SENIOR SUBORDINATED INTERCOMPANY NOTE
December 15, 1992
FOR VALUE RECEIVED, the undersigned, Kaiser Aluminum &
Chemical Corporation, a Delaware corporation (the "Company"),
HEREBY PROMISES TO PAY to the order of KLU Holdings, Inc., a
Delaware corporation (the "Payee"), the principal sum of TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00), with
interest thereon, which shall be due and payable as hereinafter
provided.
1. This Note shall bear interest, compounded
semiannually (computed on the basis of a 360-day year of twelve
30-day months), on the unpaid principal amount outstanding
hereunder plus all accrued and unpaid interest thereon, from the
date this Note is issued (the "Issuance Date"), until such
principal amount is repaid in full, at a rate equal to twelve
percent (12%) per annum or, if New Subordinated Notes (as such
term is defined in the Credit Agreement (as hereinafter defined)
shall be issued on or prior to December 31, 1992, the stated
interest rate per annum on such New Subordinated Notes.
2. Subject to Section 5 hereon, (a) no payment of
principal or interest shall be required to be made on this Note
prior to June 30, 1995, and (b) the entire unpaid principal
amount of this Note, together with accrued interest thereon,
shall be due and payable on June 30, 1995.
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
holiday 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, and/or interest on, this Note, in whole or
in part, at any time or from time to time, without
-1-
premium or penalty, but with interest on the portion of the
principal amount or interest so prepaid accrued to the date of
prepayment. This Note is one of the notes (the "PIK Notes")
issued pursuant to the requirements of Section 10.1.18 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"). The Company shall, on demand,
prepay the principal of, and/or accrued interest on, the PIK
Notes, without premium or penalty, but with interest on the
principal amount or interest so prepaid, when, as and to the
extent that such prepayment is not prohibited by the Credit
Agreement.
6. In the 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
principal of, or interest on, any PIK Note when due; 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 of 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 substantial part of its property, or ordering the winding-up
or liquidation 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
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;
-2-
(d) 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 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 thereof, likewise
covenants 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
pursuant 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, in 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 equivalents of all Senior Indebtedness of the Company.
(b) Upon 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, upon any
dissolution, 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 (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)
before the holder of this Note shall be entitled to receive any
direct or indirect payment 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 connection with, the issuance of
this
-3-
Note, or for reimbursement or contribution on account of such a
claim (a "Claim"), or the payment of principal of or interest on
this Note; and
(ii) any direct or indirect payment or
distribution of assets 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 of
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 foregoing, 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, including by way of or on account of a Claim, or the
payment of principal 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 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
substantially 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 provided that such transaction does not violate the terms of
the Credit Agreement.
-4-
Subject to the payment in full in cash or cash equivalents
of all Senior Indebtedness of the Company, the holders of PIK
Notes 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 the PIK Notes shall be paid in
full and, for the purpose of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of the
Company of cash, property or securities otherwise distributable
to the holders of PIK Notes shall, as between the Company, its
creditors other than the holders of Senior Indebtedness of the
Company, and the holders of PIK Notes, 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 provisions
of this Section 7 (and of Section 7 of all other PIK Notes) are
and are intended solely for the purpose of defining the relative
rights of the holders of PIK Notes, 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 holders of PIK
Notes 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 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 Indebtedness 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.
-5-
(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,
such payment or distribution is prohibited by the Credit
Agreement.
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
foregoing 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.
(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 bankruptcy reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings or upon a
general assignment 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
-6-
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 authorize 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.
(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
payment 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
instrument 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
Indebtedness 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);
-7-
(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 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 defaultas provided in Section 6 of this Note, the
Company shall promptly notify this Agent under the Credit
Agreement 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 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 all monetary obligations of the Company under the
Credit Agreement, including all related notes, collateral
documents, 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).
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 proceedings 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
-8-
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
severable, 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.
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 here from, 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.
-9-
KAISER ALUMINUM & CHEMICAL
CORPORATION
By: ___________________________
John T. La Duc
Vice President and
Chief Financial Officer
-10-