AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and
between the Pension Benefit Guaranty Corporation ("PBGC"), a United States
government corporation, and RES Holding Corporation ("RES"), a Delaware
Corporation, and is effective as of November 2, 1998 (the "Effective Date").
WITNESSETH
WHEREAS, RES has acquired the common stock of Republic
Engineered Steels, Inc. ("RESI"), which maintains one or more defined benefit
pension plans (the "RESI Plans"), including the RESI USWA Defined Benefit Plan
(the "USWA Plan"), which are covered by Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and
WHEREAS, PBGC asserts that RESI may be liable for unfunded
benefit liabilities of the RESI Plans within the meaning of 29 U.S.C. Sections
130l(a)(18) and 1362(b), determined on the basis of assumptions prescribed by
PBGC regulations, 29 C.F.R. pt. 4044, in the event of the termination of one or
all of the RESI Plans; and
WHEREAS, RES is considering combining RES and RESI under a
common Ultimate Parent corporation with the operating assets of entities
including Bar Technologies, Inc. ("BarTech"); and
WHEREAS, BarTech maintains one or more defined benefit pension
plans (the "BarTech Plans"), which are covered by Title IV of ERISA; and
WHEREAS, the parties hereto differ as to the effect of the
Transaction (as defined herein), the Combination (as defined herein), and the
Permitted Closures (as defined herein) on the RESI Plans, and
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WHEREAS, representatives of RESI initiated contact with PBGC
in an effort to explore and resolve these differences; and
WHEREAS, PBGC and RES have entered into a Memorandum of
Understanding dated November 2, 1998 (the "MOU"), which sets forth the
substantive terms of their agreement regarding the RESI Plans and BarTech Plan;
and
WHEREAS, PBGC and RES, pursuant to the terms of the MOU, wish
to enter into a definitive agreement covering such matters;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
Section I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meaning set forth below:
"BarTech" shall mean Bar Technologies, Inc., a Delaware
corporation.
"BarTech Plan" shall mean any defined benefit pension plan to
which BarTech contributes on behalf of its employees.
"Benefit Liabilities"' shall have the meaning ascribed thereto
in 29 U.S.C. Section 130l(a)(16).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Combination" shall mean the combination of RES and RESI under
a common Ultimate Parent corporation with the operating assets of BarTech
(whether by merger or
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otherwise), including any financings or refinancings by RES, RESI, BarTech
and/or their affiliates in connection therewith or resulting therefrom.
"Confidential Memorandum" shall mean the memorandum setting
forth the Permitted Closures attached hereto and incorporated herein Attachment
A.
"Contribution Dates" shall mean the dates of the Required
Contributions set forth in Section IV(b) and IV(c) of this Agreement.
"Controlled Group" shall have the meaning ascribed thereto in
29 U.S.C. Section 130l(a)(14).
"Effective Date" shall mean November 2, 1998.
"ERBs" shall mean early retirement benefit packages.
"ER1SA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, 29 U.S.C. Sections 1001-1461 (1994 and Supp. II 1996).
"Holdings" shall mean, from the Effective Date of this
Agreement until the consummation of the Combination, RES, and at all times
thereafter, the Ultimate Parent.
"L/C" shall mean the letter(s) of credit held as security by
PBGC for the benefit of the RESI Plans for the Required Contributions due in
January and July of 1999.
"Merger" shall mean the merger of RES Acquisition Corporation
with and into RESI.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, a
wholly-owned United States government corporation.
"Permitted Closure" shall mean the plant closings and/or
discontinuations identified in the Confidential Memorandum identified as
Attachment A hereto.
"Plan Year" shall mean January 1 to December 31 of each year.
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"Required Contributions" shall mean the cash contributions
required by Section IV of this Agreement.
"Required Credit Balance" shall mean the credit balance
required to be maintained for the USWA Plan by Section VI of this Agreement.
"RES" shall mean RES Holding Corporation, a Delaware
corporation.
"RES Acquisition" shall mean RES Acquisition Corporation, a
Delaware corporation, and a wholly-owned subsidiary of RES.
"RESI" shall mean Republic Engineered Steels, Inc., a Delaware
corporation, and a wholly-owned subsidiary of RES Acquisition Corporation.
"RESI Plans" shall mean the defined benefit pension plans
sponsored by RESI, including the USWA Plan.
"Responsible Entity or Entities" shall mean the entities
described in Section VII of this Agreement that are jointly and severally liable
for each Required Contribution.
"Tender Offer" shall mean the acquisition of RESI by RES
pursuant to a tender offer by RES Acquisition.
"Transaction" shall mean, collectively, the Tender Offer and
Merger.
"Ultimate Parent" shall mean parent corporation of the
Combination of RES and RESI with the operating assets of entities including
BarTech.
"USWA" shall mean the United Steel Workers of America.
"USWA Plan" shall mean the Republic Engineered Steels, Inc.
USWA Defined Benefit Plan.
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Section II
PBGC OBLIGATIONS
In consideration of the RES obligations described in Section
III of this Agreement, PBGC will forebear from instituting proceedings to
terminate the USWA Plan, or any single employer defined benefit pension plan of
BarTech or its affiliates under ER1SA Section 4042(a)(4), as a result of (i) the
Transaction, (ii) the subsequent Combination and/or (iii) the Permitted
Closures.
Section III
RES OBLIGATIONS
RES shall cause RESI to comply with the requirements hereof.
Section IV
RESI OBLIGATIONS
(a) RESI will make a Required Contribution to the USWA Plan in
the amount of $27 million within five (5) business days after January 1, 1999.
Such Required Contribution will be in addition to the $3.2 million paid in
January 1998.
(b) All other Required Contributions, in the amounts and on
the Contribution Dates set forth below will be made by one or more of the
Responsible Entities. If on any Contribution Date the minimum funding
contributions to the USWA Plan required by Code Section 412 exceed the amount of
the Required Contribution, the minimum funding contributions required under Code
Section 412 shall be made in lieu of the Required Contribution. The Required
Contributions shall be made in cash. The amounts of Required Contributions under
this Agreement are based on projections that include the assumption that no
shutdown benefits will be granted and that certain liabilities will arise from
granting 1,000 ERBs to USWA Plan participants.
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Contribution Date Amount ($mill)
no later than 7/1/99 $20.0
no later than 10/1/99 7.5
no later than 1/1/00 7.5
no later than 4/1/00 7.5
no later than 7/1/00 7.5
no later than 10/1/00 7.625
no later than 1/1/01 7.625
no later than 4/1/01 7.625
no later than 7/1/01 7.625
no later than 10/1/01 9.075
no later than 1/1/02 9.075
no later than 4/1/02 9.075
no later than 7/1/02 9.075
no later than 10/1/02 8.475
no later than 1/1/03 8.475
no later than 4/1/03 8.475
no later than 7/1/03 8.475
(c) Notwithstanding the provisions of Section III(b), in the
event BarTech's employees are not participants in the USWA Plan on any
Contribution Date listed above, BarTech will make its minimum tending
contribution required under Code Section 412 to the defined benefit plan in
which BarTech's employees participate on such Contribution Date. If BarTech's
employees are not participants in the USWA Plan, the Required Contributions
shall be as follows:
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Contribution Date Amount ($mill)
no later than 7/1/99 $20.0
no later than 10/1/99 7.5
no later than 1/1/00 7.5
no later than 4/1/00 7.5
no later than 7/1/00 7.5
no later than 10/1/00 7.5
no later than 1/1/01 7.5
no later than 4/1/01 7.5
no later than 7/1/01 7.5
no later than 10/1/01 7.55
no later than 1/1/02 7.55
no later than 4/1/02 7.55
no later than 7/1/02 7.55
no later than 10/1/02 7.55
no later than 1/1/03 7.55
no later than 4/1/03 7.55
no later than 7/1/03 7.55
(d) The Responsible Entities shall not be obligated to make
the portion of any Required Contribution under this Agreement that would not be
deductible under Code Section 404 for the Plan Year. The amount of maximum
deductible contributions will be determined with the current liability computed
using the interest rate that represents the lowest end of the permissible range
as prescribed by Code Section 412(1)(7)(C). If any portion of a Required
Contribution is not made because it is not tax deductible, RES will provide PBGC
with evidence, on the date the Required Contribution is due, that such portion
of the Required Contribution is not being made because it is not tax deductible.
This evidence will be subject to PBGC's review.
Section V
LETTER OF CREDIT
The portions of the Required Contribution due no later than
(a) five (5) business days after January 1, 1999, and (b) July 1, 1999,
respectively (the "Due Dates"), will be backed by a $47 million L/C which was
put in place on November 4, 1998. The L/C provides, by reference to this
Agreement, that in the event a Responsible Entity (or Entities) fails to make
the
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Required Contribution due by the applicable Contribution Date, then PBGC may
draw down on the L/C for the benefit of the USWA Plan in an amount equal to the
missed payment. If a Responsible Entity (or Entities) does make the applicable
portion of the Required Contribution on or before a Contribution Date, the
amount of the L/C will be reduced to the remaining unpaid amounts due on any
applicable Contribution Date.
Section Vi
REQUIRED CREDIT BALANCE
(a) At the end of each Plan Year of the USWA Plan beginning
with January 1, 2004 through the end of this Agreements the USWA Plan's Required
Credit Balance shall be the sum of:
(i) the USWA Plan's December 31, 2003 funding
standard account credit balance, plus
(ii) interest on (i) to the end of the Plan Year, at
the funding standard account rate.
(b)For each Plan Year beginning with January 1, 2004 through
the end of this Agreement, cash contributions must be made to the USWA Plan
during the Plan Year so that the USWA Plan's funding standard account credit
balance at the end of the Plan Year is at least equal to the Required Credit
Balance; provided, however, that nothing herein shall require any contribution
to be made to the extent any such contribution is not tax deductible in
accordance with the terms of Section IV(d) of this Agreement.
Section VII
JOINT AND SEVERAL LIABILITY
From the Elective Date until the consummation of the
Combination, Holdings, and each entity that is a member of the Holdings
Controlled Group on a particular Contribution Date is a Responsible Entity and
shall be jointly and severally liable for the Required
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Contribution due on such Contribution Date; provided, however, that (i) such
member shall not be so liable if it is acquired by Holdings or a member of the
Holdings Controlled Group subsequent to the consummation of the Combination and
all of its financing in excess of $500,000, whether equity or debt, is
non-recourse to, and not guaranteed or contributed by, Holdings or any other
member at the Holdings Controlled Group; and (ii) no stockholder of Holdings
will be liable for any portion of the Required Contribution. This provision does
not apply to required minimum funding contributions under Code Section 412 or to
controlled group liability under ER1SA upon termination of the USWA Plan.
Section VIII
EXPIRATION OF THE AGREEMENT
This Agreement will terminate upon the earliest to occur of
(a), (b), (c), or (d) below but in the case of (a), (b), or (c), no earlier than
September 15, 2003.
(a) The date on which Ultimate Parent obtains ratings on
its unsecured debt from Standard & Poor's and Xxxxx'x
of at least BBB- and Baa3, respectively;
(b) The date on which Ultimate Parent demonstrates to
PBGC that the USWA Plan has no amount of unfunded
benefit liabilities as determined under ERISA
Section 4001 (a)(18) as of the last day of the Plan
Year for any two consecutive Plan Years (the last
day of the Plan Year in the second consecutive year
being the measurement date);
(c) In the event there is no rating as provided in
section (a) above, the date on which the Ultimate
Parent obtains a private rating on a hypothetical
issue of unsecured debt at the rating level from S&P
and Xxxxx'x of at least BBB- and Baa3, respectively.
For purposes of obtaining such private ratings, the
amount of the hypothetical debt issue will equal at
least $100 million; and
(d) The date on which PBGC receives a Post Distribution
Certification for the USWA Plan pursuant to ERISA
Section 4041(b)(3)(B) and 29 C.F.R. Section 4041.29
indicating that the USWA Plan has been successfully
terminated in a standard termination under ER1SA
Section 4041(b).
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Section IX
INFORMATION REQUIREMENTS
The Ultimate Parent shall provide PBGC the following:
(a) Form 5500 when filed with the Internal Revenue
Service and Actuarial Valuation Report no later than
September 30 of the current Plan Year, for the USWA
Plan.
(b) By July 1 of each Plan Year beginning with 1999.
(i) a statement showing, as of May 31 of the
current Plan Year: (x) the total number of
ERBs offered and the total number of ERBs
accepted during the term of this Agreement
and (y) the market value of USWA Plan
assets; and
(ii) a statement and detailed supporting
schedules, certified by the USWA Plan's
enrolled actuary, showing the following
present values as of September 30 of the
current Plan Year:
(A) benefits of the USWA Plan that are
guaranteed by PBGC ("guaranteed
benefits");
(B) guaranteed benefits phased in under
ERISA since the prior September 30;
(C) benefits that would be guaranteed
benefits but are not yet phased in
under ERISA, and the phase-in dates
for such benefits;
(D) total benefit liabilities, as
defined in ERISA Section
400l(a)(16) of ERISA, of the USWA
Plan; and
(E) beginning in 2003, non-guaranteed
benefits payable in Priority
Category 3 pursuant to ERISA
Section 4044.
The present values will be calculated based
on participant data as of January 1 of the
current Plan Year (adjusted for any
significant events that have occurred or are
expected to occur) and PBGC plan termination
assumptions as of March 31 of the current
Plan Year.
(iii) The present values in Section IX(b) may be
calculated using approximation techniques
similar to those employed by the USWA Plan's
enrolled actuary in the estimation of
benefit liabilities used by the parties in
negotiating the Memorandum of Understanding
and outlined in a side letter appended
hereto as Attachment B. PBGC shall have the
right to receive actual calculations if the
approximation techniques described in
Attachment B have not been used.
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(c) Certification from the USWA Plan's enrolled actuary
that individual employee data is in sufficient detail
to calculate participant benefits in each Priority
Category at the current January 1 valuation date is
being maintained, and that such data will be supplied
to PBGC if requested.
(d) By December 31 of each Plan Year beginning with the
2003 Plan Year, a certified actuarial statement, plus
supporting calculations, that specifies the USWA
Plan's Required Credit Balance and the amount of the
contribution tor that Plan year that is necessary to
maintain the USWA Plan's Required Credit Balance.
(e) Written notice of failure to make any portion of the
Required Contribution within five (5) business days
after the applicable Contribution Date.
(f) Written notice thirty (30) days prior to any change
in any of the USWA Plan's actuarial assumptions or
methods for the purpose of the minimum funding
standard of Code Section 412, which change shall be
subject to PBGC's consent in advance, such consent
not to be unreasonably withheld.
(g) Written notice sixty (60) days prior to any USWA Plan
merger and/or any transfers of liabilities or assets
described in Code Section 414(1) to or from the USWA
Plan (other than mergers or transfers involving
amounts less than 3% of assets or liabilities in any
Plan Year).
(h) Written notice thirty (30) days prior to any
transaction that would have the effect of
transferring sponsorship of any of the USWA Plan
outside of the Ultimate Parent's Controlled Group.
(i) Written notice of any USWA Plan amendment on the
earlier of (a) 30 days prior to adoption or (b) at
the same time the proposed amendment is sent for
ratification to members of the USWA; provided,
however, that in the case of an amendment to the USWA
Plan that is required by law, written notice within
10 days after adoption of the amendment.
(j) Written notice within thirty (30) days after any
Permitted Closures.
(k) Written notice within thirty (30) days after delivery
or receipt of any notice of default under any debt
instrument of RES or its subsidiaries where the
outstanding balance of such debt instrument exceeds
$10 million.
(l) Written notice thirty (30) days prior to any sale,
transfer or other disposition of assets of any member
of the RES Controlled Group where such entity's
assets (i) represent 20% or more of the book value of
the assets of the RES Controlled Group on a
consolidated basis, or
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(ii) generated 20% or more of the consolidated
revenues or operating income of the RES Controlled
Group.
(m) Annual audited consolidated financial statements and
quarterly financial statements.
(n) A copy of any reportable event notice filed with PBGC
pursuant to ERISA Section 4043(b) to the Director of
PBGC's Corporate Finance and Negotiations Department
at the same time such notice is filed.
(o) A concurrent copy of the notice delivered to the USWA
as stated in Article XXXIV Section I of the 1998
Settlement Agreement (or any successor notice
obligation) regarding a Company decision to "close
permanently a plant or discontinue permanently a
department of a plant or substantial portion thereof"
other than a Permitted Closure.
Section X
PRESS RELEASE
Before either party to this Agreement issues a press release
concerning this Agreement or its terms, that party shall provide the other party
to the Agreement with a copy of that press release and 24 hours to comment on
it.
Section XI
REPRESENTATIONS AND WARRANTIES
(a) RES represents and warrants as to itself as follows:
(i) that it has full power and authority to
enter into this Agreement and that this
Agreement constitutes a legal, valid and
binding obligation, enforceable against it
in accordance with its terms; and
(ii) that the person executing this Agreement on
its behalf has been duly authorized and
empowered to execute and deliver this
Agreement on its behalf.
(b) PBGC represents and warrants as to itself as follows:
(i) that it has full power and authority to
enter into this Agreement and that this
Agreement constitutes a legal, valid and
binding obligation, enforceable against it
in accordance with its terms; and
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(ii) that the person executing this Agreement on
its behalf has been duly authorized and
empowered to execute and deliver this
Agreement on its behalf.
Section XII
MISCELLANEOUS
(a) Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall, except to the extent preempted by
federal law, be governed by and construed in accordance with the laws of the
State of Delaware without giving effect to its conflict of laws principles.
(b) Enforceability. This Agreement may be enforced only by the
parties hereto. This Agreement is solely for the benefit of the parties hereto
and is not intended to confer upon any person except the parties hereto any
rights or remedies hereunder.
(c) Entire Agreement; Amendments. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof, and merge and supersede all previous agreements, negotiations,
commitments, representations, writings and discussions between them concerning
such subject matter. This Agreement cannot be changed or terminated orally and
can be modified only upon the written consent of all the parties to be bound by
such modification.
(d) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of each
of the parties thereto. No party may, without the written consent of the parties
affected, assign any of its rights or obligations under this Agreement, directly
or indirectly, whether by operation of law or otherwise.
(e) Notices. All notices and other communications hereunder
shall be in writing and shall be delivered to the intended recipient at the
address so specified below or at
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such other address as shall be designated by any of them in a notice to each
other party set forth therein. Notices shall be effective three (3) days after
mailing by certified mail and when received if sent by any other means.
Addresses for Notices:
RES Holding Corporation:
Republic Technologies International, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxx, Xxxx 00000-0000
Attn: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
With a copy to:
The Blackstone Group
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Frudman
Fax: (000) 000-0000
PBGC
Pension Benefit Guaranty Corporation
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Director, Corporate Finance and
Negotiations Department
Fax: (000) 000-0000
With a copy to:
Pension Benefit Guaranty Corporation
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: General Counsel
Office of General Counsel
Fax: (000) 000-0000
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(f) Headings. The titles and headings of the sections of this
Agreement are for convenience of reference only and will not control or affect
in any way the scope, intent or interpretation of any of the provisions of this
Agreement.
(g) Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered as of the day and year first set forth above.
PENSION BENEFIT GUARANTY CORPORATION
By:
----------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Director, Corporate Finance and
Negotiations Department
RES HOLDING CORPORATION
By:
---------------------------------
Name:
Title:
