion of shares of PRIDES may be effected
by delivering certificates evidencing such shares of PRIDES,
together with written notice of conversion and, if required by
the Corporation, a proper assignment of such certificates to the
Corporation or in blank (and, if applicable as provided in the
following paragraph, cash payment of an amount equal to the
dividends attributable to the current quarterly dividend period
payable on such shares), to the office of the transfer agent for
the shares of PRIDES or to any other office or agency maintained
by the Corporation for that purpose and otherwise in accordance
with Optional Conversion procedures established by the
Corporation. Each Optional Conversion shall be deemed to have
been effected immediately before the close of business on the
date on which the foregoing requirements shall have been
satisfied. The Optional Conversion shall be at the Optional
Conversion Rate in effect at such time and on such date.
Holders of shares of PRIDES at the close of business on
a record date for any payment of declared dividends shall be
entitled to receive the dividend payable on such shares of PRIDES
on the corresponding dividend payment date notwithstanding the
Optional Conversion of such shares of PRIDES following such
record date and on or prior to such dividend payment date.
However, shares of PRIDES surrendered for Optional Conversion
after the close of business on a record date for any payment of
declared dividends and before the opening of business on the next
succeeding dividend payment date must be accompanied by payment
in cash of an amount equal to the dividends attributable to the
current quarterly dividend period payable on such shares on such
next succeeding dividend payment date (unless such shares of
PRIDES are subject to redemption on a redemption date between
such record date established for such dividend payment date and
such dividend payment date). Except as provided above, upon any
Optional Conversion of shares of PRIDES, the Corporation shall
make no payment of or
4
<PAGE>
<PAGE> 5
allowance for unpaid dividends, whether or not in arrears, on
such shares of PRIDES as to which Optional Conversion has been
effected or for previously declared dividends or distributions on
the shares of Common Stock issued upon Optional Conversion.
(d) Common Equivalent Rate and Optional Conversion
----------------------------------------------
Rate Adjustments. The Common Equivalent Rate and the Optional
- ----------------
Conversion Rate are each subject to adjustment from time to time
as provided below in this paragraph (d). All adjustments to the
Common Equivalent Rate and the Optional Conversion Rate shall be
calculated to the nearest 1/100th of a share of Common Stock
(with 5/1000 of a share being rounded to the next lower 1/100 of
a share).
(i) If the Corporation shall either:
(1) pay a dividend or make a
distribution with respect to Common Stock in
shares of Common Stock,
(2) subdivide or split its outstanding
shares of Common Stock into a greater number of
shares,
(3) combine its outstanding shares of
Common Stock into a smaller number of shares, or
(4) issue by reclassification of its
shares of Common Stock any shares of common stock
of the Corporation
then, in any such event, the Common Equivalent Rate and
the Optional Conversion Rate in effect immediately
prior thereto shall each be adjusted so that the holder
of a share of PRIDES shall be entitled to receive, on
the conversion of such share of PRIDES, the number of
shares of Common Stock of the Corporation which such
holder would have owned or been entitled to receive
after the happening of any of the events described
above had such share of PRIDES been converted at the
Common Equivalent Rate (in the case of a Mandatory
Conversion) or the Optional Conversion Rate (in the
case of an Optional Conversion), as applicable, in
effect immediately prior to the happening of such event
or the record date therefor, whichever is earlier.
Such adjustment shall become effective immediately
after the close of business on the record date for
determination of stockholders entitled to receive such
dividend or distribution in the case of a dividend or
distribution and shall become effective immediately
after the effective time in case of a subdivision,
split, combination or reclassification. Any shares of
Common Stock issuable in payment of a dividend or
distribution shall be deemed to have been issued
immediately prior to the close of business on the
record date for such dividend or distribution for
purposes of calculating the number of outstanding
shares of Common Stock under clauses (ii) and (iii)
below.
(ii) If the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling
them (for a period not exceeding 45 days from the date
of such issuance) to subscribe for or purchase shares
of Common Stock at a price per share less than the
Current Market Price per share of the Common Stock on
the day five business days prior to the record date for
the determination of stockholders entitled to receive
such rights or warrants, then in each case the Common
Equivalent Rate and the Optional Conversion Rate shall
each be adjusted by multiplying (I) the Common
Equivalent Rate
5
<PAGE>
<PAGE> 6
or the Optional Conversion Rate, as applicable, in
effect immediately prior thereto by (II) a fraction, of
which the numerator shall be (A) the number of shares
of Common Stock outstanding on the date of issuance of
such rights or warrants, immediately prior to such
issuance, plus (B) the number of additional shares of
Common Stock offered for subscription or purchase, and
of which the denominator shall be (A) the number of
shares of Common Stock outstanding on the date of
issuance of such rights or warrants, immediately prior
to such issuance, plus (B) the number of additional
shares of Common Stock which the aggregate offering
price of the total number of shares so offered for
subscription or purchase would purchase at the Current
Market Price per share of the Common Stock on the day
five business days prior to the record date for
determining stockholders entitled to receive such
rights or warrants (determined by multiplying such
total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained
by such Current Market Price). Shares of Common Stock
owned by or held for the account of the Corporation or
another company of which a majority of the shares
entitled to vote in the election of directors are held,
directly or indirectly, by the Corporation shall not be
deemed to be outstanding for purposes of such
computation. Such adjustment shall be made
successively whenever any such rights or warrants are
issued and shall become effective immediately after the
close of business on the record date for the
determination of stockholders entitled to receive such
rights or warrants. To the extent that any rights or
warrants referred to in this clause (ii) expire
unexercised, the Common Equivalent Rate and the
Optional Conversion Rate shall each be readjusted to
the Common Equivalent Rate and the Optional Conversion
Rate, respectively, which would then be in effect had
the adjustment made upon the issuance of such rights or
warrants been made upon the basis of the issuance of
only the number of rights or warrants actually
exercised.
(iii) If the Corporation shall pay a dividend or
make a distribution to all holders of its Common Stock
of evidences of its indebtedness or other assets
(including shares of capital stock of the Corporation
but excluding any cash dividends or distributions
(other than Extraordinary Cash Distributions (as
defined in this clause (iii)) and excluding any
distributions and dividends referred to in clause (i)
above), or shall distribute to all holders of its
Common Stock rights or warrants to subscribe for or
purchase securities of the Corporation or any of its
subsidiaries (other than those referred to in clause
(ii) above), the Common Equivalent Rate and the
Optional Conversion Rate shall each be adjusted by
multiplying (I) the Common Equivalent Rate or the
Optional Conversion Rate, as applicable, in effect
immediately prior to the date of such dividend or
distribution by (II) a fraction, of which the numerator
shall be the Current Market Price per share of Common
Stock on the day five business days prior to the record
date for the determination of stockholders entitled to
receive such dividend or distribution, and of which the
denominator shall be such Current Market Price per
share of Common Stock less either (A) the fair market
value (as determined by the Board of Directors of the
Corporation, whose determination shall, if made in good
faith, be conclusive) as of the day five business days
prior to such record date of the portion of the assets
or evidences of indebtedness so distributed, or of such
subscription rights or warrants, applicable to one
share of Common Stock, or (B) if applicable, the amount
of the Extraordinary Cash Distributions. Such
adjustment shall become effective immediately after the
close of business on the record date for the
determination of stockholders entitled to receive such
dividend or distribution. The term "Extraordinary Cash
Distribution" means, with respect to any cash dividend
or distribution paid on any date,
6
<PAGE>
<PAGE> 7
the amount, if any, by which (I) all cash dividends and
cash distributions on the Common Stock paid during the
consecutive 12-month period ending on and including
such date (other than cash dividends and cash
distributions for which an adjustment to the Common
Equivalent Rate and the Optional Conversion Rate was
previously made) exceeds, on a per share of Common
Stock basis,(II) 10% of the average of the daily
Closing Prices (as defined in clause (iii) of paragraph
(i) of this Section 3) of the Common Stock over such
consecutive 12-month period.
(iv) Anything in this Section 3 to the contrary
notwithstanding, the Corporation shall be entitled to
make such upward adjustments in the Common Equivalent
Rate, the Optional Conversion Rate or the Call Price,
in addition to those required by this Section 3, as the
Corporation in its sole discretion shall determine to
be advisable, in order that any stock dividends,
subdivision or split of shares, distribution of rights
to purchase stock or securities, or a distribution of
securities convertible into or exchangeable for stock
(or any transaction which could be treated as any of
the foregoing transactions pursuant to Section 305 of
the Internal Revenue Code of 1986, as amended)
hereafter made by the Corporation to its stockholders
shall not be taxable. If the Corporation determines
that such an adjustment to the Common Equivalent Rate,
the Optional Conversion Rate or the Call Price should
be made, an adjustment shall be made effective as of
such date as is determined by the Board of Directors of
the Corporation. The determination of the Board of
Directors of the Corporation as to whether an
adjustment to the Common Equivalent Rate, the Optional
Conversion Rate or the Call Price should be made
pursuant to the foregoing provisions of this clause
(iv), and if so, as to what adjustment should be made
and when, shall be conclusive, final and binding on the
Corporation and all stockholders of the Corporation.
(v) As used in this Section 3, the Current
Market Price per share of Common Stock on any date of
determination shall be the lesser of (A) the average of
the daily Closing Prices for the fifteen consecutive
Trading Dates ending on and including the date of
determination of the Current Market Price, or (B) the
Closing Price for the date of determination of the
Current Market Price; provided, however, that, for the
purposes of calculating the Current Market Price in
connection with any redemption of the PRIDES, if any
adjustment of the Common Equivalent Rate pursuant to
paragraph (d) or paragraph (e) of this Section 3 is
effective as of any date during the period beginning on
the first day of such fifteen-day period and ending on
the date on which shares of PRIDES are to be redeemed,
then the Current Market Price as determined pursuant to
the foregoing will be adjusted to the extent
appropriate to reflect such adjustment. If the Current
Market Price is adjusted pursuant to the immediately
preceding proviso as a result of the effectiveness of
an adjustment of the Common Equivalent Rate but the
event requiring an adjustment of the Common Equivalent
Rate does not occur prior to the redemption of the
PRIDES, then the Corporation may in its sole discretion
elect to defer the following until the occurrence of
such event:
(1) issuing to the holder of any shares
of PRIDES surrendered for redemption the
additional shares of Common Stock issuable upon
such redemption over and above the shares of
Common Stock issuable upon such redemption on the
basis of the Current Market Price prior to
adjustment; and
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<PAGE> 8
(2) paying to such holder any amount in
cash in lieu of a fractional share of Common Stock
pursuant to paragraph (g) of this Section 3.
(vi) Before taking any action that would
cause an adjustment to the Common Equivalent Rate or
the Optional Conversion Rate that would cause the
Corporation to issue shares of Common Stock for
consideration below the then par value (if any) of
theCommon Stock upon conversion or redemption of the
PRIDES, the Corporation shall take any corporate action
which may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of such
Common Stock at such adjusted Common Equivalent Rate or
Optional Conversion Rate.
(vii) No adjustment in the Common Equivalent
Rate or the Optional Conversion Rate shall be required
unless such adjustment would require an increase or
decrease of at least 1% in such rate; provided,
however, that any adjustments which by reason of this
clause (vii) are not required to be (and are not) made
shall be carried forward and taken into account in any
subsequent adjustment.
(viii) In any case in which paragraph (d) of
this Section 3 shall require that an adjustment in the
Common Equivalent Rate or the Optional Conversion Rate
as a result of any event become effective after the
close of business on a record date, and the date of a
conversion pursuant to paragraph (a) or (c) of this
Section 3 occurs after such record date but before the
occurrence of such event, the Corporation may in its
sole discretion elect to defer the following until the
occurrence of such event:
(1) issuing to the holder of any shares of
PRIDES surrendered for conversion the additional
shares of Common Stock issuable upon such
conversion over and above the shares of Common
Stock issuable upon such conversion on the basis
of the Common Equivalent Rate or the Optional
Conversion Rate, as applicable, prior to
adjustment; and
(2) paying to such holder any amount in cash
in lieu of a fractional share of Common Stock
pursuant to paragraph (g) of this Section 3.
(ix) Before redeeming any shares of PRIDES, the
Corporation shall take any corporate action which may,
in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue
fully paid and nonassessable shares of Common Stock
upon such redemption.
(e) Adjustment for Certain Mergers and Other
----------------------------------------
Transactions. In case of any consolidation or merger to which the
- ------------
Corporation is a party (other than a consolidation or merger in
which the Corporation is the surviving or continuing corporation
and in which the shares of Common Stock outstanding immediately
before the merger or consolidation remain unchanged and other
than a KACC Merger (as defined in clause (iii) of paragraph (c)
of Section 4)), or in the case of any sale or transfer to another
corporation of the property of the Corporation as an entirety or
substantially as an entirety, or in the case of a statutory
exchange of securities with another corporation (other than in
connection with a merger or acquisition), each share of PRIDES
shall, after consummation of such transaction, be subject to (i)
conversion at the option of the holder into the kind and amount
of securities, cash, or other property receivable upon
consummation of such transaction by a holder of the number of
8
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<PAGE> 9
shares of Common Stock into which such share of PRIDES might have
been converted immediately before consummation of such
transaction, (ii) conversion on the Mandatory Conversion Date
into the kind and amount of securities, cash, or other property
receivable upon consummation of such transaction by a holder of
the number of shares of Common Stock into which such share of
PRIDES would have been converted if the conversion on the
Mandatory Conversion Date had occurred immediately before the
date of consummation of such transaction, plus the right to
receive cash in an amount equal to all accrued and unpaid
dividends on such share of PRIDES (other than previously declared
dividends payable to a holder of record as of a prior date), and
(iii) redemption on any redemption date on or after the Initial
Redemption Date in exchange for the kind and amount of
securities, cash, or other property receivable upon consummation
of such transaction by a holder of the number of shares of Common
Stock that would have been issuable at the Call Price in effect
on such redemption date upon a redemption of such share of PRIDES
immediately before consummation of such transaction, assuming
that, if the Notice Date for such redemption is not before such
transaction, the Notice Date had been the date of such
transaction; and assuming in each case that such holder of shares
of Common Stock failed to exercise rights of election, if any, as
to the kind or amount of securities, cash, or other property
receivable upon consummation of such transaction (provided that,
if the kind or amount of securities, cash, or other property
receivable upon consummation of such transaction is not the same
for each non-electing share, then the kind and amount of
securities, cash, or other property receivable upon consummation
of such transaction for each non-electing share shall be deemed
to be the kind and amount so receivable per share by a plurality
of the non-electing shares). The kind and amount of securities
into or for which the shares of PRIDES shall be convertible or
redeemable after consummation of such transaction shall be
subject to adjustment as described in Section 3(d) following the
date of consummation of such transaction. The Corporation may
not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.
(f) Notice of Adjustments, Etc. Whenever the Common
---------------------------
Equivalent Rate and the Optional Conversion Rate are adjusted as
herein provided, the Corporation shall:
(i) forthwith compute the adjusted Common
Equivalent Rate and the adjusted Optional Conversion
Rate in accordance with this Section 3 and prepare a
certificate signed by the Chief Executive Officer, the
Chairman, the President, any Vice President or the
Treasurer of the Corporation setting forth the adjusted
Common Equivalent Rate and the adjusted Optional
Conversion Rate, the method of calculation thereof in
reasonable detail and the facts requiring such
adjustment and upon which such adjustment is based and
file such certificate forthwith with the transfer agent
or agents for the PRIDES and the Common Stock;
(ii) make a prompt public announcement stating
that the Common Equivalent Rate and the Optional
Conversion Rate have been adjusted and setting forth
the adjusted Common Equivalent Rate and the adjusted
Optional Conversion Rate; and
(iii) mail a notice stating that the Common
Equivalent Rate and the Optional Conversion Rate have
been adjusted, the facts requiring such adjustment and
upon which such adjustment is based and setting forth
the adjusted Common Equivalent Rate and the adjusted
Optional Conversion Rate to the holders of record of
the outstanding shares of PRIDES at or prior to the
time the Corporation mails an interim statement to its
stockholders covering the quarter-yearly period during
which the facts requiring such adjustment occurred, but
in any event within 45 days of the end of such quarter-
yearly period.
9
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<PAGE> 10
In case, at any time while any of the shares of PRIDES are
outstanding,
(i) the Corporation shall declare a dividend (or
any other distribution) on its Common Stock, excluding
any cash dividends other than Extraordinary Cash
Distributions; or
(ii) the Corporation shall authorize the issuance
to all holders of its Common Stock of rights or
warrants to subscribe for or purchase shares of its
Common Stock or of any other subscription rights or
warrants; or
(iii) the Corporation shall authorize any
reclassification of its Common Stock (other than a
subdivision or combination thereof) or any
consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the
Corporation is required (except for a merger of the
Corporation into one of its subsidiaries solely for the
purpose of changing the corporate domicile of the
Corporation to another state of the United States and
in connection with which there is no substantive change
in the rights or privileges of any securities of the
Corporation other than changes resulting from
differences in the corporate statutes of the state the
Corporation was then domiciled in and the new state of
domicile), or the sale or transfer of all or
substantially all of the assets of the Corporation;
then the Corporation shall cause to be filed at each office or
agency maintained for the purpose of conversion of the shares of
PRIDES, and shall cause to be mailed to the holders of record of
the outstanding shares of PRIDES, at least 10 days (or such
shorter period, if any, as may be practicable in the case of an
action described in clause (iii)) before the date hereinafter
specified in clause (A) or (B) below (or the earlier of the dates
hereinafter specified, in the event that more than one date is
specified), a notice stating (A) the date on which a record is to
be taken for the purpose of such dividend, distribution, rights
or warrants, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be
determined, or (B) the date on which any such reclassification,
consolidation, merger, sale or transfer is expected to become
effective, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their
Common Stock for securities or other property (including cash),
if any, deliverable upon such reclassification, consolidation,
merger, sale or transfer. The failure to give or receive the
notice required by the preceding sentence or any defect therein
shall not affect the legality or validity of any such dividend,
distribution, right or warrant or other action.
(g) No Fractional Shares. No fractional shares of
---------------------
Common Stock shall be issued upon redemption or conversion of any
shares of the PRIDES. In lieu of any fractional share otherwise
issuable in respect of the aggregate number of shares of the
PRIDES of any holder that are redeemed or converted on any
redemption date or upon Mandatory Conversion or Optional
Conversion, such holder shall be entitled to receive an amount in
cash (computed to the nearest cent) equal to the same fraction of
the (i) Current Market Price of the Common Stock (determined as
of the second Trading Date immediately preceding the Notice Date)
in the case of redemption, or (ii) Closing Price of the Common
Stock determined (A) as of the fifth Trading Date immediately
preceding the Mandatory Conversion Date, in the case of Mandatory
Conversion, or (B) as of the second Trading Date immediately
preceding the effective date of conversion, in the case of an
Optional Conversion by a holder. If more than one share of
PRIDES shall be surrendered for conversion or redemption at one
time by or for the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of the PRIDES so
surrendered or redeemed.
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<PAGE> 11
(h) Cancellation. All shares of PRIDES which shall
------------
have been issued and reacquired in any manner by the Corporation
(excluding, until the Corporation elects to retire them, shares
which are held as treasury shares but including shares redeemed,
shares purchased and retired and shares converted into shares of
Common Stock or exchanged for shares of any other class of stock)
shall be retired and cancelled and the Board of Directors shall
cause to be taken all action necessary to restore such sharesto
the status of authorized but unissued shares of Preferred Stock
without designation as to series or class, and such shares may
thereafter be issued, but not as shares of PRIDES.
(i) Definitions. As used herein,
-----------
(i) the term "business day" shall mean any day
other than a Saturday, Sunday, or a day on which
banking institutions in the State of New York are
authorized or obligated by law or executive order to
close or a day which is or is declared a national or
New York holiday;
(ii) The "Call Price" of each share of PRIDES
shall be the sum of (x) $11.9925 on and after the
Initial Redemption Date, to and including March 30,
1997; $11.9319 on and after March 31, 1997, to and
including June 29, 1997; $11.8713 on and after June 30,
1997, to and including September 29, 1997; $11.8106 on
and after September 30, 1997, to and including November
29, 1997; and $11.75 on and after November 30, 1997, to
and including December 30, 1997; and (y) all accrued
and unpaid dividends thereon to but not including the
date fixed for redemption (other than previously
declared dividends payable to a holder of record as of
a prior date);
(iii) the term "Closing Price" on any day shall
mean the closing sales price regular way on such day
or, in case no such sale takes place on such day, the
average of the reported closing bid and asked
quotations regular way, in each case on the New York
Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on such Exchange, on the
principal national securities exchange on which the
Common Stock is listed or admitted to trading, or, if
not listed or admitted to trading on any national
securities exchange, the average of the high bid and
low asked quotations of the Common Stock in the over-
the-counter market on the day in question as reported
by the National Quotation Bureau Incorporated, or a
similarly generally accepted reporting service, or, if
no such quotations are available, the fair market value
of the Common Stock as determined by any New York Stock
Exchange member firm selected from time to time by the
Board of Directors of the Corporation for that purpose;
(iv) the term "Notice Date" with respect to any
notice given by the Corporation in connection with a
redemption of shares of PRIDES shall be the date on
which first occurs either the public announcement of
such redemption or the commencement of the mailing of
such notice to the holders of the shares of PRIDES in
accordance with paragraph (j) of this Section 3;
(v) the term "Trading Date" shall mean a date
on which the New York Stock Exchange (or any successor
to such Exchange) is open for the transaction of
business.
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<PAGE> 12
(j) Procedures Regarding Redemption or Mandatory
--------------------------------------------
Conversion.
- ----------
(1) The Corporation will provide notice of any
redemption of shares of PRIDES to holders of record of the PRIDES
to be redeemed not less than 15 nor more than 60 days prior to
the date fixed for such redemption. Such notice shall be
provided by mailing notice of such redemption first class postage
prepaid, to each holder of record of the shares of PRIDES to be
redeemed at such holder's address as it appears on the stock
register of the Corporation; provided, however, that no failure
to give such notice nor any defect therein shall affect the
validity of the proceeding for the redemption of any shares of
PRIDES to be redeemed except as to the holder to which the
Corporation has failed to give said notice of redemption or
except as to the holder whose notice of redemption was defective.
A public announcement of any call for redemption shall be made by
the Corporation before, or at the time of, the mailing of such
notice of redemption. Each such mailed notice shall state, as
appropriate, the following:
(i) the redemption date;
(ii) the number of shares of PRIDES to be
redeemed and, if less than all the shares held by any
holder are to be redeemed, the number of such shares to
be redeemed;
(iii) the Call Price, the number of shares of
Common Stock per share of PRIDES deliverable upon
redemption and the Current Market Price used to
calculate such number of shares of Common Stock;
(iv) the place or places where certificates for
such shares are to be surrendered for redemption;
(v) that the Corporation is depositing with a
bank or trust company, on or before the redemption
date, the shares of Common Stock payable by the
Corporation pursuant to this Section 3 and the proposed
date of such deposit; and
(vi) that dividends on shares of PRIDES to be
redeemed will cease to accrue on the day immediately
prior to the redemption date unless the Corporation
shall default in delivering the shares of Common Stock
payable by the Corporation pursuant to Section 3(b) at
the time and place specified in such notice.
(2) The Corporation's obligation to deliver
shares of Common Stock and cash, if any, in accordance with
paragraphs (a) and (b) of this Section 3 shall be deemed
fulfilled if, on or before a redemption date or the Mandatory
Conversion Date, the Corporation shall deposit, with a bank or
trust company having an office or agency and doing business in
the Borough of Manhattan in New York City and having a capital
and surplus of at least $50,000,000, such shares of Common Stock
and cash, if any, as are required to be delivered by the
Corporation pursuant to this Section 3 upon the occurrence of the
related redemption or Mandatory Conversion, in trust for the
account of the holders of the shares to be redeemed or converted
(and so as to be and continue to be available therefor), with
irrevocable instructions and authority to such bank or trust
company that such shares and funds be delivered upon redemption
or conversion of the shares of PRIDES so called for redemption or
subject to conversion. Any shares of Common Stock and cash, if
any, so deposited and unclaimed by the holders of shares of
PRIDES at the end of two years after such redemption or
conversion date (together with any interest thereon not
theretofore paid to the Corporation which shall be allowed by the
bank or trust
12
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<PAGE> 13
company with which such deposit was made) shall be paid by such
bank or trust company to the Corporation (or its successor),
after which the holder or holders of such shares of PRIDES so
redeemed or converted shall look only to the Corporation (or its
successor) for delivery of such shares of Common Stock and cash,
if any. Each holder of shares of PRIDES to be redeemed or
converted shall surrender the certificates evidencing such shares
to the Corporation at the place designated in the notice of such
redemption (or, in the case of a conversion pursuant to paragraph
(a) of this Section 3, the principal executive offices of the
Corporation or at such other place as may be designated by the
Corporation (or its successor) in a written notice mailed to the
holders of record of the PRIDES) and shall thereupon be entitled
to receive certificates evidencing shares of Common Stock and
cash, if any, payable pursuant to paragraph (a) or (b), as the
case may be, of this Section 3, following such surrender and
following the date of such redemption or conversion. In case
fewer than all the shares represented by any such surrendered
certificates are called for redemption, a new certificate shall
be issued at the expense of the Corporation representing the
unredeemed shares. If (A) shares of PRIDES are called for
redemption and, on the date fixed for redemption, shares of
Common Stock necessary for the redemption shall have been
deposited with a bank or trust company as provided above or (B)
shares of PRIDES have been converted pursuant to paragraph (a) of
this Section 3, then, notwithstanding that the certificates
evidencing any shares of PRIDES so called for redemption or
converted shall not have been surrendered, the shares represented
thereby so called for redemption or converted shall be deemed no
longer outstanding and all rights with respect to the shares so
called for redemption or converted shall forthwith cease and
terminate, except for the right of the holders to receive the
shares of Common Stock and cash, if any, payable pursuant to this
Section 3, without interest upon surrender of their certificates
therefor, provided, that if any cash payable upon the surrender
of certificates evidencing shares of PRIDES that have been
converted pursuant to paragraph (a) of this Section 3 is not paid
when due, the obligation to pay such cash shall bear interest at
the rate of 11% per annum; and provided further that holders of
shares of PRIDES at the close of business on a record date for
any payment of dividends on shares of PRIDES shall be entitled to
receive the dividends payable on such shares on the corresponding
dividend payment date notwithstanding the redemption or
conversion of such shares following such record date and on or
before such corresponding dividend payment date. Holders of
shares of PRIDES that are redeemed or converted in a Mandatory
Conversion shall not be entitled to receive dividends declared
and paid on shares of Common Stock issuable on such redemption or
Mandatory Conversion, and such shares of Common Stock shall not
be entitled to vote, until such shares of Common Stock are issued
upon the surrender of the certificates representing such shares
of PRIDES and upon such surrender such holders shall be entitled
to receive such dividends declared and paid on such shares of
Common Stock subsequent to the redemption date or Mandatory
Conversion Date, as applicable.
(k) Reservation of Shares. The Corporation shall at
---------------------
all times reserve and keep available, free from preemptive
rights, out of authorized but unissued shares of Common Stock,
the maximum number of shares of Common Stock into which all
shares of PRIDES from time to time outstanding are convertible
pursuant to paragraph (a) or (c) of this Section 3, but shares of
Common Stock held in treasury of the Corporation may, in its
discretion, be delivered upon any conversion of shares of PRIDES.
(l) Timing. The holders of shares of PRIDES at the
------
close of business on a record date for the payment of dividends
shall be entitled to receive the dividend payable on such shares
on the corresponding dividend payment date notwithstanding the
redemption or conversion thereof subsequent to such record date
and on or before such corresponding dividend payment date.
(m) Partial Redemption. In no event shall the
------------------
Corporation redeem less than all the outstanding shares of PRIDES
pursuant to paragraph (b) of this Section 3 unless full
cumulative dividends
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<PAGE> 14
shall have been paid or declared and set apart for payment upon
all outstanding shares of PRIDES for all past dividend periods.
(n) Taxes. The Corporation shall pay any and all
-----
documentary, stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on the
redemption or conversion of shares of PRIDES pursuant to this
Section 3; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the
registered holder of the shares of PRIDES redeemed or converted
or to be redeemed or converted, and no such issue or delivery
shall be made unless and until the person requesting such issue
has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such
tax has been paid.
(o) Listing. The Corporation shall endeavor to list
-------
the shares of Common Stock required to be delivered upon
redemption or conversion of the shares of PRIDES, prior to such
delivery, upon each national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of such
delivery.
(p) Multiple Shares Surrendered. If more than one
---------------------------
share shall be surrendered for redemption or conversion at one
time by the same holder, the number of full shares of Common
Stock issuable upon such redemption or conversion thereof shall
be computed on the basis of the aggregate number of shares of
PRIDES so surrendered.
(q) Compliance with Laws. Prior to the delivery of
--------------------
any securities which the Corporation shall be obligated to
deliver upon redemption or conversion of the PRIDES, the
Corporation shall endeavor to comply with all federal and state
laws and regulations thereunder requiring the registration of
such securities with, or any approval of or consent to delivery
thereof by, any governmental authority.
(r) Survival of Certain Provisions. So long as a
------------------------------
Deposit Deficit is outstanding, the provisions of this
Certificate of Designations contained in Sections 2(b), 3(a) and
3(j)(2) regarding a Deposit Deficit shall continue in full force
and effect and shall not thereafter be amended, notwithstanding
that no shares of PRIDES remain outstanding.
Section 4. Voting Rights.
-------------
(a) Except as otherwise provided by paragraph (b) or
(c) of this Section 4 or as required by law, the holders of
shares of PRIDES shall have 4/5 of a vote in respect of each
share of PRIDES held as to all matters voted upon by the
stockholders of the Corporation and shall vote together with the
holders of the Common Stock and together with the holders of any
other classes or series of stock who are entitled to vote in such
manner and not as a separate class.
(b) In the event that dividends on the shares of
PRIDES or any other series of Preferred Stock shall be in arrears
and unpaid for six quarterly dividend periods, or if any series
of Preferred Stock (other than the PRIDES) shall be entitled for
any other reason to exercise voting rights, separate from the
Common Stock, to elect any directors of the Corporation
("Preferred Stock Directors"), the holders of the shares of
PRIDES (voting separately as a class with holders of all other
series of Preferred Stock upon which like voting rights have been
conferred and are exercisable), with each share
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<PAGE>
<PAGE> 15
of PRIDES entitled to one vote on this and other matters in which
Preferred Stock votes as a group, shall be entitled to vote for
the election of two directors of the Corporation, such directors
to be in addition to the number of directors constituting the
Board of Directors immediately before the accrual of such right.
Such right, when vested, shall continue until all cumulative
dividends accumulated and payable on the shares of PRIDES and
such other series of Preferred Stock shall have been paid in full
and the right of any other series of Preferred Stock to exercise
voting rights, separate from the Common Stock, to elect Preferred
Stock Directors shall terminate or have terminated, and, when so
paid and any such termination occurs or has occurred, such right
of the holders of the shares of PRIDES shall cease. The term of
office of any director elected by the holders of the shares of
PRIDES and such other series shall terminate on the earlier of
(i) the next annual meeting of stockholders at which a successor
shall have been elected and qualified or (ii) the termination of
the right of holders of the shares of PRIDES and such other
series to vote for such directors.
(c) So long as any shares of PRIDES remain
outstanding, the consent of the holders of at least two-thirds of
all such shares voting on such matter (voting separately as a
class) given in person or by proxy, at any special or annual
meeting called for such purpose, or by written consent as
permitted by law and the Certificate of Incorporation and By-
laws, shall be necessary to permit, effect or validate any one or
more of the following:
(i) The amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Certificate of Incorporation or of the resolutions
contained in this Certificate of Designations which would
materially and adversely affect any right, preference,
privilege or voting power of the PRIDES or of the holders
thereof, provided, however, that any such amendment,
alteration or repeal that would authorize, create or issue
any additional shares of stock (whether or not already
authorized) ranking senior to, on a parity with or junior to
the PRIDES as to dividends or as to the distribution of
assets upon Liquidation, shall be deemed not to materially
and adversely affect such rights, preferences, privileges or
voting power.
(ii) Notwithstanding anything in clause (i) above to
the contrary, the issuance of shares of any class or series
of stock, or any security convertible at the option of the
holder thereof into shares of any class or series of stock,
ranking senior to the PRIDES as to dividends or as to the
distribution of assets upon Liquidation.
(iii) The consummation of a merger or consolidation of
the Corporation with Kaiser Aluminum & Chemical Corporation
("KACC"), a Delaware corporation (a "KACC Merger"), if (A)
each outstanding share of PRIDES, upon the effectiveness of
the KACC Merger, neither remains outstanding nor is
converted into one share of preferred stock of the surviving
corporation ("KACC Preferred Stock"), identical as near as
practicable to a share of PRIDES (including in respect of
accrued dividends and the listing on a national securities
exchange of such KACC Preferred Stock), convertible into and
redeemable for shares of common stock of the surviving
corporation, (B) such shares of KACC Preferred Stock (if
issued in the KACC Merger) are not to be deposited with a
bank or trust company substantially in accordance with
Section 3(j)(2) upon or prior to the effectiveness of the
KACC Merger or (C) the covenants in the debt instruments of
the surviving corporation of the KACC Merger, at the time of
the KACC Merger, prohibit the payment of any of the
dividends on the PRIDES or the KACC Preferred Stock, as the
case may be, in accordance with the terms thereof through
and including the day immediately prior to the Mandatory
Conversion Date. In the event of a KACC Merger for which
the consent of the holders of the PRIDES voting as a class
is not obtained, (x) the Corporation shall deliver to the
transfer agent or agents for the PRIDES and the Common Stock
a certificate
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<PAGE> 16
signed on behalf of the Corporation by the Chief Financial
Officer of the Corporation to the effect that such consent
is not required and (y) so long as any shares of PRIDES or
KACC Preferred Stock, as the case may be, remain
outstanding, the surviving corporation of the KACC Merger
shall not thereafter amend its debt instruments so as to
prohibit the payment of any of the dividends on the PRIDES
or KACC Preferred Stock, as the case may be, in accordance
with the terms thereof through and including the day
immediately prior to the Mandatory Conversion Date, without
the consent of the holders of at least two-thirds of the
shares of the PRIDES or the KACC Preferred Stock, as the
case may be, voting thereon (voting separately as a class).
(iv) The amendment of any of the provisions of the
Intercompany Note (as such term is defined in the
Prospectus, dated February 10, 1994, relating to the PRIDES)
in a manner that materially adversely affects the
Corporation as the holder of such Intercompany Note or the
holders of the PRIDES.
(v) The consummation of a merger or consolidation of
the Corporation with any other corporation, unless each
holder of shares of PRIDES immediately preceding such merger
or consolidation shall receive or continue to hold in the
surviving corporation the same number of shares, with
substantially the same rights and preferences (except as
contemplated by Section 3(e)), as correspond to the shares
of PRIDES so held.
The foregoing voting provisions set forth in this
paragraph (c) shall not apply if, at or prior to the time when
the act with respect to which such vote would otherwise be
required shall be effected, (1) all outstanding shares of PRIDES
shall have been redeemed or converted pursuant to paragraph (a),
(b) or (c) of Section 3 or (2) (x) all outstanding shares of
PRIDES are scheduled to be redeemed or converted pursuant to
paragraph (a) or (b) of Section 3 within two months, (y)
sufficient shares of the Common Stock and cash, if any, necessary
for such redemption or conversion shall have been deposited with
a bank or trust company in accordance with Section 3(j)(2) and
(z) a KACC Merger is not consummated prior to such redemption or
conversion.
Section 5. Liquidation Rights.
------------------
(a) Subject to the rights of holders of Series A Stock
and holders of any class or series of stock which the Corporation
may in the future issue which ranks senior to, or on a parity
with, the PRIDES in respect of a distribution of assets upon the
liquidation, dissolution or winding-up of the affairs of the
Corporation, whether voluntary or involuntary (such event, a
"Liquidation"), the holders of shares of PRIDES shall be entitled
to receive out of the assets of the Corporation available for
distribution to stockholders, whether from capital, surplus or
earnings, before any distribution or payment is made to holders
of Common Stock of the Corporation or on any other class or
series of stock of the Corporation ranking junior as to assets
distributable upon Liquidation to the shares of PRIDES,
liquidating distributions in the amount of $11.75 per share, plus
an amount equal to all dividends accrued and unpaid thereon,
whether or not earned or declared (including dividends
accumulated and unpaid), to the date of Liquidation; but such
holders shall not be entitled to any further payment. If, upon
any Liquidation, the assets of the Corporation or proceeds
thereof distributable among the holders of the shares of PRIDES
shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other class or series
of stock ranking on a parity with the PRIDES in respect of a
distribution of assets upon Liquidation, then such assets or
proceeds thereof shall be distributed among the holders of shares
of PRIDES and any such other stock ratably in accordance with the
respective amounts which would be payable on such shares of
PRIDES and any such other stock if all amounts payable thereon
were paid in full. For the purposes hereof, neither the
consolidation or merger of the
16
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<PAGE> 17
Corporation with one or more corporations nor the sale, lease or
transfer by the Corporation of all or any part of its assets
shall be deemed a Liquidation.
(b) Subject to the rights of holders of shares of any
class or series of stock ranking on a parity with or senior to
the PRIDES in respect of the distribution of assets upon
Liquidation, and after payment shall have been made in full to
the holders of PRIDES, as provided in this Section 5, but not
prior thereto, any other class or series of stock ranking junior
to the PRIDES in respect of the distribution of assets upon
Liquidation shall, subject to the respective terms and provisions
(if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of
the PRIDES shall not be entitled to share therein.
(c) Written notice of any Liquidation, stating the
payment date or dates when and the place or places where the
amounts distributable in such circumstances shall be payable,
shall be given by first class mail, postage prepaid, not less
than 15 days (to the extent practicable) prior to any payment
date stated therein, to the holders of record of the PRIDES at
their respective addresses as the same shall appear on the books
of the Corporation or any transfer agent for the PRIDES.
Section 6. Record Holders. The Corporation and the
--------------
transfer agent for the PRIDES may deem and treat the record
holder of any share of PRIDES as the true and lawful owner
thereof for all purposes, and neither the Corporation nor such
transfer agent shall be affected by any notice to the contrary.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designations to be signed in its name and on its
behalf on this 17th day of February, 1994 by an officer of the
Corporation who acknowledges that this Certificate of
Designations is the act of the Corporation and that to the best
of his knowledge, information and belief and under penalties for
perjury, all matters and facts contained in this Certificate of
Designations with respect to authorization and approval thereof
are true in all material respects.
KAISER ALUMINUM CORPORATION
---------------------------
Name: John T. La Duc
Title: Vice President
ATTEST:
- ------------------------------
Name: John Wm. Niemand, II
Title: Assistant Secretary
17
<PAGE> 1
SENIOR SUBORDINATED INTERCOMPANY NOTE
February 15, 1994
FOR VALUE RECEIVED, the undersigned, Kaiser Aluminum &
Chemical Corporation, a Delaware corporation (the "Company"),
HEREBY PROMISES TO PAY to the order of Kaiser Aluminum Corpora-
tion, a Delaware corporation (the "Payee"), the principal sum of
THIRTY MILLION FORTY-EIGHT THOUSAND FOUR HUNDRED AND FORTY-FOUR
DOLLARS ($30,048,444), which shall be due and payable as
hereinafter provided.
1. This Note shall not bear interest. This Note shall
be payable in quarterly installments on March 30, June 29,
September 29 and December 30 of each year, commencing March 30,
1994, and ending December 30, 1997, the first such quarterly
installment to be in the amount of $948,444 and each remaining
quarterly installment to be in the amount of $1,940,000.
2. The entire unpaid principal amount of this Note
shall be due and payable on December 30, 1997. Notwithstanding
the foregoing provisions of this Note, in the event that all
shares of 8.255% PRIDES, Convertible Preferred Stock (the
"PRIDES") of the Payee are redeemed or are converted into shares
of the common stock of the Payee pursuant to the Certificate of
Designations governing such shares of PRIDES, the Company may,
after all amounts payable by the Payee in respect of accrued and
unpaid dividends in connection with
<PAGE>
<PAGE> 2
such redemption or conversion have been paid, defer further
principal and interest payments on this Note until such time as
no Specified Senior Debt (as defined in Section 7(c) of this
Note) is then outstanding.
3. The Company shall make each payment hereunder not
later than 5:00 p.m. (New York City time) on the day when due in
lawful money of the United States of America to the holder of
this Note by delivery of a certified or bank cashier's check in
the amount of such payment or, at such holder's option, by wire
transfer of immediately available funds.
4. Whenever any payment to be made hereunder shall be
stated to be due on a Saturday, Sunday or a public or bank holi-
day or the equivalent for banks generally under the laws of the
State of New York (any other day being a "Business Day"), such
payment may be made on the next succeeding Business Day.
5. The Company shall have the right to prepay the
principal amount of this Note, in whole or in part, at any time
or from time to time, without premium or penalty, but with inte-
rest on the portion of the principal amount so prepaid accrued to
the date of prepayment. This Note is an Equity Proceeds Note (as
such term is defined in the Credit Agreement dated as of February
15, 1994 between Kaiser Aluminum Corporation, the Company,
certain financial institutions, and BankAmerica Business Credit,
Inc., as agent (in such capacity the "Agent"), as the same has
been, or may hereafter be, amended, supplemented, restated, or
otherwise modified from time to time (the "Credit Agreement")).
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<PAGE>
<PAGE> 3
6. In case one or more of the following events of
default shall have occurred and be continuing:
(a) the Company fails to pay any installment of prin-
cipal of, or interest on, this Note when due, whether or not
payment is prohibited by the provisions of Section 7 of this
Note; or
(b) a court having jurisdiction in the premises shall
have entered a decree or order for relief against the Company in
an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Company or for all or any substan-
tial part of its property, or ordering the winding-up or liquida-
tion of its affairs, and such decree or order shall have remained
unstayed and in effect for a period of ninety consecutive days;
or
(c) the Company shall have commenced a voluntary case
under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall have consented to the entry
of an order for relief in an involuntary case under any such law,
or shall have consented to the appointment of or taking posses-
sion by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for all or
any substantial part of its property, or shall have made an
assignment for the benefit of creditors, or shall have taken any
corporate action in furtherance of any of the foregoing;
-3-
<PAGE>
<PAGE> 4
then, in the case of an event specified in clause (a), unless the
principal of this Note shall have already become due and payable,
the holder of this Note by notice to the Company in writing may
at its option declare the principal amount and accrued interest
to the date of declaration of this Note to be due and payable
immediately. Upon any such declaration, the same shall become
and shall be immediately due and payable, provided that any pay-
ment pursuant to such acceleration shall be subject to Section
7(g) of this Note. If an event specified in clause (b) or (c)
above occurs, such amount shall ipso facto become and be immedi-
ately due and payable without any declaration or other act on the
part of the holder, but subject to Section 7(g) of this Note.
7. (a) The Company, for itself, its successors and
assigns, covenants and agrees, and the Payee (and each other
holder of this Note), by its acceptance hereof, likewise cov-
enants and agrees, for the benefit of all present and future
holders of Senior Indebtedness of the Company (as defined in
Section 7(h) of this Note), that all direct or indirect payments
or distributions on or with respect to this Note, whether pursu-
ant to the terms of this Note or upon acceleration or otherwise,
including, without limitation, by way of or on account of a
"Claim" (as defined hereinbelow) or the payment of the principal
of and interest on this Note, is hereby expressly subordinated,
to the extent and in the manner hereinafter set forth, in right
of payment to the prior payment in full in cash or cash equiva-
lents of all Senior Indebtedness of the Company (including,
without limitation, interest that would accrue but for the
occurrence of any proceeding of the kind referred to in the
introductory clause of
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<PAGE>
<PAGE> 5
Section 7(b) of this Note, whether or not such interest is an
allowable claim in such proceeding).
(b) Upon any direct or indirect payment or distribu-
tion of assets or securities of the Company of any kind or char-
acter, whether in cash, property or securities, upon any dissolu-
tion, winding up, liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency,
reorganization, receivership or other proceedings or upon an
assignment for the benefit of creditors or any other marshalling
of the assets and liabilities of the Company or otherwise,
(i) the holders of all Senior Indebtedness of the
Company shall be entitled to receive payment in full in cash or
cash equivalents of such Senior Indebtedness of the Company (in-
cluding, without limitation, interest that would accrue but for
the occurrence of any such proceeding whether or not such inter-
est is an allowable claim in such proceeding) before the holder
of this Note shall be entitled to receive any direct or indirect
payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities,
with respect to this Note, whether pursuant to the terms of this
Note or upon acceleration or otherwise, including by way of or on
account of any claim against the Company for rescission of the
issuance of this Note or for monetary damages from, or in connec-
tion with, the issuance of this Note, or for reimbursement or
contribution on account of such a claim (a "Claim"), or the pay-
ment of principal of or interest on this Note; and
-5-
<PAGE>
<PAGE> 6
(ii) any direct or indirect payment or distribu-
tion of assets or securities of the Company of any kind or
character, whether in cash, property or securities, to which the
holder of this Note would be entitled except for the provisions
of this Section 7 shall be paid by the Company or by any
liquidating trustee or agent or other person making such payment
or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of
Senior Indebtedness of the Company or their representative or
representatives, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness of the
Company held or represented by each, to the extent necessary to
make payment in full in cash or cash equivalents of all Senior
Indebtedness of the Company (including, without limitation,
interest that would accrue but for the occurrence of any such
proceeding whether or not such interest is an allowable claim in
such proceeding) remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness of the Company; and
(iii) in the event that, notwithstanding the fore-
going, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities,
shall be received by the holder of this Note, whether pursuant to
the terms of this Note or upon acceleration or otherwise, includ-
ing by way of or on account of a Claim, or the payment of princi-
pal of or interest on this Note, before all Senior Indebtedness
of the Company is paid in full in cash or cash equivalents, such
payment or distribution shall be received and held in trust for
and paid over to the holders of such Senior Indebtedness of the
Company or their representative or representatives, ratably as
aforesaid, for application to
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<PAGE>
<PAGE> 7
the payment of all Senior Indebtedness of the Company remaining
unpaid until all such Senior Indebtedness of the Company shall
have been paid in full in cash or cash equivalents, after giving
effect to any concurrent payment or distribution to the holders
of such Senior Indebtedness of the Company.
The consolidation of the Company with, or the merger of
the Company into, another corporation or other entity or the
liquidation or dissolution of the Company following the sale or
conveyance of its property or assets as an entirety, or substan-
tially as an entirety, to another corporation or other entity
shall not be deemed a dissolution, winding up, liquidation or
reorganization of the Company for the purposes of this Section 7.
Subject to the payment in full in cash or cash equivalents of all
Senior Indebtedness of the Company, the holder of this Note shall
be subrogated (without any duty on the part of the holders of
Senior Indebtedness of the Company to warrant, create,
effectuate, preserve or protect such subrogation) to the rights
of the holders of Senior Indebtedness of the Company to receive
payments or distributions of cash, property or securities of the
Company applicable to Senior Indebtedness of the Company until
the principal of and interest on this Note shall be paid in full
and, for the purpose of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of the Com-
pany of cash, property or securities otherwise distributable to
the holder of this Note shall, as between the Company, its cre-
ditors other than the holders of Senior Indebtedness of the
Company, and the holder of this Note, be deemed to be a payment
by the Company to the holders of or on account of the Senior
Indebtedness of the Company. It is understood that the provi-
sions of this Section 7 are and are intended solely
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<PAGE>
<PAGE> 8
for the purpose of defining the relative rights of the holder of
this Note, on the one hand, and the holders of Senior
Indebtedness of the Company, on the other hand. Nothing
contained in this Section 7 or elsewhere in this Note is intended
to or shall impair, as between the Company, its creditors other
than the holders of Senior Indebtedness of the Company, and the
holder of this Note, the obligation of the Company, which is
unconditional and absolute, to pay to the holder of this Note the
principal of and interest on this Note as and when the same shall
become due and payable in accordance with its terms, or to affect
the relative rights of the holder of this Note and creditors of
the Company other than the holders of Senior Indebtedness of the
Company, nor shall anything herein prevent the holder of this
Note from exercising all remedies otherwise permitted by appli-
cable law upon default under this Note, subject to the rights, if
any, under this Section 7 of the holders of Senior Indebtedness
of the Company in respect of cash, property or securities of the
Company received upon the exercise of any such remedy. Upon any
payment or distribution of assets of the Company referred to in
this Section 7, the holder of this Note shall be entitled to rely
upon any order or decree of a court of competent jurisdiction in
which any proceedings of the nature described in this Section are
pending or upon a certificate of the liquidating trustee or agent
or other person making any distribution to the holder of this
Note for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Senior Indebted-
ness of the Company and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Section 7.
-8-
<PAGE>
<PAGE> 9
(c) No direct or indirect payments or distributions by
or on behalf of the Company on or with respect to this Note
(whether pursuant to the terms of this Note or upon acceleration
or otherwise, including by way of or on account of a Claim, or
the payment of principal of or interest on this Note) shall be
made if, at the time of such payment or distribution, there
exists a default in the payment of all or any portion of any
Senior Indebtedness of the Company (other than a payment default
to the extent it relates to those items described in clause
(i)(B) of the definition of "Senior Indebtedness" contained in
the Subordinated Indenture (as the term Subordinated Indenture is
defined in the Credit Agreement) or a payment default to the
extent it relates to those items of Senior Indebtedness of the
Company referred to in clause (ii)(B) of Section 7(h)), and such
payment default (other than to the extent it relates to those
items described in clause (i)(B) of the definition of "Senior
Indebtedness" contained in the Subordinated Indenture) shall not
have been cured or waived or the benefits of this sentence waived
in writing by or on behalf of the holders of such Senior
Indebtedness of the Company. In addition, during the continuance
of any other default with respect to the obligations of the
Company referred to in clause (i) of Section 7(h) (the "Specified
Senior Debt") that would permit (or would so permit with the
passage of time or giving of notice or both) the acceleration of
the maturity of such Specified Senior Debt, no direct or indirect
payments or distributions by or on behalf of the Company on or
with respect to this Note may be made (whether pursuant to the
terms of this Note or upon acceleration or otherwise, including
by way of or on account of a Claim, or the payment of principal
of or interest on this Note) for a period (the "Payment Blockage
Period") commencing on the date of receipt by the holder of this
Note of notice of such default
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<PAGE>
<PAGE> 10
specifying that such notice is a Payment Blockage Notice from the
Agent under the Credit Agreement, or, if such default results
from the acceleration of this Note, commencing on the earlier of
the date of receipt of such notice by the holder of this Note or
the date of such acceleration, and ending on the earliest of (a)
179 days thereafter, (b) the date on or as of which (i) such
default has been cured or waived, (ii) the Company has delivered
to the holder of this Note an Officers' Certificate (as herein-
after defined) to such effect and (iii) the Agent under the
Credit Agreement shall have endorsed on such Officers' Certifi-
cate that it does not object to the form or substance of such
Officers' Certificate, provided, that if such
--------
default has been cured or waived, the Company shall promptly
notify the holder of this Note of such cure or waiver and the
Agent under the Credit Agreement shall promptly endorse such
notice, and (c) the date on or as of which the Agent under the
Credit Agreement shall have consented in writing to the
termination of such Payment Blockage Period. Notwithstanding the
foregoing, in no event (a) may the total number of days during
which any Payment Blockage Period or Payment Blockage Periods may
be in effect during any 360 consecutive day period exceed 179
days in the aggregate or (b) will payments or distributions be
prohibited by this Section 7(c) if (i) any of the Company's 12-
3/4% Senior Subordinated Notes due 2003 shall then be outstanding
and (ii) payments and distributions are not then prohibited under
Sections 3.03 and (if, at the time, there are any "Subsidiary
Guarantors" (as such term is defined in the Subordinated
Indenture)) 16.04 of the Subordinated Indenture. No default
which existed or was continuing on the date of the commencement
of any Payment Blockage Period with respect to Specified Senior
Debt and was known at the time of commencement thereof to the
Agent under the Credit Agreement shall be, or be made, the
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<PAGE> 11
basis for the commencement of a second Payment Blockage Period by
the Agent under the Credit Agreement whether or not within a
period of 360 consecutive days, unless such default shall have
been cured or waived for a period of not less than 90 consecutive
days. As used herein, the term "Officers' Certificate" shall
mean a certificate of the Company signed on behalf of the Company
by the Chairman of the Board, the President or any Vice President
and by the Chief Financial Officer, the Controller, the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company.
In the event that, notwithstanding the foregoing, the
Company shall make any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, to the holder of this Note prohibited by the fore-
going provisions of this Section 7(c) (whether pursuant to the
terms of this Note or upon acceleration or otherwise, including
by way of or on account of a Claim, or the payment of principal
of or interest on this Note), then and in any such event such
payment or distribution shall, to the extent permitted by law, be
received and held in trust for the benefit of and be paid over
and delivered forthwith to the holders of the Senior Indebtedness
of the Company or their representative or representatives.
The provisions of this Section 7(c) shall not apply to
any payment with respect to which Section 7(b) would be
applicable.
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<PAGE>
<PAGE> 12
(d) Except as provided in clause (b) or (c) above,
nothing contained in this Note shall affect the obligation of the
Company to make, or prevent the Company from making, at any time,
payments of principal or interest on this Note.
(e) The holder of this Note shall take such action as
may be necessary or appropriate to effectuate the subordination
as provided in this Section 7, including, without limitation, in
the event of any dissolution, winding up, liquidation or bank-
ruptcy reorganization of the Company (whether in bankruptcy,
insolvency or receivership proceedings or upon a general assign-
ment for the benefit of creditors or any other similar remedy or
otherwise) tending towards liquidation of the business and assets
of the Company, the immediate filing of a claim for the unpaid
balance of this Note in the form required in such proceedings and
using its best efforts to cause such claim to be approved. If
the holder of this Note does not file a proper claim or proof of
debt in the form required in such proceedings prior to 30 days
before the expiration of the time to file such claim or claims,
the holders of Senior Indebtedness of the Company (or their
representative or representatives) are hereby authorized to file
an appropriate claim for and on behalf of the holder of this
Note. Nothing herein shall be deemed to authorize the holders of
Senior Indebtedness of the Company to authorize or consent to or
accept or adopt on behalf of the holder of this Note any plan of
reorganization, arrangement, adjustment or composition affecting
this Note or the rights of the holder of this Note, or to autho-
rize the holders of Senior Indebtedness of the Company to vote in
respect of the claim of the holder of this Note in any such
proceeding. In the event that the provisions of this Section 7
shall at the time prohibit payments to the
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<PAGE> 13
holder of this Note, no holder of this Note shall waive, forgive
or cancel any monetary obligation, or any claim before a
bankruptcy court, under or with respect to this Note or any
Claim.
(f) No right of any present or future holder of any
Senior Indebtedness of the Company to enforce subordination as
provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of
this Note, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with. The holders of
Senior Indebtedness of the Company may at any time and from time
to time, without the consent of or notice to the holder of this
Note, without incurring responsibility to the holder of this Note
and without impairing or releasing or otherwise affecting the
rights of any holder of Senior Indebtedness of the Company or the
respective liabilities or obligations of the Company or the
holder this Note or in any way altering or affecting any of the
provisions of this Section 7:
(1) change the amount, manner, place or terms of pay-
ment or change or extend the time of payment of or renew,
refinance, modify, alter or restructure the terms of the
Senior Indebtedness of the Company or any document or in-
strument evidencing or governing such Senior Indebtedness of
the Company in any manner or enter into or amend in any
manner any other agreement relating to Senior Indebtedness
of the Company or any security therefor;
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<PAGE> 14
(2) sell, exchange, release or otherwise deal with any
property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, Senior Indebtedness of the
Company and otherwise deal freely with the Company;
(3) release anyone (including any guarantor) liable in
any manner for the payment or collection of Senior Indebted-
ness of the Company;
(4) exercise or refrain from exercising any rights
against the Company and others (including any guarantor),
including releasing, selling or exchanging any security;
(5) apply any sums by whomsoever paid or however
realized to the Senior Indebtedness of the Company; or
(6) take any other action which otherwise might be
deemed to impair the rights of the holder of this Note.
No compromise, alteration, amendment, modification,
extension, renewal or other change of, or waiver, consent or
other action in respect of, any liabilities or obligation under
or in respect of, or of any of the terms, covenants or conditions
of any indenture or other instrument under which any Senior
Indebtedness of the Company is outstanding or of such Senior
Indebtedness of the Company, whether or not in accordance with
the provisions of any applicable document, shall in any way alter
or affect any of the provisions of this Section 7. As long as
any Senior Indebtedness of the Company is outstanding, no
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<PAGE> 15
amendment to, or any waiver of the provisions of, this Section 7
which adversely affects the rights of the holders of Senior
Indebtedness of the Company under this Section 7 shall be
effective against the holders of Senior Indebtedness of the
Company who have not consented thereto.
(g) If payment of the Note is accelerated because of
an event of default as provided in Section 6 of this Note, the
Company shall promptly notify the Agent under the Credit Agree-
ment, and the trustee under the indenture (the "Senior
Indenture") governing the Company's 9-7/8% Senior Notes due
February 15, 2002 (the "Senior Notes"), of the acceleration. The
Company may not pay the Note until five Business Days after the
Agent under the Credit Agreement and the trustee under the Senior
Indenture receive such notice (if any Senior Indebtedness of the
Company remains outstanding) and thereafter may pay this Note
only if this Note otherwise permits the payment at that time.
(h) The term "Senior Indebtedness of the Company"
shall mean (i) all monetary obligations of the Company under the
Credit Agreement, including all related notes, collateral docu-
ments, and guarantees, in each case, as any of the same has been
or may be amended, supplemented, restated or otherwise modified
from time to time (in each case in whole or in part) and any
refundings, refinancings, replacements or restructurings of such
monetary obligations that individually or in the aggregate
provide, at one time, the source of repayment for at least fifty
percent of the then outstanding aggregate amount of all monetary
obligations of the Company under the Credit Agreement, and (ii)
(A) all principal of, premium, if any, and interest on the Senior
Notes, and (B) all other monetary obligations
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<PAGE>
<PAGE> 16
of the Company under the Senior Notes or the Senior Indenture, in
each case, as the same may be amended, supplemented, restated or
otherwise modified from time to time.
8. All powers and remedies given to the holder of this
Note shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and
remedies available to the holder of this Note, by judicial pro-
ceedings or otherwise, to enforce the performance or observance
of the covenants and agreements contained in this Note, and no
delay or omission of the holder of this Note to exercise any
right or power accruing upon any default hereunder shall impair
any such right or power, or shall be construed to be a waiver of
any such default or an acquiescence therein.
9. This Note shall be binding upon the Company and its
successors and assigns, and the terms and provisions of this Note
shall inure to the benefit of Payee, the holders of Senior
Indebtedness of the Company and their respective successors and
assigns, including subsequent holders hereof.
10. The terms and provisions of this Note are sever-
able, and if any term or provision shall be determined to be
superseded, illegal, invalid or otherwise unenforceable in whole
or in part pursuant to applicable law by a governmental authority
having jurisdiction, such determination shall not in any manner
impair or otherwise affect the validity, legality or enforce-
ability of that term or provision in any other jurisdiction or
any of the remaining terms and provisions of this Note in any
jurisdiction.
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<PAGE>
<PAGE> 17
11. Presentment for payment, notice of dishonor, protest,
notice of protest and any other notice are hereby waived. This Note
shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to principles of
conflict of laws.
12. No amendment, modification or waiver of any term or
provision of this Note, nor consent to any departure by the Company
herefrom, shall be effective unless the same shall be in writing and
signed by the holder of this Note, and then such waiver, modification
or consent shall be effective only in the specific instance and for
the specific purpose for which given.
13. Nothing in this Note, expressed or implied, shall give
or be construed to give any person, firm or corporation, other than
the parties hereto and the holders of Senior Indebtedness of the
Company, any legal or equitable right, remedy or claim under or in
respect of this Note, or under any covenant, condition or provision
herein contained; all its covenants, conditions and provisions being
for the sole benefit of the Company, the holder of this Note and the
holders of Senior Indebtedness of the Company.
IN WITNESS WHEREOF, the Company has caused this Note to be
executed and delivered to the Payee on the date and year first above
written.
KAISER ALUMINUM & CHEMICAL
CORPORATION
By:
Name: John T. La Duc
Title: Vice President
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<PAGE> 1
SENIOR SUBORDINATED INTERCOMPANY NOTE
March 17, 1994
FOR VALUE RECEIVED, the undersigned, Kaiser Aluminum &
Chemical Corporation, a Delaware corporation (the "Company"),
HEREBY PROMISES TO PAY to the order of Kaiser Aluminum
Corporation, a Delaware corporation (the "Payee"), the principal
sum of THREE MILLION TWO HUNDRED THIRTEEN THOUSAND FIVE HUNDRED
THIRTY THREE DOLLARS ($3,213,533), which shall be due and payable
as hereinafter provided.
1. This Note shall not bear interest. This Note shall
be payable in quarterly installments on March 30, June 29,
September 29 and December 30 of each year, commencing March 30,
1994, and ending December 30, 1997 quarterly installment to be in
the amount of $207,471.
2. The entire unpaid principal amount of this Note
shall be due and payable on December 30, 1997. Notwithstanding
the foregoing provisions of this Note, in the event that all
shares of 8.255% PRIDES, Convertible Preferred Stock (the
"PRIDES") of the Payee are redeemed or are converted into shares
of the common stock of the Payee pursuant to the Certificate of
Designations governing such shares of PRIDES, the Company may,
after all amounts payable by the Payee in respect of accrued and
unpaid dividends in connection with such redemption or conversion
have been paid, defer further principal and interest payments on
this Note until such time as no Specified Senior Debt (as defined
in Section 7(c) of this Note) is then outstanding.
<PAGE>
<PAGE> 2
3. The Company shall make each payment hereunder not
later than 5:00 p.m. (New York City time) on the day when due in
lawful money of the United States of America to the holder of
this Note by delivery of a certified or bank cashier's check in
the amount of such payment or, at such holder's option, by wire
transfer of immediately available funds.
4. Whenever any payment to be made hereunder shall be
stated to be due on a Saturday, Sunday or a public or bank holi-
day or the equivalent for banks generally under the laws of the
State of New York (any other day being a "Business Day"), such
payment may be made on the next succeeding Business Day.
5. The Company shall have the right to prepay the
principal amount of this Note, in whole or in part, at any time
or from time to time, without premium or penalty, but with inte-
rest on the portion of the principal amount so prepaid accrued to
the date of prepayment. This Note is an Equity Proceeds Note (as
such term is defined in the Credit Agreement dated as of February
15, 1994 between Kaiser Aluminum Corporation, the Company,
certain financial institutions, and BankAmerica Business Credit,
Inc., as agent (in such capacity the "Agent"), as the same has
been, or may hereafter be, amended, supplemented, restated, or
otherwise modified from time to time (the "Credit Agreement")).
6. In case one or more of the following events of
default shall have occurred and be continuing:
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<PAGE>
<PAGE> 3
(a) the Company fails to pay any installment of prin-
cipal of, or interest on, this Note when due, whether or not
payment is prohibited by the provisions of Section 7 of this
Note; or
(b) a court having jurisdiction in the premises shall
have entered a decree or order for relief against the Company in
an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Company or for all or any substan-
tial part of its property, or ordering the winding-up or liquida-
tion of its affairs, and such decree or order shall have remained
unstayed and in effect for a period of ninety consecutive days;
or
(c) the Company shall have commenced a voluntary case
under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall have consented to the entry
of an order for relief in an involuntary case under any such law,
or shall have consented to the appointment of or taking posses-
sion by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for all or
any substantial part of its property, or shall have made an
assignment for the benefit of creditors, or shall have taken any
corporate action in furtherance of any of the foregoing;
then, in the case of an event specified in clause (a), unless the
principal of this Note shall have already become due and payable,
the holder of this Note by notice to the Company in writing may
at its option declare the principal amount and accrued interest
to the date of declaration of this Note to be due and payable
immediately. Upon any such declaration, the
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<PAGE>
<PAGE> 4
same shall become and shall be immediately due and payable,
provided that any payment pursuant to such acceleration shall be
subject to Section 7(g) of this Note. If an event specified in
clause (b) or (c) above occurs, such amount shall ipso facto
become and be immediately due and payable without any declaration
or other act on the part of the holder, but subject to Section
7(g) of this Note.
7. (a) The Company, for itself, its successors and
assigns, covenants and agrees, and the Payee (and each other
holder of this Note), by its acceptance hereof, likewise cov-
enants and agrees, for the benefit of all present and future
holders of Senior Indebtedness of the Company (as defined in
Section 7(h) of this Note), that all direct or indirect payments
or distributions on or with respect to this Note, whether pursu-
ant to the terms of this Note or upon acceleration or otherwise,
including, without limitation, by way of or on account of a
"Claim" (as defined hereinbelow) or the payment of the principal
of and interest on this Note, is hereby expressly subordinated,
to the extent and in the manner hereinafter set forth, in right
of payment to the prior payment in full in cash or cash equiva-
lents of all Senior Indebtedness of the Company (including,
without limitation, interest that would accrue but for the
occurrence of any proceeding of the kind referred to in the
introductory clause of Section 7(b) of this Note, whether or not
such interest is an allowable claim in such proceeding).
(b) Upon any direct or indirect payment or distribu-
tion of assets or securities of the Company of any kind or char-
acter, whether in cash, property or securities, upon any dissolu-
tion, winding up, liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency,
reorganization, receivership or other proceedings or
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<PAGE>
<PAGE> 5
upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Company or
otherwise,
(i) the holders of all Senior Indebtedness of the
Company shall be entitled to receive payment in full in cash or
cash equivalents of such Senior Indebtedness of the Company (in-
cluding, without limitation, interest that would accrue but for
the occurrence of any such proceeding whether or not such inter-
est is an allowable claim in such proceeding) before the holder
of this Note shall be entitled to receive any direct or indirect
payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities,
with respect to this Note, whether pursuant to the terms of this
Note or upon acceleration or otherwise, including by way of or on
account of any claim against the Company for rescission of the
issuance of this Note or for monetary damages from, or in connec-
tion with, the issuance of this Note, or for reimbursement or
contribution on account of such a claim (a "Claim"), or the pay-
ment of principal of or interest on this Note; and
(ii) any direct or indirect payment or distribu-
tion of assets or securities of the Company of any kind or
character, whether in cash, property or securities, to which the
holder of this Note would be entitled except for the provisions
of this Section 7 shall be paid by the Company or by any
liquidating trustee or agent or other person making such payment
or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of
Senior Indebtedness of the Company or their representative or
representatives, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness of the
Company held or represented by each, to
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<PAGE>
<PAGE> 6
the extent necessary to make payment in full in cash or cash
equivalents of all Senior Indebtedness of the Company (including,
without limitation, interest that would accrue but for the occur-
rence of any such proceeding whether or not such interest is an
allowable claim in such proceeding) remaining unpaid, after
giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness of the Company; and
(iii) in the event that, notwithstanding the fore-
going, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities,
shall be received by the holder of this Note, whether pursuant to
the terms of this Note or upon acceleration or otherwise, includ-
ing by way of or on account of a Claim, or the payment of princi-
pal of or interest on this Note, before all Senior Indebtedness
of the Company is paid in full in cash or cash equivalents, such
payment or distribution shall be received and held in trust for
and paid over to the holders of such Senior Indebtedness of the
Company or their representative or representatives, ratably as
aforesaid, for application to the payment of all Senior
Indebtedness of the Company remaining unpaid until all such
Senior Indebtedness of the Company shall have been paid in full
in cash or cash equivalents, after giving effect to any concur-
rent payment or distribution to the holders of such Senior
Indebtedness of the Company.
The consolidation of the Company with, or the merger of
the Company into, another corporation or other entity or the
liquidation or dissolution of the Company following the sale or
conveyance of its property or assets as an entirety, or substan-
tially as an entirety, to another corporation or other entity
shall not be deemed a dissolution, winding up,
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<PAGE>
<PAGE> 7
liquidation or reorganization of the Company for the purposes of
this Section 7. Subject to the payment in full in cash or cash
equivalents of all Senior Indebtedness of the Company, the holder
of this Note shall be subrogated (without any duty on the part of
the holders of Senior Indebtedness of the Company to warrant,
create, effectuate, preserve or protect such subrogation) to the
rights of the holders of Senior Indebtedness of the Company to
receive payments or distributions of cash, property or securities
of the Company applicable to Senior Indebtedness of the Company
until the principal of and interest on this Note shall be paid in
full and, for the purpose of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of the Com-
pany of cash, property or securities otherwise distributable to
the holder of this Note shall, as between the Company, its cre-
ditors other than the holders of Senior Indebtedness of the
Company, and the holder of this Note, be deemed to be a payment
by the Company to the holders of or on account of the Senior
Indebtedness of the Company. It is understood that the provi-
sions of this Section 7 are and are intended solely for the
purpose of defining the relative rights of the holder of this
Note, on the one hand, and the holders of Senior Indebtedness of
the Company, on the other hand. Nothing contained in this
Section 7 or elsewhere in this Note is intended to or shall im-
pair, as between the Company, its creditors other than the hold-
ers of Senior Indebtedness of the Company, and the holder of this
Note, the obligation of the Company, which is unconditional and
absolute, to pay to the holder of this Note the principal of and
interest on this Note as and when the same shall become due and
payable in accordance with its terms, or to affect the relative
rights of the holder of this Note and creditors of the Company
other than the holders of Senior Indebtedness of the Company, nor
shall anything herein prevent the holder of this Note from
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<PAGE>
<PAGE> 8
exercising all remedies otherwise permitted by applicable law
upon default under this Note, subject to the rights, if any,
under this Section 7 of the holders of Senior Indebtedness of the
Company in respect of cash, property or securities of the Company
received upon the exercise of any such remedy. Upon any payment
or distribution of assets of the Company referred to in this
Section 7, the holder of this Note shall be entitled to rely upon
any order or decree of a court of competent jurisdiction in which
any proceedings of the nature described in this Section are
pending or upon a certificate of the liquidating trustee or agent
or other person making any distribution to the holder of this
Note for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Senior Indebted-
ness of the Company and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Section 7.
(c) No direct or indirect payments or distributions by
or on behalf of the Company on or with respect to this Note
(whether pursuant to the terms of this Note or upon acceleration
or otherwise, including by way of or on account of a Claim, or
the payment of principal of or interest on this Note) shall be
made if, at the time of such payment or distribution, there
exists a default in the payment of all or any portion of any
Senior Indebtedness of the Company (other than a payment default
to the extent it relates to those items described in clause
(i)(B) of the definition of "Senior Indebtedness" contained in
the Subordinated Indenture (as the term Subordinated Indenture is
defined in the Credit Agreement) or a payment default to the
extent it relates to those items of Senior Indebtedness of the
Company referred to in clause (ii)(B) of Section 7(h)), and such
payment default (other
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<PAGE>
<PAGE> 9
than to the extent it relates to those items described in clause
(i)(B) of the definition of "Senior Indebtedness" contained in
the Subordinated Indenture) shall not have been cured or waived
or the benefits of this sentence waived in writing by or on
behalf of the holders of such Senior Indebtedness of the Company.
In addition, during the continuance of any other default with
respect to the obligations of the Company referred to in clause
(i) of Section 7(h) (the "Specified Senior Debt") that would
permit (or would so permit with the passage of time or giving of
notice or both) the acceleration of the maturity of such
Specified Senior Debt, no direct or indirect payments or
distributions by or on behalf of the Company on or with respect
to this Note may be made (whether pursuant to the terms of this
Note or upon acceleration or otherwise, including by way of or on
account of a Claim, or the payment of principal of or interest on
this Note) for a period (the "Payment Blockage Period")
commencing on the date of receipt by the holder of this Note of
notice of such default specifying that such notice is a Payment
Blockage Notice from the Agent under the Credit Agreement, or, if
such default results from the acceleration of this Note,
commencing on the earlier of the date of receipt of such notice
by the holder of this Note or the date of such acceleration, and
ending on the earliest of (a) 179 days thereafter, (b) the date
on or as of which (i) such default has been cured or waived, (ii)
the Company has delivered to the holder of this Note an Officers'
Certificate (as hereinafter defined) to such effect and (iii) the
Agent under the Credit Agreement shall have endorsed on such
Officers' Certificate that it does not object to the form or
substance of such Officers' Certificate, provided, that if such
--------
default has been cured or waived, the Company shall promptly
notify the holder of this Note of such cure or waiver and the
Agent under the Credit Agreement shall promptly endorse such
notice, and
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<PAGE>
<PAGE> 10
(c) the date on or as of which the Agent under the Credit
Agreement shall have consented in writing to the termination of
such Payment Blockage Period. Notwithstanding the foregoing, in
no event (a) may the total number of days during which any
Payment Blockage Period or Payment Blockage Periods may be in
effect during any 360 consecutive day period exceed 179 days in
the aggregate or (b) will payments or distributions be prohibited
by this Section 7(c) if (i) any of the Company's 12-3/4% Senior
Subordinated Notes due 2003 shall then be outstanding and (ii)
payments and distributions are not then prohibited under Sections
3.03 and (if, at the time, there are any "Subsidiary Guarantors"
(as such term is defined in the Subordinated Indenture)) 16.04 of
the Subordinated Indenture. No default which existed or was
continuing on the date of the commencement of any Payment
Blockage Period with respect to Specified Senior Debt and was
known at the time of commencement thereof to the Agent under the
Credit Agreement shall be, or be made, the basis for the
commencement of a second Payment Blockage Period by the Agent
under the Credit Agreement whether or not within a period of 360
consecutive days, unless such default shall have been cured or
waived for a period of not less than 90 consecutive days. As
used herein, the term "Officers' Certificate" shall mean a
certificate of the Company signed on behalf of the Company by the
Chairman of the Board, the President or any Vice President and by
the Chief Financial Officer, the Controller, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company.
In the event that, notwithstanding the foregoing, the
Company shall make any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, to the holder of this Note prohibited by the fore-
going provisions of this
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<PAGE> 11
Section 7(c) (whether pursuant to the terms of this Note or upon
acceleration or otherwise, including by way of or on account of a
Claim, or the payment of principal of or interest on this Note),
then and in any such event such payment or distribution shall, to
the extent permitted by law, be received and held in trust for
the benefit of and be paid over and delivered forthwith to the
holders of the Senior Indebtedness of the Company or their
representative or representatives.
The provisions of this Section 7(c) shall not apply to
any payment with respect to which Section 7(b) would be appli-
cable.
(d) Except as provided in clause (b) or (c) above,
nothing contained in this Note shall affect the obligation of the
Company to make, or prevent the Company from making, at any time,
payments of principal or interest on this Note.
(e) The holder of this Note shall take such action as
may be necessary or appropriate to effectuate the subordination
as provided in this Section 7, including, without limitation, in
the event of any dissolution, winding up, liquidation or bank-
ruptcy reorganization of the Company (whether in bankruptcy,
insolvency or receivership proceedings or upon a general assign-
ment for the benefit of creditors or any other similar remedy or
otherwise) tending towards liquidation of the business and assets
of the Company, the immediate filing of a claim for the unpaid
balance of this Note in the form required in such proceedings and
using its best efforts to cause such claim to be approved. If
the holder of this Note does not file a proper claim or proof of
debt in the form required in such proceedings prior to 30 days
before the expiration of the time to file such claim or claims,
the
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<PAGE>
<PAGE> 12
holders of Senior Indebtedness of the Company (or their repre-
sentative or representatives) are hereby authorized to file an
appropriate claim for and on behalf of the holder of this Note.
Nothing herein shall be deemed to authorize the holders of Senior
Indebtedness of the Company to authorize or consent to or accept
or adopt on behalf of the holder of this Note any plan of
reorganization, arrangement, adjustment or composition affecting
this Note or the rights of the holder of this Note, or to autho-
rize the holders of Senior Indebtedness of the Company to vote in
respect of the claim of the holder of this Note in any such
proceeding. In the event that the provisions of this Section 7
shall at the time prohibit payments to the holder of this Note,
no holder of this Note shall waive, forgive or cancel any
monetary obligation, or any claim before a bankruptcy court,
under or with respect to this Note or any Claim.
(f) No right of any present or future holder of any
Senior Indebtedness of the Company to enforce subordination as
provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of
this Note, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with. The holders of
Senior Indebtedness of the Company may at any time and from time
to time, without the consent of or notice to the holder of this
Note, without incurring responsibility to the holder of this Note
and without impairing or releasing or otherwise affecting the
rights of any holder of Senior Indebtedness of the Company or the
respective liabilities or obligations of the Company or the
holder this Note or in any way altering or affecting any of the
provisions of this Section 7:
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<PAGE>
<PAGE> 13
(1) change the amount, manner, place or terms of pay-
ment or change or extend the time of payment of or renew,
refinance, modify, alter or restructure the terms of the
Senior Indebtedness of the Company or any document or in-
strument evidencing or governing such Senior Indebtedness of
the Company in any manner or enter into or amend in any
manner any other agreement relating to Senior Indebtedness
of the Company or any security therefor;
(2) sell, exchange, release or otherwise deal with any
property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, Senior Indebtedness of the
Company and otherwise deal freely with the Company;
(3) release anyone (including any guarantor) liable in
any manner for the payment or collection of Senior Indebted-
ness of the Company;
(4) exercise or refrain from exercising any rights
against the Company and others (including any guarantor),
including releasing, selling or exchanging any security;
(5) apply any sums by whomsoever paid or however
realized to the Senior Indebtedness of the Company; or
(6) take any other action which otherwise might be
deemed to impair the rights of the holder of this Note.
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<PAGE>
<PAGE> 14
No compromise, alteration, amendment, modification,
extension, renewal or other change of, or waiver, consent or
other action in respect of, any liabilities or obligation under
or in respect of, or of any of the terms, covenants or conditions
of any indenture or other instrument under which any Senior
Indebtedness of the Company is outstanding or of such Senior
Indebtedness of the Company, whether or not in accordance with
the provisions of any applicable document, shall in any way alter
or affect any of the provisions of this Section 7. As long as
any Senior Indebtedness of the Company is outstanding, no
amendment to, or any waiver of the provisions of, this Section 7
which adversely affects the rights of the holders of Senior
Indebtedness of the Company under this Section 7 shall be
effective against the holders of Senior Indebtedness of the
Company who have not consented thereto.
(g) If payment of the Note is accelerated because of
an event of default as provided in Section 6 of this Note, the
Company shall promptly notify the Agent under the Credit Agree-
ment, and the trustee under the indenture (the "Senior
Indenture") governing the Company's 9-7/8% Senior Notes due
February 15, 2002 (the "Senior Notes"), of the acceleration. The
Company may not pay the Note until five Business Days after the
Agent under the Credit Agreement and the trustee under the Senior
Indenture receive such notice (if any Senior Indebtedness of the
Company remains outstanding) and thereafter may pay this Note
only if this Note otherwise permits the payment at that time.
(h) The term "Senior Indebtedness of the Company"
shall mean (i) all monetary obligations of the Company under the
Credit Agreement, including all related notes, collateral docu-
ments, and guarantees, in each case, as any of the same has been
or may be
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<PAGE> 15
amended, supplemented, restated or otherwise modified from time
to time (in each case in whole or in part) and any refundings,
refinancings, replacements or restructurings of such monetary
obligations that individually or in the aggregate provide, at one
time, the source of repayment for at least fifty percent of the
then outstanding aggregate amount of all monetary obligations of
the Company under the Credit Agreement, and (ii) (A) all
principal of, premium, if any, and interest on the Senior Notes,
and (B) all other monetary obligations of the Company under the
Senior Notes or the Senior Indenture, in each case, as the same
may be amended, supplemented, restated or otherwise modified from
time to time.
8. All powers and remedies given to the holder of this
Note shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and
remedies available to the holder of this Note, by judicial pro-
ceedings or otherwise, to enforce the performance or observance
of the covenants and agreements contained in this Note, and no
delay or omission of the holder of this Note to exercise any
right or power accruing upon any default hereunder shall impair
any such right or power, or shall be construed to be a waiver of
any such default or an acquiescence therein.
9. This Note shall be binding upon the Company and its
successors and assigns, and the terms and provisions of this Note
shall inure to the benefit of Payee, the holders of Senior
Indebtedness of the Company and their respective successors and
assigns, including subsequent holders hereof.
10. The terms and provisions of this Note are sever-
able, and if any term or provision shall be determined to be
superseded, illegal, invalid or otherwise unenforceable in
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<PAGE>
<PAGE>16
whole or in part pursuant to applicable law by a governmental
authority having jurisdiction, such determination shall not in
any manner impair or otherwise affect the validity, legality or
enforceability of that term or provision in any other
jurisdiction or any of the remaining terms and provisions of this
Note in any jurisdiction.
11. Presentment for payment, notice of dishonor, protest,
notice of protest and any other notice are hereby waived. This Note
shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to principles of
conflict of laws.
12. No amendment, modification or waiver of any term or
provision of this Note, nor consent to any departure by the Company
herefrom, shall be effective unless the same shall be in writing and
signed by the holder of this Note, and then such waiver, modification
or consent shall be effective only in the specific instance and for
the specific purpose for which given.
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<PAGE>
<PAGE> 17
13. Nothing in this Note, expressed or implied, shall give
or be construed to give any person, firm or corporation, other than
the parties hereto and the holders of Senior Indebtedness of the
Company, any legal or equitable right, remedy or claim under or in
respect of this Note, or under any covenant, condition or provision
herein contained; all its covenants, conditions and provisions being
for the sole benefit of the Company, the holder of this Note and the
holders of Senior Indebtedness of the Company.
IN WITNESS WHEREOF, the Company has caused this Note to be
executed and delivered to the Payee on the date and year first above
written.
KAISER ALUMINUM & CHEMICAL
CORPORATION
By:
------------------------
Name: Anthony R. Pierno
Title: Vice President and
General Counsel
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<PAGE> 1
SENIOR SUBORDINATED INTERCOMPANY NOTE
June 30, 1993
FOR VALUE RECEIVED, the undersigned, Kaiser Aluminum &
Chemical Corporation, a Delaware corporation (the "Company"),
HEREBY PROMISES TO PAY to the order of Kaiser Aluminum Corpora-
tion, a Delaware corporation (the "Payee"), the principal sum of
THIRTY SEVEN MILLION SEVEN HUNDRED NINETY SIX THOUSAND SEVEN
HUNDRED FIFTY-TWO AND 50/100 DOLLARS ($37,796,752.50), which
shall be due and payable as hereinafter provided.
1. This Note shall not bear interest. This Note shall
be payable in quarterly installments on March 30, June 29,
September 29 and December 30 of each year, commencing September
29, 1993, and ending June 29, 1996, each such quarterly install-
ment to be in the amount of $3,149,729.38.
2. The entire unpaid principal amount of this Note
shall be due and payable on June 29, 1996. Notwithstanding the
foregoing provisions of this Note, in the event that all shares
of Series A Mandatory Conversion Premium Dividend Preferred Stock
(the "Series A Stock") of the Payee are converted into shares of
the common stock of the Payee pursuant
<PAGE>
<PAGE> 2
to the Certificate of Designations governing such shares of
Series A Stock, the Company may, after all amounts payable by the
Payee in respect of accrued and unpaid dividends in connection
with such conversion have been paid, defer further principal and
interest payments on this Note until such time as no Specified
Senior Debt (as defined in Section 7(c) of this Note) is then
outstanding.
3. The Company shall make each payment hereunder not
later than 5:00 p.m. (New York City time) on the day when due in
lawful money of the United States of America to the holder of
this Note by delivery of a certified or bank cashier's check in
the amount of such payment or, at such holder's option, by wire
transfer of immediately available funds.
4. Whenever any payment to be made hereunder shall be
stated to be due on a Saturday, Sunday or a public or bank holi-
day or the equivalent for banks generally under the laws of the
State of New York (any other day being a "Business Day"), such
payment may be made on the next succeeding Business Day.
5. The Company shall have the right to prepay the
principal amount of this Note, in whole or in part, at any time
or from time to time, without premium or penalty, but with inte-
rest on the portion of the principal amount so prepaid accrued to
the date of prepayment. This Note is the Equity Proceeds Note
-2-
<PAGE>
<PAGE> 3
issued pursuant to the requirements of the Credit Agreement dated
as of December 13, 1989 between Kaiser Aluminum Corporation
(formerly named KaiserTech Limited), the Company, certain
financial institutions, Bank of America National Trust and
Savings Association, as agent, and Mellon Bank, N.A., as
collateral agent, as the same has been, or may hereafter be,
amended, supplemented, restated, or otherwise modified from time
to time (the "Credit Agreement").
6. In case one or more of the following events of
default shall have occurred and be continuing:
(a) the Company fails to pay any installment of prin-
cipal of, or interest on, this Note when due, whether or not
payment is prohibited by the provisions of Section 7 of this
Note; or
(b) a court having jurisdiction in the premises shall
have entered a decree or order for relief against the Company in
an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Company or for all or any substan-
tial part of its property, or ordering the winding-up or liquida-
tion of its affairs, and such decree or order shall have remained
unstayed and in effect for a period of ninety consecutive days;
or
-3-
<PAGE>
<PAGE> 4
(c) the Company shall have commenced a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry of an
order for relief in an involuntary case under any such law, or
shall have consented to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for all or
any substantial part of its property, or shall have made an
assignment for the benefit of creditors, or shall have taken any
corporate action in furtherance of any of the foregoing;
then, in the case of an event specified in clause (a), unless the
principal of this Note shall have already become due and payable,
the holder of this Note by notice to the Company in writing may
at its option declare the principal amount and accrued interest
to the date of declaration of this Note to be due and payable
immediately. Upon any such declaration, the same shall become
and shall be immediately due and payable, provided that any pay-
ment pursuant to such acceleration shall be subject to Section
7(g) of this Note. If an event specified in clause (b) or (c)
above occurs, such amount shall ipso facto become and be immedi-
ately due and payable without any declaration or other act on the
part of the holder, but subject to Section 7(g) of this Note.
7. (a) The Company, for itself, its successors and
assigns, covenants and agrees, and the Payee (and each other
holder of this Note), by its acceptance hereof, likewise cov-
-4-
<PAGE>
<PAGE> 5
enants and agrees, for the benefit of all present and future
holders of Senior Indebtedness of the Company (as defined in
Section 7(h) of this Note), that all direct or indirect payments
or distributions on or with respect to this Note, whether pursu-
ant to the terms of this Note or upon acceleration or otherwise,
including, without limitation, by way of or on account of a
"Claim" (as defined hereinbelow) or the payment of the principal
of and interest on this Note, is hereby expressly subordinated,
to the extent and in the manner hereinafter set forth, in right
of payment to the prior payment in full in cash or cash equiva-
lents of all Senior Indebtedness of the Company (including,
without limitation, interest that would accrue but for the
occurrence of any proceeding of the kind referred to in the
introductory clause of Section 7(b) of this Note, whether or not
such interest is an allowable claim in such proceeding).
(b) Upon any direct or indirect payment or distribu-
tion of assets or securities of the Company of any kind or char-
acter, whether in cash, property or securities, upon any dissolu-
tion, winding up, liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency,
reorganization, receivership or other proceedings or upon an
assignment for the benefit of creditors or any other marshalling
of the assets and liabilities of the Company or otherwise,
(i) the holders of all Senior Indebtedness of the
Company shall be entitled to receive payment in full in cash or
-5-
<PAGE>
<PAGE> 6
cash equivalents of such Senior Indebtedness of the Company (in-
cluding, without limitation, interest that would accrue but for
the occurrence of any such proceeding whether or not such inter-
est is an allowable claim in such proceeding) before the holder
of this Note shall be entitled to receive any direct or indirect
payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities,
with respect to this Note, whether pursuant to the terms of this
Note or upon acceleration or otherwise, including by way of or on
account of any claim against the Company for rescission of the
issuance of this Note or for monetary damages from, or in connec-
tion with, the issuance of this Note, or for reimbursement or
contribution on account of such a claim (a "Claim"), or the pay-
ment of principal of or interest on this Note; and
(ii) any direct or indirect payment or distribu-
tion of assets or securities of the Company of any kind or
character, whether in cash, property or securities, to which the
holder of this Note would be entitled except for the provisions
of this Section 7 shall be paid by the Company or by any
liquidating trustee or agent or other person making such payment
or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of
Senior Indebtedness of the Company or their representative or
representatives, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness of the
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<PAGE>
<PAGE> 7
Company held or represented by each, to the extent necessary to
make payment in full in cash or cash equivalents of all Senior
Indebtedness of the Company (including, without limitation,
interest that would accrue but for the occurrence of any such
proceeding whether or not such interest is an allowable claim in
such proceeding) remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness of the Company; and
(iii) in the event that, notwithstanding the fore-
going, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities,
shall be received by the holder of this Note, whether pursuant to
the terms of this Note or upon acceleration or otherwise, includ-
ing by way of or on account of a Claim, or the payment of princi-
pal of or interest on this Note, before all Senior Indebtedness
of the Company is paid in full in cash or cash equivalents, such
payment or distribution shall be received and held in trust for
and paid over to the holders of such Senior Indebtedness of the
Company or their representative or representatives, ratably as
aforesaid, for application to the payment of all Senior
Indebtedness of the Company remaining unpaid until all such
Senior Indebtedness of the Company shall have been paid in full
in cash or cash equivalents, after giving effect to any concur-
rent payment or distribution to the holders of such Senior
Indebtedness of the Company.
-7-
<PAGE>
<PAGE> 8
The consolidation of the Company with, or the merger of the
Company into, another corporation or other entity or the liqui-
dation or dissolution of the Company following the sale or
conveyance of its property or assets as an entirety, or substan-
tially as an entirety, to another corporation or other entity
shall not be deemed a dissolution, winding up, liquidation or
reorganization of the Company for the purposes of this Section 7.
Subject to the payment in full in cash or cash equiva-
lents of all Senior Indebtedness of the Company, the holder of
this Note shall be subrogated (without any duty on the part of
the holders of Senior Indebtedness of the Company to warrant,
create, effectuate, preserve or protect such subrogation) to the
rights of the holders of Senior Indebtedness of the Company to
receive payments or distributions of cash, property or securities
of the Company applicable to Senior Indebtedness of the Company
until the principal of and interest on this Note shall be paid in
full and, for the purpose of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of the Com-
pany of cash, property or securities otherwise distributable to
the holder of this Note shall, as between the Company, its cre-
ditors other than the holders of Senior Indebtedness of the
Company, and the holder of this Note, be deemed to be a payment
by the Company to the holders of or on account of the Senior
Indebtedness of the Company. It is understood that the provi-
sions of this Section 7 are and are intended solely for the
-8-
<PAGE>
<PAGE> 9
purpose of defining the relative rights of the holder of this
Note, on the one hand, and the holders of Senior Indebtedness of
the Company, on the other hand. Nothing contained in this
Section 7 or elsewhere in this Note is intended to or shall im-
pair, as between the Company, its creditors other than the hold-
ers of Senior Indebtedness of the Company, and the holder of this
Note, the obligation of the Company, which is unconditional and
absolute, to pay to the holder of this Note the principal of and
interest on this Note as and when the same shall become due and
payable in accordance with its terms, or to affect the relative
rights of the holder of this Note and creditors of the Company
other than the holders of Senior Indebtedness of the Company, nor
shall anything herein prevent the holder of this Note from exer-
cising all remedies otherwise permitted by applicable law upon
default under this Note, subject to the rights, if any, under
this Section 7 of the holders of Senior Indebtedness of the
Company in respect of cash, property or securities of the Company
received upon the exercise of any such remedy. Upon any payment
or distribution of assets of the Company referred to in this
Section 7, the holder of this Note shall be entitled to rely upon
any order or decree of a court of competent jurisdiction in which
any proceedings of the nature described in this Section are
pending or upon a certificate of the liquidating trustee or agent
or other person making any distribution to the holder of this
Note for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Senior Indebted-
-9-
<PAGE>
<PAGE> 10
ness of the Company and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Section 7.
(c) No direct or indirect payments or distributions by
or on behalf of the Company on or with respect to this Note
(whether pursuant to the terms of this Note or upon acceleration
or otherwise, including by way of or on account of a Claim, or
the payment of principal of or interest on this Note) shall be
made if, at the time of such payment or distribution, there
exists a default in the payment of all or any portion of any
Senior Indebtedness of the Company (other than a payment default
to the extent it relates to those items described in clause
(i)(B) of the definition of "Senior Indebtedness" contained in
the Subordinated Indenture (as the term Subordinated Indenture is
defined in the Credit Agreement)), and such payment default
(other than to the extent it relates to those items described in
clause (i)(B) of the definition of "Senior Indebtedness" con-
tained in the Subordinated Indenture) shall not have been cured
or waived or the benefits of this sentence waived in writing by
or on behalf of the holders of such Senior Indebtedness of the
Company. In addition, during the continuance of any other
default with respect to the obligations of the Company referred
to in clause (i) of Section 7(h) (the "Specified Senior Debt")
that would permit (or would so permit with the passage of time or
giving of notice or both) the acceleration of the
-10-
<PAGE>
<PAGE> 11
maturity of such Specified Senior Debt, no direct or indirect
payments or distributions by or on behalf of the Company on or
with respect to this Note may be made (whether pursuant to the
terms of this Note or upon acceleration or otherwise, including
by way of or on account of a Claim, or the payment of principal
of or interest on this Note) for a period (the "Payment Blockage
Period") commencing on the date of receipt by the holder of this
Note of notice of such default specifying that such notice is a
Payment Blockage Notice from the Agent under the Credit Agree-
ment, or, if such default results from the acceleration of this
Note, commencing on the earlier of the date of receipt of such
notice by the holder of this Note or the date of such accelera-
tion, and ending on the earliest of (a) 179 days thereafter, (b)
the date on or as of which (i) such default has been cured or
waived, (ii) the Company has delivered to the holder of this Note
an Officers' Certificate (as hereinafter defined) to such effect
and (iii) the Agent under the Credit Agreement shall have
endorsed on such Officers' Certificate that it does not object to
the form or substance of such Officers' Certificate, provided,
--------
that if such default has been cured or waived, the Company shall
promptly notify the holder of this Note of such cure or waiver
and the Agent under the Credit Agreement shall promptly endorse
such notice, and (c) the date on or as of which the Agent under
the Credit Agreement shall have consented in writing to the
termination of such Payment Blockage Period. Notwithstanding the
foregoing, in no event (a) may the total
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<PAGE>
<PAGE> 12
number of days during which any Payment Blockage Period or
Payment Blockage Periods may be in effect during any 360
consecutive day period exceed 179 days in the aggregate or (b)
will payments or distributions be prohibited by this Section 7(c)
if (i) any of the Company's 12- 3/4% Senior Subordinated Notes
due 2003 shall then be outstanding and (ii) payments and
distributions are not then prohibited under Sections 3.03 and
(if, at the time, there are any "Subsidiary Guarantors" (as such
term is defined in the Subordinated Indenture)) 16.04 of the
Subordinated Indenture. No default which existed or was
continuing on the date of the commencement of any Payment
Blockage Period with respect to Specified Senior Debt and was
known at the time of commencement thereof to the Agent under the
Credit Agreement shall be, or be made, the basis for the
commencement of a second Payment Blockage Period by the Agent
under the Credit Agreement whether or not within a period of 360
consecutive days, unless such default shall have been cured or
waived for a period of not less than 90 consecutive days. As
used herein, the term "Officers' Certificate" shall mean a
certificate of the Company signed on behalf of the Company by the
Chairman of the Board, the President or any Vice President and by
the Chief Financial Officer, the Controller, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company.
-12-
<PAGE>
<PAGE> 13
In the event that, notwithstanding the foregoing, the
Company shall make any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, to the holder of this Note prohibited by the fore-
going provisions of this Section 7(c) (whether pursuant to the
terms of this Note or upon acceleration or otherwise, including
by way of or on account of a Claim, or the payment of principal
of or interest on this Note), then and in any such event such
payment or distribution shall, to the extent permitted by law, be
received and held in trust for the benefit of and be paid over
and delivered forthwith to the holders of the Senior Indebtedness
of the Company or their representative or representatives.
The provisions of this Section 7(c) shall not apply to
any payment with respect to which Section 7(b) would be appli-
cable.
(d) Except as provided in clause (b) or (c) above,
nothing contained in this Note shall affect the obligation of the
Company to make, or prevent the Company from making, at any time,
payments of principal or interest on this Note.
(e) The holder of this Note shall take such action as
may be necessary or appropriate to effectuate the subordination
as provided in this Section 7, including, without limitation, in
the event of any dissolution, winding up, liquidation or bank-
ruptcy reorganization of the Company (whether in bankruptcy,
-13-
<PAGE>
<PAGE> 14
insolvency or receivership proceedings or upon a general assign-
ment for the benefit of creditors or any other similar remedy or
otherwise) tending towards liquidation of the business and assets
of the Company, the immediate filing of a claim for the unpaid
balance of this Note in the form required in such proceedings and
using its best efforts to cause such claim to be approved. If
the holder of this Note does not file a proper claim or proof of
debt in the form required in such proceedings prior to 30 days
before the expiration of the time to file such claim or claims,
the holders of Senior Indebtedness of the Company (or their
representative or representatives) are hereby authorized to file
an appropriate claim for and on behalf of the holder of this
Note. Nothing herein shall be deemed to authorize the holders of
Senior Indebtedness of the Company to authorize or consent to or
accept or adopt on behalf of the holder of this Note any plan of
reorganization, arrangement, adjustment or composition affecting
this Note or the rights of the holder of this Note, or to autho-
rize the holders of Senior Indebtedness of the Company to vote in
respect of the claim of the holder of this Note in any such
proceeding. In the event that the provisions of this Section 7
shall at the time prohibit payments to the holder of this Note,
no holder of this Note shall waive, forgive or cancel any
monetary obligation, or any claim before a bankruptcy court,
under or with respect to this Note or any Claim.
-14-
<PAGE>
<PAGE> 15
(f) No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as provided
herein shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Company or by any
act or failure to act, in good faith, by any such holder, or by
any noncompliance by the Company with the terms of this Note,
regardless of any knowledge thereof which any such holder may
have or otherwise be charged with. The holders of Senior
Indebtedness of the Company may at any time and from time to
time, without the consent of or notice to the holder of this
Note, without incurring responsibility to the holder of this Note
and without impairing or releasing or otherwise affecting the
rights of any holder of Senior Indebtedness of the Company or the
respective liabilities or obligations of the Company or the
holder this Note or in any way altering or affecting any of the
provisions of this Section 7:
(1) change the amount, manner, place or terms of pay-
ment or change or extend the time of payment of or renew,
refinance, modify, alter or restructure the terms of the
Senior Indebtedness of the Company or any document or in-
strument evidencing or governing such Senior Indebtedness of
the Company in any manner or enter into or amend in any
manner any other agreement relating to Senior Indebtedness
of the Company or any security therefor;
-15-
<PAGE>
<PAGE> 16
(2) sell, exchange, release or otherwise deal with any
property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, Senior Indebtedness of the
Company and otherwise deal freely with the Company;
(3) release anyone (including any guarantor) liable in
any manner for the payment or collection of Senior Indebted-
ness of the Company;
(4) exercise or refrain from exercising any rights
against the Company and others (including any guarantor),
including releasing, selling or exchanging any security;
(5) apply any sums by whomsoever paid or however
realized to the Senior Indebtedness of the Company; or
(6) take any other action which otherwise might be
deemed to impair the rights of the holder of this Note.
No compromise, alteration, amendment, modification,
extension, renewal or other change of, or waiver, consent or
other action in respect of, any liabilities or obligation under
or in respect of, or of any of the terms, covenants or conditions
of any indenture or other instrument under which any Senior
Indebtedness of the Company is outstanding or of such Senior
Indebtedness of the Company, whether or not in accordance with
the provisions of any applicable document, shall in any way alter
or affect any of the provisions of this Section 7. As long as
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<PAGE>
<PAGE> 17
the Credit Agreement is in effect, no amendment to, or any waiver
of the provisions of, this Section 7 which adversely affects the
rights of the holders of Senior Indebtedness of the Company under
this Section 7 shall be effective against the holders of Senior
Indebtedness of the Company who have not consented thereto.
(g) If payment of the Note is accelerated because of an
event of default as provided in Section 6 of this Note, the
Company shall promptly notify the Agent under the Credit Agree-
ment of the acceleration. The Company may not pay the Note until
five Business Days after the Agent under the Credit Agreement
receives such notice (if any Specified Senior Debt remains
outstanding) and thereafter may pay this Note only if this Note
otherwise permits the payment at that time.
(h) The term "Senior Indebtedness of the Company"
shall mean (i) all monetary obligations of the Company under the
Credit Agreement, including all related notes, collateral docu-
ments, and guarantees, in each case, as any of the same has been
or may be amended, supplemented, restated or otherwise modified
from time to time (in each case in whole or in part) and any
refundings, refinancings, replacements or restructurings of such
monetary obligations that individually or in the aggregate
provide, at one time, the source of repayment for at least fifty
percent of the then outstanding aggregate amount of all monetary
obligations of the Company under the Credit Agreement.
-17-
<PAGE>
<PAGE> 18
8. All powers and remedies given to the holder of this
Note shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and
remedies available to the holder of this Note, by judicial pro-
ceedings or otherwise, to enforce the performance or observance
of the covenants and agreements contained in this Note, and no
delay or omission of the holder of this Note to exercise any
right or power accruing upon any default hereunder shall impair
any such right or power, or shall be construed to be a waiver of
any such default or an acquiescence therein.
9. This Note shall be binding upon the Company and its
successors and assigns, and the terms and provisions of this Note
shall inure to the benefit of Payee, the holders of Senior
Indebtedness of the Company and their respective successors and
assigns, including subsequent holders hereof.
10. The terms and provisions of this Note are sever-
able, and if any term or provision shall be determined to be
superseded, illegal, invalid or otherwise unenforceable in whole
or in part pursuant to applicable law by a governmental authority
having jurisdiction, such determination shall not in any manner
impair or otherwise affect the validity, legality or enforce-
ability of that term or provision in any other jurisdiction or
any of the remaining terms and provisions of this Note in any
jurisdiction.
-18-
<PAGE>
<PAGE> 19
11. Presentment for payment, notice of dishonor, pro-
test, notice of protest and any other notice are hereby waived.
This Note shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to
principles of conflict of laws.
12. No amendment, modification or waiver of any term
or provision of this Note, nor consent to any departure by the
Company herefrom, shall be effective unless the same shall be in
writing and signed by the holder of this Note, and then such
waiver, modification or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13. Nothing in this Note, expressed or implied, shall
give or be construed to give any person, firm or corporation,
other than the parties hereto and the holders of Senior Indebted-
ness of the Company, any legal or equitable right, remedy or
claim under or in respect of this Note, or under any covenant,
condition or provision herein contained; all its covenants,
conditions and provisions being for the sole benefit of the
Company, the holder of this Note and the holders of Senior
Indebtedness of the Company.
-19-
<PAGE>
<PAGE> 20
IN WITNESS WHEREOF, the Company has caused this Note to
be executed and delivered to the Payee on the date and year first
above written.
KAISER ALUMINUM & CHEMICAL
CORPORATION
By:
--------------------------
Name: Byron L. Wade
Title: Vice President,
Secretary, and
Deputy General
Counsel
-20-
<PAGE>
To the Stockholders and the Board of Directors of Kaiser Aluminum
Corporation:
We have audited the accompanying consolidated balance sheets of
Kaiser Aluminum Corporation (a Delaware corporation) and
subsidiaries as of December 31, 1993 and 1992, and the related
statements of consolidated income and cash flows for each of the
three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Kaiser Aluminum Corporation and subsidiaries as of December
31, 1993 and 1992, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted
accounting principles.
As explained in Note 1 of the Notes to Consolidated Financial
Statements, effective January 1, 1993, the Company changed its
methods of accounting for postretirement benefits other than
pensions, postemployment benefits, and income taxes.
ARTHUR ANDERSEN & CO.
Houston, Texas
February 24, 1994
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------------------
Kaiser Aluminum Corporation ("Kaiser" or the "Company"), through its
wholly owned subsidiary, Kaiser Aluminum & Chemical Corporation
("KACC"), operates in two business segments: bauxite and alumina, and
aluminum processing. Intracompany shipments and sales are excluded
from the information set forth below.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
(In millions of dollars, except shipments and prices) 1993 1992 1991
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shipments: (000 tons) (1)
Alumina 1,997.5 2,001.3 1,945.9
Aluminum products:
Primary aluminum 242.5 355.4 340.6
Fabricated products 373.2 343.6 314.2
-------- -------- --------
Total aluminum products 615.7 699.0 654.8
======== ======== ========
Average realized sales price:
Alumina (per ton) $ 169 $ 195 $ 240
Primary aluminum (per pound) .56 .66 .72
Net sales:
Bauxite and alumina:
Alumina $ 338.2 $ 390.8 $ 466.5
Other (2)(3) 85.2 75.7 84.3
-------- -------- --------
Total bauxite and alumina 423.4 466.5 550.8
-------- -------- --------
Aluminum processing:
Primary aluminum 301.7 515.0 538.5
Fabricated products 981.4 913.7 898.9
Other (3) 12.6 13.9 12.6
-------- -------- --------
Total aluminum processing 1,295.7 1,442.6 1,450.0
-------- -------- --------
Total net sales $1,719.1 $1,909.1 $2,000.8
======== ======== ========
Operating income (loss):
Bauxite and alumina $ (4.5) $ 62.6 $ 150.0
Aluminum processing (46.3) 104.9 150.2
Corporate (72.6) (77.6) (84.2)
-------- -------- --------
Total operating income (loss) $ (123.4) $ 89.9 $ 216.0
======== ======== ========
Income (loss) before income taxes, minority interests,
extraordinary loss, and cumulative effect of changes
in accounting principles $ (208.5) $ 32.1 $ 142.4
======== ======== ========
Income (loss) before extraordinary loss and cumulative effect
of changes in accounting principles $ (123.1) $ 26.9 $ 108.4
Extraordinary loss on early extinguishment of debt,
net of tax benefit of $11.2 (21.8)
Cumulative effect of changes in accounting principles,
net of tax benefit of $237.7 (507.3)
-------- -------- ---------
Net income (loss) $ (652.2) $ 26.9 $ 108.4
======== ======== ========
Capital expenditures $ 67.7 $ 114.4 $ 118.1
========= ======== =========
</TABLE>
(1) All references to tons refer to metric tons of 2,204.6 pounds.
(2) Includes net sales of bauxite.
(3) Includes the portion of net sales attributable to minority
interests in consolidated subsidiaries.
- 20 -
<PAGE>
<PAGE>
Results of Operations
The Company's operating results are sensitive to changes in prices of
alumina, primary aluminum, and fabricated aluminum products, and also
depend to a significant degree upon the volume and mix of all products
sold. The previous table provides selected operational and financial
information on a consolidated basis with respect to the Company for
the years ended December 31, 1993, 1992, and 1991. As an integrated
aluminum producer, the Company uses a portion of its bauxite, alumina,
and primary aluminum production for additional processing at certain
of its other facilities.
Net Sales
Bauxite and Alumina -- Revenue from net sales of bauxite and alumina
to third parties was $423.4 million in 1993, compared with $466.5
million in 1992 and $550.8 million in 1991. Revenue from alumina
decreased 13% to $338.2 million in 1993 from $390.8 million in 1992
because of lower average realized prices. Revenue from alumina
decreased 16% to $390.8 million in 1992 from $466.5 million in 1991 as
significantly lower average realized prices more than offset a 3%
increase in alumina shipments, which was principally attributable to
increased production at all three of Kaiser's refineries. The
remainder of the segment's sales revenues were from sales of bauxite,
which remained about the same throughout the three years, and the
portion of sales of alumina attributable to the minority interest in
Alumina Partners of Jamaica ("Alpart").
Aluminum Processing -- Revenue from net sales to third parties for
the aluminum processing segment was $1,295.7 million in 1993, compared
with $1,442.6 million in 1992 and $1,450.0 million in 1991. The bulk
of the segment's sales represents Kaiser's primary aluminum and
fabricated aluminum products, with the remainder attributable to the
portion of sales of primary aluminum related to the minority interest
in Volta Aluminium Company Limited.
Revenue from primary aluminum decreased 41% to $301.7 million in 1993
from $515.0 million in 1992 because of lower shipments and lower
average realized prices. Shipments of primary aluminum to third
parties were approximately 39% of total aluminum products shipments in
1993, compared with approximately 51% in 1992. Revenue from primary
aluminum decreased 4% to $515.0 million in 1992 from $538.5 million in
1991, as an 8% decrease in average realized prices more than offset a
4% increase in primary aluminum shipments. Shipments of primary
aluminum to third parties were approximately 51% of total aluminum
products shipments in 1992, compared with approximately 52% in 1991.
Revenue from fabricated aluminum products increased 7% to $981.4
million in 1993 from $913.7 million in 1992, principally due to
increased shipments of most fabricated aluminum products, partially
offset, to a lesser extent, by a decrease in average realized prices
of most of these products. Revenue from fabricated aluminum products
increased 2% to $913.7 million in 1992 from $898.9 million in 1991,
primarily because lower average realized prices were more than offset
by a 9% increase in shipments of fabricated aluminum products.
- 21 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------------------------------------------
Operating Income (Loss)
The Company had an operating loss of $123.4 million in 1993, compared
with income of $89.9 million in 1992 and $216.0 million in 1991. In
the fourth quarter of 1993, the Company recorded a pre-tax charge of
approximately $35.8 million related to the restructuring charges (see
Note 3 of the Notes to Consolidated Financial Statements) and a pre-
tax charge of $19.4 million ($29.0 million in the fourth quarter of
1992) because of a reduction in the carrying value of its inventories
caused principally by prevailing lower prices for alumina, primary
aluminum, and fabricated products.
Bauxite and Alumina -- This segment's operating loss in 1993 was $4.5
million, compared with income of $62.6 million in 1992 and $150.0
million in 1991. In 1993 compared with 1992, operating income was
adversely affected principally due to a decrease in average realized
prices for alumina, which more than offset above-market prices for
virtually all of its excess alumina sold forward in prior periods
under long-term contracts. In 1992 compared to 1991, operating income
was adversely affected by a decrease in average realized prices for
alumina, which more than offset higher alumina shipments and above-
market prices for significant quantities of alumina sold forward in
prior periods under long-term contracts.
Aluminum Processing -- This segment's operating loss was $46.3 million
in 1993, compared with income of $104.9 million in 1992. This
decrease was caused principally by reduced shipments and lower average
realized prices of primary aluminum products which more than offset
increased shipments of fabricated products. In 1993, KACC implemented
a restructuring plan for its flat-rolled products operation at its
Trentwood plant in response to overcapacity in the aluminum rolling
industry, flat demand in the U.S. can stock markets, and declining
demand for aluminum products sold to customers in the commercial
aerospace industry, all of which have resulted in declining prices in
Trentwood's key markets. Additionally, KACC implemented a plan to
discontinue its casting operations, which include three facilities
located in Ohio. This entire restructuring is expected to be
completed by the end of 1995 and will affect approximately 670
employees. The pre-tax charge for this restructuring of $35.8 million
includes $25.2 million for pension, severance, and other termination
benefits; $4.7 million for a writedown of the casting facilities to
net realizable value; $3.3 million for estimated 1994 casting
operating losses until the date of closure or sale; and $2.6 million
for various other items. The Trentwood restructuring is expected to
result in annual cost savings of at least $50.0 million after it has
been fully implemented. Other contributing factors were lower
production at the Company's smelters in the Pacific Northwest in 1993
as a result of the removal of three reduction potlines from production
at those smelters in January 1993 in response to the Bonneville Power
Administration's (the "BPA") reduction during the first quarter of
1993 of the amount of power it normally provides to the Company, and
the increased cost of substitute power in such quarter. In 1993, the
Company's average realized price from sales of primary aluminum was
approximately $.56 per pound, compared to the average Midwest United
States transaction price of approximately $.54 per pound during such
period. In both 1993 and 1992, the Company realized above-market
prices for significant quantities of primary aluminum sold forward in
prior periods under long-term contracts. Operating income for the
aluminum processing segment was $104.9 million in 1992, a decrease of
30% from $150.2 million in 1991. Operating income in 1992 was
adversely affected by a decrease in average realized prices for
primary aluminum and most fabricated aluminum products, partially
offset by increased shipments. In both 1992 and 1991, the Company
realized above-market prices for significant quantities of primary
aluminum sold forward in prior periods under long-term contracts.
- 22 -
<PAGE>
<PAGE>
Corporate -- Corporate operating expenses of $72.6 million, $77.6
million, and $84.2 million in 1993, 1992, and 1991, respectively,
represented corporate general and administrative expenses which were
not allocated to segments.
Income (Loss) Before Extraordinary Loss and Cumulative Effect of
Changes in Accounting Principles
Loss before extraordinary loss and cumulative effect of changes in
accounting principles in 1993 was $123.1 million, compared with income
of $26.9 million in 1992. This decrease resulted from the lower
operating income previously described and approximately $10.8 million
of other pre-tax charges, principally related to establishing
additional litigation and environmental reserves. Other income
remained about the same in 1992 and 1991, as approximately $14.0
million of income for non-recurring adjustments to previously recorded
liabilities and reserves in the fourth quarter of 1992 approximately
equaled the receipt of a $12.0 million fee in the first quarter of
1991 from the Company's minority partner in Alpart in consideration
for the execution of an expansion agreement for the Alpart alumina
refinery.
Income before extraordinary loss and cumulative effect of changes in
accounting principles in 1992 was $26.9 million, a decrease of 75%
from $108.4 million in 1991. This decrease resulted from the lower
operating income previously described, partially offset by an increase
in other income principally due to approximately $14.0 million of
income for non-recurring adjustments to previously recorded
liabilities and reserves in the fourth quarter of 1992.
Net Income (Loss)
The Company reported a net loss of $652.2 million or $11.47 per common
share in 1993, compared with net income of $26.9 million or $.47 per
common share in 1992 and $108.4 million or $2.03 per common share in
1991. The principal reasons for the earnings decline in 1993 compared
with 1992 were the cumulative effect of changes in accounting
principles of $507.3 million related to the adoption of Statements of
Financial Accounting Standards No. 106, 112, and 109 (see Note 1 of
the Notes to Consolidated Financial Statements), the extraordinary
loss on early extinguishment of debt of $21.8 million, and the
operating losses described above.
The principal reason for the earnings decline in 1992 compared with
1991 was the decrease in average realized prices for alumina, primary
aluminum, and most fabricated products, partially offset by an
increase in shipments of such products.
Financial Condition and Capital Spending
Capital Structure
On February 17, 1994, the Company and KACC entered into a credit
agreement with BankAmerica Business Credit, Inc. (as agent for itself
and other lenders), the Bank of America National Trust and Savings
Association, and certain other lenders (the "1994 Credit Agreement").
The 1994 Credit Agreement replaced the credit agreement entered into
in December 1989 by the Company and KACC with a syndicate of
commercial banks and other financial institutions (as amended, the
"1989 Credit Agreement") and consists of a $250.0 million five-year
secured, revolving line of credit, scheduled to mature in 1999. KACC
is able to borrow under the facility by means of revolving credit
advances and letters of credit (up to $125.0 million) in an aggregate
amount equal to the lesser of $250.0 million or a borrowing base
relating to eligible accounts receivable plus eligible inventory. The
Company
- 23 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------------------------------------------
will record a pre-tax extraordinary loss of approximately $8.3 million
in the first quarter of 1994, consisting primarily of the write-off of
unamortized deferred financing costs related to the 1989 Credit
Agreement. As of February 24, 1994, the amount outstanding under the
1994 Credit Agreement was $67.4 million of letters of credit. The
1994 Credit Agreement is unconditionally guaranteed by the Company and
by all significant subsidiaries of KACC which were guarantors of
KACC's obligations under the 1989 Credit Agreement. Loans under the
1994 Credit Agreement bear interest at a rate per annum, at KACC's
election, equal to (i) a Reference Rate (as defined) plus 1-1/2% or
(ii) LIBO Rate (Reserve Adjusted) plus 3-1/4%. After June 30, 1995,
the interest rate margins applicable to borrowings under the 1994
Credit Agreement may be reduced by up to 1-1/2% (non-cumulatively),
based upon a financial test, determined quarterly.
The 1994 Credit Agreement requires KACC to maintain certain financial
covenants and places restrictions on the Company's and KACC's ability
to, among other things, incur debt and liens, make investments, pay
common stock dividends, undertake transactions with affiliates, make
capital expenditures, and enter into unrelated lines of business. The
1994 Credit Agreement is secured by, among other things, (i) mortgages
on KACC's major domestic plants (excluding the Gramercy plant); (ii)
subject to certain exceptions, liens on the accounts receivable,
inventory, equipment, domestic patents and trademarks, and
substantially all other personal property of KACC and certain of its
subsidiaries; (iii) a pledge of all the stock of KACC owned by Kaiser;
and (iv) pledges of all of the stock of a number of KACC's wholly
owned domestic subsidiaries, pledges of a portion of the stock of
certain foreign subsidiaries, and pledges of a portion of the stock of
certain partially owned foreign affiliates.
On February 17, 1994, the Company consummated the public offering of
8,000,000 shares of its 8.255% PRIDES, Convertible Preferred Stock
(the "PRIDES"). The net proceeds from the sale of the shares of
PRIDES were approximately $90.6 million. The Company used such net
proceeds to make a non-interest bearing loan to KACC in a principal
amount equal to $30.0 million (the aggregate dividends scheduled to
accrue on the shares of PRIDES from the issuance date until December
31, 1997, the date on which the outstanding PRIDES will be mandatorily
converted into shares of the Company's common stock), evidenced by an
intercompany note, and used the balance of such net proceeds to make a
capital contribution to KACC in the amount of approximately $60.6
million. In connection with the PRIDES offering, the Company granted
the underwriters an over allotment option for up to 1,200,000 of such
shares.
Concurrent with the offering of the PRIDES, on February 17, 1994, KACC
issued $225.0 million of its 9-7/8% Senior Notes due 2002 (the "Senior
Notes"). The net proceeds of the offering of the Senior Notes were
used to reduce outstanding borrowings under the Revolving Credit
Facility of the 1989 Credit Agreement immediately prior to the
effectiveness of the 1994 Credit Agreement and for working capital and
general corporate purposes.
The offering of the PRIDES, the concurrent issuance of the Senior
Notes, and the replacement of the 1989 Credit Agreement are the final
steps of a comprehensive refinancing plan which the Company and KACC
began in January 1993 which extended the maturities of the Company's
outstanding indebtedness, enhanced its liquidity, and raised new
equity capital.
- 24 -
<PAGE>
<PAGE>
At December 31, 1993, the Company's total consolidated indebtedness
was $729.4 million, compared to $795.8 million at December 31, 1992.
As of December 31, 1992, the Company's long-term indebtedness
consisted principally of $321.7 million aggregate amount of the 14-
1/4% Senior Subordinated Notes due 1995 (the "14-1/4% Notes") and the
1989 Credit Agreement. KACC refinanced the 14-1/4% Notes through the
issuance in February 1993 of $400.0 million aggregate principal amount
of the 12-3/4% Senior Subordinated Notes due 2003 (the "12-3/4%
Notes"). The net proceeds from the sale of the 12-3/4% Notes were
used to retire $321.7 million aggregate principal amount of, and pay
premiums on, the 14-1/4% Notes, to prepay $18.0 million of the term
loan under the 1989 Credit Agreement, and to reduce outstanding
borrowings under the Revolving Credit Facility of the 1989 Credit
Agreement. These transactions resulted in a pre-tax extraordinary
loss of approximately $33.0 million in the first quarter of 1993
($21.8 million after taxes), consisting primarily of the write-off of
unamortized discount and deferred financing costs related to the 14-
1/4% Notes and the payment of premiums on the 14-1/4% Notes.
The obligations of KACC with respect to the Senior Notes and the 12-
3/4% Notes are guaranteed, jointly and severally, by certain
subsidiaries of KACC. The indentures governing the Senior Notes and
the 12-3/4% Notes restrict, among other things, KACC's ability, and
the 1994 Credit Agreement restricts, among other things, Kaiser's and
KACC's ability, to incur debt, undertake transactions with affiliates,
and pay dividends.
To increase its equity capital, the Company consummated a public
offering of its $.65 Depositary Shares in June 1993, each representing
one-tenth of a share of Series A Mandatory Conversion Premium Dividend
Preferred Stock (the "Series A Shares") pursuant to which it realized
net cash proceeds of approximately $119.3 million. In connection with
the offering of the $.65 Depositary Shares, the Company made a non-
interest bearing loan to KACC in the principal amount of $37.8 million
(the aggregate dividends scheduled to accrue on the Series A Shares
from the issuance date until the date on which the outstanding Series
A Shares mandatorily convert into shares of the Company's common
stock). The loan is evidenced by an intercompany note which matures
on June 29, 1996, and is payable in quarterly installments. As of
December 31, 1993, the aggregate principal amount of such intercompany
note was $31.5 million.
Cash from Operations
Cash provided by operations was $24.2 million in 1993, compared with
$26.3 million in 1992 and $135.0 million in 1991. The decrease in
1992 compared with 1991 was primarily because of the decline in net
income and a $66.3 million decrease in previously withdrawn equity
resulting from the excess of current market value over the premiums
paid in certain option contracts.
Capital Expenditures
The Company's capital expenditures of approximately $300.2 million (of
which $42.6 million was funded by the Company's minority partners in
certain foreign joint ventures) during the three years ended December
31, 1993, were made primarily to improve production efficiency, reduce
operating costs, expand capacity at existing facilities, and construct
new facilities. Total consolidated capital expenditures were $67.7
million in 1993, compared with $114.4 million in 1992 and $118.1
million in 1991 (of which $9.4, $17.1, and $16.1 million were funded
by the minority partners in certain foreign joint ventures in 1993,
1992, and 1991, respectively). Total consolidated capital
expenditures (of which approximately 5% is expected to be funded by
the minority partners in certain foreign joint ventures) are expected
to be in the range of $50.0 to $75.0 million per year in the years
1994-1996.
- 25 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------------------------------------------
Debt Service and Capital Expenditure Requirements
The Company expects that it will be able to satisfy its debt service
and capital expenditure requirements through at least December 31,
1995, from cash flows generated by operations and, to the extent
necessary, from borrowings under the 1994 Credit Agreement.
Dividends and Distributions
The declaration and payment of dividends by the Company and KACC on
their shares of common stock is subject to certain covenants contained
in the 1994 Credit Agreement and, in the case of KACC, the Senior Note
Indenture and the 12-3/4% Note Indenture. The 1994 Credit Agreement
does not permit the Company or KACC to pay any dividends on their
common stock. The declaration and payment of dividends by the Company
on the shares of the Series A Shares and the PRIDES is expressly
permitted by the terms of the 1994 Credit Agreement to the extent the
Company receives payments on the intercompany notes or certain other
permitted distributions from KACC.
Other Obligations
In December 1992, KACC entered into an installment sale agreement (the
"Sale Agreement") with the Parish of St. James, Louisiana (the
"Louisiana Parish"), pursuant to which the Louisiana Parish issued
$20.0 million aggregate principal amount of its 7-3/4% Bonds due
August 1, 2022 (the "Bonds"), to finance the construction of certain
solid waste disposal facilities at KACC's Gramercy plant. The
proceeds from the sale of the Bonds were deposited into a construction
fund and may be withdrawn, from time to time, pursuant to the terms of
the Sale Agreement and the Bond indenture. At December 31, 1993,
$10.8 million remained in the construction fund. The Sale Agreement
requires KACC to make payments to the Louisiana Parish in installments
due on the dates and in the amounts required to permit the Louisiana
Parish to satisfy all of its payment obligations under the Bonds.
The Company has historically participated in various raw material
joint ventures outside the United States. At December 31, 1993, the
Company was unconditionally obligated for $73.6 million of
indebtedness of one such joint venture affiliate.
Environmental Contingencies
The Company and KACC are subject to a wide variety of environmental
laws and regulations and to fines or penalties assessed for alleged
breaches of the environmental laws and to claims and litigation based
upon such laws. KACC is currently subject to a number of lawsuits
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments
Reauthorization Act of 1986 ("CERCLA"), and, along with certain other
entities, has been named as a potentially responsible party for
remedial costs at certain third-party sites listed on the National
Priorities List under CERCLA.
Based upon KACC's evaluation of these and other environmental matters,
KACC has established environmental accruals primarily related to
potential solid waste disposal and soil and groundwater remediation
matters. The following table presents the changes in such accruals,
which are primarily included in Long-term liabilities, for the years
ended December 31, 1993, 1992, and 1991:
<TABLE>
<CAPTION>
(In millions of dollars) 1993 1992 1991
---------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $46.4 $51.5 $57.7
Additional amounts 1.7 4.5 7.8
Less expenditures (7.2) (9.6) (14.0)
----- ----- -----
Balance at end of period $40.9 $46.4 $51.5
===== ===== =====
</TABLE>
- 26 -
<PAGE>
<PAGE>
These environmental accruals represent KACC's estimate of costs
reasonably expected to be incurred based upon presently enacted laws
and regulations, currently available facts, existing technology, and
KACC's assessment of the likely remediation action to be taken. KACC
expects that these remediation actions will be taken over the next
several years and estimates that expenditures to be charged to the
environmental accrual will be approximately $4.0 to $8.0 million for
the years 1994 through 1998 and an aggregate of approximately $12.8
million thereafter.
As additional facts are developed and definitive remediation plans and
necessary regulatory approvals for implementation of remediation are
established, or alternative technologies are developed, changes in
these and other factors may result in actual costs exceeding the
current environmental accruals by amounts which cannot presently be
estimated. While uncertainties are inherent in the ultimate outcome
of these matters and it is impossible to presently determine the
actual costs that ultimately may be incurred, management believes that
the resolution of such uncertainties should not have a material
adverse effect upon the Company's consolidated financial position or
results of operations.
Asbestos Contingencies
KACC is a defendant in a number of lawsuits in which the plaintiffs
allege that certain of their injuries were caused by exposure to
asbestos during, and as a result of, their employment with KACC or to
products containing asbestos produced or sold by KACC. The lawsuits
generally relate to products KACC has not manufactured for at least 15
years.
At year-end 1993, the number of such lawsuits pending was
approximately 23,400 (approximately 11,400 of which were received in
1993). The number of such lawsuits instituted against KACC increased
substantially in 1993, and management believes the number of such
lawsuits will continue at approximately the same rate for the next few
years.
In connection with such litigation, during 1993, 1992, and 1991, KACC
made cash payments for settlement and other related costs of $7.0,
$7.1, and $6.1 million, respectively. Based upon prior experience,
KACC estimates annual future cash payments in connection with such
litigation of approximately $8.0 to $13.0 million for the years 1994
through 1998, and an aggregate of approximately $88.4 million
thereafter through 2006. Based upon past experience and reasonably
anticipated future activity, KACC has established an accrual for
estimated asbestos-related costs for claims filed and estimated to be
filed and settled through 2006. The Company does not presently
believe there is a reasonable basis for estimating such costs beyond
2006 and, accordingly, no accrual has been recorded for such costs
which may be incurred. This accrual was calculated based upon the
current and anticipated number of asbestos-related claims, the prior
timing and amounts of asbestos-related payments, the current state of
case law related to asbestos claims, the advice of counsel, and the
anticipated effects of inflation and discounting at an estimated risk-
free rate (5.25% at December 31, 1993). Accordingly, an accrual of
$102.8 million for asbestos-related expenditures is included primarily
in Long-term liabilities at December 31, 1993. The aggregate amount
of the undiscounted liability at December 31, 1993, of $141.5 million,
before considerations for insurance recoveries, reflects an increase
of $56.6 million from the prior year, resulting primarily from an
increase in claims filed during 1993 and the Company's belief that the
number of such lawsuits will continue at approximately the same rate
for the next few years.
- 27 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------------------------------------------
The Company believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs. While
claims for recovery from one of KACC's insurance carriers are
currently subject to pending litigation and other carriers have raised
certain defenses, the Company believes, based upon prior insurance-
related recoveries in respect of asbestos-related claims, existing
insurance policies, and the advice of counsel, that substantial
recoveries from the insurance carriers are probable. Accordingly,
estimated insurance recoveries of $94.0 million determined on the same
basis as the asbestos-related cost accrual are recorded primarily in
Other assets as of December 31, 1993.
Based upon the factors discussed in the two preceding paragraphs,
management currently believes that there is no more than a remote
possibility (under generally accepted accounting principles) that the
Company's asbestos-related costs net of related insurance recoveries
exceed those accrued as of December 31, 1993, and, accordingly, that
the resolution of such uncertainties and the incurrence of such net
costs should not have a material adverse effect upon the Company's
consolidated financial position or results of operations.
Income Tax Matters
Tax Attribute Carryforwards
At December 31, 1993, Kaiser had certain tax attribute carryforwards
which may be utilized, subject to certain limitations, to reduce
future income tax liabilities. See Note 7 of the Notes to
Consolidated Financial Statements for a discussion of the effects upon
the Company's tax attribute carryforwards and carrybacks resulting
from the offering of the Company's $.65 Depositary Shares in June
1993.
Deferred Income Tax Assets
As discussed in Note 7 of the Notes to Consolidated Financial
Statements, the Company's net deferred income tax assets as of
December 31, 1993, were $206.8 million. Approximately $82.4 million
of these net deferred income tax assets relate to the benefit of loss
and credit carryforwards, net of valuation allowances. The Company
evaluated all appropriate factors to determine the proper valuation
allowances for these carryforwards, including any limitations
concerning their use and the year the carryforwards expire, as well as
the levels of taxable income necessary for utilization. For example,
full valuation allowances were provided for certain credit
carryforwards that expire in the near term. With regard to future
levels of income, the Company believes, based on the cyclical nature
of its business, its history of prior operating earnings, and its
expectations for future years, that it will more likely than not
generate sufficient taxable income to realize the benefit attributable
to the loss and credit carryforwards for which valuation allowances
were not provided. The remaining portion of the Company's net
deferred income tax assets at December 31, 1993, is approximately
$124.4 million. A principal component of this amount is the tax
benefit associated with the accrual for postretirement benefits other
than pensions. The future tax deductions with respect to the
turnaround of this accrual will occur over a 30- to 40-year period.
If such deductions create or increase a net operating loss in any one
year, the Company has the ability to carry forward such loss for 15
taxable years. For these reasons, the Company believes a long-term
view of profitability is appropriate and has concluded that this net
deferred income tax asset will more likely than not be realized
despite the recent decline in profitability.
- 28 -
<PAGE>
<PAGE>
Trends
Exports from the Commonwealth of Independent States ("C.I.S."),
additions to smelter capacities during the past several years,
continued high operating rates, and other factors have contributed to
a significant increase in primary aluminum inventories in the Western
world. If Western world production and exports from the C.I.S.
continue at current levels, primary aluminum inventory levels will
increase further in 1994. The foregoing factors, among others, have
contributed to a significant reduction in the market price of primary
aluminum, and may continue to adversely affect the market price of
primary aluminum in the future.
Government officials from the European Union, the United States of
America, Canada, Norway, Australia, and the Russian Federation met in
a multilateral conference in January 1994 to discuss the current
excess global supply of primary aluminum. All six participating
governments have ratified as a trade agreement the resulting
Memorandum which provides, in part, for (i) a reduction in Russian
Federation primary aluminum production by 300,000 tons per year within
three months of ratification of the Memorandum and an additional
200,000 tons within the following three months, (ii) improved
availability of comprehensive data on Russian aluminum production, and
(iii) certain assistance to the Russian aluminum industry. A Russian
Federation Trade Ministry official has publicly stated that the output
reduction would remain in effect for 18 months to two years, provided
that other worldwide production cutbacks occur, existing trade
restrictions on aluminum are eliminated, and no new trade restrictions
on aluminum are imposed. The Memorandum does not require specific
levels of production cutbacks by other producing nations. There can
be no assurance that the implementation of the Memorandum will
adequately address the current oversupply of primary aluminum.
If the Company's average realized sales prices in 1994 for substantial
quantities of its primary aluminum and alumina were based on the
current market price of primary aluminum, the Company would continue
to sustain net losses in 1994, which would be expected to approximate
the loss in 1993 ($81.5 million) before extraordinary loss and
cumulative effect of changes in accounting principles, restructuring
charges, reduction in the carrying value of inventories, and additions
to litigation and environmental reserves as described in Notes 1 and 3
of the Notes to Consolidated Financial Statements.
Effective October 1, 1993, an increase in the base rate the BPA
charges to its direct service industry customers for electricity was
adopted, which will increase the Company's production costs at the
Mead and Tacoma smelters by approximately $15.0 million per year
(approximately $11.3 million per year, based on the current operating
rate of approximately 75% of full capacity). The rate increase is
generally expected to remain in effect for two years.
Sensitivity to Prices and Hedging Programs
The Company's earnings are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also
depend to a significant degree upon the volume and mix of all products
sold. Consequently, the Company has developed strategies to mitigate
its exposure to possible further declines in the market prices of
alumina and primary aluminum while retaining the ability to
participate in favorable pricing environments that may materialize.
- 29 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------------------------------------------
Alumina -- The Company has sold forward substantially all of the
alumina available to it in excess of its projected internal smelting
requirements for 1994, and a substantial portion of such excess
alumina for 1995. Approximately 95% of 1994 sales and virtually all
of 1995 sales were made at prices indexed to future prices of primary
aluminum. Approximately 75% of 1994 sales were made at prices indexed
to future prices of primary aluminum, but with minimum prices that
exceed the Company's estimated cash production costs. The remainder
of 1994 sales were made either at fixed prices that exceed the
Company's estimated cash production costs, or are subject to prices
indexed to future prices of primary aluminum but without minimum
prices. Approximately 85% of 1995 sales were made at prices indexed
to future prices of primary aluminum, but with minimum prices that
exceed the Company's estimated cash production costs.
Aluminum Processing -- As of the date of this report, the Company has
sold forward at fixed prices approximately 75% of its primary aluminum
in excess of its projected internal fabrication requirements in 1994
and approximately 55% of such surplus in 1995 at fixed prices that
exceed the current market price of primary aluminum. Hedging programs
already in place would allow the Company to participate in higher
market prices, should they materialize, for approximately 40% of the
Company's excess primary aluminum sold forward in 1994, and 100% of
the Company's excess primary aluminum sold forward in 1995.
In response to the low price of primary aluminum caused by the current
surplus, a number of companies have closed smelting facilities. In
addition, in response to certain power reductions undertaken by the
BPA in the Pacific Northwest, a number of companies (including the
Company) have curtailed or shut down production capacities at their
smelter facilities in the Pacific Northwest. Furthermore, after
continued assessment of its production levels in light of market
prices, industry inventory levels, production costs, and user demand,
on February 25, 1994, the Company announced that in April 1994 it will
curtail approximately 9.3% of its primary aluminum current annual
production capacity.
Fabricated aluminum prices, which vary considerably among products,
are heavily influenced by changes in the price of primary aluminum and
generally lag behind primary aluminum prices for periods of up to six
months. A significant portion of the Company's fabricated product
shipments consist of body, lid, and tab stock for the beverage
container market. The Company may not be able to receive increases in
primary aluminum prices from its can stock customers as promptly as in
the recent past because of competition from other aluminum producers
and because of excess supply in the industry. The Company also ships
fabricated products to customers in the aerospace market. Aluminum
demand in the aerospace market is decreasing as a result of the
structural contraction of the defense industry caused by the end of
the Cold War. In addition, the commercial aerospace market is
experiencing a cyclical downturn in business due to the recent
economic recessions in the United States, Canada, Australia, and the
United Kingdom, and slow economic growth in other countries.
- 30 -
<PAGE>
To the Stockholders and the Board of Directors of
Kaiser Aluminum Corporation:
We have audited the accompanying consolidated balance sheets of
Kaiser Aluminum Corporation (a Delaware corporation) and
subsidiaries as of December 31, 1993 and 1992, and the related
statements of consolidated income and cash flows for each of the
three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Kaiser
Aluminum Corporation and subsidiaries as of December 31, 1993 and
1992, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As explained in Note 1 of the Notes to Consolidated Financial
Statements, effective January 1, 1993, the Company changed its
methods of accounting for postretirement benefits other than
pensions, postemployment benefits, and income taxes.
ARTHUR ANDERSEN & CO.
Houston, Texas
February 24, 1994
- 31 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
--------------------
(In millions of dollars, except share amounts) 1993 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 14.7 $ 19.1
Receivables:
Trade, less allowance for doubtful receivables
of $2.9 in 1993 and $3.0 in 1992 156.1 174.0
Other 78.6 96.0
Inventories 426.9 439.9
Prepaid expenses and other current assets 60.7 37.0
-------- --------
Total current assets 737.0 766.0
Investments in and advances to unconsolidated affiliates 183.2 150.1
Property, plant, and equipment -- net 1,163.7 1,066.8
Deferred income taxes 210.8
Other assets 233.2 189.7
-------- --------
Total $2,527.9 $2,172.6
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 126.3 $ 136.6
Accrued interest 23.6 4.6
Accrued salaries, wages, and related expenses 56.1 84.4
Accrued postretirement benefit
obligation -- current portion 47.6
Other accrued liabilities 133.2 121.0
Payable to affiliates 62.4 78.4
Short-term borrowings .5 4.8
Long-term debt -- current portion 8.7 25.9
-------- --------
Total current liabilities 458.4 455.7
Long-term liabilities 501.8 281.7
Accrued postretirement benefit obligation 713.1
Long-term debt 720.2 765.1
Minority interests 105.0 104.9
Stockholders' equity:
Preferred stock, par value $.05, authorized
20,000,000 shares; Series A Convertible, stated
value $.10, issued and outstanding, 1,938,295 and
nil in 1993 and 1992 .2
Common stock, par value $.01, authorized 100,000,000 shares;
issued and outstanding, 58,095,599 and 57,327,279 shares
in 1993 and 1992 .6 .6
Additional capital 425.9 288.5
Retained earnings (accumulated deficit) (375.7) 282.8
Additional minimum pension liability (21.6) (6.7)
-------- --------
Total stockholders' equity 29.4 565.2
-------- --------
Total $2,527.9 $2,172.6
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
- 32 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
(In millions of dollars, except share amounts) 1993 1992 1991
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,719.1 $1,909.1 $2,000.8
-------- -------- --------
Costs and expenses:
Cost of products sold 1,587.7 1,619.3 1,594.2
Depreciation 97.1 80.3 73.2
Selling, administrative, research and
development, and general 121.9 119.6 117.4
Restructuring of operations 35.8
-------- -------- --------
Total costs and expenses 1,842.5 1,819.2 1,784.8
-------- -------- --------
Operating income (loss) (123.4) 89.9 216.0
Other income (expense):
Interest and other income -- net (.9) 20.9 20.3
Interest expense (84.2) (78.7) (93.9)
-------- -------- --------
Income (loss) before income taxes, minority interests,
extraordinary loss, and cumulative effect of changes
in accounting principles (208.5) 32.1 142.4
Credit (provision) for income taxes 86.9 (5.3) (32.4)
Minority interests (1.5) .1 (1.6)
-------- -------- --------
Income (loss) before extraordinary loss and cumulative
effect of changes in accounting principles (123.1) 26.9 108.4
Extraordinary loss on early extinguishment of debt,
net of tax benefit of $11.2 (21.8)
Cumulative effect of changes in accounting principles,
net of tax benefit of $237.7 (507.3)
-------- -------- --------
Net income (loss) $ (652.2) $ 26.9 $ 108.4
======== ======== ========
Per common and common equivalent share:
Income (loss) before extraordinary loss and cumulative effect of
changes in accounting principles $ (2.25) $ .47 $ 2.03
Extraordinary loss (.38)
Cumulative effect of changes in accounting principles (8.84)
-------- -------- --------
Net income (loss) $ (11.47) $ .47 $ 2.03
======== ======== ========
Weighted average common and common equivalent shares
outstanding (000) 57,423 57,250 53,297
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
- 33 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
(In millions of dollars) 1993 1992 1991
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) $(652.2) $ 26.9 $ 108.4
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
Depreciation 97.1 80.3 73.2
Amortization of deferred financing costs and discount
on long-term debt 11.2 11.5 10.7
Non-cash postretirement benefit expenses
other than pensions 19.2
Restructuring of operations 35.8
Minority interests 1.5 (.1) 1.6
Extraordinary loss on early extinguishment of debt -- net 21.8
Cumulative effect of changes in accounting principles -- net 507.3
(Decrease) increase in accrued and deferred income taxes (96.4) 3.5 10.1
Equity in losses of unconsolidated affiliates 3.3 1.9 19.5
Recognition of previously deferred income
from a forward alumina sale (.6) (25.7) (42.0)
Increase (decrease) in accrued interest 19.2 (.3) (1.9)
Incurrence of financing costs (12.7) (5.5) (5.9)
Increase in receivables (6.1) (57.8) (2.5)
Decrease in inventories 13.0 58.7 25.3
Decrease (increase) in prepaid expenses
and other current assets 7.4 7.6 (38.3)
Increase (decrease) in accounts payable,
payable to affiliates, and accrued liabilities 47.4 (93.9) (29.6)
Other 8.0 19.2 6.4
------- ------- -------
Net cash provided by operating activities 24.2 26.3 135.0
------- ------- -------
Cash flows from investing activities:
Net proceeds from disposition of property and investments 13.1 26.1 8.8
Capital expenditures (67.7) (114.4) (118.1)
------- ------- -------
Net cash used for investing activities (54.6) (88.3) (109.3)
------- ------- -------
Cash flow from financing activities:
Repayments of long-term debt, including revolving credit (1,134.5) (221.4) (533.3)
Borrowings of long-term debt, including revolving credit 1,068.1 303.8 575.9
Borrowings from MAXXAM Group Inc. (see supplemental
disclosure below) 15.0
Tender premiums and other costs of early
extinguishment of debt (27.1)
Net short-term (payments) borrowings (4.3) (1.5) 6.7
Borrowing (prepayment) of notes to parent 2.5 (100.2)
Dividends paid (6.3) (11.4) (55.7)
Capital stock issued 119.3 .6 93.2
Redemption of minority interests' preference stock (4.2) (7.3) (20.4)
------- ------- -------
Net cash provided by (used for) financing activities 26.0 65.3 (33.8)
------- ------- -------
Net increase (decrease) in cash and cash equivalents
during the year (4.4) 3.3 (8.1)
Cash and cash equivalents at beginning of year 19.1 15.8 23.9
------- ------- -------
Cash and cash equivalents at end of year $ 14.7 $ 19.1 $ 15.8
======= ======= =======
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 53.7 $ 68.1 $ 81.7
Income taxes paid 13.5 1.8 20.9
Tax allocation payments to MAXXAM 28.0 39.1
Supplemental disclosure of non-cash financing activities:
Contribution to capital of notes payable to parent together
with accrued interest $ 53.9
Exchange of the borrowings from MAXXAM Group Inc. for capital stock $ 15.0
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
- 34 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the statements of Kaiser
Aluminum Corporation ("Kaiser" or the "Company") and its majority
owned subsidiaries. Investments in 50%-or-less-owned entities are
accounted for primarily by the equity method. Intercompany balances
and transactions are eliminated. The Company is a subsidiary of
MAXXAM Inc. ("MAXXAM"), and conducts its operations through its wholly
owned subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC").
Certain reclassifications of prior-year information were made to
conform to the current presentation.
Changes in Accounting Principles
The Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106"), and Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits"
("SFAS 112"), as of January 1, 1993. The costs of postretirement
benefits other than pensions and postemployment benefits are now
accrued over the period employees provide services to the date of
their full eligibility for such benefits. Previously, such costs were
expensed as actual claims were incurred. The cumulative effect of the
changes in accounting principles for the adoption of SFAS 106 and SFAS
112 were recorded as charges to results of operations of $497.7 and
$7.3, net of related income taxes of $234.2 and $3.5, respectively.
The new accounting standards had no effect on the Company's cash
outlays for postretirement or postemployment benefits, nor did these
one-time charges affect the Company's compliance with its existing
debt covenants. The Company reserves the right, subject to applicable
collective bargaining agreements and applicable legal requirements, to
amend or terminate these benefits.
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109"), as of January 1,
1993. The adoption of SFAS 109 changes the Company's method of
accounting for income taxes to an asset and liability approach from
the deferral method prescribed by Accounting Principles Board Opinion
No. 11, "Accounting for Income Taxes" ("APB 11"). The asset and
liability approach requires the recognition of deferred income tax
assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements
or tax returns. Under this method, deferred income tax assets and
liabilities are determined based on the temporary differences between
the financial statement and tax bases of assets and liabilities using
enacted tax rates. The cumulative effect of the change in accounting
principle reduced the Company's results of operations by $2.3.
Cash and Cash Equivalents
The Company considers only those short-term, highly liquid investments
with original maturities of 90 days or less to be cash equivalents.
Inventories
Substantially all product inventories are stated at last-in, first-out
("LIFO") cost, not in excess of market. Replacement cost is not in
excess of LIFO cost. Other inventories, principally operating
supplies and repair and maintenance parts, are stated at the lower of
average cost or market. Inventory costs consist of material, labor,
and manufacturing overhead, including depreciation. Inventories
consist of the following:
- 35 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
----------------
1993 1992
-----------------------------------------------------------------------
<S> <C> <C>
Finished fabricated products $ 83.7 $ 91.2
Primary aluminum and work in process 141.4 128.7
Bauxite and alumina 94.0 107.4
Operating supplies and repair and maintenance parts 107.8 112.6
------ ------
$426.9 $439.9
====== ======
</TABLE>
The Company recorded pre-tax charges of approximately $19.4 in 1993
and $29.0 in 1992 because of a reduction in the carrying values of its
inventories caused principally by prevailing lower prices for alumina,
primary aluminum, and fabricated products. The 1992 amount includes a
LIFO inventory liquidation of $10.2.
Depreciation
Depreciation is computed principally by the straight-line method at
rates based upon the estimated useful lives of the various classes of
assets. The principal estimated useful lives by class of assets are:
-----------------------------------------------------------------------
Land improvements 8 to 25 years
Buildings 15 to 45 years
Machinery and equipment 10 to 22 years
Other Income
Other income in 1993 includes approximately $10.8 of pre-tax charges
related principally to establishing additional litigation and
environmental reserves in the fourth quarter. Other income in 1992
includes approximately $14.0 of pre-tax income for non-recurring
adjustments to previously recorded liabilities and reserves in the
fourth quarter. Included in interest and other income in 1991 is the
receipt of a $12.0 fee in the first quarter from the Company s
minority partner in consideration for the execution of an expansion
agreement for the Alumina Partners of Jamaica ("Alpart") alumina
refinery. The agreement provides for a program of expansion and
modernization of Alpart at the existing ownership interest of 65% for
KACC and 35% for KACC's minority partner. The prior expansion
agreement provided for expansion rights of 75% for KACC and 25% for
KACC's minority partner.
Futures Contracts and Options
The Company periodically enters into forward foreign exchange,
commodity futures, and commodity and currency option contracts, which
are primarily accounted for as hedges of its revenues and costs. The
gains and losses on these contracts are reflected in earnings
concurrently with the hedged revenues or costs. The cash flows from
these contracts are classified in a manner consistent with the
underlying nature of the transactions. At December 31, 1993, the net
fair market value of the Company's position in these contracts was not
material.
Deferred Financing Costs
Costs incurred to obtain debt financing are deferred and amortized
over the estimated term of the related borrowing.
Foreign Currency
The Company uses the United States dollar as the functional currency
for its foreign operations.
- 36 -<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
-----------------------------------------------------------------------
Fair Value of Financial Instruments
Unless otherwise disclosed, the carrying amount of all financial
instruments is a reasonable estimate of fair value.
Net Income per Common and Common Equivalent Share
Net income per common and common equivalent share is computed based on
the weighted average number of common and common equivalent shares
outstanding during each period. For the year ended December 31, 1993,
common stock equivalents of 19,382,950 attributable to the Series A
Convertible Preferred Stock and 584,300 attributable to nonqualified
stock options (see Note 9) were excluded from the calculation of
weighted average shares because they were antidilutive. Dividends on
the Series A Convertible Preferred Stock ($6.3 for the year ended
December 31, 1993) are deducted from net income (added to net loss)
for the purpose of calculating net income (loss) per common and common
equivalent share.
2. Pro Forma Financial Information
On February 17, 1994, the Company completed an equity offering of
preferred stock (see Note 9), and KACC completed a refinancing which
included the issuance of $225.0 of Senior Notes and the signing of the
1994 Credit Agreement (see Note 6). The following unaudited pro forma
information reflects the effects of these transactions as if they had
occurred on December 31, 1993.
-----------------------------------------------------------------------
Current assets $ 843.6
Non-current assets 1,800.1
Current liabilities 454.2
Long-term debt 755.7
Stockholders' equity 113.8
3. Restructuring of Operations
In 1993, KACC implemented a restructuring plan for its flat-rolled
products operation at its Trentwood plant in response to overcapacity
in the aluminum rolling industry, flat demand in the U.S. can stock
markets, and declining demand for aluminum products sold to customers
in the commercial aerospace industry, all of which have resulted in
declining prices in Trentwood's key markets. Additionally, KACC
implemented a plan to discontinue its casting operations, which
include three facilities located in Ohio. This entire restructuring
is expected to be completed by the end of 1995 and will affect
approximately 670 employees. The pre-tax charge for this
restructuring of $35.8 includes $25.2 for pension, severance, and
other termination benefits; $4.7 for a writedown of the casting
facilities to net realizable value; $3.3 for estimated 1994 casting
operating losses until the date of closure or sale; and $2.6 for
various other items.
4. Investments In and Advances To Unconsolidated Affiliates
Summary combined financial information is provided below for
unconsolidated aluminum investments, most of which supply and process
raw materials. The investees are Queensland Alumina Limited ("QAL")
(28.3% owned), Anglesey Aluminium Limited ("Anglesey") (49.0% owned),
and Kaiser Jamaica Bauxite Company (49.0% owned). The equity in
earnings (losses) before income taxes of such operations are treated
as a reduction (increase) in cost of products sold. At December 31,
1993 and 1992, KACC's net receivables from these affiliates were not
material.
- 37 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------------------------
(In millions of dollars, except share amounts)
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary of Combined Financial Position
December 31,
-------------------
1993 1992
-------------------------------------------------------------------------
<S> <C> <C>
Current assets $312.3 $295.0
Property, plant, and equipment -- net 371.1 389.4
Other assets 46.3 49.9
------ ------
Total assets $729.7 $734.3
====== ======
Current liabilities $130.4 $132.8
Long-term debt 290.0 275.0
Other liabilities 17.8 20.0
Stockholders' equity 291.5 306.5
------ ------
Total liabilities and stockholders' equity $729.7 $734.3
====== ======
</TABLE>
Summary of Combined Operations
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1993 1992 1991
-------------------------------
<S> <C> <C> <C>
Net sales $ 510.3 $ 586.6 $ 589.0
Costs and expenses (527.2) (586.7) (630.7)
Provision for income taxes 1.9 6.9 9.5
------- ------- -------
Net income (loss) $ (15.0) $ 6.8 $ (32.2)
======= ======= =======
Company's equity in losses $ (3.3) $ (1.9) $ (19.5)
======= ======= =======
</TABLE>
The Company's equity in losses differs from the summary net income
(loss) due to various percentage ownerships in the entities and equity
method accounting adjustments.
At December 31, 1993, KACC's investment in its unconsolidated
affiliates exceeded its equity in their net assets by approximately
$80.7. The Company is amortizing this amount over a 12-year period,
which results in an annual amortization charge of approximately $11.9.
The Company and its affiliates have interrelated operations. KACC
provides some of its affiliates with services such as financing,
management, and engineering. Significant activities with affiliates
include the acquisition and processing of bauxite, alumina, and
primary aluminum. Purchases from these affiliates were $206.6,
$219.4 and $238.7 in the years ended December 31, 1993, 1992, and
1991, respectively. No dividends were received from investees in the
three years ended December 31, 1993. See Note 7 for the impact of the
adoption of SFAS 109 in 1993.
- 38 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
------------------------------------------------------------------------
5. Property, Plant, and Equipment
The major classes of property, plant, and equipment are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 135.1 $ 123.8
Buildings 194.8 164.1
Machinery and equipment 1,223.0 1,010.7
Construction in progress 64.9 70.3
-------- --------
1,617.8 1,368.9
Accumulated depreciation 454.1 302.1
-------- --------
Property, plant, and equipment -- net $1,163.7 $1,066.8
======== ========
</TABLE>
See Note 7 for the impact of the adoption of SFAS 109 in 1993.
6. Long-Term Debt
Long-term debt and its maturity schedule are as follows:
<TABLE>
<CAPTION>
December 31,
1999 ---------------
and 1993 1992
1994 1995 1996 1997 1998 After Total Total
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1989 Credit Agreement (6.59% at
December 31, 1993)
Revolving Credit Facility $188.0 $188.0 $290.0
Term Loan 36.6
Pollution Control and Solid Waste Disposal
Facilities Obligations (6.00%-7.75%) $ 1.1 $ 1.2 $ 1.2 $ 1.3 $ 1.3 33.1 39.2 40.0
Alpart CARIFA Loan (fixed and variable rates) 60.0 60.0 60.0
Alpart Term Loan (8.95%) 6.3 6.2 6.3 6.2 25.0 31.3
12-3/4% Senior Subordinated Notes 400.0 400.0
14-1/4% Senior Subordinated Notes 320.5
Other borrowings (fixed and variable rates) 1.3 3.7 1.5 1.5 7.8 .9 16.7 12.6
------ ------ ------ ------ ------ ------ ------ ------
Total $ 8.7 $ 11.1 $ 9.0 $ 9.0 $ 9.1 $682.0 728.9 791.0
====== ====== ====== ====== ====== ======
Less current portion 8.7 25.9
------ ------
Long-term debt $720.2 $765.1
====== ======
</TABLE>
1994 Credit Agreement
On February 17, 1994, the Company and KACC entered into a credit
agreement with BankAmerica Business Credit, Inc. (as agent for itself
and other lenders), Bank of America National Trust and Savings
Association, and certain other lenders (the "1994 Credit Agreement").
The 1994 Credit Agreement replaced the 1989 Credit Agreement (as
defined below) and consists of a $250.0 five-year secured, revolving
line of credit, scheduled to mature in 1999. The Company is able to
borrow under the facility by means of revolving credit advances and
letters of credit (up to $125.0) in an aggregate amount equal to the
lesser of $250.0 or a borrowing base relating to eligible accounts
- 39 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
receivable plus eligible inventory. The Company will record a
pre-tax extraordinary loss of approximately $8.3 in the first quarter
of 1994, consisting primarily of the write-off of unamortized deferred
financing costs related to the 1989 Credit Agreement. As of February
24, 1994, the amount outstanding under the 1994 Credit Agreement was
$67.4 of letters of credit. The 1994 Credit Agreement is
unconditionally guaranteed by the Company and by all significant
subsidiaries of KACC which were guarantors of KACC's obligations under
the 1989 Credit Agreement. Loans under the 1994 Credit Agreement bear
interest at a rate per annum, at KACC's election, equal to (i) a
Reference Rate (as defined) plus 1-1/2% or (ii) LIBO Rate (Reserve
Adjusted) plus 3-1/4%. After June 30, 1995, the interest rate margins
applicable to borrowings under the 1994 Credit Agreement may be
reduced by up to 1-1/2% (non-cumulatively), based upon a financial
test, determined quarterly.
The 1994 Credit Agreement requires KACC to maintain certain financial
covenants and places restrictions on the Company's and KACC's ability
to, among other things, incur debt and liens, make investments, pay
common stock dividends, undertake transactions with affiliates, make
capital expenditures, and enter into unrelated lines of business. The
1994 Credit Agreement is secured by, among other things, (i) mortgages
on KACC's major domestic plants (excluding the Gramercy plant); (ii)
subject to certain exceptions, liens on the accounts receivable,
inventory, equipment, domestic patents and trademarks, and
substantially all other personal property of KACC and certain of its
subsidiaries; (iii) a pledge of all the stock of KACC owned by Kaiser;
and (iv) pledges of all of the stock of a number of KACC's wholly
owned domestic subsidiaries, pledges of a portion of the stock of
certain foreign subsidiaries, and pledges of a portion of the stock of
certain partially owned foreign affiliates.
The 1989 Credit Agreement
The Company and KACC entered into a credit agreement with a syndicate
of commercial banks and other financial institutions. This agreement
was composed of a Revolving Credit Facility, a five-year Term Loan,
and certain other agreements (as amended, the "1989 Credit
Agreement"). The obligations of KACC in respect of the credit
facilities were guaranteed by Kaiser, and by a number of wholly owned
subsidiaries of KACC.
The Revolving Credit Facility under the 1989 Credit Agreement provided
for loans not to exceed the lesser of $350.0 or a borrowing base
relating to the amount of eligible accounts receivable and eligible
inventory of KACC and certain of its subsidiaries. Up to $50.0 of
availability under the Revolving Credit Facility could have been used
for letters of credit. As of December 31, 1993, $113.6 of borrowing
capacity was unused under the Revolving Credit Facility of the 1989
Credit Agreement (of which $12.8 could also have been used for letters
of credit). The five-year Term Loan component of the 1989 Credit
Agreement, which was originally to be repaid in ten equal semi-annual
installments commencing May 31, 1990, was prepaid in June 1993.
Senior Notes
Concurrent with the offering by the Company of its 8.255% PRIDES,
Convertible Preferred Stock (the "PRIDES") on February 17, 1994 (see
Note 9), KACC issued $225.0 of its 9-7/8% Senior Notes due 2002 (the
"Senior Notes"). The net proceeds of the offering of the Senior Notes
were used to reduce outstanding borrowings under the Revolving Credit
Facility of the 1989 Credit Agreement immediately prior to the
effectiveness of the 1994 Credit Agreement and for working capital and
general corporate purposes.
Senior Subordinated Notes
On February 1, 1993, KACC issued $400.0 of 12-3/4% Senior Subordinated
Notes due 2003 (the "12-3/4% Notes"). The net proceeds from the sale
of the 12-3/4% Notes were used to retire the 14-1/4% Senior
Subordinated Notes due 1995 (the "14-1/4% Notes"), to prepay $18.0 of
the Term Loan, and to reduce outstanding borrowings under the
Revolving Credit
- 40 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
-----------------------------------------------------------------
Facility. These transactions resulted in a pre-tax extraordinary loss
of approximately $33.0 in the first quarter of 1993, consisting
primarily of the write-off of unamortized discount and deferred
financing costs related to the 14-1/4% Notes and the payment of premiums
on the 14-1/4% Notes.
The obligations of KACC with respect to the Senior Notes and the 12-3/4%
Notes are guaranteed, jointly and severally, by certain subsidiaries
of KACC. The indentures governing the Senior Notes and the 12-3/4% Notes
restrict, among other things, KACC's ability, and the 1994 Credit
Agreement restricts, among other things, Kaiser's and KACC's ability,
to incur debt, undertake transactions with affiliates, and pay
dividends.
Gramercy Revenue Bonds
In December 1992, KACC entered into an installment sale agreement (the
"Sale Agreement") with the Parish of St. James, Louisiana (the
"Louisiana Parish"), pursuant to which the Louisiana Parish issued
$20.0 aggregate principal amount of its 7-3/4% Bonds due August 1,
2022 (the "Bonds") to finance the construction of certain solid waste
disposal facilities at KACC's Gramercy plant. The proceeds from the
sale of the Bonds were deposited into a construction fund and may be
withdrawn, from time to time, pursuant to the terms of the Sale
Agreement and the Bond indenture. At December 31, 1993, $10.8
remained in the construction fund. The Sale Agreement requires KACC
to make payments to the Louisiana Parish in installments due on the
dates and in the amounts required to permit the Louisiana Parish to
satisfy all of its payment obligations under the Bonds.
Alpart CARIFA Loan
In December 1991, Alpart entered into a loan agreement with the
Caribbean Basin Projects Financing Authority ("CARIFA") under which
CARIFA loaned Alpart the proceeds from the issuance of CARIFA's
industrial revenue bonds. The terms of the loan parallel the bonds'
repayment terms. The $38.0 aggregate principal amount of Series A
bonds matures on June 1, 2008. The Series A bonds bear interest at a
floating rate of 87% of the applicable LIBID Rate (LIBOR less 1/8 of
1%) on $37.5 of the principal amount (2.9% at December 31, 1993) with
the remaining $.5 bearing interest at a fixed rate of 6.35%. The
$22.0 aggregate principal amount of Series B bonds matures on June 1,
2007, and bears interest at a fixed rate of 8.25%.
Proceeds from the sale of the bonds were used by Alpart to refinance
interim loans from the partners in Alpart, to pay eligible project
costs for the expansion and modernization of its alumina refinery and
related port and bauxite mining facilities, and to pay certain costs
of issuance. Under the terms of the loan agreement, Alpart must
remain a qualified recipient for Caribbean Basin Initiative funds as
defined in applicable laws. Alpart has agreed to indemnify
bondholders of CARIFA for certain tax payments that could result from
events, as defined, that adversely affect the tax treatment of the
interest income on the bonds. Alpart's obligations under the loan
agreement are secured by a $64.2 letter of credit guaranteed by the
partners in Alpart (of which $22.5 is guaranteed by the Company s
minority partner in Alpart).
Capitalized Interest
Interest capitalized in 1993, 1992, and 1991 was $3.4, $4.4, and $4.2,
respectively.
Restricted Net Assets of Subsidiary
Certain debt instruments restrict the ability of KACC to transfer
assets, make loans and advances, and pay dividends to the Company.
The assets of KACC, which are substantially all of the Company's
assets, are restricted.
- 41 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
Fair Value Disclosure
The fair value of the Company's long-term debt was approximately
$734.1 and $806.8 at December 31, 1993 and 1992, respectively. For
1993, the fair value of the 12-3/4% Notes was estimated using the market
value of such notes, or $401.0. For 1992, the estimated fair value of
the 14-1/4% Notes was the amount used to retire the 14-1/4% Notes in
February 1993, or $347.8. The fair value of all other long-term debt
is based upon discounting the future cash flows using the current rate
for debt of similar maturities and terms.
7. Income Taxes
The adoption of SFAS 109 as of January 1, 1993, as discussed in Note
1, required the Company to restate certain assets and liabilities to
their pre-tax amounts from their net-of-tax amounts originally
recorded in connection with the acquisition by MAXXAM in October 1988.
The restatement of the assigned values with respect to certain assets
and liabilities recorded as a result of the acquisition and the
recomputation of deferred income tax liabilities under SFAS 109
resulted in: (i) an increase of $144.6 in the net carrying value of
property, plant, and equipment; (ii) an increase of $47.8 in
investments in and advances to unconsolidated affiliates; (iii) an
increase of $126.1 in deferred income tax liabilities (a substantial
portion of which has been netted against deferred income tax assets on
the Consolidated Balance Sheet); (iv) a decrease of $2.5 in other
assets; (v) an increase of $56.0 in long-term liabilities; and (vi) an
increase of $10.1 in other liabilities. As a result of restating the
assets and liabilities, as described above, the loss before income
taxes, minority interests, extraordinary loss, and cumulative effect
of changes in accounting principles for the year ended December 31,
1993, was increased by $9.3.
Concurrent with the adoption of SFAS 109, the Company implemented
changes in its accounting method for postretirement benefits and
postemployment benefits pursuant to SFAS 106 and SFAS 112 (see Notes 1
and 8). The pre-tax cumulative effect of changes in accounting
principles relating to SFAS 106 and SFAS 112 was a charge of $742.7.
These accounting principles changes resulted in the recognition of
deferred income tax assets of $237.7, net of valuation allowances.
Income (loss) before income taxes, minority interests, extraordinary
loss, and cumulative effect of changes in accounting principles by
geographic area is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(232.0) $ (77.6) $ 16.2
Foreign 23.5 109.7 126.2
------- ------ ------
Total $(208.5) $ 32.1 $142.4
</TABLE> ======= ======= ======
- 42 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
The credit (provision) for income taxes on income (loss) before income
taxes, minority interests, extraordinary loss, and cumulative effect
of changes in accounting principles consists of:
<TABLE>
<CAPTION>
Federal Foreign State Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 Current $ 12.6 $ (7.9) $ (.1) $ 4.6
Deferred 68.5 12.0 1.8 82.3
------ ------ ------ ------
Total $ 81.1 $ 4.1 $ 1.7 $ 86.9
====== ====== ====== ======
1992 Current $ (9.7) $(11.4) $ (.1) $(21.2)
Deferred 13.1 3.3 (.5) 15.9
------ ------ ------ ------
Total $ 3.4 $ (8.1) $ (.6) $ (5.3)
====== ====== ====== ======
1991 Current $(25.3) $ (8.9) $ (1.1) $(35.3)
Deferred 1.9 (1.4) 2.4 2.9
------ ------ ------ -------
Total $(23.4) $(10.3) $ 1.3 $(32.4)
====== ====== ====== ======
</TABLE>
The Omnibus Budget Reconciliation Act of 1993 (the "Act"), enacted on
August 10, 1993, retroactively increased the maximum federal statutory
income tax rate from 34% to 35% for periods beginning on or after
January 1, 1993. The 1993 federal deferred credit for income taxes of
$68.5 includes $29.2 for the benefit of operating loss carryforwards
generated in 1993 and includes a $3.4 benefit for increasing net
deferred income tax assets (liabilities) as of the date of enactment
of the Act due to the increase in the federal statutory income tax
rate.
The deferred credit for income taxes for the years ended December 31,
1992 and 1991, as computed under APB 11, results from the following
timing differences:
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------
1992 1991
-----------------------------------------------------------------------------------------
<S> <C> <C>
Undistributed earnings or losses of foreign and
unconsolidated affiliates $ 12.3 $ 12.4
Inventory costing differences 5.5 (5.9)
Revision of prior years' tax estimates 2.9 8.7
Net federal and foreign tax loss and credit carryforwards
utilized and other foreign tax items (.9)
Depreciation (5.4) (7.8)
Other .6 (3.6)
------ ------
Total $ 15.9 $ 2.9
====== ======
</TABLE>
A reconciliation between the credit (provision) for income taxes and
the amount computed by applying the federal statutory income tax rate
to income (loss) before income taxes, minority interests,
extraordinary loss, and cumulative effect of changes in accounting
principles is as follows:
- 43 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1993 1992 1991
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount of federal income tax based upon the statutory rate $73.0 $(10.9) $(48.4)
Percentage depletion 6.4 6.3 6.0
Revision of prior years' tax estimates and other changes
in valuation allowances 3.9 2.9 8.7
Increase in net deferred income tax assets due to tax rate change 3.4
Financial reporting/tax basis differences (3.0) 6.4
Losses and expenses for which no federal tax benefit was recognized (3.8)
Foreign taxes, net of federal tax benefit (2.6) (.4) .2
Other 2.8 (.2) (1.5)
----- ----- ------
Credit (provision) for income taxes $86.9 $(5.3) $(32.4)
===== ===== ======
</TABLE>
As shown in the Statement of Consolidated Income (Loss) for the year
ended December 31, 1993, the Company reported an extraordinary loss
related to the early extinguishment of debt. The Company reported the
loss, net of related current federal income taxes, of $11.2, which
approximated the federal statutory rate in effect on the date the
transaction occurred. The related deferred income tax benefits
recorded by the Company in respect of SFAS 106 and SFAS 112 were
recorded at the federal statutory rate in effect on the date the
accounting standards were adopted before giving effect to certain
valuation allowances. At December 31, 1993 and 1992, the Company
recorded charges to equity for additional minimum pension liabilities
pursuant to Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS 87"). The Company
recorded the charges net of related deferred federal and state income
taxes of $8.7 at December 31, 1993, and $3.6 at December 31, 1992,
which approximated the federal and state statutory rates.
After giving effect to the adoption of SFAS 106, SFAS 109, and SFAS
112, the components of the Company's net deferred income tax assets
were as follows:
<TABLE>
<CAPTION>
December 31, January 1, 1993
1993 (date of adoption)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Postretirement benefits other than pensions $ 285.4 $ 270.8
Loss and credit carryforwards 142.6 83.3
Other liabilities 105.2 98.8
Pensions 60.6 45.8
Foreign and state deferred income tax liabilities 33.0 44.4
Property, plant, and equipment 23.1 22.6
Other 10.5 18.6
Valuation allowances (133.5) (103.7)
------- -------
Total deferred income tax assets -- net 526.9 480.6
------- -------
Deferred income tax liabilities:
Property, plant, and equipment (224.4) (218.3)
Investments in and advances to unconsolidated affiliates (60.6) (60.9)
Inventories (14.8) (18.6)
Other (20.3) (28.7)
-------- -------
Total deferred income tax liabilities (320.1) (326.5)
------- -------
Net deferred income tax assets $ 206.8 $ 154.1
======= =======
</TABLE>
- 44 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
The valuation allowances listed above relate primarily to loss and
credit carryforwards and postretirement benefits other than pensions.
As of December 31, 1993, approximately $82.4 of the net deferred
income tax assets listed above relate to the benefit of loss and
credit carryforwards, net of valuation allowances. The Company
evaluated all appropriate factors to determine the proper valuation
allowances for these carryforwards, including any limitations
concerning their use and the year the carryforwards expire, as well as
the levels of taxable income necessary for utilization. For example,
full valuation allowances were provided for certain credit
carryforwards that expire in the near term. With regard to future
levels of income, the Company believes, based on the cyclical nature
of its business, its history of prior operating earnings, and its
expectations for future years, that it will more likely than not
generate sufficient taxable income to realize the benefit attributable
to the loss and credit carryforwards for which valuation allowances
were not provided. The remaining portion of the Company's net
deferred income tax assets at December 31, 1993, is approximately
$124.4. A principal component of this amount is the tax benefit
associated with the accrual for postretirement benefits other than
pensions. The future tax deductions with respect to the turnaround of
this accrual will occur over a 30- to 40-year period. If such
deductions create or increase a net operating loss in any one year,
the Company has the ability to carry forward such loss for 15 taxable
years. For these reasons, the Company believes a long-term view of
profitability is appropriate and has concluded that this net deferred
income tax asset will more likely than not be realized despite the
recent decline in profitability.
Certain of the deferred income tax assets and liabilities listed above
are included on the Consolidated Balance Sheet in the captions
entitled Receivables, Prepaid expenses and other current assets, Other
accrued liabilities, and Long-term liabilities.
The Company and its subsidiaries were included in the consolidated
federal income tax returns of MAXXAM for the period from October 28,
1988, through December 31, 1992. The taxable income and loss and tax
credits for the Company and its subsidiaries for the period January 1,
1993, through June 30, 1993, will be included in the 1993 MAXXAM
consolidated federal income tax return.
As a consequence of the issuance of the Depositary Shares on June 30,
1993, as discussed in Note 9, the Company and its subsidiaries are no
longer included in the consolidated federal income tax return of
MAXXAM. The Company and its subsidiaries have become members of a new
consolidated return group of which the Company is the common parent
corporation (the "New Kaiser Tax Group"). The New Kaiser Tax Group
will file a consolidated federal income tax return for taxable periods
beginning on or after July 1, 1993.
The tax allocation agreement between the Company and MAXXAM (the
"Company Tax Allocation Agreement") and the tax allocation agreement
between KACC and MAXXAM (the "KACC Tax Allocation Agreement")
(collectively, the "Tax Allocation Agreements"), terminated pursuant
to their terms, effective for taxable periods beginning after June 30,
1993. Any unused federal income tax attribute carryforwards under the
terms of the Tax Allocation Agreements were eliminated and are not
available to offset federal income tax liabilities for taxable periods
beginning on or after July 1, 1993. Upon the filing of MAXXAM's 1993
consolidated federal income tax return, the tax attribute
carryforwards of the MAXXAM consolidated return group as of
December 31, 1993, will be apportioned in part to the New Kaiser Tax
Group, based upon the provisions of the relevant consolidated return
regulations. It is estimated that the benefit of such tax attribute
carryforwards apportioned to the New Kaiser Tax Group will approximate
or exceed the benefit of tax attribute carryforwards eliminated under
the Tax Allocation Agreements. To the extent the New Kaiser Tax Group
generates unused tax losses or tax credits for periods beginning on or
after July 1, 1993, such amounts will not be available to obtain
refunds of amounts paid by the Company or KACC to MAXXAM for periods
ending on or before June 30, 1993, pursuant to the Tax Allocation
Agreements.
- 45 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
KACC and MAXXAM entered into the KACC Tax Allocation Agreement,
which became effective as of October 28, 1988. Under the terms of the
KACC Tax Allocation Agreement, MAXXAM computed the federal income tax
liability for KACC and its subsidiaries (collectively, the "Subgroup")
as if the Subgroup were a separate affiliated group of corporations
which was never connected with MAXXAM. During 1991, the Company and
MAXXAM entered into the Company Tax Allocation Agreement which became
effective as of January 1, 1991. Under the terms of the Company Tax
Allocation Agreement, MAXXAM computed a tentative federal income tax
liability for the Company as if it and its subsidiaries, including
KACC and its subsidiaries, were a separate affiliated group of
corporations which was never connected with MAXXAM. The federal
income tax liability of the Company is the difference between the
tentative federal income tax liability and the liability computed
under the KACC Tax Allocation Agreement.
The provisions of the Tax Allocation Agreements will continue to
govern for periods ended prior to July 1, 1993. Therefore, payments
or refunds may still be required by or payable to the Company or KACC
under the terms of their respective tax allocation agreements for
periods ended prior to July 1, 1993, due to the final resolution of
audits, amended returns, and related matters with respect to such
periods. However, the 1994 Credit Agreement prohibits the payment by
KACC to MAXXAM of any amounts due under the KACC Tax Allocation
Agreement, except for certain payments that are required as a result
of audits and only to the extent of any amounts paid after February
17, 1994, by MAXXAM to KACC under the KACC Tax Allocation Agreement.
As of December 31, 1993, MAXXAM owed the Company approximately $.1 and
owed KACC approximately $11.6 under the terms of their respective tax
allocation agreements.
Income taxes are classified as either domestic or foreign, based on
whether payment is made or due to the United States or a foreign
country. Certain income classified as foreign is also subject to
domestic income taxes.
The following table presents the Company's tax attributes for federal
income tax purposes as of December 31, 1993. The amounts of such
attributes may change based upon the final 1993 tax returns. The
utilization of certain of these tax attributes are subject to
limitations:
<TABLE>
<CAPTION>
Expiring
Through
----------------------------------------------------------------------------------------
<S> <C> <C>
Regular tax attribute carryforwards:
Current year net operating loss $ 83.4 2008
Prior year net operating losses 54.9 2006
General business tax credits 41.6 2006
Foreign tax credits 19.8 1998
Alternative minimum tax credits 15.3 Indefinite
Alternative minimum tax attribute carryforwards:
Current year net operating loss $ 56.0 2008
Prior year net operating losses 24.0 2002
Foreign tax credits 12.0 1998
</TABLE>
8. Employee Benefit and Incentive Plans
Retirement Plans
Retirement plans are non-contributory for salaried and hourly
employees and generally provide for benefits based on a formula which
considers length of service and earnings during years of service. The
Company's funding policies meet or exceed all regulatory requirements.
- 46 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
Employee pension benefit plans funded status and amounts included in
the Company's Consolidated Balance Sheets are as follows:
<TABLE>
<CAPTION>
Plans with Accumulated
Benefits Exceeding Assets(1)
December 31,
--------------------
1993 1992
----------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation:
Vested employees $(705.0) $(663.5)
Nonvested employees (40.1) (49.6)
------- -------
Accumulated benefit obligation (745.1) (713.1)
Additional amounts related to projected salary increases (45.5) (33.7)
------- -------
Projected benefit obligation (790.6) (746.8)
Plan assets (principally fixed income
obligations and common stocks) at fair value 569.8 572.5
------- -------
Plan assets less than projected benefit obligation (220.8) (174.3)
Unrecognized net losses 75.7 34.7
Unrecognized net obligations 1.6 2.6
Unrecognized prior-service cost 16.9 15.9
Adjustment required to recognize minimum liability (47.7) (25.3)
------- -------
Accrued pension obligation included in the
Consolidated Balance Sheets (principally
in long-term liabilities) $(174.3) $(146.4)
======= =======
</TABLE>
(1) Includes plans with assets exceeding accumulated benefits by
approximately $.1 and $.4 in 1993 and 1992, respectively.
The Company also recorded $13.7 of additional pension obligation (not
included in the amounts above) as part of the restructuring reserve
(see Note 3).
SFAS No. 87 requires recognition of a minimum pension liability for
unfunded plans. At December 31, 1993 and 1992, the Company recorded
an after-tax charge to equity of $14.9 and $6.7, respectively, for the
excess of the minimum liability over the unrecognized net obligation
and prior-service cost.
The components of net periodic pension cost are:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1993 1992 1991
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned during the period $10.8 $ 11.0 $ 9.8
Interest cost on projected benefit obligation 59.2 58.8 59.3
Return on assets:
Actual gain (70.3) (26.3) (100.1)
Deferred gain (loss) 15.9 (31.2) 49.9
Net amortization and deferral 2.3 2.1 .3
------ ------ ------
Net periodic pension cost $ 17.9 $ 14.4 $ 19.2
====== ====== ======
</TABLE>
- 47 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
Assumptions used to value obligations at year-end, and to determine
the net periodic pension cost in the subsequent year are:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.50% 8.25% 8.25%
Expected long-term rate of return on assets 10.00% 10.00% 10.00%
Rate of increase in compensation levels 5.00% 5.00% 5.00%
</TABLE>
Postretirement Benefits Other Than Pensions
Kaiser adopted SFAS 106 to account for postretirement benefits other
than pensions effective January 1, 1993 (see Note 1). The Company and
its subsidiaries provide postretirement health care and life insurance
benefits to retired employees. Substantially all employees may become
eligible for those benefits if they reach retirement age while still
working for the Company or its subsidiaries. These benefits are
provided through contracts with various insurance carriers. The
Company has not funded the liability for these benefits.
The Company changed certain salaried retiree group insurance benefits
effective January 1, 1994, to provide for additional cost-sharing
features, such as reducing certain reimbursements and requiring future
retiree contributions which will lower salaried retiree medical
expenses.
The Company's accrued postretirement benefit obligation is composed of
the following:
<TABLE>
<CAPTION>
December 31, 1993
----------------------------------------------------------------------------------------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $(629.3)
Active employees eligible for postretirement benefits (35.1)
Active employees not eligible for postretirement benefits (128.3)
-------
Accumulated postretirement benefit obligation (792.7)
Unrecognized net losses 67.0
Unrecognized prior-service costs (35.0)
------
Accrued postretirement benefit obligation $(760.7)
=======
</TABLE>
The components of net periodic postretirement benefit cost are:
<TABLE>
<CAPTION>
Year Ended
December 31, 1993
---------------------------------------------------------------------------------------
<S> <C>
Service cost $ 7.1
Interest cost 58.5
-----
Net periodic postretirement benefit cost $65.6
=====
</TABLE>
The 1994 annual assumed rates of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) are 9.5% and
8.0% for retirees under 65 and over 65, respectively, and are assumed
to decrease gradually to 5.25% in 2006 and remain at that level
thereafter. The health care cost trend rate has a significant effect
on the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
- 48 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
postretirement benefit obligation as of December 31, 1993, by
approximately $96.0 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1993 by
approximately $9.5. The weighted average discount rate used to
determine the accumulated postretirement benefit obligation at
December 31, 1993, was 7.5%.
Postemployment Benefits
Kaiser adopted the new accounting standard on postemployment benefits
effective January 1, 1993 (see Note 1). The Company provides certain
benefits to former or inactive employees after employment but before
retirement.
Incentive Plans
Effective January 1, 1989, the Company and KACC adopted an unfunded
Long-Term Incentive Plan (the "LTIP") for certain key employees of the
Company, KACC, and their consolidated subsidiaries. All compensation
vested as of December 31, 1992, under the LTIP, as amended in 1991 and
1992, has been paid to the participants in cash or common stock of the
Company as of December 31, 1993. Under the LTIP, as amended, 764,092
shares were distributed to participants during 1993, which will
generally vest at the rate of 25% per year. The Company will record
the related expense of $6.5 over the four-year period ending December
31, 1996.
Effective January 1, 1990, KACC adopted an unfunded Middle Management
Long-Term Incentive Plan. KACC also has a supplemental savings and
retirement plan for salaried employees under which the participants
contribute a percentage of their base salaries.
The Company's expense for the above plans was $5.3, $6.6, and $6.5 for
the years ended December 31, 1993, 1992, and 1991, respectively.
- 49 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
9. Stockholders' Equity and Minority Interests
Changes in stockholders' equity and minority interests were:
<TABLE>
<CAPTION>
Minority Interests Stockholders Equity
---------------------- -------------------------------------------------
Retained
Earnings Additional
Redeemable (Accu- Minimum
Preference Preferred Common Additional mulated Pension
Stock Other Stock Stock Capital Deficit) Liability
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1991 $ 47.8 $ 75.4 $ .5 $140.9 $214.6
Net income 108.4
Redeemable preference stock:
Accretion 7.2
Stock redemption (20.2)
Dividends on common stock (55.7)
Conversions (3,262 preference shares into cash) (.2)
Common stock issued .1 93.1
Capital contribution 53.9
Minority interest in majority-owned
subsidiaries (1.1)
------ ----- ------ ------ ------
BALANCE, DECEMBER 31, 1991 34.8 74.1 .6 287.9 267.3
Net income 26.9
Redeemable preference stock:
Accretion 5.1
Stock redemption (7.1)
Dividends on common stock (11.4)
Conversions (2,405 preference shares into cash) (.2)
Common stock issued .6
Minority interest in majority-owned
subsidiaries (1.8)
Additional minimum pension liability $ (6.7)
----- ----- ------ ------ ------ ------
BALANCE, DECEMBER 31, 1992 32.8 72.1 .6 288.5 282.8 (6.7)
Net loss (652.2)
Redeemable preference stock:
Accretion 4.8
Stock redemption (4.0)
Conversions (1,967 preference shares into cash) (.2)
Common stock issued 3.3
Preferred stock issued $ .2 134.1
Dividend on preferred stock (6.3)
Minority interest in majority-owned
subsidiaries (.5)
Additional minimum pension liability (14.9)
------ ------ ------ ------ ------ ------ ------
BALANCE, DECEMBER 31, 1993 $ 33.6 $ 71.4 $ .2 $ .6 $425.9 $(375.7) $(21.6)
====== ====== ====== ====== ====== ======= ======
</TABLE>
- 50 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
Redeemable Preference Stock
In March 1985, KACC entered into a three-year agreement with the
United Steelworkers of America ("USWA") whereby shares of a new
series of "Cumulative (1985 Series A) Preference Stock" would be
issued to an employee stock ownership plan in exchange for certain
elements of wages and benefits. Concurrently, a similar plan was
established for certain nonbargaining employees which provided for
the issuance of "Cumulative (1985 Series B) Preference Stock."
Series A Stock and Series B Stock ("Series A and B Stock") each
have a par value of $1 per share and a liquidation and redemption
value of $50 per share plus accrued dividends, if any.
For financial reporting purposes, Series A and B Stock were
recorded at fair market value when issued, based on independent
appraisals, with a corresponding charge to compensation cost.
Carrying values have been increased each year to recognize
accretion of redemption values and, in certain years, there have
been other increases for reasons described below. Issuances and
redemptions of Series A and B Stock are shown below.
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares:
Beginning of year 1,163,221 1,305,550 1,718,051
Issued 1,868
Redeemed (81,673) (142,329) (414,369)
--------- --------- ---------
End of year 1,081,548 1,163,221 1,305,550
========= ========= =========
</TABLE>
No additional Series A or B Stock will be issued based on
compensation earned in 1992 or subsequent years. While held by the
plan trustee, Series B Stock is entitled to cumulative annual
dividends, when and as declared by the Board of Directors, payable
in stock or in cash at the option of KACC on or after March 1,
1991, in respect to years commencing January 1, 1990, based on a
formula tied to KACC's income before tax from aluminum operations.
When distributed to plan participants (generally upon separation
from KACC), the Series A and B stocks are entitled to an annual
cash dividend of $5 per share, payable quarterly, when and as
declared by the Board of Directors.
Redemption fund agreements require KACC to make annual payments by
March 31 each year based on a formula tied to consolidated net
income until the redemption funds are sufficient to redeem all
Series A and B Stock. On an annual basis, the minimum payment is
$4.3 and the maximum payment is $7.3. In March 1992 and 1993, KACC
contributed $7.0 and $4.3 for the years 1991 and 1992,
respectively, and will contribute $4.3 in March 1994 for 1993.
Under the USWA labor contract effective November 1, 1990, KACC was
obligated to offer to purchase up to 80 shares of Series A Stock
from each active participant in 1991 at a price equal to its
redemption value of $50 per share. KACC also agreed to offer to
purchase up to an additional 40 shares from each participant in
1994. The employees may elect to receive their shares, accept
cash, or place the proceeds into KACC's 401(k) savings plan. Under
separate action, KACC also offered to purchase 80 shares of Series
B stock from active participants in 1991 and 40 shares in 1994.
Under the provisions of these contracts, in February 1994, KACC
purchased $4.6 and $.8 of the Series A and B stock, respectively.
The Series A and B Stock is distributed in the event of death,
retirement, or in other specified circumstances. KACC may also
redeem such stock at $50 per share plus accrued dividends, if any.
At the option of the plan participant, the trustee shall redeem
stock distributed from the plans at redemption value to the extent
funds are available in the
- 51 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
redemption fund. Under the Tax Reform Act of 1986, at the option
of the plan participant, KACC must purchase distributed shares
earned after December 31, 1985, at redemption value on a five-year
installment basis, with interest at market rates. The obligation
of KACC to make such installment payments must be secured.
The Series A and B Stock is entitled to the same voting rights as
KACC common stock and to certain additional voting rights under
certain circumstances, including the right to elect, along with
other KACC preference stockholders, two directors whenever accrued
dividends have not been paid on two annual dividend payment dates,
or when accrued dividends in an amount equivalent to six full
quarterly dividends are in arrears. The Series A and B Stock
restricts the ability of KACC to redeem or pay dividends on common
stock if KACC is in default on any dividends payable on the Series
A and B Stock.
Preference Stock
KACC Cumulative Convertible Preference Stock, $100 par value ("$100
Preference Stock"), restricts acquisition of junior stock and
payment of dividends. At December 31, 1993, such provisions were
less restrictive as to the payment of cash dividends than the 1989
Credit Agreement provisions. KACC has the option to redeem the
$100 Preference Stocks at par value plus accrued dividends. KACC
does not intend to issue any additional shares of the $100
Preference Stocks.
The 4-1/8% and 4-3/4% (1957 Series, 1959 Series, and 1966 Series)
$100 Preference Stock can be exchanged for per share cash amounts
of $69.30, $77.84, $78.38, and $76.46, respectively. KACC records
the $100 Preference Stock at their exchange amounts for financial
statement presentation and the Company includes such amounts in
minority interests. The outstanding shares of KACC preference
stock were:
<TABLE>
<CAPTION>
December 31,
-------------------
1993 1992
-------------------------------------------------------------------------------
<S> <C> <C>
4-1/8% 3,921 4,110
4-3/4% (1957 Series) 2,623 3,054
4-3/4% (1959 Series) 13,605 14,607
4-3/4% (1966 Series) 3,890 4,235
</TABLE>
Preferred Stock
Series A Convertible - On June 30, 1993, Kaiser issued 17,250,000
of its $.65 Depositary Shares (the "Depositary Shares"), each
representing one-tenth of a share of Series A Mandatory Conversion
Premium Dividend Preferred Stock (the "Series A Shares"). In
connection with the issuance of the Depositary Shares, MAXXAM Group
Inc. ("MGI"), a wholly owned subsidiary of MAXXAM, exchanged a
$15.0 promissory note of KACC (the "MAXXAM Note") for an additional
2,132,950 Depositary Shares.
The net cash proceeds from the sale of Depositary Shares were
approximately $119.3. Kaiser used approximately $37.8 of such net
proceeds to make a non-interest bearing loan to KACC evidenced by
an intercompany note, which matures on June 29, 1996, and is
payable in quarterly installments. The intercompany note is
designed to provide sufficient funds to Kaiser to enable it to make
dividend payments on the Series A Shares until June 30, 1996, the
date on which the outstanding Series A Shares are mandatorily
converted into shares of the Company's common stock. Kaiser used
approximately $81.5 of such net proceeds and the MAXXAM Note to
make a capital contribution to KACC. KACC used approximately $13.7
of the funds it received from Kaiser to prepay the remaining
balance of the Term Loan under
- 52 -
<PAGE>
(In millions of dollars, except share amounts)
-------------------------------------------------------------------
the 1989 Credit Agreement and $105.6 of such funds to reduce
outstanding borrowings under the Revolving Credit Facility of the
1989 Credit Agreement.
The owners of Depositary Shares are entitled to receive (when, as,
and if the Board of Directors declares dividends on the Series A
Shares) cumulative preferential cash dividends from the date of
issue, accruing at the rate of $.65 per annum for each of the
Depositary Shares, payable quarterly in arrears on the last day of
each March, June, September and December, commencing September 30,
1993. Holders of Depositary Shares (based on the voting rights of
the Series A Shares) have one vote for each Depositary Share held
of record, except as required by law, and are entitled to vote with
the holders of common stock on all matters submitted to a vote of
common stockholders.
On June 30, 1996, each of the outstanding Depositary Shares will
automatically convert (upon the automatic conversion of the Series
A Shares) into (i) one share of common stock, plus (ii) the right
to receive an amount in cash equal to the accrued and unpaid
dividends payable with respect to such Depositary Share. Automatic
conversion of the outstanding Depositary Shares (and the Series A
Shares) will occur upon certain mergers or consolidations of the
Company (as defined). At any time or from time to time prior to
June 30, 1996, the Company may call the outstanding Depositary
Shares (by calling the Series A Shares) for redemption, in whole or
in part, at a call price per Depositary Share initially equal to
$12.46, declining by $.0018 on each day following the date of issue
to $10.624 on April 30, 1996, and equal to $10.51 thereafter,
payable in shares of common stock having an aggregate Current
Market Price (as defined) equal to the applicable call price, plus
an amount in cash equal to all accrued and unpaid dividends payable
with respect to such Depositary Share.
PRIDES Convertible - On February 17, 1994, the Company consummated
the public offering of 8,000,000 shares of the PRIDES. The net
proceeds from the sale of the shares of PRIDES were approximately
$90.6. The Company used such net proceeds to make a non-interest
bearing loan to KACC in a principal amount equal to $30.0 (the
aggregate dividends scheduled to accrue on the shares of PRIDES
from the issuance date until December 31, 1997, the date on which
the outstanding PRIDES are mandatorily converted into shares of the
Company's common stock), evidenced by an intercompany note, and
used the balance of such net proceeds to make a capital
contribution to KACC in the amount of approximately $60.6.
Holders of shares of PRIDES are entitled to receive (when, as, and
if the Board of Directors declares dividends on the PRIDES)
cumulative preferential cash dividends at a rate per annum of
8.255% of the per share offering price (equivalent to $.97 per
annum for each share of PRIDES), from the date of initial issuance,
payable quarterly in arrears on the last day of each March, June,
September, and December of each year. Holders of shares of PRIDES
have a 4/5 vote for each share held of record and, except as
required by law, are entitled to vote together with the holders of
common stock and together with the holders of any other classes or
series of stock (including the Series A Shares) who are entitled to
vote in such manner on all matters submitted to a vote of common
stockholders.
On December 31, 1997, unless either previously redeemed or
converted at the option of the holder, each of the outstanding
shares of PRIDES will mandatorily convert into (i) one share of the
Company's common stock, subject to adjustment in certain events,
and (ii) the right to receive an amount in cash equal to all
accrued and unpaid dividends thereon (other than previously
declared dividends payable to a holder of record on a prior date).
Shares of PRIDES are not redeemable prior to December 31, 1996. At
any time and from time to time on or after December 31, 1996, the
Company may redeem any or all of the outstanding shares of PRIDES.
Upon any such redemption, each holder will receive, in exchange for
each share of PRIDES, the number of shares of common stock equal to
(A) the sum of (i) $11.9925, declining after December 31, 1996, to
$11.75 until December 31, 1997, plus,
- 53 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
in the event the Company does not elect to pay cash dividends to
the redemption date, (ii) all accrued and unpaid dividends thereon
divided by (B) the Current Market Price (as defined) on the
applicable date of determination, but in no event less than .8333
of a share of common stock, subject to adjustment in certain
events. At any time prior to December 31, 1997, unless previously
redeemed, each share of PRIDES is convertible at the option of the
holder thereof into .8333 of a share of common stock (equivalent to
a conversion price of $14.10 per share of common stock), subject to
adjustment in certain events. The number of shares of common stock
a holder will receive upon redemption, and the value of the shares
received upon conversion, will vary depending on the market price
of the common stock from time to time.
Common Stock
On July 18, 1991, the Company issued 7,250,000 shares of its common
stock for net proceeds of approximately $93.2. Three-fourths of
the net proceeds from the offering were used by the Company to
prepay a portion of the promissory notes of the Company (see
"Dividends on Common Stock" below) with accrued interest, payable
to its parent. The remaining balance of such notes payable to
parent that were not prepaid with the net proceeds of the offering,
together with accrued interest, were contributed to the
stockholders' equity of the Company. The remaining one-fourth of
the net proceeds from the offering was used by Kaiser to purchase
common stock of KACC. KACC reduced its Term Loan by an amount
equal to the proceeds it received from Kaiser.
Stock Incentive Plan
In 1993, the Company adopted the Kaiser 1993 Omnibus Stock
Incentive Plan. A total of 2,500,000 shares of Kaiser common stock
are reserved for awards or for payment of rights granted under the
Plan. Six Company executives have received grants of 764,092
shares under the LTIP for benefits generally earned but not vested
as of December 31, 1992 (see Note 8). In 1993, the stockholders
approved the award of 584,300 shares as "nonqualified stock
options" to members of management other than those participating in
the LTIP. These options will generally vest at the rate of 20% per
year over the next five years, commencing May 18, 1994. The
exercise price of these shares is $7.25 per share, the quoted
market price at the date of grant.
Dividends on Common Stock
On January 31, September 16, and December 16, 1991, the Company
declared and paid dividends on common stock of $50.0, $2.9, and
$2.8, respectively. The Company paid cash dividends on common
stock of $2.9 in each quarter of 1992. As required under the 1989
Credit Agreement, on December 15, 1992, KACC issued a Pay-in-Kind
Note (the "PIK Note") to MGI in the principal amount of $2.5,
representing the entire amount of the dividend received by MGI in
respect of the shares of the Company's common stock which it owned.
The PIK Note bears interest, compounded semiannually, at a rate
equal to 12% per annum, and is due and payable, together with
accrued interest thereon, on June 30, 1995.
The indentures governing the Senior Notes and the 12-3/4% Notes
restrict, among other things, KACC's ability, and the 1994 Credit
Agreement restricts, among other things, Kaiser's and KACC's
ability, to incur debt, undertake transactions with affiliates, and
pay dividends. Under the most restrictive of these covenants,
neither the Company nor KACC is currently permitted to pay
dividends on its common stock.
At December 31, 1993, 28,000,000 shares of the Company's common
stock owned by MAXXAM were pledged as security for debt issued by
MGI, consisting of $100.0 aggregate principal amount of 11-1/4% Senior
Secured Notes due 2003 and $126.7 aggregate principal amount of
12-1/4% Senior Secured Discount Notes due 2003.
- 54 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
10. Commitments and Contingencies
Commitments
The Company has financial commitments, including purchase
agreements, tolling arrangements, forward foreign exchange
contracts, forward sales contracts, letters of credit, and
guarantees.
Purchase agreements and tolling arrangements include agreements to
supply alumina to Anglesey and to purchase aluminum from that
company.
Similarly, KACC has long-term agreements for the purchase and
tolling of bauxite into alumina in Australia by QAL. These
obligations expire in 2008. Under the agreements, KACC is
unconditionally obligated to pay its proportional share of debt,
operating costs, and certain other costs of QAL. The aggregate
minimum amount of required future principal payments at December
31, 1993, is $73.6, due in 1997. The KACC share of payments,
including operating costs and certain other expenses under the
agreement, was $86.7, $99.2, and $107.6 for the years ended
December 31, 1993, 1992, and 1991, respectively.
Minimum rental commitments under operating leases at December 31,
1993, are as follows: years ending December 31, 1994 -- $24.3;
1995 -- $23.2; 1996 -- $22.3; 1997 -- $21.8; 1998 -- $23.4;
thereafter -- $243.2. The future minimum rentals receivable under
noncancelable subleases was $90.7 at December 31, 1993.
Rental expenses were $29.0, $26.2, and $23.3 for the years ended
December 31, 1993, 1992, and 1991, respectively.
Environmental Contingencies
The Company and KACC are subject to a wide variety of environmental
laws and regulations and to fines or penalties assessed for alleged
breaches of the environmental laws and to claims and litigation
based upon such laws. KACC is currently subject to a number of
lawsuits under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendments Reauthorization Act of 1986 ("CERCLA"), and, along with
certain other entities, has been named as a potentially
responsible party for remedial costs at certain third-party sites
listed on the National Priorities List under CERCLA.
Based upon the Company's evaluation of these and other
environmental matters, the Company has established environmental
accruals primarily related to potential solid waste disposal and
soil and groundwater remediation matters. The following table
presents the changes in such accruals, which are primarily included
in Long-term liabilities, for the years ended December 31, 1993,
1992, and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 46.4 $ 51.5 $ 57.7
Additional amounts 1.7 4.5 7.8
Less expenditures (7.2) (9.6) (14.0)
------ ------ ------
Balance at end of period $ 40.9 $ 46.4 $ 51.5
====== ====== ======
</TABLE>
These environmental accruals represent the Company's estimate of
costs reasonably expected to be incurred based upon presently
enacted laws and regulations, currently available facts, existing
technology, and the Company's assessment of the likely remediation
action to be taken. The Company expects that these remediation
actions will be taken over
- 55 - <PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
----------------------------------------------------------------------
(In millions of dollars, except share amounts)
----------------------------------------------------------------------
the next several years and estimates that expenditures to be charged
to the environmental accrual will be approximately $4.0 to $8.0 for
the years 1994 through 1998 and an aggregate of approximately $12.8
thereafter.
As additional facts are developed and definitive remediation plans
and necessary regulatory approvals for implementation of
remediation are established, or alternative technologies are
developed, changes in these and other factors may result in actual
costs exceeding the current environmental accruals by amounts which
cannot presently be estimated. While uncertainties are inherent in
the ultimate outcome of these matters and it is impossible to
presently determine the actual costs that ultimately may be
incurred, management believes that the resolution of such
uncertainties should not have a material adverse effect upon the
Company's consolidated financial position or results of operations.
Asbestos Contingencies
KACC is a defendant in a number of lawsuits in which the plaintiffs
allege that certain of their injuries were caused by exposure to
asbestos during, and as a result of, their employment with KACC or
to products containing asbestos produced or sold by KACC. The
lawsuits generally relate to products KACC has not manufactured for
at least 15 years.
At year-end 1993, the number of such lawsuits pending was
approximately 23,400 (approximately 11,400 of which were received
in 1993). The number of such lawsuits instituted against KACC
increased substantially in 1993, and management believes the number
of such lawsuits will continue at approximately the same rate for
the next few years.
In connection with such litigation, during 1993, 1992, and 1991,
KACC made cash payments for settlement and other related costs of
$7.0, $7.1, and $6.1, respectively. Based upon prior experience,
the Company estimates annual future cash payments in connection
with such litigation of approximately $8.0 to $13.0 for the years
1994 through 1998, and an aggregate of approximately $88.4
thereafter through 2006. Based upon past experience and reasonably
anticipated future activity, the Company has established an accrual
for estimated asbestos-related costs for claims filed and estimated
to be filed and settled through 2006. The Company does not
presently believe there is a reasonable basis for estimating such
costs beyond 2006 and, accordingly, no accrual has been recorded
for such costs which may be incurred. This accrual was calculated
based upon the current and anticipated number of asbestos-related
claims, the prior timing and amounts of asbestos-related payments,
the current state of case law related to asbestos claims, the
advice of counsel, and the anticipated effects of inflation and
discounting at an estimated risk-free rate (5.25% at December 31,
1993). Accordingly, an accrual of $102.8 for asbestos-related
expenditures is included primarily in Long-term liabilities at
December 31, 1993. The aggregate amount of the undiscounted
liability at December 31, 1993, of $141.5, before considerations
for insurance recoveries, reflects an increase of $56.6 from the
prior year, resulting primarily from an increase in claims filed
during 1993 and the Company's belief that the number of such
lawsuits will continue at approximately the same rate for the next
few years.
The Company believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs. While
claims for recovery from one of KACC's insurance carriers are
currently subject to pending litigation and other carriers have
raised certain defenses, the Company believes, based upon prior
insurance-related recoveries in respect of asbestos-related claims,
existing insurance policies, and the advice of counsel, that
substantial recoveries from the insurance carriers are probable.
Accordingly, estimated insurance recoveries of $94.0, determined on
the same basis as the asbestos-related cost accrual, are recorded
primarily in Other assets as of December 31, 1993.
- 56 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
-------------------------------------------------------------------
Based upon the factors discussed in the two preceding paragraphs,
management currently believes that there is no more than a remote
possibility (under generally accepted accounting principles) that
the Company's asbestos-related costs net of related insurance
recoveries exceed those accrued as of December 31, 1993, and,
accordingly, that the resolution of such uncertainties and the
incurrence of such net costs should not have a material adverse
effect upon the Company's consolidated financial position or
results of operations.
Other Contingencies
The Company is involved in various other claims, lawsuits, and
other proceedings relating to a wide variety of matters. While
uncertainties are inherent in the ultimate outcome of such matters
and it is impossible to determine the actual costs that ultimately
may be incurred, management believes that the resolution of such
uncertainties and the incurrence of such costs should not have a
material adverse effect upon the Company's consolidated financial
position or results of operations.
11. Segment and Geographical Area Information
Sales and transfers among geographic areas are made on a basis
intended to reflect the market value of products.
The aggregate foreign currency gain included in determining net
income was $4.9, $12.0, and $1.2 for the years ended December 31,
1993, 1992, and 1991, respectively.
There were no sales of more than 10% of total revenue to a single
customer for the year ended December 31, 1993. Sales to a single
customer were $135.3 and $155.9 of bauxite and alumina and $144.9
and $160.9 of aluminum processing for the years ended December 31,
1992, and 1991, respectively.
Export sales were less than 10% of total revenue during the years
ended December 31, 1993, 1992, and 1991.
- 57 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
------------------------------------------------------------------
(In millions of dollars, except share amounts)
-------------------------------------------------------------------
Financial information by industry segment at December 31, 1993 and
1992, and for the years ended December 31, 1993, 1992, and 1991, is
as follows:
<TABLE>
<CAPTION>
Year Ended Bauxite & Aluminum
December 31, Alumina Processing Corporate Total
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers 1993 $ 423.4 $1,295.7 $1,719.1
1992 466.5 1,442.6 1,909.1
1991 550.8 1,450.0 2,000.8
Intersegment sales 1993 $ 129.4 $ 129.4
1992 179.9 179.9
1991 194.6 194.6
Equity in earnings (losses) of 1993 $ (2.5) $ (.8) $ (3.3)
unconsolidated affiliates 1992 1.8 (3.7) (1.9)
1991 (4.4) (15.1) (19.5)
Operating income (loss) 1993 $ (4.5) $ (46.3) $ (72.6) $ (123.4)
1992 62.6 104.9 (77.6) 89.9
1991 150.0 150.2 (84.2) 216.0
Effect of changes in accounting principles
on operating income (loss)
SFAS 106 1993 $ (2.0) $ (16.1) $ (1.1) $ (19.2)
SFAS 109 1993 (7.7) (7.8) .3 (15.2)
Depreciation 1993 $ 35.3 $ 59.9 $ 1.9 $ 97.1
1992 29.8 49.0 1.5 80.3
1991 26.4 46.0 .8 73.2
Capital expenditures 1993 $ 35.3 $ 31.2 $ 1.2 $ 67.7
1992 50.8 39.4 24.2 114.4
1991 51.1 64.8 2.2 118.1
Investment in and advances to 1993 $ 151.5 $ 30.7 $ 1.0 $ 183.2
unconsolidated affiliates 1992 136.2 12.5 1.4 150.1
Identifiable assets 1993 $ 734.0 $1,214.9 $ 579.0 $2,527.9
1992 715.7 1,165.9 291.0 2,172.6
</TABLE>
- 58 -
<PAGE>
<PAGE>
(In millions of dollars, except share amounts)
-------------------------------------------------------------------
Geographical area information relative to operations is summarized
as follows:
<TABLE>
<CAPTION>
Year Ended Other
December 31, Domestic Caribbean Africa Foreign Eliminations Total
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers 1993 $1,230.5 $ 96.5 $207.5 $184.6 $1,719.1
1992 1,359.6 92.9 263.5 193.1 1,909.1
1991 1,383.8 149.6 269.2 198.2 2,000.8
Sales and transfers among 1993 $ 92.3 $ 79.6 $(171.9)
geographic areas 1992 111.8 93.5 (205.3)
1991 116.4 112.3 (228.7)
Equity in losses of 1993 $ (3.3) $ (3.3)
unconsolidated affiliates 1992 (1.9) (1.9)
1991 (19.5) (19.5)
Operating income (loss) 1993 $ (159.8) $ (2.0) $ 34.1 $ 4.3 $ (123.4)
1992 (25.3) 18.4 78.8 18.0 89.9
1991 59.7 47.8 72.1 36.4 216.0
Investment in and advances to 1993 $ 1.0 $ 30.5 $151.7 $ 183.2
unconsolidated affiliates 1992 1.4 29.5 119.2 150.1
Identifiable assets 1993 $1,758.0 $360.4 $223.0 $186.5 $2,527.9
1992 1,374.9 358.3 227.5 211.9 2,172.6
</TABLE>
- 59 -
<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
FIVE-YEAR FINANCIAL DATA
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
(In millions of dollars) 1993 1992 1991 1990 1989
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 14.7 $ 19.1 $ 15.8 $ 23.9 $ 95.1
Receivables 234.7 270.0 218.8 227.5 262.9
Inventories 426.9 439.9 498.6 523.9 511.1
Prepaid expenses and other current assets 60.7 37.0 84.0 36.1 6.6
Assets held for sale 51.1
-------- -------- -------- -------- --------
Total current assets 737.0 766.0 817.2 811.4 926.8
Investments in and advances to
unconsolidated affiliates 183.2 150.1 161.9 184.5 187.8
Property, plant, and equipment -- net 1,163.7 1,066.8 1,014.5 970.3 936.0
Deferred income taxes 210.8
Other assets 233.2 189.7 140.5 152.3 80.3
-------- -------- -------- -------- --------
Total $2,527.9 $2,172.6 $2,134.1 $2,118.5 $2,130.9
======== ======== ======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accruals $ 339.7 $ 351.4 $ 461.6 $ 432.1 $ 526.9
Accrued postretirement benefit
obligation -- current portion 47.6
Payable to affiliates 62.4 78.4 87.1 82.4 60.7
Long-term debt -- current portion 8.7 25.9 26.3 32.5 139.0
-------- -------- -------- -------- --------
Total current liabilities 458.4 455.7 575.0 547.0 726.6
Long-term liabilities 501.8 281.7 212.9 310.8 321.1
Accrued postretirement benefit obligation 713.1
Long-term debt 720.2 765.1 681.5 631.5 655.8
Note payable to parent 150.0
Minority interests 105.0 104.9 108.9 123.2 135.1
Stockholders' Equity:
Preferred stock .2
Common stock .6 .6 .6 .5
Additional capital 425.9 288.5 287.9 140.9 141.4
Retained earnings (accumulated deficit) (375.7) 282.8 267.3 214.6 150.9
Additional minimum pension liability (21.6) (6.7)
-------- -------- -------- -------- --------
Total stockholders' equity 29.4 565.2 555.8 356.0 292.3
-------- -------- -------- -------- --------
Total $2,527.9 $2,172.6 $2,134.1 $2,118.5 $2,130.9
======== ======== ======== ======== =======
Debt-to-capital ratio(1) 81.3 54.1 51.5 51.1(2) 64.9
</TABLE>
(1) Total debt as a ratio of total debt, deferred income taxes, minority
interests, and stockholders' equity.
(2) Excludes the effect of a $150.0 dividend paid in the form of an
intercompany promissory note to parent.
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<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
FIVE-YEAR FINANCIAL DATA
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
(In millions of dollars, except share amounts) 1993 1992 1991 1990 1989
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,719.1 $1,909.1 $2,000.8 $2,095.0 $2,192.7
-------- -------- -------- -------- --------
Costs and expenses:
Cost of products sold 1,587.7 1,619.3 1,594.2 1,525.2 1,545.6
Depreciation 97.1 80.3 73.2 70.5 62.3
Selling, administrative, research
and development, and general 121.9 119.6 117.4 123.2 119.7
Restructuring of operations 35.8
--------- -------- -------- -------- --------
Total costs and expenses 1,842.5 1,819.2 1,784.8 1,718.9 1,727.6
--------- -------- -------- -------- --------
Operating income (loss) (123.4) 89.9 216.0 376.1 465.1
Other income (expense):
Interest and other income -- net (.9) 20.9 20.3 17.6 53.4
Interest expense (84.2) (78.7) (93.9) (96.6) (207.0)
-------- -------- -------- -------- --------
Income (loss) before income taxes,
minority interests, extraordinary loss
and cumulative effect of changes in
accounting principles (208.5) 32.1 142.4 297.1 311.5
Credit (provision) for income taxes 86.9 (5.3) (32.4) (75.6) (100.1)
Minority interests (1.5) .1 (1.6) (7.8) (9.3)
-------- -------- -------- -------- --------
Income (loss) before extraordinary loss
and cumulative effect of changes in
accounting principles (123.1) 26.9 108.4 213.7 202.1
Extraordinary loss on early extinguishment of
debt, net of tax benefit of $11.2 (21.8)
Cumulative effect of changes in accounting
principles, net of tax benefit of $237.7 (507.3)
-------- -------- -------- -------- --------
Net income (loss) $ (652.2) $ 26.9 $ 108.4 $ 213.7 $ 202.1
======== ======== ======== ======== ========
Per common share:
Net income (loss) $ (11.47) $ .47 $ 2.03 $ 4.27 $ 4.04
Dividends declared .20 1.10 3.00
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<PAGE>
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------
(In millions of dollars, except share amounts) March 31 June 30 September 30 December 31
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Net sales $442.6 $432.2 $428.4 $415.9
Operating loss 9.7 14.2 17.5 82.0(1)
Net loss 545.7(2) 19.4 21.0 66.1(3)
Per common share:
Net loss 9.52 .34 .42 1.20
Market price:
High 9-7/8 8 8-5/8 10-1/2
Low 7-3/8 6-3/8 6-5/8 6-7/8
Close 7-1/2 7-7/8 7-7/8 9
1992
Net sales $463.7 $490.9 $458.5 $496.0
Operating income 29.5 29.6 26.6 4.2(4)
Net income 8.4 12.0 3.9 2.6(5)
Per common share:
Net income .15 .21 .06 .05
Dividends declared .05 .05 .05 .05
Market price:
High 14-3/4 14-1/4 11 9-1/2
Low 10-1/8 10-1/4 7-5/8 6-7/8
Close 13-3/4 10-7/8 7-7/8 8-5/8
(1) Includes pre-tax charges of approximately $35.8 related to the restructuring
of operations and $19.4 because of a reduction in the carrying value of inventories.
(2) Includes $507.3 after-tax charge for the cumulative effect of changes in accounting
principles and $21.8 after-tax charge for extraordinary loss on early extinguishment of debt.
(3) Includes a pre-tax charge of approximately $10.8 principally related to establishing of
additional litigation and environmental reserves.
(4) Includes a pre-tax charge of approximately $29.0 because of a reduction in the carrying value of
inventories.
(5) Includes approximately $14.0 of pre-tax income for non-recurring adjustments to previously
recorded liabilities and reserves.
</TABLE>
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