LOAN AND PLEDGE AGREEMENT
AGREEMENT dated as of June 28, 1996, between CUSTODIAL TRUST COMPANY
("Bank"), a bank and trust company organized and existing under the laws of
the State of New Jersey, and MAXXAM INC. ("Borrower"), a corporation
organized and existing under the laws of the State of Delaware.
WHEREAS, Borrower wishes to obtain, and Bank is willing to make, loans
in an aggregate principal amount of up to U.S. dollars $25,000,000 from
time to time outstanding;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms, unless the context otherwise
requires, shall have the following meanings as used herein:
(a) "Business Day" means any day on which banks in the States of New
Jersey, New York and Texas are open for business.
(b) "Business Hour" means any hour in a Business Day.
(c) "Collateral" has the meaning given in Section 8(c) below.
(d) "Event of Default" has the meaning given in Section 17 below.
(e) "Excess Collateral" at any time means Pledged Securities having an
Initial Loan Value equal to the difference between (i) the Initial Loan
Value of all Pledged Securities at such time and (ii) the aggregate
principal amount of all Loans (as defined in Section 2 below) then
outstanding.
(f) "Guarantee" of or by any Person means any obligation, contingent
or otherwise, of such Person guaranteeing the payment of any Indebtedness
of any other Person in any manner, whether directly or indirectly, and
including any obligation of such Person, direct or indirect, (i) to
purchase (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness, or (ii) to purchase
property, securities or services for the purpose of assuring the owner of
such Indebtedness of the payment of such Indebtedness; provided, however,
that the term Guarantee shall not include endorsements for collection or
deposit, in either case in the ordinary course of business.
(g) "Indebtedness" of any Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (iii)
all obligations of such Person upon which interest charges are customarily
paid, but not including such obligations which consist of accounts payable
and other current liabilities arising in the ordinary course of business,
(iv) all obligations of such Person to repurchase securities under
repurchase agreements and all obligations of such Person issued or assumed
as the deferred purchase price of property or services which under
generally accepted accounting principles would be shown on a balance sheet
of such Person as a liability, but not including such obligations which
consist of (A) accounts payable and other current liabilities arising in
the ordinary course of business and (B) compensation, pension and other
obligations arising from employee compensation and benefit arrangements,
(v) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed, (vi) all Guarantees by
such Person of Indebtedness of others, and (vii) all obligations of such
Person as an account party in respect of letters of credit and bankers'
acceptances.
(h) "Initial Loan Value" means the collateral value assigned to the
Collateral in accordance with Section 8(e) below.
(i) "Kaiser" means Kaiser Aluminum Corporation, a corporation
organized and existing under the laws of the State of Delaware.
(j) "Kaiser Common" means the common stock of Kaiser, including any
class thereof issued upon any reclassification or recapitalization of
Kaiser's capital stock.
(k) "Kaiser Stock" means (i) Kaiser Common, and (ii) any other capital
stock of Kaiser which is listed on a national securities exchange in the
United States and is acceptable to Bank in its sole and absolute
discretion.
(l) "Lien" means, with respect to any asset, (i) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset or any assignment, hypothecation or other preferential arrangement of
or with respect to such asset, and (ii) any purchase option, call or
similar right of a third party with respect to such asset.
(m) "Loan" or "Loans" means any or all of the loans provided for in
Section 2 below, which may be Revolving Loans and the Term Loan.
(n) "Maintenance Loan Value" means the collateral value assigned to
the Collateral in accordance with Section 8(e) below.
(o) "Market Value" means the value assigned to the Collateral in
accordance with Section 8(f) below.
(p) "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
government or any agency, court or political division thereof, or any
other entity.
(q) "Pledge Account" means an account of Bank as pledgee of Borrower,
maintained at Bank and entitled "MAXXAM pledgor/CTC pledgee".
(r) "Pledged Securities" means all shares of Kaiser Stock and other
securities, which are in the Pledge Account and pledged by Borrower to Bank
as provided in this Agreement, and any securities into which such
securities are converted or for which they are exchanged.
(s) "Prime Rate" means the prime rate as quoted in The Wall Street
Journal (Eastern Edition) for the Business Day preceding the date on which
the determination is made. If more than one prime rate is so quoted, the
Prime Rate shall be the average of the prime rates so quoted.
(t) "Revolving Credit Commitment" has the meaning given in Section
2(a) below.
(u) "Revolving Loan(s)" has the meaning given in Section 2(a) below.
(v) "Significant Subsidiary" has the meaning assigned to that term in
Regulation S-X of the Securities Act of 1933, as such Regulation is in
effect on the date hereof.
(w) "Term Loan" has the meaning given in Section 2(c) below.
2. LOANS. (a) Subject to the terms and conditions of this Agreement,
Bank shall make loans to Borrower from the date of this Agreement to but
not including the first anniversary of such date (each, a "Revolving Loan",
and, collectively, the "Revolving Loans"), at such times within such period
of time and in such amounts as Borrower may request, which amounts may be
borrowed, repaid and reborrowed, provided that the Revolving Loans shall
not exceed $25,000,000 in aggregate principal amount at any one time
outstanding (the "Revolving Credit Commitment").
(b) Borrower shall request each Revolving Loan by notice to Bank,
specifying (i) the date (which shall be a Business Day) for the making of
such Revolving Loan, (ii) the principal amount of such Revolving Loan, and
(iii) the Collateral for such Revolving Loan, which notice shall be
received by Bank at least one Business Day prior to the date for the making
of such Revolving Loan.
(c) Subject to the terms and conditions of this Agreement, Bank shall
make a loan to Borrower on the first anniversary of the date of this
Agreement (the "Term Loan") in a principal amount equal to the aggregate
principal amount of all Revolving Loans then outstanding.
3. CONDITIONS PRECEDENT. (a) The obligation of Bank to make any Loan
shall be subject to the fulfillment of each of the following conditions
precedent: (i) that on the date of the making of such Loan no event has
occurred and is continuing which constitutes an Event of Default under this
Agreement or which, upon the giving of notice, the lapse of time, or both,
would constitute an Event of Default, (ii) that the representations and
warranties of Borrower in Sections 10, 11 and 12 below are correct and
accurate in all material respects on the date of the making of such Loan as
though made on such date, (iii) that Borrower has fulfilled, to the
satisfaction of Bank, Borrower's obligation with respect to such Loan as
set forth in Section 8(a) below, (iv) if such Loan is a Revolving Loan,
that after giving effect to the making of such Loan and any pledge of
Collateral therefor, the Collateral then held by Bank has an Initial Loan
Value equal to the sum of the principal amount of such Loan and the
aggregate principal amount of all other Loans then outstanding plus the
accrued interest thereon, (v) if such Loan is the Term Loan, that after
giving effect to the making of such Loan and any pledge of Collateral
therefor, the Collateral then held by Bank has an Initial Loan Value equal
to the principal amount of such Loan, and (vi) that after giving effect to
the making of such Loan and the pledge of Collateral therefor, the
representation and warranty of Borrower in Section 12(a) below continues to
be correct and accurate in all material respects, and (vii) that Bank has
received from Borrower such documents as Bank may have reasonably
requested.
(b) The obligation of Bank to make the first Revolving Loan shall be
subject to the fulfillment of the condition precedent that on or prior to
the date of the making of such Loan, Bank shall have received from Borrower
(i) the arranging fee and reimbursement of out-of-pocket expenses provided
for in Section 14 below, (ii) a balance sheet and the related income
statement for Borrower's most recent quarterly fiscal period for which such
financials are available as well as audited financials for Borrower's most
recent fiscal year for which such audited financials are available, and
(iii) a Statement of Purpose (Federal Reserve Form U-1) duly completed and
signed by Borrower and (iv) such other documents as Bank may have
reasonably requested.
4. TERMS OF REPAYMENT; WAIVERS. (a) Borrower may repay any Revolving
Loan in its entirety or in part at any time prior to the first anniversary
of the date of this Agreement, without premium and without notice of any
kind but together with all accrued but unpaid interest thereon.
(b) Borrower shall repay all Revolving Loans in their entirety on the
first anniversary of the date of this Agreement. Forthwith upon the making
of the Term Loan, Bank shall apply the proceeds thereof on behalf of
Borrower to such repayment of all Revolving Loans then outstanding.
(c) Borrower shall repay the Term Loan in its entirety on the second
anniversary of the date of this Agreement.
(d) Any Loan may also become repayable, in whole or in part, as
provided in Section 8(d) below, and shall become repayable in its entirety
as provided in Section 17 below upon the occurrence of an Event of Default.
(e) Borrower hereby waives presentment and protest of any instrument
and notice thereof, notice of default and, to the extent permitted by
applicable law, all other notices (except notices required by the terms of
this Agreement) to which Borrower might otherwise be entitled.
5. INTEREST AND OTHER CHARGES. (a) Borrower shall pay Bank interest
on the principal amount of each Loan from the date on which such Loan is
made pursuant to Section 2 above until (but not including) the date such
Loan is due under this Agreement, at a fluctuating rate per annum equal at
all times to the Prime Rate in effect from time to time plus one-half of
one percent (50 basis points), with each change in such fluctuating
interest rate to take effect simultaneously with the corresponding change
in the Prime Rate. Such interest shall be payable monthly on the 10th day
of each month (or, if the 10th day is not a Business Day, on the next
succeeding Business Day) and upon repayment of such Loan in full.
(b) Borrower shall pay Bank interest on any amount not paid by
Borrower when due under this Agreement, from the date payment of such
amount was due until the date such amount is paid, at a fluctuating rate
per annum equal at all times to the Prime Rate in effect from time to time
plus three percent (300 basis points), with each change in such fluctuating
interest rate to take effect simultaneously with the corresponding change
in the Prime Rate. Such interest shall be payable on demand made by Bank
from time to time.
(c) Interest payable hereunder shall be calculated on the basis of a
360-day year and for the actual number of days elapsed.
(d) In no event whatsoever shall the interest rate and other charges
charged hereunder exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that a court determines, in a final
determination, that Bank has received interest and other charges hereunder
in excess of such highest rate, Bank shall promptly refund such excess
amount to Borrower, and the provisions hereof shall be deemed amended to
provide for such permissible rate.
6. COMMITMENT FEE. Borrower shall pay to Bank a commitment fee
computed (on the basis of a 360-day year and for the actual number of days
elapsed) at a rate of one-half of one percent (50 basis points) per annum
on the average daily unused amount of the Revolving Credit Commitment. Such
commitment fee shall accrue from the date of this Agreement to and
including the first anniversary of such date, and shall be payable on the
last Business Day of each calendar month up to and including the calendar
month during which the first anniversary of the date of this Agreement
occurs.
7. PLACE AND MANNER OF PAYMENT. Borrower shall make all payments
required to be made by it under this Agreement (whether of principal,
interest or any other amount) prior to 11:00 A.M. New York time on the date
such payment is due, at such address in the United States of America as
Bank shall from time to time indicate to Borrower, in U.S. dollars and in
immediately available funds.
8. COLLATERAL SECURITY, PLEDGE AND LIMITATION ON COLLATERAL. (a) On or
before the date of the making of any Loan, Borrower shall deliver to the
Pledge Account shares of Kaiser Stock and/or other securities (which other
securities shall be acceptable to Bank in its sole and absolute
discretion), having on the date of the making of such Loan (i) an aggregate
Initial Loan Value of no less than the principal amount of such Loan, or
(ii) if there is Excess Collateral in the Pledge Account on such date, an
aggregate Initial Loan Value of no less than the difference between (A) the
principal amount of such Loan and (B) the Initial Loan Value of such Excess
Collateral on such date.
(b) If shares of Kaiser Common are delivered to the Pledge Account
pursuant to Section 8(a) above after a reclassification or recapitalization
of Kaiser Common into two or more classes of shares, then the shares so
delivered shall at all times consist of (i) a number of shares from each of
such classes that bears the same proportion to all of the shares so
delivered as (ii) the total number of shares of such class that were issued
solely by reason of such reclassification or recapitalization bears to the
total number of shares of all classes of Kaiser Common issued solely by
reason of such reclassification or recapitalization.
(c) To secure the due and punctual payment of each Loan, all accrued
interest thereon and all other amounts from time to time payable by
Borrower under this Agreement, and the performance by Borrower of all its
obligations and covenants under this Agreement, Borrower hereby pledges,
hypothecates, assigns, transfers and sets over to Bank, and grants to Bank
a continuing security interest in and lien upon, (i) all Pledged Securities
at any time in the Pledge Account, (ii) all other property of Borrower now
or at any time hereafter in Bank's actual possession including, but not
limited to, all other securities, monies, claims and credit balances, and
(iii) all proceeds, products and profits derived from any of the foregoing
(including proceeds of any insurance policies and all cash, securities,
dividends and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the foregoing securities), and copies of all books and records
related to any of the foregoing (all of the foregoing Pledged Securities
and other property, together with all other property in which Borrower may
hereafter grant to Bank a lien and security interest, being herein
collectively referred to as the "Collateral").
(d) At all times while any Loan is outstanding, Borrower shall
maintain Collateral with Bank consisting of Pledged Securities having an
aggregate Maintenance Loan Value of not less than the aggregate principal
amount of all Loans outstanding hereunder and all accrued interest thereon.
Forthwith upon demand made to Borrower by Bank, Borrower shall, at its
option, either (i) deliver and transfer to Bank such shares of Kaiser Stock
or such other securities which are acceptable to Bank in its sole and
absolute discretion, or (ii) repay so much of the aggregate principal
amount of all Loans outstanding as, in either case, may be necessary for
the aggregate Maintenance Loan Value of all Pledged Securities to be no
less than the aggregate principal amount of all Loans outstanding hereunder
and all accrued interest thereon.
(e) The Initial Loan Value and the Maintenance Loan Value of any of
the Pledged Securities or other item of Collateral are each an amount
representing a percentage of the Market Value of such Pledged Security or
other item of Collateral and shall be determined (i) in accordance with
Schedule A hereto if the percentages required for such determination are
set forth therein or (ii) from time to time by Bank in its sole and
absolute discretion if such percentages are not set forth therein,
provided, however, that in no event shall Kaiser Common, irrespective of
its Market Value, be accorded a Maintenance Loan Value higher than $7.50
per share of Kaiser Common.
(f) If and for so long as any Pledged Securities are listed on a
national securities exchange in the United States of America, their Market
Value shall be determined for all purposes by the last sales price for such
Pledged Securities on any such exchange on the Business Day next preceding
the date of determination or, if there was no sale on that Business Day, by
the last sales price for such Pledged Securities on the next preceding
Business Day on which there was a sale thereof on any such exchange, all as
quoted on the Consolidated Tape or, if not quoted on the Consolidated Tape,
then as quoted by any such exchange. The Market Value of any other item of
Collateral, and the Market Value of such Pledged Securities if they are no
longer listed on any such exchange, shall be determined by Bank for all
purposes (i) based upon the prices bid (on the Business Day next preceding
the date of determination) by banks and broker/dealers which regularly
quote prices on property of the same type as such item of Collateral or
(ii) if no such quotations are available for such Business Day, based upon
such factors as Bank, in its sole and reasonable judgment, shall determine
and communicate to Borrower. Market Value, in the case of interest-bearing
Collateral, shall include accrued interest to the date on which such Market
Value is determined.
(g) Subject to Section 8(i) below, Bank shall promptly pay over to
Borrower (i) any and all cash dividends and interest paid on any of the
Collateral and received by Bank, and (ii) any other cash received by Bank
on account of the Collateral (whether upon the repayment, redemption or
exchange of any thereof or otherwise) unless, after giving effect to such
payment of cash dividends or interest or other cash to Borrower, the
aggregate Maintenance Value of all Collateral then held by Bank would be
less than the sum of the aggregate principal amount of all outstanding
Loans and the interest accrued thereon, in which case Bank shall promptly
apply the amount of such cash to the repayment of such aggregate principal
amount. Any and all other distributions of property (including stock
dividends) made for any reason whatsoever on or in respect of any of the
Collateral, which are received by Bank, shall be retained by Bank and held
by it as part of the Collateral subject to this Agreement.
(h) Subject to Section 8(i) below, Borrower shall be entitled to
exercise, for any purpose not inconsistent with the terms of this
Agreement, any and all voting and/or consensual rights relating or
pertaining to the Collateral. In furtherance of such exercise, Bank shall
deliver to Borrower all notices of meetings, proxies, proxy materials and
other materials which it receives regarding Pledged Securities from the
issuers thereof or, in the case of tender, exchange or similar offers for
Pledged Securities, from the party (or its agent) making the offer, or from
any party to any reorganization, liquidation or other similar proceedings
for such issuers. Before delivering them to Borrower, Bank shall cause all
such proxies relating to any such Pledged Securities which are not
registered in the name of Borrower to be executed by the registered holder
of such securities, without any indication of how such proxies are to be
voted.
(i) If an Event of Default occurs and for so long as it continues,
Borrower shall cease to be entitled (i) to exercise any and all voting
and/or consensual rights relating or pertaining to any of the Collateral,
and (ii) to receive any cash dividends and interest, or other cash, payable
on or on account of any of the Collateral; and Bank shall have the sole and
exclusive right and authority to exercise such voting and/or consensual
rights and powers and to receive and retain such dividends and interest and
other cash. Any money or other property received by Bank pursuant to this
Section 8(i) shall be retained by Bank as additional Collateral and applied
as required in Section 18(a) below.
(j) If the aggregate Initial Loan Value of the Collateral at any time
exceeds the aggregate principal amount of all then outstanding Loans and
the interest accrued thereon, and provided that no Event of Default has
occurred and is continuing, Borrower may designate to Bank, in writing,
Pledged Securities which have an aggregate Initial Loan Value no greater
than such excess, and Bank, promptly upon such designation, shall release
such designated Pledged Securities from the lien and security interest
granted in Section 8(c) above and deliver and transfer them pursuant to
such instructions as Borrower may have given to Bank, provided that,
immediately after giving effect to such delivery and transfer, the
aggregate Initial Loan Value of all remaining Collateral is not less than
the aggregate principal amount of all such Loans and the interest accrued
thereon.
(k) Upon the payment in full of all the Loans, all accrued interest
thereon and all other amounts from time to time payable by Borrower under
this Agreement, the security interest and lien granted in Section 8(c)
above in and upon the Collateral shall terminate, and all of Bank's rights
hereunder to the Collateral shall revert to Borrower. Upon such
termination, Bank shall deliver and transfer the Collateral in the Pledge
Account to Borrower, together with all instruments and documents evidencing
the Collateral and such other documents as Borrower shall reasonably
request to evidence such termination.
9. PROTECTION OF SECURITY INTEREST. (a) Borrower shall, at its expense
and from time to time, perform all steps reasonably requested by Bank at
any time to perfect, maintain, protect and enforce Bank's security interest
in and lien upon the Collateral, including, without limitation, (i)
executing and filing financing or continuation statements and amendments
thereto, in form and substance satisfactory to Bank, and (ii) obtaining
such consents, providing such endorsements and executing and delivering
such other documents as may be required for any sale, transfer or other
disposition thereof by Bank in accordance with the provisions of this
Agreement. From time to time, Borrower shall, upon Bank's written request,
promptly execute and deliver confirmatory written instruments pledging the
Collateral to Bank, but any failure by Borrower to do so shall not affect
or limit Bank's security interest in, lien upon or other rights in and to
the Collateral. Until payment in full of all the Loans, all accrued
interest thereon and all other amounts from time to time payable by
Borrower under this Agreement, Bank's security interest in the Collateral
shall continue in full force and effect.
(b) Subject to the terms of this Agreement, Borrower hereby
irrevocably appoints Bank its true and lawful attorney in its name, place
and stead, and at its expense, in connection with the preservation and
enforcement of Bank's rights and remedies under this Agreement if an Event
of Default occurs and is continuing (i) to receive, endorse and collect all
checks and other orders for the payment of money made payable to Borrower
representing any dividend, interest or other distribution payable or
distributable in respect of any of the Collateral and to give full
discharge for the same, (ii) to give all notices, obtain all consents,
effectuate all registrations in Bank's name or that of a proposed purchaser
or other transferee and make all transfers of all or any part of the
Collateral which are necessary or appropriate in connection with any sale,
transfer or other disposition thereof pursuant to this Agreement, (iii) to
execute and deliver for value all necessary or appropriate assignments and
other instruments in connection with any such sale, transfer or other
disposition, and (iv) to execute and deliver all other documents, and do
all other acts and things, which Bank reasonably deems appropriate in such
connection. Borrower hereby ratifies and confirms all that Bank, as
Borrower's attorney, may lawfully do hereunder and pursuant hereto, but,
nevertheless, at Bank's request or that of the purchaser or other
transferee in question, Borrower shall ratify and confirm any sale,
transfer or other disposition of Collateral pursuant to this Agreement in
such manner as Bank or such purchaser or other transferee may reasonably
specify in such request.
10. OTHER LIENS. Borrower represents and warrants to Bank that all
Collateral consisting of Pledged Securities and other items of Collateral
is, and Borrower covenants that it will continue to be, owned by Borrower
free and clear of all Liens (except for (i) Liens in favor of Bank, (ii)
Liens for taxes not delinquent or being contested in good faith and in
appropriate proceedings, (iii) Liens in connection with workers'
compensation, unemployment insurance, social security or similar
obligations, and (iv) mechanics', workmen's, materialmen's, landlords',
carriers' or other like liens arising in the ordinary course of business
with respect to obligations which are not due or which are being contested
in good faith).
11. USE OF PROCEEDS. Borrower represents and warrants to Bank that
each Loan is a commercial loan the proceeds of which will be used in the
business of Borrower which is, by various means (including the purchase or
repurchase of securities issued by Borrower) to invest in, acquire and
operate businesses of various kinds, including the businesses described in
Borrower's annual report on Securities and Exchange Commission Form 10-K
for its fiscal year ended December 31, 1995.
12. OTHER REPRESENTATIONS AND WARRANTIES. Borrower further represents
and warrants to Bank that:
(a) at no time shall the Collateral include Pledged Securities, or any
class of Pledged Securities, in an amount such that solely by reason of
such Pledged Securities, either upon exercising its rights under Section 18
below or otherwise, Bank would become a holder of 10% or more of any class
of Pledged Securities or would become (or be presumed to be) an affiliate
of the issuer of such Pledged Securities (as such term "affiliate" is
defined for purposes of the Securities Act of 1933);
(b) Borrower has, for purposes of Rule 144 under the Securities Act of
1933, been the beneficial owner of the shares of Kaiser Common or other
Kaiser Stock pledged (or to be pledged) to Bank under this Agreement at all
times since May 15, 1993 or earlier;
(c) Borrower (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, (ii) is qualified
to do business and is in good standing in all states in which qualification
and good standing are necessary in order for it to conduct its business and
own its property, except where the failure to so qualify or to be in good
standing could not reasonably be expected to have a material adverse effect
on the financial condition, operations or business of Borrower and its
subsidiaries considered as one enterprise and (iii) has all requisite
corporate power and authority to conduct its business, to own its property
and to execute and deliver this Agreement and to perform its obligations
hereunder;
(d) it has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement, and such
authorization, delivery and performance do not (i) violate its corporate
charter or by-laws or any material law, rule, regulation, order, judgment,
injunction, decree, determination or award presently in effect and
applicable to it, (ii) require any consent or result in a breach of or
constitute a default under any material agreement, lease or instrument to
which it is a party or by which it or any of its assets may be bound or
affected, or (iii) result in or require the creation or imposition of any
Lien (other than in favor of Bank pursuant to this Agreement) upon or with
respect to any shares of Kaiser Common or other Kaiser Stock owned by
Borrower or any material portion of Borrower's other properties;
(e) this Agreement has been duly and validly executed and delivered by
Borrower and constitutes a legal, valid and binding obligation of Borrower,
enforceable against it in accordance with its terms, subject, as to
enforceability of remedies (i) to bankruptcy, insolvency and other laws
affecting creditors' rights generally, and (ii) to the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(f) as of the date hereof, no recording, order, authorization,
consent, license, registration, approval, exemption, filing, notice or
other similar action by or with any governmental body, governmental
official or other regulatory authority (except such as have been obtained,
made or given and copies of which have been delivered by Borrower to Bank)
is or will be required to be obtained, made or given by Borrower in order
to (i) ensure the legality, validity, binding effect or enforceability of
this Agreement, (ii) permit the performance by Borrower of its obligations
under this Agreement in accordance with the terms thereof, or (iii) enable
Bank to enforce its rights and remedies pursuant to the terms of this
Agreement, including any sale, transfer or other disposition by Bank of all
or any part of the Collateral, except such as may be required under the
Securities Act of 1933, the regulations promulgated thereunder and State
securities laws or by any national securities exchange;
(g) Borrower is not in default with respect to any Indebtedness of
Borrower in a principal amount greater than $500,000;
(h) except as disclosed by it in reports filed under the Securities
Exchange Act of 1934 or otherwise disclosed in writing by Borrower to Bank,
there is no litigation or other proceeding pending or, to its knowledge,
threatened against or affecting Borrower which could reasonably be expected
to have a material adverse effect (i) on its financial condition,
operations or business, or (ii) on any of the Collateral; and
(i) the consolidated balance sheet of Borrower and its consolidated
subsidiaries as of December 31, 1995, and the related consolidated income
statement for the twelve-month period then ended and the consolidated
balance sheet of Borrower and its consolidated subsidiaries as of March 31,
1996 and the related consolidated income statement for the three-month
period then ended, copies of all of which have heretofore been delivered to
Bank by Borrower, present fairly, in all material respects, the
consolidated financial condition of Borrower and its consolidated
subsidiaries as at the dates thereof and their consolidated results of
operations for the periods then ended, and have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis; since the date of Borrower's most recent, publicly available current
or periodic report filed with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, which has been delivered by it to
Bank, there have been no material adverse changes in the assets or
liabilities or financial condition of Borrower or of any of its Significant
Subsidiaries; and neither Borrower nor any of its Significant Subsidiaries
has entered into any commitment or contract, or incurred any other
liability, which is not reflected in said balance sheets and could
reasonably be expected to have a material adverse effect upon its financial
condition, operations or business.
13. REITERATION OF REPRESENTATIONS. The representations in Sections
10, 11 and 12 above shall be deemed to be repeated by Borrower each time a
Loan is made.
14. ARRANGING FEE AND EXPENSES. Upon execution of this Agreement,
Borrower shall pay Bank an arranging fee of $125,000 for the credit
facility provided in this Agreement. Upon presentation of an invoice
therefor, Borrower shall reimburse Bank for such reasonable out-of-pocket
expenses (including reasonable fees and disbursements of legal counsel to
Bank) as Bank may have incurred in the negotiation of this Agreement and
the establishment of such credit facility.
15. REPORTING. (a) As soon as available, and in any event within 60
days after the close of each of the first three quarters of each fiscal
year of Borrower, commencing with the quarter ending on June 30, 1996,
Borrower shall deliver to Bank the consolidated balance sheet of Borrower
and its consolidated subsidiaries at the end of such quarter and the
related consolidated income statement for the portion of the fiscal year
ending on the last day of such quarter, all in reasonable detail and
stating in comparative form the figures for the corresponding date and
period in the previous fiscal year, prepared in accordance with generally
accepted accounting principles applied on a consistent basis, subject,
however, to year-end audit adjustments, and unless delivered to Bank as
part of Borrower's quarterly report on Securities and Exchange Commission
Form 10Q, certified by Borrower's chief financial or accounting officer.
(b) As soon as available, and in any event within 105 days after the
close of each fiscal year of Borrower, Borrower shall deliver to Bank the
consolidated balance sheet of Borrower and its consolidated subsidiaries as
at the close of such fiscal year and the related consolidated income
statement for such fiscal year, all in reasonable detail and stating in
comparative form the figures as at the close of and for the previous fiscal
year, audited by certified public accountants satisfactory to Bank and
accompanied by a report thereon, satisfactory to Bank, issued by such
accountants.
16. OTHER COVENANTS. Borrower covenants with Bank that until the
payment in full of all Loans, all accrued interest thereon and all other
amounts from time to time payable by Borrower under this Agreement, it
shall:
(a) maintain and preserve its existence and all rights, privileges,
approvals and other authority adequate for the conduct of its business;
(b) promptly notify Bank in writing of any violation by Borrower of
any law, statute, regulation or ordinance of any governmental entity, or of
any agency thereof, applicable to it which would likely materially and
adversely affect the Collateral or the financial condition, operations or
business of Borrower and its subsidiaries considered as one enterprise;
(c) notify Bank in writing within five (5) Business Days of any
default by Borrower with respect to any of its Indebtedness in a principal
amount of more than $1,000,000;
(d) promptly notify Bank in writing of any change in the control of
Borrower or the control of Kaiser;
(e) deliver to Bank (i) promptly after the same are available copies
of all financial statements and other reports and documents that Borrower
distributes to its shareholders or otherwise makes publicly available, and
(ii) such other documents as Bank may from time to time reasonably request,
including such Statements of Purpose (Federal Reserve Form U-1's) with
regard to any Pledged Securities as may be required under Regulation U of
the Board of Governors of the Federal Reserve System; and
(f) not create, incur, assume or permit to exist any Lien on any
shares of Kaiser Common, shares of other Kaiser Stock or any other
securities equivalent to Kaiser Common or other Kaiser Stock, whether such
shares or other securities are now owned or hereafter acquired by it, other
than (i) Liens for taxes not delinquent or being contested in good faith
and in appropriate proceedings; (ii) Liens in connection with workers'
compensation, unemployment insurance, social security or similar
obligations; (iii) mechanics', workmen's, materialmen's, landlords',
carriers' or other like liens arising in the ordinary course of business
with respect to obligations which are not due or which are being contested
in good faith; (iv) Liens granted prior to the date of this Agreement to
secure the 12-1/4% Senior Secured Discount Notes due 2003 and/or the
11-1/4% Senior Secured Notes due 2003 of MAXXAM Group Inc.; (v) Liens in
favor of Bank; and (vi) such other Liens as Bank and Borrower may from time
to time agree upon in writing.
17. EVENTS OF DEFAULT. It shall constitute an Event of Default
hereunder (and, upon the occurrence thereof, all of Bank's obligations
hereunder to make any Loan shall terminate and the then outstanding
principal amount of each Loan, all accrued but unpaid interest thereon and
all accrued but unpaid commitment fee shall become immediately due and
payable, without demand, presentment or notice of any kind, all of which
are hereby expressly waived) if at any time:
(a) Borrower fails to pay in full the principal amount of any Loan
when due; or
(b) Borrower fails to make or pay when due any interest payment,
charge or other amount required to be made or paid by it under this
Agreement, and such failure continues for five Business Days after the date
on which the making of such payment or the payment of such charge or other
amount was due; or
(c) Borrower fails to deliver Collateral in accordance with Section
8(d) above upon demand therefor made by Bank in writing at the address for
notices to Borrower specified in Section 23 below, and such failure
continues for five Business Days after the date of the making of such
demand; or
(d) Borrower fails to perform or observe in any material respect any
other term, covenant or condition to be performed or observed by it under
this Agreement, and such failure continues for a period in excess of 10
Business Days after the earlier of (i) the date an executive officer of
Borrower obtains knowledge of such failure or (ii) the date on which
written notice thereof is given by Bank to Borrower; or
(e) any representation or warranty made by Borrower in Sections 10, 11
and 12 above proves to have been incorrect in any material respect on any
of the dates as of which made or deemed to have been repeated; or
(f) Borrower defaults in the payment when due, whether at stated
maturity or when otherwise due (which shall include any applicable grace
period), of any of its Indebtedness (other than Indebtedness under this
Agreement) in a principal amount of more than $2,000,000, whether now or
hereafter existing;
(g) Borrower fails (within the applicable grace period, if any) to
perform any term, covenant or agreement on its part to be performed under
any agreement or instrument (other than this Agreement) evidencing or
securing any of its Indebtedness (whether now or hereafter existing) in a
principal amount of more than $2,000,000, or any event occurs or condition
exists (and such event or condition is not remedied within the applicable
grace period, if any), if the effect of such failure, event or condition is
to cause, or to permit the holder or holders of such Indebtedness (with or
without the giving of notice, lapse of time or both) to cause, such
Indebtedness to become due prior to its stated maturity;
(h) (i) Borrower as debtor commences a case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
law, or seeks the appointment of a receiver, trustee, custodian or similar
official for itself or any substantial part of its property, (ii) any such
case or proceeding is commenced against it, or another seeks such an
appointment, which (A) is consented to or not timely contested by it, (B)
results in the entry of an order for relief, such an appointment, or the
entry of an order having a similar effect, or (C) is not dismissed within
90 days, (iii) it makes a general assignment for the benefit of creditors,
or (iv) it admits in writing its inability to pay its debts as they become
due; or
(i) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $2,000,000 are rendered against Borrower and
(A) the same remain undischarged for a period of 30 or more consecutive
days during which execution thereof is not effectively stayed upon appeal
or otherwise or (B) any proceeding by a creditor to enforce the same is
pending.
18. BANK'S RIGHTS AND REMEDIES. (a) If an Event of Default occurs and
is then continuing, Bank shall promptly apply to the payment of the
principal of, and accrued but unpaid interest on, the Loans and of any
other amounts payable by Borrower under this Agreement (in such order as
Bank in its sole and absolute discretion may determine) any cash held by
Bank as part of the Collateral pursuant to Section 8(i) above.
(b) In addition to its obligation under Section 18(a) above, if an
Event of Default occurs and is then continuing, Bank shall have the right
to exercise with respect to any or all of the Collateral any rights and
remedies available to a secured creditor under applicable law and, in
addition, (without being required to give any notice to Borrower except as
may be required in Section 18(d) below) to sell any or all of such
Collateral, publicly or privately, at a place of Bank's choosing, and (in
such order as Bank in its sole and absolute discretion may determine) to
apply the proceeds of such sale to the payment of the principal of, and
accrued but unpaid interest on, the Loans and of any other amounts payable
by Borrower under this Agreement.
(c) If any Pledged Securities forming part of the Collateral are, in
whole or in part, actually convertible into or exchangeable for other
securities, then Bank shall have the right, in its discretion, instead of
selling such Pledged Securities as provided in Section 18(b) above, to
convert or exchange them pursuant to their terms, to apply any cash
received by Bank in such conversion or exchange to the payment of the
principal of, and accrued but unpaid interest on, the Loans and of any
other amounts payable by Borrower under this Agreement, and to sell as
provided in Section 18(b) above any securities it receives in such
conversion or exchange.
(d) The Pledged Securities at any time forming part of the Collateral
are of a type customarily sold on recognized markets and no notification to
Borrower of any public or private sale thereof by Bank is required,
provided, however, that if any such notice is required by applicable law
with respect to any such sale, then one Business Day's notice thereof shall
be reasonable notification to Borrower.
19. NO WAIVER. No failure by Bank to exercise any right, power or
remedy under this Agreement, and no delay by Bank in exercising any such
right, power or remedy, shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise by Bank of any other
right, power or remedy. The rights and remedies of Bank provided for in
this Agreement are cumulative and not exclusive of any remedies provided at
law or in equity.
20. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties with respect to the Loans, and, except as provided
in Section 5(d) above, no amendment, modification, termination or waiver of
any provision hereof or consent to a departure herefrom by Borrower shall
be effective unless the same is in writing and signed by both Bank and
Borrower.
21. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
representatives, successors and assigns, provided, however, that except as
provided in Section 21(b) below it may not be assigned by either party
hereto without the prior written consent of the other party hereto, and any
purported assignment in violation of this provision shall be null and void.
(b) Section 21(a) above notwithstanding, Bank may from time to time,
in its sole and absolute discretion and without Borrower's further consent
(i) assign this Agreement and any Loan to any affiliate of Bank, or (ii)
sell participations in any Loan to any Person, provided, however, that in
the case of any such sale of participations Bank's obligations under this
Agreement shall remain unchanged and it shall remain solely responsible to
Borrower for its performance thereof.
22. GOVERNING LAW AND JURISDICTION. (a) This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, without regard to the conflict of law principles thereof.
(b) Any suit, action or proceeding with respect to this Agreement or
any Loan may be brought in the Supreme Court of the State of New York,
County of New York, or in the United States District Court for the Southern
District of New York, and the parties hereto hereby submit to the non-
exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding, and hereby waive for such purpose any other
preferential jurisdiction by reason of their present or future domicile or
otherwise.
23. NOTICES. Unless otherwise specified, any notice or demand required
hereunder shall be sent, delivered or transmitted to the recipient at the
address (or, in the case of facsimile transmission, the telephone number)
set forth after its name hereinbelow:
IF TO BANK, AT:
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231
Attention: Vice President -
Loan Compliance
Telephone: (609) 951-2313
Facsimile: (609) 951-2317
IF TO BORROWER, AT:
MAXXAM Inc.
5847 San Felipe, Ste 2600
Houston, Texas 77057
Attention: Paul N. Schwartz
Telephone: (713) 267-3685
Facsimile: (713) 267-3703
AND
Attention: Treasury Department
Telephone: (713) 267-3619
Facsimile: (713) 267-3704
or to such other address or telephone number as each party may designate
for itself by like notice. The means by or through which notices, demands
and other communications hereunder may be sent or transmitted include
teletype, facsimile, central processing unit connection, on-line terminal
and magnetic tape.
24. EXPENSES. Borrower shall pay or, at the election of Bank, shall
reimburse Bank for paying (a) all reasonable costs, fees and expenses
(including reasonable attorneys' fees) incurred by Bank in connection with
the enforcement of this Agreement and Bank's security interest in the
Collateral, and (b) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any tax or other governmental
authority in respect of this Agreement or any Loan.
25. SEVERABILITY. If any provision of this Agreement is invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions of this Agreement (and the
validity, legality and enforceability of such provision in any other
jurisdiction) shall not be affected or impaired thereby.
26. MISCELLANEOUS. (a) For the avoidance of doubt, it is hereby
expressly understood that Borrower as defined in this Agreement means
MAXXAM INC. considered individually and does not refer to any subsidiary
thereof, whether accounted for on a consolidated basis with Borrower or
not, and that the rights and obligations of Borrower under this Agreement
are not rights and obligations of any such subsidiary.
(b) All agreements, representations and warranties contained in this
Agreement shall survive the execution and delivery of this Agreement and
the making of any Loan.
(c) Bank shall be held to the exercise of reasonable care in the
custody and preservation of the Collateral in its possession, and shall be
deemed to have exercised such care if such Collateral is accorded treatment
substantially equal to that which Bank accords to its own property.
(d) Except to the extent that pursuant to Section 26(c) above Bank may
be liable to Borrower for Bank's negligence in the custody and preservation
of Collateral in Bank's possession, and except as may be otherwise provided
in the matter of collateral by applicable provisions of the Uniform
Commercial Code as in effect in the State of New York, Bank shall be
without liability to Borrower for any loss, damage, cost, expense,
liability or claim which does not arise from willful misfeasance, bad faith
or gross negligence on the part of Bank in taking or omitting to take any
action under this Agreement.
(e) Bank shall have the continuing and exclusive right to apply any
and all payments to any portion of the Loans. All payments by Borrower to
Bank pursuant to this Agreement shall be made without set-off, and none of
such payments shall be subject to any counterclaim by Borrower. To the
extent that Borrower makes a payment or Bank receives any payment or
proceeds of the Collateral for Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, debtor in possession, receiver or any
other party under any bankruptcy, reorganization or insolvency law, common
law or equitable cause, then, to such extent, the obligation hereunder of
Borrower which was to have been satisfied by such payment or proceeds shall
be revived and continue as if such payment or proceeds had not been
received by Bank.
(f) Bank shall maintain, and shall cause its officers, directors,
employees and affiliates under its control to maintain, the confidentiality
of all information provided by Borrower to Bank pursuant to this Agreement
and which Borrower has identified to Bank (at the time that it is provided
to Bank) as being non-public, except to the extent that such information
(i) becomes generally available to the public other than as a result of
disclosure by Bank, (ii) is required to be provided to regulatory
authorities or Bank's auditors, (iii) is required to be provided pursuant
to court process, provided that Bank shall promptly notify Borrower of such
process so that Borrower may seek a protective order in connection
therewith, or (iv) needs to be disclosed in connection with the exercise,
preservation and enforcement of Bank's rights and remedies under this
Agreement.
(g) The headings of sections in this Agreement are for convenience of
reference only and shall not affect the meaning or construction of any
provision of this Agreement.
(h) This Agreement may be executed in one or more counterparts and by
the parties hereto on separate counterparts, each of which shall be deemed
an original but all of which taken together shall constitute but one and
the same instrument.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and on its behalf by its representative thereunto
duly authorized, all as of the day and year first above written.
MAXXAM INC.
By: PAUL N. SCHWARTZ
Name: Paul N. Schwartz
Title: Executive Vice President
CUSTODIAL TRUST COMPANY
By: RONALD D. WATSON
Name: Ronald D. Watson
Title: President
SCHEDULE A
Loan Value
(percentages are
Collateral Type % of Market Value)
- --------------- -----------------
Initial Maintenance
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Common Stock of Kaiser
Aluminum Corporation 33-1/3% lower of 50%
or $7.50 per
share