EXHIBIT 2.1
ORIGINAL EXECUTED COPY
---------------------------------------
AGREEMENT AND PLAN OF MERGER
---------------------------------------
Among
ISPAT INTERNATIONAL N.V.,
INLAND MERGER SUB, INC.,
INLAND STEEL INDUSTRIES, INC.
and
INLAND STEEL COMPANY
Dated as of May 27, 1998
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms 2
ARTICLE II
THE MERGER; CONVERSION OF SECURITIES
2.01. The Merger 12
2.02. Closing 12
2.03. Effective Time 12
2.04. Effect of the Merger 12
2.05. Certificate of Incorporation; Bylaws; Directors and Officers
of Surviving Corporation 13
2.06. Conversion of Securities 13
2.07. No Further Rights in ISC Capital Stock 14
2.08. Payment of Intercompany Indebtedness 14
2.09. Closing Deliveries by ISI 15
2.10. Closing Deliveries by Ispat 15
2.11. Adjustment of Common Stock Merger Consideration 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ISI
3.01. Organization, Authority and Qualification of ISI 17
3.02. Organization, Authority and Qualification of ISC 18
3.03. Capital Stock of ISC; Ownership of the Shares 18
3.04. Subsidiaries and Ventures 19
3.05. Corporate Books and Records 20
3.06. No Conflict 20
3.07. Governmental Consents and Approvals 21
3.08. SEC Filings; Financial Information 21
3.09. No Undisclosed Liabilities 22
3.10. Inventories 22
3.11. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions 22
3.12. Litigation 26
3.13. Compliance with Laws 26
3.14. Environmental Matters 27
Section Page
3.15. Material Contracts 28
3.16. Intellectual Property 30
3.17. Real Property 30
3.18. Assets 31
3.19. Employee Benefit Matters 32
3.20. Labor Matters 35
3.21. Key Employees 36
3.22. Taxes 36
3.23. Insurance 38
3.24. Fairness Opinion 39
3.25. Brokers 39
3.26. Disclaimer of ISI 40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ISPAT
4.01. Organization and Authority of Ispat 40
4.02. Organization and Authority of Merger Sub 40
4.03. No Conflict 41
4.04. Governmental Consents and Approvals 41
4.05. Financing 41
4.06. Brokers 41
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing 42
5.02. Access to Information 42
5.03. Confidentiality 43
5.04. Regulatory and Other Authorizations; Notices and Consents 44
5.05. Notice of Developments 45
5.06. No Solicitation or Negotiation 45
5.07. Use of Intellectual Property 46
5.08. Non-Competition 47
5.09. Release of Obligations 48
5.10. Certain Obligations 48
5.11. ISC Directors and Officers 49
5.12. Headquarters 49
5.13. Further Action 49
ARTICLE VI
Section Page
EMPLOYEE MATTERS
6.01. Employment of Certain ISI Employees; Assumption of Certain
Agreements 50
6.02. Pension Plan 50
6.03. Thrift Plan 51
6.04. Other Employee Plans 51
6.05. Continuation of Current Bargaining Agreements, Employment
and Benefits 52
6.06. No Third Party Beneficiaries 53
ARTICLE VII
TAX MATTERS
7.01. Indemnity 53
7.02. Returns and Payments 54
7.03. Refunds 55
7.04. Contests 55
7.05. Time of Payment 57
7.06. Cooperation and Exchange of Information 57
7.07. Conveyance Taxes 57
7.08. Section 338(h)(10) Election 58
7.09. Miscellaneous 59
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligations of ISI and ISC 60
8.02. Conditions to Obligations of Ispat and Merger Sub 61
ARTICLE IX
INDEMNIFICATION
9.01. Survival of Representations and Warranties 64
9.02. Indemnification 65
9.03. Limits on Indemnification 66
9.04. Tax Matters 67
9.05. Environmental Matters 67
Section Page
ARTICLE X
TERMINATION AND WAIVER
10.01. Termination 68
10.02. Effect of Termination 69
10.03. Waiver 69
ARTICLE XI
GENERAL PROVISIONS
11.01. Expenses 69
11.02. Notices 70
11.03. Public Announcements 70
11.04. Headings 70
11.05. Severability 70
11.06. Entire Agreement 70
11.07. Assignment 70
11.08. No Third Party Beneficiaries 70
11.09. Amendment 70
11.10. Governing Law 70
11.11. Counterparts 71
11.12. Specific Performance 71
11.13. Other Actions 71
EXHIBIT 8.01(h)(i) - Form of Opinion of De Brauw Blackstone Westbroek
EXHIBIT 8.01(h)(ii) - Form of Opinion of Shearman & Sterling
EXHIBIT 8.02(h)(i) - Form of Opinion of ISI's General Counsel
EXHIBIT 8.02(h)(ii) - Form of Opinion of Xxxxx, Xxxxx & Xxxxx
AGREEMENT AND PLAN OF MERGER, dated as of May 27, 1998, among ISPAT
INTERNATIONAL N.V., a company organized under the laws of The Netherlands
("Ispat"), INLAND MERGER SUB, INC., a Delaware corporation and an indirect
wholly owned subsidiary of Ispat ("Merger Sub"), INLAND STEEL INDUSTRIES, INC.,
a Delaware corporation ("ISI"), and INLAND STEEL COMPANY, a Delaware corporation
and a wholly owned subsidiary of ISI ("ISC").
W I T N E S S E T H:
WHEREAS, ISI owns all the issued and outstanding shares of (i) common
stock, par value $1.00 per share, of ISC ("ISC Common Stock"), (ii) Series A
Preferred Stock, par value $1.00 per share, of ISC ("Series A Preferred Stock"),
(iii) Series B Preferred Stock, par value $1.00 per share, of ISC ("Series B
Preferred Stock"), and (iv) Series C Preferred Stock, par value $1.00 per share,
of ISC ("Series C Preferred Stock" and, together with Series A Preferred Stock
and the Series B Preferred Stock, the "ISC Preferred Stock"); and
WHEREAS, the boards of directors of Ispat and ISI have determined that
it is consistent with and in furtherance of their respective long-term business
strategies and fair to and in the best interests of their respective companies
and stockholders for Ispat to acquire ISC pursuant to the terms and conditions
set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, the board of directors of
each of Ispat, Merger Sub, ISI and ISC has approved and declared advisable the
merger of Merger Sub with and into ISC (the "Merger") and the stockholders of
Merger Sub and ISC have voted to approve and adopt this Agreement, upon the
terms and subject to the conditions of this Agreement and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, for United States federal income tax purposes, it is intended
that the parties to this Agreement will elect to treat the Merger as a deemed
asset sale under Section 338(h)(10) of the United States Internal Revenue Code
of 1986, as amended (the "Code"), and the Treasury regulations thereunder (the
"Regulations");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, Ispat, Merger Sub, ISI and ISC
hereby agree as follows:
2
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquired ISI Business" has the meaning specified in Section 5.08(a).
"Acquisition Proposal" has the meaning specified in Section 5.06(c).
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Agreement and Plan of
Merger, dated as of May 27, 1998, among Ispat, Merger Sub, ISI and ISC
(including the Exhibits hereto and the Disclosure Schedule) and all amendments
hereto made in accordance with the provisions of Section 11.09.
"Allocation" has the meaning specified in Section 7.08(b).
"Assets" has the meaning specified in Section 3.18.
"Book Value" means the excess of total consolidated assets over total
consolidated liabilities of ISC and the Subsidiaries, as determined in
accordance with U.S. GAAP and as shown on the Reference Balance Sheet or the
Closing Balance Sheet, as the case may be.
"Business" means the business of manufacturing, processing, selling,
marketing and distributing steel products and all other business which as of the
date hereof is being conducted by ISC, the Subsidiaries and the Ventures.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City of
New York.
"Business Plan" means the 1998 business plan of ISC, a copy of which
is set forth in Section 3.11(viii) of the Disclosure Schedule.
"Certificate of Merger" has the meaning specified in Section 2.03.
3
"Closing" has the meaning specified in Section 2.02.
"Closing Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto, if any) of ISC and the
Subsidiaries, to be prepared pursuant to Section 2.11(a) and to be dated as of
the Closing Date.
"Closing Date" means the date of the Closing.
"Code" has the meaning specified in the recitals to this Agreement.
"Collective Bargaining Agreements" has the meaning specified in
Section 6.05(a).
"Common Stock Merger Consideration" has the meaning specified in
Section 2.06(a).
"Competing ISI Operations" has the meaning specified in Section
5.08(a).
"Confidentiality Agreement" means the Confidentiality and Standstill
Agreement dated December 19, 1997 between ISI and Ispat.
"control" (including the terms "controlling", "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Designated Amount" means $100,000.
"Designated Rate" means, as of a particular date, a rate of interest
per annum equal to the London Interbank Offered Rate for one-month Eurodollar
deposits as published in the final New York edition of the Wall Street Journal
on the next succeeding Business Day.
"Designated Welfare Plans" has the meaning specified in Section
6.04(a).
"DGCL" has the meaning specified in the recitals to this Agreement.
"Disclosure Schedule" means the Disclosure Schedule, dated as of the
date hereof, delivered by ISI to Ispat.
"$" means United States dollars.
4
"Effective Time" has the meaning specified in Section 2.03.
"Elections" has the meaning specified in Section 7.08(c).
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Environment" means surface waters, groundwaters, surface water
sediment, soil, subsurface strata and ambient air.
"Environmental Claims" means any and all actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation, notices of
liability or potential liability, investigations, proceedings, consent orders or
consent agreements relating in any way to any Environmental Law, any
Environmental Permit or any Hazardous Material or arising from any alleged
violation of Environmental Laws.
"Environmental Laws" means any Law in effect as of the Closing Date,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the Environment or natural resources, or to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required to operate the Business or the
Real Property under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) petroleum and petroleum products, by-
products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated
5
biphenyls, and (b) any other chemicals, materials or substances regulated as
toxic or hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business consistent with past practice, (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property),
(e) all obligations of such Person as lessee under leases that have been or
should be, in accordance with U.S. GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all obligations of such Person to purchase,
redeem, retire, defease or otherwise acquire for value any capital stock of such
Person or any warrants, rights or options to acquire such capital stock, valued,
in the case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (h) all
Indebtedness of others referred to in clauses (a) through (f) above guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (i) all
Indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02(c).
"Indemnifying Party" has the meaning specified in Section 9.02(c).
"Independent Accounting Firm" has the meaning specified in
Section 2.11(b)(ii).
6
"I/N Kote" means I/N Kote, an Indiana general partnership in which a
Subsidiary owns a 50% partnership interest.
"I/N Tek" means I/N Tek, an Indiana general partnership in which a
Subsidiary owns a 60% partnership interest.
"Intellectual Property" means (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, (b) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (c) patents, patent registrations and patent applications
(including all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations) and all rights therein provided by international
treaties or conventions and all improvements to the inventions disclosed in each
such registration, patent or application, (d) trademarks, service marks, trade
dress, logos, trade names and corporate names, whether or not registered,
including all common law rights, and registrations and applications for
registration thereof, including, but not limited to, all marks registered in the
United States Patent and Trademark Office and throughout the world and all
rights therein provided by international treaties or conventions, (e) copyrights
(registered or otherwise) and registrations and applications for registration
thereof, and all rights therein provided by international treaties or
conventions, computer software, including, without limitation, source code,
operating systems and specifications, data, data bases, files, documentation and
other materials related thereto, data and documentation, (f) trade secrets and
confidential, technical and business information (including ideas, formulas,
compositions, inventions, and conceptions of inventions whether patentable or
unpatentable and whether or not reduced to practice), (g) whether or not
confidential, technology (including know-how and show-how), manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (h) copies and tangible embodiments of all the foregoing, in
whatever form or medium, (i) all rights to obtain and rights to apply for
patents, and to register trademarks and copyrights, and (j) all rights to xxx or
recover and retain damages and costs and attorneys' fees for present and past
infringement of any of the foregoing.
"Intercompany Indebtedness" has the meaning specified in Section
2.08(a).
"Inventories" means all raw materials, work in progress and finished
goods related to the Business maintained, held or stored by or for ISC, any
Subsidiary or any Venture at the Effective Time and any prepaid deposits for any
of the same.
"IRS" means the Internal Revenue Service of the United States.
7
"ISC" has the meaning specified in the preamble to this Agreement.
"ISC Capital Stock" means the ISC Common Stock and ISC Preferred
Stock.
"ISC Common Stock" has the meaning specified in the recitals to this
Agreement.
"ISC Employees" means (i) persons employed by ISC, the Subsidiaries
and the Ventures as of the Effective Time, including ISI Transferred Employees,
(ii) former employees of ISC, the Subsidiaries and the Ventures, and (iii) a
mutually agreed-upon listing of current and former employees of ISI, and, in
each of the foregoing cases, the beneficiaries and alternate payees for the
respective employees or former employees.
"ISC Plans" has the meaning specified in Section 6.04(a).
"ISC Preferred Stock" has the meaning specified in the recitals to
this Agreement.
"ISC SEC Reports" has the meaning specified in Section 3.08(a).
"ISI" has the meaning specified in the preamble to this Agreement.
"ISI Employees" means employees and former employees of ISI, and
beneficiaries and alternate payees of such persons, other than those persons who
constitute ISC Employees.
"ISI Indemnified Party" has the meaning specified in Section 9.02(b).
"ISI Monetization Transaction" has the meaning specified in Section
5.10.
"ISI Pension Plan" means the Inland Steel Industries Pension Plan.
"ISI Pension Trust" means the Inland Steel Industries Pension Trust.
"ISI Thrift Plan" means the Inland Steel Industries Thrift Plan.
"ISI Non-Transferred Employee Defined Benefit Plan" means a defined
benefit plan (as defined in Section 3(35) of ERISA) maintained or established by
ISI or a subsidiary of ISI (other than a Subsidiary).
"ISI Transferred Employees" has the meaning specified in Section
6.01(a).
"ISI's Accountants" means Price Waterhouse LLP, independent
accountants of ISI and ISC.
8
"Ispat" has the meaning specified in the preamble to this Agreement.
"Ispat Indemnified Party" has the meaning specified in
Section 9.02(a).
"Ispat's Accountants" means Deloitte & Touche LLP, independent
accountants of Ispat.
"Issued Shares" has the meaning specified in Section 3.03.
"Kote Agreements" has the meaning specified in Section 3.15(a)(ix).
"Labor Organizations" has the meaning specified in Section 6.05(a).
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order or other requirement or rule of law.
"Leased Real Property" means the real property leased by ISC, any
Subsidiary or any Venture (or by ISI on behalf of ISC, any Subsidiary or any
Venture), as tenant (including, without limitation, the office space at 00 Xxxx
Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx), together with, to the extent leased by ISC,
any Subsidiary or any Venture, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of ISC, any Subsidiary or any Venture
attached or appurtenant thereto, and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Letter Agreement" means the letter agreement, dated March 16, 1998,
between ISI and Ispat.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"Loss" has the meaning specified in Section 9.02(a).
"Material Adverse Effect" means any circumstance, change in or effect
on ISC, any Subsidiary or any Venture that, individually or in the aggregate, is
or would reasonably be expected to be materially adverse to the business, Assets
and Liabilities, results of operations or financial condition of ISC, the
Subsidiaries and the Ventures, taken as a whole, except for circumstances,
changes or effects affecting the industry of manufacturing, processing, selling,
marketing and distributing steel generally.
9
"Material Contracts" has the meaning specified in Section 3.15(a).
"Merger" has the meaning specified in the recitals to this Agreement.
"Merger Consideration" means, collectively, the Common Stock Merger
Consideration and the Preferred Stock Merger Consideration.
"Merger Sub" has the meaning specified in the preamble to this
Agreement.
"Merger Sub Common Stock" has the meaning specified in Section
2.06(d).
"Multiemployer Plan" has the meaning specified in Section 3(37) of
ERISA.
"Multiple Employer Plan" has the meaning specified in Section 3.19(b).
"New Defined Contribution Plan" has the meaning specified in Section
6.03.
"New Pension Trust" has the meaning specified in Section 6.02.
"1993 Consent Decree" means the consent decree entered June 10, 1993,
by the U.S. District Court for the Northern District of Indiana in Civil Action
No. H 90-0328 between the United States of America (on behalf of the U.S.
Environmental Protection Agency) and ISC.
"Owned Real Property" means the real property owned by ISC, any
Subsidiary or any Venture, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of ISC, any Subsidiary or any
Venture attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.
"PCI Associates" means PCI Associates, an Indiana general partnership
in which a Subsidiary owns a 50% partnership interest.
"Permitted Encumbrances" means (a) liens for taxes, assessments and
governmental charges or levies not yet due and payable not in excess of the
amount accrued therefor on the Reference Balance Sheet and which would not have
a Material Adverse Effect; (b) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations
that (i) are not overdue for a period of more than 90 days and (ii) which would
not have a Material Adverse Effect; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to secure
public or statutory obligations; (d) survey exceptions, easements and other
customary encumbrances on title to real property that (i) were not incurred in
connection with any Indebtedness, (ii) do not render title to the property
10
encumbered thereby unmarketable and (iii) do not, individually or in the
aggregate, materially adversely affect the value of such property or the use of
such property for its current and currently anticipated purposes; and (e) the
existing Encumbrances set forth in Section 3.18 of the Disclosure Schedule.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Plans" has the meaning specified in Section 3.19(a).
"Preferred Stock Merger Consideration" has the meaning specified in
Section 2.06(b).
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Receivables" means any and all accounts receivable, notes and other
amounts receivable by ISC, any Subsidiary or any Venture from third parties,
including, without limitation, customers, arising from the conduct of the
Business or otherwise before the Effective Time, whether or not in the ordinary
course, together with all unpaid financing charges accrued thereon.
"Reference Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of ISC, dated as of December
31, 1997, a copy of which is included in the Annual Report on Form 10-K of ISC
for the year ended December 31, 1997.
"Reference Balance Sheet Date" means December 31, 1997.
"Regulations" has the meaning specified in the recitals to this
Agreement.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
Environment.
"Remedial Action" means all action to (i) clean up, remove, treat or
handle in any other way Hazardous Materials in the Environment; (ii) prevent the
Release of Hazardous Materials so that they do not migrate, endanger or threaten
to endanger public health or the Environment; or (iii) perform remedial
investigations, feasibility studies, corrective actions, closures and
postremedial or postclosure studies, investigations, operations, maintenance and
monitoring on, about or in any Real Property.
11
"Reportable Event" means a reportable event within the meaning of
Section 4043 of ERISA for which the 30 day notice requirements have not been
waived.
"Restricted Period" has the meaning specified in Section 5.08(a).
"Returns" has the meaning specified in Section 7.02(a).
"SEC" means the United States Securities and Exchange Commission.
"Section 338(h)(10) Election" has the meaning specified in
Section 7.08(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" has the meaning specified in the recitals
to this Agreement.
"Series B Preferred Stock" has the meaning specified in the recitals
to this Agreement.
"Series C Preferred Stock" has the meaning specified in the recitals
to this Agreement.
"Subsidiaries" means any and all corporations, partnerships, limited
liability companies, joint ventures, associations and other entities controlled
by ISC directly or indirectly through one or more intermediaries; provided,
however, that Subsidiaries does not include the Ventures.
"Surviving Corporation" has the meaning specified in Section 2.01.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, fines, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs duties, tariffs, and
similar charges.
"Tek Agreements" has the meaning specified in Section 3.15(a)(ix).
"Termination Fee" has the meaning specified in Section 10.02(b).
12
"Third Party Claims" has the meaning specified in Section 9.02(c).
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time.
"USWA" means the United Steelworkers of America.
"Ventures" means, collectively, I/N Tek, I/N Kote and PCI Associates.
"WARN" has the meaning specified in Section 3.19(g).
ARTICLE II
THE MERGER; CONVERSION OF SECURITIES
SECTION 2.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, at the Effective
Time, Merger Sub shall be merged with and into ISC. As a result of the Merger,
the separate corporate existence of Merger Sub shall cease and ISC shall
continue as the surviving corporation of the Merger as an indirect wholly owned
subsidiary of Ispat (the "Surviving Corporation").
SECTION 2.02. Closing. Unless this Agreement shall have been
terminated and the Merger herein contemplated shall have been abandoned pursuant
to Section 10.01 and subject to the satisfaction or waiver of the conditions set
forth in Article VIII, the consummation of the Merger shall take place at a
closing (the "Closing") to be held on the later of (a) the third business day
after satisfaction or waiver of the conditions set forth in Article VIII and (b)
June 30, 1998, at the offices of Xxxxx, Xxxxx & Xxxxx, 000 Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx, unless another date, time or place is agreed to by Ispat and
ISI.
SECTION 2.03. Effective Time. At the Closing, the parties shall cause
the Merger to be consummated by filing a certificate of merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware, in such form
as required by, and executed in accordance with the relevant provisions of, the
DGCL (the date and time of such filing, or such later date or time as set forth
therein, being the "Effective Time").
SECTION 2.04. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of ISC and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of ISC and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
13
SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation. At the Effective Time:
(a) the Certificate of Incorporation and the Bylaws of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation and the Bylaws of the Surviving Corporation (except that
Article I of the Certificate of Incorporation shall be amended as of the
Effective Time to read as follows: "The name of the Corporation is Inland
Steel Company.");
(b) the directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation from and
after the Effective Time, in each case until their successors are elected
or appointed and qualified or until their resignation or removal; and
(c) the officers of ISC immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation from and after the
Effective Time, in each case until their successors are elected or
appointed and qualified or until their resignation or removal.
SECTION 2.06. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, ISC or
the holders of any of the capital stock of Merger Sub or ISC:
(a) All shares of ISC Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive an
aggregate of $650,000,000 in cash (the "Common Stock Merger
Consideration"), subject to adjustment as provided in Section 2.11. At the
Effective Time, all such shares of ISC Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously representing any such shares
shall thereafter represent only the right to receive a pro rata share of
the Common Stock Merger Consideration.
(b) All shares of ISC Preferred Stock issued and outstanding
immediately prior to the Effective Time shall be converted as follows:
(i) all issued and outstanding shares of Series A Preferred Stock
shall be converted into the right to receive an aggregate of
$13,200,000, plus unpaid dividends declared thereon, in cash;
(ii) all issued and outstanding shares of Series B Preferred Stock
shall be converted into the right to receive an aggregate of
$75,000,000, plus unpaid dividends declared thereon, in cash;
and
14
(iii) all issued and outstanding shares of Series C Preferred Stock
shall be converted into the right to receive an aggregate of
$150,000,000, plus unpaid dividends declared thereon, in cash.
The aggregate amount of consideration for all shares of ISC Preferred Stock
under the foregoing clauses (i), (ii) and (iii) are referred to herein
collectively as the "Preferred Stock Merger Consideration". At the
Effective Time, all such shares of ISC Preferred Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously representing any such shares
shall thereafter represent only the right to receive a pro rata share of
the Preferred Stock Merger Consideration allocated to the applicable series
of ISC Preferred Stock.
(c) Each share of ISC Capital Stock, if any, held in the treasury of
ISC immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
(d) Each share of common stock, par value $0.01 per share, of Merger
Sub ("Merger Sub Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one newly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
SECTION 2.07. No Further Rights in ISC Capital Stock. The Merger
Consideration issued upon conversion of the shares of ISC Capital Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of ISC Capital Stock, and
from and after the Effective Time, the holders of certificates representing
shares of ISC Capital Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of ISC Capital Stock
except as otherwise provided herein or by the DGCL. At the Effective Time, the
stock transfer books of ISC shall be closed and there shall be no further
registration of transfers of shares of ISC Capital Stock thereafter on the
records of ISC.
SECTION 2.08. Payment of Intercompany Indebtedness; Transfer of
Inventories.
(a) Upon the terms and subject to the conditions of this Agreement, at
the Closing and immediately prior to the Effective Time, Ispat or its designee
shall pay or cause to be paid to ISI as additional consideration the net amount
of intercompany indebtedness, accrued interest, intercompany receivables and
payables and service charges (the "Intercompany Indebtedness") owed by ISC to
ISI as at the Closing Date and ISI shall cancel the Intercompany Indebtedness at
such time.
(b) Upon the terms and subject to the conditions of this Agreement, at
the Closing and immediately prior to the Effective Time, if Ispat so elects by
written notice no later than the earlier of (i) 2 days after all of the
conditions set forth in Article VIII have been satisfied
15
or waived and (ii) June 30, 1998, ISC shall sell, assign, transfer, convey and
deliver to a newly formed wholly owned subsidiary of Ispat, and such subsidiary
shall purchase from ISC, all Inventories then owned by ISC. The aggregate
purchase price for such Inventories shall be the fair market value of such
Inventories as at the Closing Date. Such transfer shall have no effect on any
Merger Consideration adjustment. Ispat shall indemnify ISI for any costs or
additional tax liabilities that are incurred as a result of such transfer under
an indemnification agreement in form and substance satisfactory to ISI in its
sole discretion.
SECTION 2.09. Closing Deliveries by ISI. At the Closing, ISI shall
deliver or cause to be delivered to Ispat:
(a) a receipt for the Merger Consideration and the net amount of
Intercompany Indebtedness; and
(b) the opinions, certificates and other documents required to be
delivered pursuant to Section 8.02.
SECTION 2.10. Closing Deliveries by Ispat. At the Closing, Ispat
shall deliver to ISI:
(a) the Merger Consideration and the net amount of Intercompany
Indebtedness by wire transfer in immediately available funds to an account
or accounts designated by ISI in a written notice to Ispat not less than
two Business Days prior to the Closing Date; and
(b) the opinions, certificates and other documents required to be
delivered pursuant to Section 8.01.
SECTION 2.11. Adjustment of Common Stock Merger Consideration. The
Common Stock Merger Consideration shall be subject to adjustment after the
Closing as specified in this Section 2.11:
(a) Closing Balance Sheet. As promptly as practicable, but in any
event within ninety calendar days following the Effective Time, ISI shall
deliver to Ispat the Closing Balance Sheet, which shall fairly present the
consolidated financial position of ISC at the Effective Time in conformity with
U.S. GAAP applied on a basis consistent with the preparation of the Reference
Balance Sheet (except that it shall not reflect any Tax refund relating to ISC
or any Subsidiary that is receivable at the Effective Time), together with a
report of ISI's Accountants stating that the Closing Balance Sheet has been
prepared in conformity with U.S. GAAP.
16
(b) Disputes. (i) Subject to clause (ii) of this Section 2.11 (b),
the Closing Balance Sheet delivered by ISI to Ispat shall be deemed to be
and shall be final, binding and conclusive on the parties hereto.
(ii) Upon receipt of the Closing Balance Sheet, Ispat and Ispat's
Accountants shall be granted full access to, and the right to make copies
of, the books and records and work papers used by ISI and ISI's Accountants
in preparing the Closing Balance Sheet. Ispat agrees that, following the
Closing, it shall (i) provide cooperation and assistance to ISI to the
extent reasonably requested in the preparation of the Closing Balance Sheet
and (ii) not take any actions with respect to ISC's accounting books,
records, policies and procedures that would obstruct or prevent the
preparation of the Closing Balance Sheet. Ispat may dispute any amounts
reflected on the Closing Balance Sheet to the extent the net effect of such
disputed amounts in the aggregate would affect the Book Value reflected on
the Closing Balance Sheet by more than the Designated Amount, but only on
the basis that the amounts reflected on the Closing Balance Sheet were not
arrived at in accordance with U.S. GAAP applied on a basis consistent with
the preparation of the Reference Balance Sheet; provided, however, that
Ispat shall have notified ISI in writing of each disputed item, specifying
the amount thereof in dispute and setting forth, in reasonable detail, the
basis for such dispute, within ten Business Days of ISI's delivery of the
Closing Balance Sheet to Ispat. In the event of such a dispute, ISI and
Ispat shall attempt to reconcile their differences, and any resolution by
them as to any disputed amounts shall be final, binding and conclusive on
the parties hereto. If any such resolution by Ispat and ISI leaves in
dispute amounts the net effect of which in the aggregate would not affect
the Book Value reflected on the Closing Balance Sheet by more than the
Designated Amount, all such amounts remaining in dispute shall then be
deemed to have been resolved in favor of the Closing Balance Sheet
(adjusted, as appropriate, for any such resolution of disputed amounts
under the immediately preceding sentence) delivered by ISI to Ispat. If ISI
and Ispat are unable to reach a resolution with such effect within twenty
Business Days after receipt by ISI of Ispat's written notice of dispute,
ISI and Ispat shall submit the items remaining in dispute for resolution to
an independent accounting firm of international reputation mutually
acceptable to Ispat and ISI (such accounting firm being referred to herein
as the "Independent Accounting Firm"), which shall, within thirty Business
Days after such submission, determine and report to Ispat and ISI upon such
remaining disputed items, and such report shall be final, binding and
conclusive on ISI and Ispat. The fees and disbursements of the Independent
Accounting Firm shall be allocated between ISI and Ispat in the same
proportion that the aggregate amount of such remaining disputed items so
submitted to the Independent Accounting Firm that is unsuccessfully
disputed by each such party (as finally determined by the Independent
Accounting Firm) bears to the total amount of such remaining disputed items
so submitted.
(iii) In acting under this Agreement, the Independent Accounting Firm
shall be entitled to the privileges and immunities of arbitrators.
17
(iv) No adjustment to the Common Stock Merger Consideration pursuant
to Section 2.11 (c) shall be made with respect to amounts disputed by Ispat
pursuant to this Section 2.11 (b), unless the net effect of the amounts
successfully disputed by Ispat in the aggregate is to decrease the Book
Value reflected on the Closing Balance Sheet by at least the Designated
Amount.
(c) Common Stock Merger Consideration Adjustment. The Closing Balance
Sheet shall be deemed final for the purposes of this Section 2.11 upon the
earlier of (A)the failure of Ispat to notify ISI of a dispute within ten
Business Days of ISI's delivery of the Closing Balance Sheet to Ispat and (B)
the resolution of all disputes pursuant to Section 2.11(b)(ii). Subject to the
limitation set forth in Section 2.11 (b) (iv), within three Business Days of the
Closing Balance Sheet being deemed final, a Common Stock Merger Consideration
adjustment shall be made as follows:
(i) in the event that the Book Value reflected on the Reference
Balance Sheet (which the parties agree is $239,700,000) exceeds the Book
Value reflected on the final Closing Balance Sheet by at least the
Designated Amount, then the Common Stock Merger Consideration shall be
adjusted downward in an amount equal to such excess and ISI shall, within
three Business Days after such determination, pay to Ispat, by wire
transfer in immediately available funds, an amount equal to the amount of
such downward adjustment, plus interest thereon from the Closing Date to
the date of payment thereof at the Designated Rate as of the Closing Date;
and
(ii) in the event that the Book Value reflected on the final Closing
Balance Sheet exceeds the Book Value reflected on the Reference Balance
Sheet by at least the Designated Amount, then the Common Stock Merger
Consideration shall be adjusted upward in an amount equal to such excess
and Ispat shall, within three Business Days after such determination, pay
to ISI, by wire transfer in immediately available funds, an amount equal to
the amount of such upward adjustment, plus interest thereon from the
Closing Date to the date of payment thereof at the Designated Rate as of
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ISI
As an inducement to Ispat and Merger Sub to enter into this Agreement,
ISI hereby represents and warrants to Ispat and Merger Sub as follows:
SECTION 3.01. Organization, Authority and Qualification of ISI. ISI
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement, to
18
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. ISI is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licensing or qualification
necessary, except to the extent that the failure to be so licensed or qualified
would not adversely affect (i)the ability of ISI to carry out its obligations
under, and to consummate the transactions contemplated by, this Agreement and
(ii)the ability of ISC, the Subsidiaries and the Ventures to conduct the
Business. The execution and delivery of this Agreement by ISI, the performance
by ISI of its obligations hereunder and the consummation by ISI of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of ISI and no action by its stockholders is required in
connection therewith. This Agreement has been duly executed and delivered by
ISI, and (assuming due authorization, execution and delivery by Ispat and Merger
Sub) this Agreement constitutes a legal, valid and binding obligation of ISI
enforceable against ISI in accordance with its terms.
SECTION 3.02. Organization, Authority and Qualification of ISC. ISC
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby and to own, operate or
lease the properties and assets now owned, operated or leased by it and to carry
on the Business as it has been and is currently conducted. ISC is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary except to the extent that the
failure to be so licensed or qualified would not adversely affect the ability of
ISC to conduct its business; and all such jurisdictions are set forth in
Section 3.02 of the Disclosure Schedule. True and correct copies of the
Certificate of Incorporation and By-laws of ISC, each as in effect on the date
hereof, have been delivered by ISI to Ispat. The execution and delivery of this
Agreement by ISC, the performance by ISC of its obligations hereunder and the
consummation by ISC of the transactions contemplated hereby have been duly
authorized by all requisite action on the part of ISC and its sole stockholder.
This Agreement has been duly executed and delivered by ISC, and (assuming due
authorization, execution and delivery by Ispat and Merger Sub) this Agreement
constitutes a legal, valid and binding obligation of ISC enforceable against ISC
in accordance with its terms.
SECTION 3.03. Capital Stock of ISC; Ownership of the Shares. (a) The
authorized capital stock of ISC consists of 2,000 shares of ISC Common Stock and
500 shares of ISC Preferred Stock. As of the date hereof, (i) 980 shares of
Common Stock, (ii) 10 shares of Series A Preferred Stock, (iii) 50 shares of
Series B Preferred Stock and (iv) 50 shares of Series C Preferred Stock (the
shares described in clauses (i), (ii), (iii) and (iv) being referred to herein
as the "Issued Shares") are issued and outstanding, all of which are validly
issued, fully paid and nonassessable. None of the Issued Shares were issued in
violation of any preemptive rights. There are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to the ISC Capital Stock or obligating ISI or ISC to
19
issue or sell any shares of capital stock of, or any other interest in, ISC
other than under this Agreement. There are no outstanding contractual
obligations of ISC to repurchase, redeem or otherwise acquire any shares of ISC
Capital Stock or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other Person, except as set
forth in Section 3.03 (a) of the Disclosure Schedule. The Issued Shares
constitute all the issued and outstanding capital stock of ISC and are owned of
record and beneficially solely by ISI free and clear of all Encumbrances. There
are no voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the
Issued Shares.
(b) The stock register of ISC accurately records (i) the name and
address of each Person owning shares of ISC Capital Stock and (ii) the
certificate number of each certificate evidencing Issued Shares, the number of
shares evidenced by each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation.
SECTION 3.04. Subsidiaries and Ventures. (a) Section 3.04(a) of the
Disclosure Schedule sets forth a true and complete list of all Subsidiaries and
Ventures, listing for each Subsidiary and Venture its name, type of entity, the
jurisdiction and date of its incorporation or organization, its authorized
capital stock, partnership capital or equivalent, the number and type of its
issued and outstanding shares of capital stock, partnership interests or similar
ownership interests and the current ownership of such shares, partnership
interests or similar ownership interests.
(b) Other than the Subsidiaries and the Ventures and except as set
forth in Section 3.04(b) of the Disclosure Schedule, there are no other
corporations, partnerships, limited liability companies, joint ventures,
associations or other entities in which ISC owns, of record or beneficially, any
direct or indirect equity or other interest or any right (contingent or
otherwise) to acquire the same. Other than the Ventures and except as set forth
in Section 3.04(b) of the Disclosure Schedule, ISC is not a member of (nor is
any part of the Business conducted through) any partnership. Except as set forth
in Section 3.04(b) of the Disclosure Schedule, ISC is not a participant in any
joint venture or similar arrangement other than the Ventures.
(c) Each Subsidiary (i) is duly organized and validly existing under
the laws of its jurisdiction of incorporation or organization, (ii) has all
necessary corporate power and authority to own, operate or lease the properties
and assets owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such Subsidiary and
(iii) is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the operation
of its business makes such licensing or qualification necessary or desirable,
except for such failures to be so licensed or qualified which, when taken
together with all other such failures, would not have a Material Adverse Effect
or prevent or materially delay the consummation by ISI and ISC of the
transactions contemplated hereby.
20
(d) All the outstanding shares of capital stock of each Subsidiary
that is a corporation are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned by ISC, whether directly or indirectly, free and
clear of all Encumbrances. Except as set forth in Section 3.04(d) of the
Disclosure Schedule, there are no options, warrants, convertible securities, or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of any Subsidiary or obligating ISI, ISC or any Subsidiary
to issue or sell any shares of capital stock of, or any other interest in, any
Subsidiary. Except as set forth in Section 3.04(d) of the Disclosure Schedule,
no Subsidiary is a member of (nor is any part of its business conducted through)
any partnership nor is any Subsidiary a participant in any joint venture or
similar arrangement. Except as set forth in Section 3.04(d) of the Disclosure
Schedule, there are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer of
any shares of capital stock of or any other interests in any Subsidiary.
(e) True and complete copies of the certificate of incorporation and
by-laws (or similar organizational documents), in each case as in effect on the
date hereof, of each Subsidiary have been delivered by ISI to Ispat.
(f) The stock register of each Subsidiary that is a corporation
accurately records (i) the name and address of each Person owning shares of
capital stock of such Subsidiary and (ii) the certificate number of each
certificate evidencing shares of capital stock issued by such Subsidiary, the
number of shares evidenced by each such certificate, the date of issuance
thereof and, in the case of cancellation, the date of cancellation.
(g) Each Venture (i) is duly organized and validly existing under the
laws of its jurisdiction of organization and (ii) has all necessary power and
authority to own, operate or lease the properties and assets owned, operated or
leased by such Venture and to carry on its business as it has been and is
currently conducted by such Venture. Except as set forth on Section 3.04(g) of
the Disclosure Schedule, the partnership interest owned by ISC, whether directly
or indirectly, in each Venture is free and clear of all Encumbrances, and there
are no options, warrants, convertible securities, or other rights, agreements,
arrangements or commitments or any character relating to the partnership
interest in any Venture. True and complete copies of the partnership agreement,
in each case as in effect on the date hereof, of each Venture have been
delivered by ISI to Ispat.
SECTION 3.05. Corporate Books and Records. Complete and accurate
copies of the minute books and of the stock register of ISC, each Subsidiary and
each Venture have been made available by ISI to Ispat.
SECTION 3.06. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.07 have been obtained
and all filings and notifications listed in Section 3.07 of the Disclosure
Schedule have been made, the execution,
21
delivery and performance of this Agreement by ISI and ISC do not and will not
(a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws (or similar organizational documents) of
ISI, ISC, any Subsidiary or any Venture, (b) conflict with or violate in any
material respect (or cause an event which would have a Material Adverse Effect
or prevent or materially delay the consummation by ISI and ISC of the
transactions contemplated hereby as a result of) any Law or Governmental Order
applicable to ISI, ISC, any Subsidiary, any Venture or any of their respective
assets, properties or businesses, including, without limitation, the Business,
or (c) except as set forth in Section 3.06(c) of the Disclosure Schedule,
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the Issued Shares or on any of the
assets or properties of ISC, any Subsidiary or any Venture pursuant to, any
note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which ISC, any
Subsidiary or any Venture is a party or by which any of the Issued Shares or any
of such assets or properties is bound or affected, except in the case of clause
(c) for any conflicts, breaches, defaults or other matters that would not have a
Material Adverse Effect or prevent or materially delay the consummation by ISI
and ISC of the transactions contemplated hereby.
SECTION 3.07. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by ISI and ISC do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority, except (a) as
described in Section 3.07 of the Disclosure Schedule and (b) the notification
requirements of the HSR Act.
SECTION 3.08. SEC Filings; Financial Information. (a) ISC has filed
all forms, reports and documents required to be filed by it with the SEC since
January 1, 1995 though the date of this Agreement (collectively, the "ISC SEC
Reports"). The ISC SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the ISC SEC Reports was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly, in all material respects, the consolidated financial position of ISC and
its consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein except as otherwise noted therein (subject,
in the case of unaudited statements, to normal and recurring year-end
adjustments).
22
(c) The books of account and other financial records of ISC, the
Subsidiaries and the Ventures (i) reflect all items of income and expense and
all Assets and Liabilities required to be reflected therein in accordance with
U.S. GAAP applied on a basis consistent with the past practices of ISC, the
Subsidiaries and the Ventures, respectively, and (ii) are in all material
respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies.
SECTION 3.09. No Undisclosed Liabilities. There are no Liabilities of
ISC, any Subsidiary or any Venture, other than Liabilities (i) reflected or
reserved against on the Reference Balance Sheet or the audited balance sheets of
the Ventures dated December 31, 1997, (ii) disclosed in Section 3.09 of the
Disclosure Schedule or (iii) which do not have a Material Adverse Effect.
SECTION 3.10. Inventories. (a) Subject to amounts reserved therefor
on the Reference Balance Sheet or the audited balance sheets of the Ventures
dated December 31, 1997, as applicable, the values at which all Inventories are
carried on the Reference Balance Sheet or such audited balance sheets of the
Ventures, as applicable, reflect the historical inventory valuation policy of
ISC, the Subsidiaries and the Ventures of stating such Inventories at the lower
of cost (determined by the last-in, first-out method except for supply
inventories which are determined by the average cost or first-in, first-out
methods) or market value. Except as set forth in Section 3.10 of the Disclosure
Schedule, ISC, a Subsidiary or a Venture, as the case may be, has good and
marketable title to the Inventories free and clear of all Encumbrances except
for Permitted Encumbrances. The Inventories do not consist of, in any material
amount, items that are obsolete, damaged or slow moving. Since the Reference
Balance Sheet Date, none of ISC, any Subsidiary or any Venture has changed the
price of any Inventory except for (i) reductions and increases to reflect any
changes in the cost thereof to ISC, such Subsidiary or such Venture and (ii)
reductions and increases responsive to normal competitive conditions and
consistent with ISC's, such Subsidiary's or such Venture's past sales practices.
(b) The Inventories are in good and merchantable condition in all
material respects, are suitable and usable for the purposes for which they are
intended and the finished goods included in the Inventories are in a condition
such that they can be sold in the ordinary course of the Business consistent
with past practice.
SECTION 3.11. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the Reference Balance Sheet Date, except
as disclosed in Section 3.11 of the Disclosure Schedule or as expressly required
by the terms of this Agreement, the business of ISC, the Subsidiaries and the
Ventures has been conducted in the ordinary course and consistent with past
practice. As amplification and not limitation of the foregoing, except as
disclosed in Section 3.11 of the Disclosure Schedule or as required by the terms
of this Agreement, since the Reference Balance Sheet Date, none of ISC, any
Subsidiary nor any Venture has:
23
(i) permitted or allowed any of the assets or properties (whether
tangible or intangible) of ISC, any Subsidiary or any Venture to be
subjected to any Encumbrance, other than Permitted Encumbrances and
Encumbrances that will be released at or prior to the Closing;
(ii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance
or paid or otherwise discharged any Liability, other than current
liabilities reflected on the Reference Balance Sheet and current
liabilities incurred in the ordinary course of business consistent with
past practice since the Reference Balance Sheet Date;
(iii) made any loan to, guaranteed any Indebtedness of or otherwise
incurred any Indebtedness on behalf of any Person except intercompany
transactions in the ordinary course of business consistent with past
practice;
(iv) failed to pay any creditor any amount owed to such creditor
when due other than amounts contested in good faith in the ordinary course
of business consistent with past practice;
(v) redeemed any of the capital stock of or other equity interest
in ISC, any Subsidiary or any Venture or declared, made or paid any
dividends or distributions (whether in cash, securities or other property)
to the holders of capital stock of or other equity interest in ISC, any
Subsidiary or any Venture or otherwise, other than dividends, distributions
and redemptions declared, made or paid by ISC to ISI on the ISC Preferred
Stock or by any Subsidiary or any Venture solely to ISC;
(vi) made any material changes in the customary methods of
operations of ISC, any Subsidiary or any Venture, including, without
limitation, practices and policies relating to manufacturing, purchasing,
Inventories, marketing, selling and pricing;
(vii) merged with, entered into a consolidation with or acquired an
interest of 5% or more in any Person or acquired a substantial portion of
the assets or business of any Person or any division or line of business
thereof, or otherwise acquired any material assets other than in the
ordinary course of business consistent with past practice;
(viii) made any capital expenditure or commitment for any capital
expenditure in excess of $5,000,000 in the aggregate that is not
specifically provided for in the Business Plan;
(ix) issued any sales orders or otherwise agreed to make any
purchases involving exchanges in value in excess of $20,000,000 in the
aggregate;
24
(x) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including,
without limitation, leasehold interests and intangible assets), other than
the sale of Inventories in the ordinary course of business consistent with
past practice and the replacement of worn-out or obsolete property, plant
and equipment in the ordinary course of business consistent with past
practice;
(xi) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of,
or any other interest in, ISC, any Subsidiary or any Venture;
(xii) entered into any agreement, arrangement or transaction with
any of its directors, officers or employees (or with any relative,
beneficiary, spouse or Affiliate of such Person);
(xiii) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by ISC, any Subsidiary or any Venture to any of its
employees, including, without limitation, any increase or change pursuant
to any Plan or (B) established or increased or promised to increase any
benefits under any Plan, in the case of either clause (A) or clause (B)
except as required by Law or any collective bargaining agreement, the terms
of this Agreement or pursuant to the terms of any Plan or involving
ordinary increases or promotions consistent with the past practices of ISC,
such Subsidiary or such Venture;
(xiv) written down or written up (or failed to write down or write
up in accordance with U.S. GAAP consistent with past practice) the value of
any Inventories or Receivables or revalued any assets of ISC, any
Subsidiary or any Venture other than in the ordinary course of business
consistent with past practice and in accordance with U.S. GAAP;
(xv) amended, terminated, canceled or compromised any material
claims of ISC, any Subsidiary or any Venture or waived any other rights of
substantial value to ISC, any Subsidiary or any Venture other than in the
ordinary course of business consistent with past practice;
(xvi) made any change in any method of accounting or accounting
practice or policy used by ISC, any Subsidiary or any Venture, other than
such changes required by U.S. GAAP;
(xvii) failed to maintain the Assets in accordance with good business
practice and in good operating condition and repair, except those Assets
that have been or are
25
scheduled to be removed from service permanently or for an extended period
without a current intention to return such Assets to service;
(xviii) allowed any material Permit or Environmental Permit that was
issued or relates to ISC, any Subsidiary or any Venture or otherwise
relates to any Asset to lapse or terminate or failed to renew any such
Permit or Environmental Permit or any material insurance policy that is
scheduled to terminate or expire within 45 calendar days after the
Effective Time;
(xix) incurred any Indebtedness except in the ordinary course of
its business in accordance with past practice;
(xx) terminated, consented to the termination of, or in any
material respect amended or modified any other Material Contract or ISC's,
any Subsidiary's or any Venture's rights thereunder;
(xxi) amended or restated the Certificate of Incorporation or the
By-laws (or other organizational documents) of ISC, any Subsidiary or any
Venture;
(xxii) terminated, discontinued, closed or disposed of any plant,
facility or other business operation, or laid off any employees (other than
layoffs of less than 50 employees in any six-month period in the ordinary
course of business consistent with past practice) or implemented any early
retirement, separation or program providing early retirement window
benefits within the meaning of Section 1.401(a)-4 of the Regulations or
announced or planned any such action or program for the future;
(xxiii) disclosed any secret or confidential Intellectual Property
(except by way of issuance of a patent) or permitted to lapse or go
abandoned any Intellectual Property (or any registration or grant thereof
or any application relating thereto) to which, or under which, ISC, any
Subsidiary or any Venture has any right, title, interest or license;
(xxiv) made any express or deemed election or settled or compromised
any liability with respect to Taxes of ISC, any Subsidiary or any Venture
other than in the ordinary course of business consistent with past
practice;
(xxv) suffered any casualty loss or damage in excess of $5,000,000
in the aggregate with respect to any of the Assets, whether or not such
loss or damage shall have been covered by insurance;
(xxvi) suffered any Material Adverse Effect; or
26
(xxvii) agreed to take any of the actions specified in this Section
3.11 or granted any options to purchase, rights of first refusal, rights of
first offer or any other similar rights or commitments with respect to any
of the actions specified in this Section 3.11.
SECTION 3.12. Litigation. Except as set forth in Section 3.12 of the
Disclosure Schedule (which, with respect to each Action disclosed therein, sets
forth the parties, nature of the proceeding, date and method commenced, amount
of damages or other relief sought and, if applicable, paid or granted), there
are no Actions by or against ISC, any Subsidiary or any Venture involving claims
in excess of $100,000 or seeking equitable relief (or by or against ISI or any
Affiliate thereof and relating to the Business, ISC, any Subsidiary or any
Venture), or affecting any of the Assets, pending before any Governmental
Authority (or, to the best knowledge of ISI threatened to be brought by or
before any Governmental Authority). None of the matters disclosed in Section
3.12 of the Disclosure Schedule has, has had or would have a Material Adverse
Effect or could affect the legality, validity or enforceability of this
Agreement or the consummation of the transactions contemplated hereby. Except as
set forth in Section 3.12 of the Disclosure Schedule, none of ISC, the
Subsidiaries, the Ventures nor any of the Assets nor ISI is subject to any
Governmental Order (nor, to the best knowledge of ISI are there any such
Governmental Orders threatened to be imposed by any Governmental Authority)
which has, has had or would have a Material Adverse Effect.
SECTION 3.13. Compliance with Laws. (a) Except as set forth in
Section 3.13(a) of the Disclosure Schedule, ISC, the Subsidiaries and the
Ventures have each conducted and continue to conduct the Business in accordance
with all Laws and Governmental Orders applicable to ISC, any Subsidiary, any
Venture or any of the Assets or the Business, except for violations of those
Laws and Governmental Orders which would not, individually or in the aggregate,
have a Material Adverse Effect, and none of ISC, any Subsidiary or any Venture
is in violation of any such Law or Governmental Order, except for violations of
those Laws and Governmental Orders which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Section 3.13(b) of the Disclosure Schedule sets forth a brief
description of each material Governmental Order applicable to ISC, any
Subsidiary or any Venture or any of the Assets or the Business, and no such
Governmental Order has, has had or would have a Material Adverse Effect.
(c) The representations and warranties in this Section 3.13 are not
applicable to Laws and Governmental Orders (i) relating to the Environment,
which are covered under Section 3.14, (ii) Taxes, which are covered under
Section 3.22 or (iii) employee benefits, which are covered under Section 3.19.
27
SECTION 3.14. Environmental Matters. (a) Except as disclosed in
Section 3.14(a) of the Disclosure Schedule and as would not reasonably be
expected to have a Material Adverse Effect:
(i) ISC, the Subsidiaries and the Ventures are in compliance with,
and for the past three years have been in compliance in all material
respects with, all applicable Environmental Laws and all Environmental
Permits. All past non-compliance with Environmental Laws or Environmental
Permits has been resolved without any pending, on-going or future
obligation, cost or liability, and there is no requirement proposed for
adoption or implementation under any Environmental Law or Environmental
Permit that is reasonably expected to have a Material Adverse Effect.
(ii) There are no underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being or have been treated, stored or disposed on
any of the Real Property by ISC, any Subsidiary or any Venture, or to the
knowledge of ISI, on any property formerly owned, leased or occupied by
ISC, any Subsidiary or any Venture.
(iii) ISC, the Subsidiaries and the Ventures have not, and to the
knowledge of ISI no other Person has, Released Hazardous Materials on any
of the Real Property currently or formerly owned, leased or occupied by
ISC, the Subsidiaries or the Ventures.
(iv) ISC, the Subsidiaries and the Ventures are not conducting, and
have not undertaken or completed, any Remedial Action relating to any
Release or threatened Release at the Real Property or at any other site,
location or operation, either voluntarily or pursuant to the order of any
Governmental Authority or the requirements of any Environmental Law or
Environmental Permit.
(v) None of the Real Property is listed or proposed for listing on
the National Priorities List under the federal Comprehensive Environmental
Response, Compensation, and Liability Act, or, to the knowledge of ISI, any
analogous federal, state or local list.
(vi) There are no Environmental Claims pending or, to the knowledge
of ISI, threatened against ISC, the Subsidiaries, the Ventures, the
Business or the Real Property, and there are no circumstances that can
reasonably be expected to form the basis of any such Environmental Claim,
including without limitation with respect to any off-site disposal location
currently or formerly used by ISC, any Subsidiary or any Venture or any of
their predecessors or with respect to any currently or formerly owned or
operated facilities.
(vii) ISC, the Subsidiaries and the Ventures can reasonably be
expected to maintain present production levels in compliance with
applicable Environmental Laws
28
without material capital or operating expenditures and without modifying
their Environmental Permits or obtaining any additional Environmental
Permits.
(b) ISC and the Subsidiaries have made available to Ispat copies of
all environmental assessment or audit reports and other similar studies or
analyses relating to the Real Property or the operations of ISC, the
Subsidiaries or the Ventures which have been prepared since January 1, 1993.
(c) Except as disclosed in Section 3.14(c) of the Disclosure
Schedule, neither the execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement will require any Remedial Action or
notice to or consent of Governmental Authorities or any third party pursuant to
any applicable Environmental Law or Environmental Permit.
SECTION 3.15. Material Contracts. (a) Section 3.15(a) of the
Disclosure Schedule lists each of the following contracts and agreements of ISC,
the Subsidiaries and the Ventures (such contracts and agreements, together with
all contracts, agreements, leases and subleases concerning any Real Property
listed or otherwise disclosed in Section 3.17(a) or 3.17(b) of the Disclosure
Schedule to which ISC, any Subsidiary or any Venture is a party and all
agreements relating to Intellectual Property, being "Material Contracts"):
(i) each contract and agreement for the purchase Inventory, spare
parts, other materials or personal property with any supplier or for the
furnishing of services to ISC, any Subsidiary or any Venture under the
terms of which ISC, any Subsidiary or any Venture (A) is likely to pay or
otherwise give consideration of more than $1,000,000 in the aggregate
during the calendar year ending December 31, 1998, (B) is likely to pay or
otherwise give consideration of more than $10,000,000 in the aggregate over
the remaining term of such contract or (C) cannot be canceled by ISC, such
Subsidiary or such Venture without penalty or further payment of more than
$5,000,000;
(ii) each contract and agreement for the sale of Inventory or other
personal property or for the furnishing of services by ISC, any Subsidiary
or any Venture which (A) is likely to involve consideration of more than
$1,000,000 in the aggregate during the calendar year ending December 31,
1998, (B) is likely to involve consideration of more than $10,000,000 in
the aggregate over the remaining term of the contract or (C) cannot be
canceled by ISC, such Subsidiary or such Venture without penalty or further
payment of more than $5,000,000;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which ISC, any Subsidiary or
any Venture is a party under the terms of which ISC, such Subsidiary or
such Venture (A) is likely to pay or otherwise give consideration of more
than $1,000,000 in the aggregate during the calendar year ending
29
December 31, 1998, (B) is likely to pay or otherwise give consideration of
more than $10,000,000 in the aggregate over the remaining term of such
contract or (C) cannot be canceled by ISC, such Subsidiary or such Venture
without penalty or further payment of more than $5,000,000;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which ISC (or ISI
on behalf of ISC), any Subsidiary or any Venture is a party under the terms
of which ISC, any Subsidiary or any Venture: (A) is likely to pay or
otherwise give consideration of more than $1,000,000 in the aggregate
during the calendar year ending December 31, 1998, (B) is likely to pay or
otherwise give consideration of more than $10,000,000 in the aggregate over
the remaining term of such contract or (C) cannot be canceled by ISC, such
Subsidiary or such Venture without penalty or further payment of more than
$5,000,000;
(v) all contracts and agreements relating to Indebtedness of ISC,
any Subsidiary or any Venture for borrowed money and any other Indebtedness
of ISC, any Subsidiary or any Venture in excess of $500,000;
(vi) all contracts and agreements with any Governmental Authority to
which ISC, any Subsidiary or any Venture is a party under the terms of
which ISC, any Subsidiary or any Venture (A) is likely to pay or otherwise
give or receive consideration of more than $1,000,000 over the remaining
term of such contract or agreement or (B) has a term in excess of one year;
(vii) all contracts and agreements that limit or purport to limit the
ability of ISC, any Subsidiary or any Venture to compete in any line of
business or with any Person or in any geographic area or during any period
of time;
(viii) all contracts and agreements between, on the one hand, ISC, any
Subsidiary or any Venture and, on the other hand, ISI or any Affiliate of
ISI (other than ISC, a Subsidiary or a Venture);
(ix) all contracts and agreements creating or entered into by PCI
Associates, I/N Kote (collectively, the "Kote Agreements") or I/N Tek
(collectively, the "Tek Agreements"), whether or not ISC, any Subsidiary or
any Venture is a party thereto, under the terms of which such Venture (A)
is likely to pay or otherwise give consideration of more than $1,000,000 in
the aggregate during the calendar year ending December 31, 1998, (B) is
likely to pay or otherwise give consideration of more than $5,000,000, in
the aggregate over the remaining term of such contract or (C) cannot be
canceled by such Venture without penalty or further payment of more than
$5,000,000, including, without limitation, all contracts and agreements
relating to the formation, ownership, business,
30
operations or financing of any of such partnership arrangements, including
all agreements with lenders to such partnerships and partners in such
partnerships; and
(x) all other contracts and agreements whether or not made in the
ordinary course of business, which are material to ISC, any Subsidiary, any
Venture or the conduct of the Business or the absence of which would have a
Material Adverse Effect.
For purposes of this Section 3.15 and Section 3.17, the term "lease"
shall include any and all leases, subleases, sale/leaseback agreements or
similar arrangements.
(b) Except as disclosed in Section 3.15(b) of the Disclosure
Schedule, each Material Contract: (i) is valid and binding on ISC, the
Subsidiary or the Venture party thereto and, to the knowledge of ISI, the
respective other parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement, except to the
extent that any consents set forth in Section 3.06(c) of the Disclosure Schedule
are not obtained, shall continue in full force and effect without penalty or
other adverse consequence. None of ISC, any Subsidiary or, to the knowledge of
ISI, any Venture, is in breach of, or default under, any Material Contract,
except as set forth in Section 3.15(b) of the Disclosure Schedule. Except as
disclosed in Section 3.15(b) of the Disclosure Schedule, to the best knowledge
of ISI and ISC, no other party to any Material Contract is in breach thereof or
default thereunder.
(c) Except as disclosed in Section 3.15(c) of the Disclosure
Schedule, there is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than in the ordinary course of
business consistent with past practice, any of the properties or assets of ISC,
any Subsidiary or any Venture.
SECTION 3.16. Intellectual Property. Except as set forth in Section
3.16 of the Disclosure Schedule or as would not have a Material Adverse Effect,
ISC, each of the Subsidiaries and each of the Ventures own or possess adequate
licenses or other legal rights to use all Intellectual Property used or held for
use in connection with the Business as currently conducted, and ISI and ISC are
unaware of any assertion or claim challenging the validity of any of the
foregoing. The conduct of the Business as currently conducted does not, to the
knowledge of ISI, infringe in any way any Intellectual Property of any third
party in a manner that, individually or in the aggregate, would have a Material
Adverse Effect. To ISI's knowledge, there are no infringements of any
Intellectual Property owned by or licensed by or to ISC, any Subsidiary or any
Venture that, individually or in the aggregate, would have a Material Adverse
Effect.
SECTION 3.17. Real Property. (a) Section 3.17(a) of the Disclosure
Schedule lists the Owned Real Property.
31
(b) Section 3.17(b) of the Disclosure Schedule lists: (i) the
location of each parcel of Leased Real Property, (ii) the identity of the
lessor, lessee and current occupant (if different from lessee) of each such
parcel of Leased Real Property, (iii) the term (referencing applicable renewal
periods) and rental payment terms of the leases (and any subleases) pertaining
to each such parcel of Leased Real Property and (iv) the current use of each
such parcel of Leased Real Property.
(c) Except as described in Section 3.17(c) of the Disclosure
Schedule, either ISC, a Subsidiary or a Venture, as the case may be, is in
peaceful and undisturbed possession of each parcel of Real Property and there
are no contractual or legal restrictions that preclude or restrict in any
material respect the ability to use the premises for the purposes for which they
are currently being used. Except as set forth in Section 3.17(c) of the
Disclosure Schedule, neither ISC, any Subsidiary or any Venture has leased or
subleased any parcel or any portion of any parcel of Real Property to any other
Person, nor has ISC, any Subsidiary or any Venture assigned its interest under
any lease or sublease listed in Section 3.17(b) of the Disclosure Schedule to
any third party.
(d) ISI has, or has caused to be, delivered to Ispat true and
complete copies of all leases and subleases listed in Section 3.17(b) of the
Disclosure Schedule and any and all ancillary documents pertaining thereto
(including, but not limited to, all amendments, consents for alterations and
documents recording variations and evidence of commencement dates and expiration
dates).
(e) Except as set forth in Section 3.17(e) of the Disclosure
Schedule, there are no condemnation proceedings or eminent domain proceedings of
any kind pending or, to the best knowledge of ISI, threatened against the Real
Property.
(f) Except as set forth in Section 3.17(f) of the Disclosure
Schedule, all the Real Property is occupied under a valid and current
certificate of occupancy or similar permit, the transactions contemplated by
this Agreement will not require the issuance of any new or amended certificate
of occupancy and, to the best knowledge of ISI, there are no facts that would
prevent the Real Property from being occupied by ISC, any Subsidiary or any
Venture, as the case may be, after the Closing in the same manner as occupied by
ISC, such Subsidiary or such Venture immediately prior to the Closing.
SECTION 3.18. Assets. (a) Except as disclosed in Section 3.18 of the
Disclosure Schedule, either ISC, a Subsidiary or a Venture, as the case may be,
owns, leases or has the legal right to use all the properties and assets,
including, without limitation, the Intellectual Property, the Real Property and
the tangible personal property, used in the conduct of the Business or otherwise
owned, leased or used by ISC, any Subsidiary or any Venture and, with respect to
contract rights, is a party to and enjoys the right to the benefits of all
material contracts, agreements and other arrangements used by ISC, any
Subsidiary or any Venture or in or relating
32
to the conduct of the Business (all such properties, assets and contract rights
being the "Assets") except as would not have a Material Adverse Effect. Either
ISC, a Subsidiary or a Venture, as the case may be, has good and marketable
title to, or, in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all the Assets, free and clear of all Encumbrances,
except (i) as disclosed in Section 3.16, 3.17(a), 3.17(b), or 3.18(a) of the
Disclosure Schedule and (ii) Permitted Encumbrances.
(b) The Assets constitute all the material properties, assets and
rights forming a part of, used, held or intended to be used in, and all such
properties, assets and rights as are necessary in the conduct of, the Business.
(c) Except to the extent that any consents set forth in Section
3.06(c) of the Disclosure Schedule are not obtained, following the consummation
of the transactions contemplated by this Agreement, either ISC, a Subsidiary or
a Venture, as the case may be, will continue to own, pursuant to good and
marketable title, or lease, under valid and subsisting leases, or otherwise
retain its respective interest in the Assets without incurring any material
penalty or other material adverse consequence, including, without limitation,
any material increase in rentals, royalties, or licenses or other fees imposed
as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement. Immediately following the Closing, either ISC, a
Subsidiary or a Venture, as the case may be, shall own and possess all
documents, books, records, agreements and financial data of any sort used by
ISC, such Subsidiary or such Venture in the conduct of the Business or
otherwise.
SECTION 3.19. Employee Benefit Matters. (a) Section 3.19(a) of the
Disclosure Schedule contains a true and complete list of (i) all employee
benefit plans (within the meaning of Section 3(3) of ERISA), other than any plan
which constitutes a Multiemployer Plan, and (ii) all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, special retirement, severance or other
benefit plans, programs or arrangements, and all employment, termination,
severance or other contracts or agreements which do not constitute employee
benefit plans, to which ISI, ISC, any Subsidiary or any Venture is a party,
which are maintained, contributed to or sponsored by ISI, ISC, any Subsidiary or
any Venture or with respect to which ISI, ISC, any Subsidiary or any Venture has
any obligation for the benefit of any current or former employee, officer or
director of ISC, any Subsidiary or any Venture (collectively, the "Plans"). ISI
has made available to Ispat a true and complete copy of each Plan document and,
to the extent applicable, a true and complete copy of each of the following with
respect to the Plans: (i) trust or other funding arrangement, (ii) summary plan
description and summary of material modifications, (iii) the most recently filed
IRS Form 5500, (iv) the most recently received IRS determination letter and
(v) the most recently prepared actuarial report and financial statement. Except
as required by applicable Law, the terms of any collective bargaining agreement
or in connection with the transactions contemplated by this Agreement, none of
ISI, ISC, any Subsidiary or any Venture has any express or implied commitment
(i) to
33
create, incur liability with respect to or cause to exist any employee benefit
plan, program or arrangement other than the Plans, (ii) to enter into any
contract or agreement to provide compensation or benefits to any individual or
(iii) to materially modify, change or terminate any Plan.
(b) Other than as disclosed in Section 3.19(b) of the Disclosure
Schedule: (i) none of the Plans is a single employer plan, within the meaning of
Section 4001(a)(15) of ERISA, for which ISI, ISC, any Subsidiary or any Venture
could incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer
Plan"); (ii) none of the Plans (A) provides for the payment of separation,
severance, termination or similar-type benefits to any person, (B) obligates
ISI, ISC, any Subsidiary or any Venture to pay separation, severance,
termination or other benefits as a result of any transaction or (C) obligates
ISI, ISC, any Subsidiary or any Venture to make any payment or provide any
benefit that would be subject to a tax under Section 4999 of the Code; and (iii)
none of the Plans provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director of
ISC, any Subsidiary or any Venture.
(c) Each Plan which constitutes an employee pension benefit plan
(within the meaning of Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS or a request for a favorable determination
letter has been or will be filed within the remedial amendment period applicable
thereto. To the knowledge of ISI, no fact or event has occurred since the date
of any such determination letter from the IRS that would reasonably be expected
to have a material adverse effect on the qualified status of any such Plan. Each
trust maintained or contributed to by ISI, ISC, any Subsidiary or any Venture
which is intended to be qualified as a voluntary employees' beneficiary
association exempt from federal income taxation under Sections 501(a) and
501(c)(9) of the Code has received a favorable determination letter from the IRS
that it is so qualified and so exempt, and to the knowledge of ISI no fact or
event has occurred since the date of such determination by the IRS that would
reasonably be expected to have a material adverse effect on such qualified or
exempt status.
(d) Except as set forth in Section 3.19(d) of the Disclosure
Schedule, there has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. None
of ISI, ISC, any Subsidiary or any Venture is currently liable or has previously
incurred any liability for any material tax or penalty arising under Section
4971, 4972, 4979, 4980 or 4980B of the Code or Section 502(c) of ERISA with
respect to any Plan, and to the knowledge of ISI, no fact or event exists which
could give rise to any such liability. Except as set forth in Section 3.19(d)
of the Disclosure Schedule, none of ISI, ISC, any Subsidiary or any Venture has
incurred any liability under, arising out of or by operation of Title IV of
ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), including, without
34
limitation, any liability in connection with (i) the termination or
reorganization of any Plan which is an employee pension benefit plan and which
is subject to Title IV of ERISA or (ii) the withdrawal from any Multiple
Employer Plan, and to the knowledge of ISI, no fact or event exists which could
give rise to any such liability. No complete or partial termination of any Plan
which is an employee pension benefit plan and which is subject to Title IV of
ERISA has occurred within the five years preceding the date hereof. Except as
set forth in Section 3.19(d) of the Disclosure Schedule, no Reportable Event has
occurred or is expected to occur with respect to any Plan which is subject to
Title IV of ERISA. No asset of ISI, ISC, any Subsidiary or any Venture is the
subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; none of ISI, ISC, any Subsidiary or any Venture has been required to
post any security under Section 307 of ERISA or Section 401(a)(29) of the Code;
and to the knowledge of ISI no fact or event exists which could reasonably be
expected to give rise to any such lien or requirement to post any such security.
(e) Except as set forth in Section 3.19(e) of the Disclosure
Schedule, each Plan is now and has been operated in all material respects in
accordance with the requirements of all applicable Laws, including, without
limitation, ERISA and the Code, and ISI, ISC, each Subsidiary and each Venture
have performed all material obligations required to be performed by them under,
are not in any material respect in default under or in violation of, and have no
knowledge of any default or violation by any party to, any Plan. No Plan has
incurred an "accumulated funding deficiency" (within the meaning of Section 302
of ERISA or Section 412 of the Code), whether or not waived.
(f) Except as set forth in Section 3.19(f) of the Disclosure Schedule,
none of ISI, ISC, any Subsidiary or any Venture has any obligation to contribute
to a Multiemployer Plan. With respect to each such plan listed in Section
3.19(f) of the Disclosure Schedule:
(i) all contributions have been made as required by the terms of such
plans, the terms of any collective bargaining agreements, and applicable
Laws;
(ii) none of ISI, ISC, any Subsidiary nor any Venture has withdrawn,
partially withdrawn, or received any notice of any claim or demand for
withdrawal liability or partial withdrawal liability;
(iii) none of ISI, ISC, any Subsidiary nor any Venture has received
any notice that any such plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, that any such plan is or has been funded at a
rate less than required under Section 412 of the Code, or that any such
plan is or may become insolvent.
35
(g) ISI, ISC, the Subsidiaries and the Ventures have not incurred any
liability under, and have complied in all respects with, the Worker Adjustment
Retraining Notification Act and the regulations promulgated thereunder ("WARN")
and do not reasonably expect to incur any such liability as a result of actions
taken or not taken prior to the Effective Time. Section 3.19(g) of the
Disclosure Schedule lists (i) all the employees terminated or laid off by ISC,
any Subsidiary or any Venture during the 90 days prior to the date hereof and
(ii) all the employees of ISC, any Subsidiary or any Venture who have
experienced a reduction in hours of work of more than 50% during any month
during the 90 days prior to the date hereof and describes all notices given by
ISC, the Subsidiaries and the Ventures in connection with WARN.
(h) The transactions contemplated by this Agreement shall not, in and
of themselves, constitute a termination of employment for purposes of the change
in control agreements listed on Section 6.01(b) of the Disclosure Schedule.
SECTION 3.20. Labor Matters. Except as set forth in Section 3.20 of
the Disclosure Schedule, or, except with respect to subsections (a) and (b), as
would not have a Material Adverse Effect, (a) neither ISC, any Subsidiary nor
any Venture is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by ISC, any Subsidiary or any
Venture and currently there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which would reasonably be expected to affect ISC, any Subsidiary or any Venture;
(b) there are no strikes, slowdowns or work stoppages pending or, to the best
knowledge of ISI, threatened between ISC, any Subsidiary or any Venture and any
of their respective employees, and neither ISC, any Subsidiary nor any Venture
has experienced any such strike, slowdown or work stoppage within the past three
years; (c) neither ISI, ISC, any Subsidiary nor any Venture has breached or
otherwise failed to comply with the provisions of any collective bargaining or
union contract, including without limitation, any agreement with the USWA, and
there are no grievances outstanding against ISC, any Subsidiary or any Venture
under any such agreement or contract; (d) there are no unfair labor practice
complaints pending against ISC, any Subsidiary or any Venture before the
National Labor Relations Board or any other Governmental Authority or any
current union representation questions involving employees of ISC, any
Subsidiary or any Venture; (e) ISC, each Subsidiary and each Venture is
currently in compliance with all applicable Laws relating to the employment of
labor, including those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by the appropriate
Governmental Authority and has withheld and paid to the appropriate Governmental
Authority or is holding for payment not yet due to such Governmental Authority
all amounts required to be withheld from employees of ISC, any Subsidiary or any
Venture and is not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing; (f) ISC, each Subsidiary
and each Venture has paid in full to all their respective employees or
adequately accrued for in accordance with U.S. GAAP all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees;
36
(g) there is no claim with respect to payment of wages, salary or overtime pay
that has been asserted or is now pending or threatened before any Governmental
Authority with respect to any Persons currently or formerly employed by ISC, any
Subsidiary or any Venture; (h) neither ISC, any Subsidiary nor any Venture is a
party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices; (i) there
is no charge or proceeding with respect to a violation of any occupational
safety or health standards that has been asserted or is now pending or
threatened with respect to ISC, any Subsidiary or any Venture; and (j) there is
no charge of discrimination in employment or employment practices, for any
reason, including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or
threatened before the United States Equal Employment Opportunity Commission, or
any other Governmental Authority in any jurisdiction in which ISC, any
Subsidiary or any Venture has employed or currently employs any Person.
SECTION 3.21. Key Employees. (a) Section 3.21(a) of the Disclosure
Schedule lists the name, place of employment, the current annual salary rates,
bonuses, deferred or contingent compensation, pension, accrued vacation, "golden
parachute" and other like benefits paid or payable (in cash or otherwise) in the
last three years, the date of employment and a description of position and job
function of each current salaried employee, officer, director, consultant or
agent of ISC, any Subsidiary or any Venture whose annual base pay exceeded (or,
in 1998, is expected to exceed) $200,000.
(b) Substantially all of the directors, officers, management
employees, and technical and professional employees of ISC, each Subsidiary and
each Venture are under written obligation to ISC, such Subsidiary or such
Venture to maintain in confidence all confidential or proprietary information
acquired by them in the course of their employment and to assign to ISC, such
Subsidiary or such Venture all inventions made by them within the scope of their
employment during such employment and for a reasonable period thereafter under a
form of agreement previously furnished by ISI to Ispat.
SECTION 3.22. Taxes. (a) (i) All returns and reports in respect of
Taxes required to be filed with respect to ISC and each Subsidiary (including
the consolidated federal income tax return of ISI and any state Tax return that
includes ISC or any Subsidiary on a consolidated or combined basis) have been
timely filed; (ii) all Taxes required to be shown on such returns and reports or
otherwise due have been timely paid; (iii) all such returns and reports are, to
the best knowledge of ISI, true, correct and complete in all material respects;
(iv) no adjustment relating to such returns has been proposed formally or
informally by any Tax authority (insofar as either relates to the activities or
income of ISC or any Subsidiary or could result in liability to ISC or any
Subsidiary on the basis of joint and/or several liability) and, to the best
knowledge of ISI and ISC, no basis exists for any such adjustment; (v) there are
no pending or, to the best knowledge of ISI and ISC, threatened actions or
proceedings for the assessment or collection of Taxes against ISC or any
Subsidiary or (insofar as either relates to the activities or
37
income of ISC or any Subsidiary or could result in liability of ISC or any
Subsidiary on the basis of joint and/or several liability) any corporation that
was included in the filing of a return with ISC or any subsidiary on a
consolidated or combined basis; (vi) no consent under Section 341(f) of the Code
has been filed with respect to ISC or any Subsidiary; (vii) there are no Tax
liens on any assets of ISC or any Subsidiary; (viii) neither ISC nor any
Subsidiary or Affiliate of ISC is a party to any agreement or arrangement that
would result, separately or in the aggregate, in the payment of any amounts that
would not be deductible by ISC or any Subsidiary under Section 280G of the Code;
(ix) no acceleration of the vesting schedule for any property that is
substantially unvested within the meaning of the regulations under Section 83 of
the Code will occur in connection with the transactions contemplated by this
Agreement; (x) from and after January 1, 1964, ISC and each Subsidiary has been
and continues to be a member of the affiliated group (within the meaning of
Section 1504(a)(1) of the Code) for which ISI files a consolidated return as the
common parent, and has not been includible in any other consolidated return for
any taxable period for which the statute of limitations has not expired; (xi)
all moneys required to be withheld by ISC or any Subsidiary from its employees
or from third parties for income and payroll taxes have been or will be withheld
and either paid to the appropriate tax authorities or set aside in accounts for
such purpose in accordance with the requirement of applicable law; (xii) neither
ISC nor any of its Subsidiaries has agreed to or is required to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
or any similar provision of state, local or foreign law by reason of any change
in any accounting method of ISC or such Subsidiary, there is no application
pending with any taxing authority requesting permission for any changes in any
accounting method of ISC or any of its Subsidiaries, and neither the IRS nor any
other taxing authority has proposed any such adjustment or change in accounting
method; (xiii) neither ISC nor any Subsidiary has been at any time a member of
any partnership or joint venture (other than the Subsidiaries) or the holder of
a beneficial interest in any trust for any period for which the statute of
limitations for any Tax has not expired, except as set forth in Section 3.22(a)
of the Disclosure Schedule; and (xiv) neither ISC nor any Subsidiary has ever
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code.
(b) Except as disclosed with reasonable specificity in Section 3.22(b)
of the Disclosure Schedule: (i) there are no outstanding waivers, agreements or
arrangements extending the statute of limitations for any period with respect to
any Tax to which ISC or any Subsidiary may be subject; (ii) neither ISC nor any
Subsidiary (A) has or is projected to have an amount includible in its income
for the current taxable year under Section 951 of the Code, (B) has an
unrecaptured overall foreign loss within the meaning of Section 904(f) of the
Code or (C) has participated in or cooperated with an international boycott
within the meaning of Section 999 of the Code; (iii) neither ISC nor any
Subsidiary has any (A) income reportable for a period ending after the Effective
Time but attributable to a transaction (e.g., an installment sale) occurring in,
or a change in accounting method made for, a period ending on or prior to the
Effective Time which resulted in a deferred reporting of income from such
transaction or from such change in accounting method (other than a deferred
intercompany transaction), or (B) deferred gain or loss arising out of any
deferred intercompany transaction; (iv) there are no requests for information
38
currently outstanding that could affect the Taxes of ISC or any Subsidiary; (v)
there are no proposed reassessments of any property owned by ISC or any
Subsidiary or other proposals that could increase the amount of any Tax to which
ISC or any Subsidiary would be subject; (vi) neither ISC nor any Subsidiary is
obligated under any agreement with respect to industrial development bonds or
similar obligations, with respect to which the excludibility from gross income
of the holder for federal income tax purposes could be affected by the
transactions contemplated hereunder; and (vii) no power of attorney that is
currently in force has been granted with respect to any matter relating to Taxes
that could affect ISC or any Subsidiary.
(c) (i) Section 3.22(c) of the Disclosure Schedule lists all income,
franchise and similar Tax Returns (federal, state, local and foreign) filed with
respect to each of ISC and the Subsidiaries for taxable periods ended on or
after December 31, 1996, indicates for which jurisdictions Returns have been
filed on the basis of a unitary group, indicates the most recent income,
franchise or similar tax Return for each relevant jurisdiction for which an
audit has been completed or the statute of limitations has lapsed and indicates
all Tax Returns that currently are the subject of audit; (ii) ISI has delivered
to Ispat correct and complete copies of all federal, state and foreign income,
franchise and similar Tax Returns (including the consolidated federal income tax
return of ISI and any state or foreign Tax Return that includes ISC or any
Subsidiary on a consolidated or combined basis), examination reports, and
statements of deficiencies assessed against or agreed to by ISC or any
Subsidiary since December 31, 1996; (iii) ISI has delivered to Ispat a true and
complete copy of any tax-sharing or allocation agreement or arrangement
involving ISC or any Subsidiary and a true and complete description of any such
unwritten or informal agreement or arrangement; and (iv) ISI has delivered to
Ispat complete and correct copies of all pro forma federal income Tax Returns of
ISC and the Subsidiaries, prepared in connection with ISI's or any other
consolidated federal income Tax Return, accompanied by a schedule reconciling
the items in the pro forma Return to the items as included in the consolidated
Tax Return for all taxable years ending on or after December 31, 1996.
(d) On the Reference Balance Sheet, reserves and allowances have been
provided, and on the Closing Balance Sheet reserves and allowances will be
provided, in each case adequate (exclusive of reserves for deferred taxes) to
satisfy all Liabilities for Taxes relating to ISC and the Subsidiaries for
periods through the Effective Time (without regard to the materiality thereof).
SECTION 3.23. Insurance. (a) Section 3.23(a) of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (providing property, casualty, liability, workers' compensation, and bond
and surety arrangements) under which ISC, any Subsidiary or any Venture has been
an insured, a named insured or otherwise the principal beneficiary of coverage
in excess of $25,000 at any time within the past three years:
(i) the name, address and telephone number of the agent or broker;
39
(ii) the name of the insurer and the names of the principal insured
and each named insured;
(iii) the policy number and the period of coverage;
(iv) the type, scope (including an indication of whether the coverage
was on a claims made, occurrence or other basis) and amount (including a
description of how deductibles, retentions and aggregates are calculated
and operate) of coverage; and
(v) the premium charged for the policy, including, without limitation,
a description of any retroactive premium adjustments or other loss-sharing
arrangements.
(b) With respect to each such insurance policy: (i) the policy is
legal, valid, binding and enforceable in accordance with its terms and, except
for policies that have expired under their terms in the ordinary course, is in
full force and effect; (ii) neither ISC, any Subsidiary nor any Venture is in
breach or default (including any breach or default with respect to the payment
of premiums or the giving of notice), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default or permit
termination or modification, under the policy; (iii) no party to the policy has
repudiated, or given notice of an intent to repudiate, any provision thereof;
and (iv) to the best knowledge of ISI and ISC, no insurer on the policy has been
declared insolvent or placed in receivership, conservatorship or liquidation.
(c) All material assets, properties and risks of ISC, each Subsidiary
and each Venture are, and for the past five years have been, covered by valid
and, except for policies that have expired under their terms in the ordinary
course, currently effective insurance policies or binders of insurance
(including, without limitation, general liability insurance, property insurance
and workers' compensation insurance) issued in favor of ISC, a Subsidiary or a
Venture, as the case may be, in each case with responsible insurance companies,
in such types and amounts (including deductibles and retentions) and covering
such risks as are consistent with customary practices and standards of companies
engaged in businesses and operations similar to those of ISC, such Subsidiary or
such Venture, as the case may be.
(d) At the time of the Closing, all insurance policies currently in
effect, or substantially similar coverage, will be outstanding and duly in
force.
SECTION 3.24. Fairness Opinion. Xxxxxxx, Xxxxx & Co. has delivered to
the board of directors of ISI its opinion that, as of May 27, 1998, the Merger
Consideration to be paid to ISI in the Merger is fair to ISI from a financial
point of view.
SECTION 3.25. Brokers. Except for Xxxxxxx, Sachs & Co., no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection
40
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of ISC. ISI is solely responsible for the fees and expenses
of Xxxxxxx, Xxxxx & Co.
SECTION 3.26. Disclaimer of ISI. WITHOUT LIMITING THE REPRESENTATIONS
AND WARRANTIES CONTAINED IN THIS ARTICLE III, EXCEPT AS SET FORTH IN THIS
ARTICLE III, ISI MAKES NO OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AT LAW OR IN EQUITY, IN RESPECT OF ISC, THE SUBSIDIARIES, THE VENTURES, ANY OF
THEIR RESPECTIVE ASSETS, LIABILITIES OR OPERATIONS, OR THE BUSINESS, INCLUDING,
WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ISPAT
As an inducement to ISI and ISC to enter into this Agreement, Ispat
hereby represents and warrants to ISI and ISC as follows:
SECTION 4.01. Organization and Authority of Ispat. Ispat is a
corporation duly organized, validly existing and in good standing under the laws
of The Netherlands and has all necessary corporate power and authority to enter
into this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Ispat, the performance by Ispat of its obligations hereunder and
the consummation by Ispat of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Ispat. This
Agreement has been duly executed and delivered by Ispat, and (assuming due
authorization, execution and delivery by ISI and ISC) this Agreement constitutes
a legal, valid and binding obligation of Ispat enforceable against Ispat in
accordance with its terms.
SECTION 4.02. Organization and Authority of Merger Sub. Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. Merger Sub has conducted
no business to date other than in contemplation of the transactions contemplated
hereby. The execution and delivery of this Agreement by Merger Sub, the
performance by Merger Sub of its obligations hereunder and the consummation by
Merger Sub of the transactions contemplated hereby have been duly authorized by
all requisite corporate action on the part of Merger Sub and its sole
stockholder. This Agreement has been duly executed and delivered by Merger Sub,
and (assuming due authorization, execution and delivery by ISI and
41
ISC) this Agreement constitutes a legal, valid and binding obligation of Merger
Sub enforceable against Merger Sub in accordance with its terms.
SECTION 4.03. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred to
in Section 4.04, except as may result from any facts or circumstances relating
solely to ISI or ISC, the execution, delivery and performance of this Agreement
by Ispat and Merger Sub do not and will not (a) violate, conflict with or result
in the breach of any provision of the Certificate of Incorporation or By-laws of
Ispat or Merger Sub, (b) conflict with or violate any Law or Governmental Order
applicable to Ispat or Merger Sub or (c) conflict with, or result in any breach
of, constitute a default (or event which with the giving of notice or lapse or
time, or both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation, or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of Ispat or Merger Sub pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which Ispat or Merger
Sub is a party or by which any of such assets or properties are bound or
affected, which in any case would prevent or materially delay the consummation
by Ispat and Merger Sub of the transactions contemplated by this Agreement.
SECTION 4.04. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by Ispat and Merger Sub do not and
will not require any consent, approval, authorization or other order of, action
by, filing with, or notification to, any Governmental Authority, except (a) in
connection with the transfer of ownership of certain shipping vessels currently
owned by ISC and its Subsidiaries and (b) the notification requirements of the
HSR Act.
SECTION 4.05. Financing. Ispat will have available at the Closing
funds sufficient to pay the Merger Consideration and the Intercompany
Indebtedness.
SECTION 4.06. Brokers. Except for Credit Suisse First Boston
Corporation, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Ispat. Ispat is solely responsible for payment of the fees and
expenses of Credit Suisse First Boston Corporation.
42
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) ISI
covenants and agrees that, except as described in Section 5.01(a) of the
Disclosure Schedule, between the date hereof and the Effective Time, none of
ISI, ISC, any Subsidiary or any Venture shall conduct its business other than in
the ordinary course and consistent with ISC's, such Subsidiary's and such
Venture's prior practice. Without limiting the generality of the foregoing,
except as described in Section 5.01(a) of the Disclosure Schedule, ISI shall
cause ISC, each Subsidiary and each Venture to (i) continue its advertising and
promotional activities, and pricing and purchasing policies, in accordance with
past practice; (ii) not shorten or lengthen the customary payment cycles for any
of its payables or receivables; (iii) use its best efforts to (A) preserve
intact their business organizations and the business organization of the
Business, (B) keep available to Ispat the services of the employees of ISC, each
Subsidiary and each Venture, (C) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of ISC, each Subsidiary, each Venture and the Business and
(D) preserve its current relationships with its customers, suppliers and other
persons with which it has significant business relationships; (iv) exercise, but
only after notice to Ispat and receipt of Ispat's prior written approval, any
rights of renewal pursuant to the terms of any of the leases or subleases set
forth in Section 3.17(b) of the Disclosure Schedule which by their terms would
otherwise expire; and (v) not engage in any practice, take any action, fail to
take any action or enter into any transaction which could cause any
representation or warranty of ISI to be untrue or result in a breach of any
covenant made by ISI or ISC in this Agreement.
(b) Except as described in Section 5.01(b) of the Disclosure Schedule,
ISI and ISC covenant and agree that, prior to the Closing, without the prior
written consent of Ispat, neither ISC, any Subsidiary nor any Venture will do
any of the things enumerated in the second sentence of Section 3.11 (including,
without limitation, clauses (i) through (viii) and (x) through (xxvii) thereof);
provided, however, that ISI and ISC will not issue any sales orders or otherwise
agree to make any purchases involving exchanges in value in excess of $1,000,000
individually or $5,000,000 in the aggregate.
(c) For the period from the date hereof through the Effective Time,
ISI covenants and agrees to cause ISC, each Subsidiary and each Venture to
maintain the level, mix and quality of the Inventories consistent with those
generally accepted by the steel manufacturing and finishing industry.
SECTION 5.02. Access to Information. (a) From the date hereof until
the Effective Time, upon reasonable notice, ISC, the Subsidiaries and the
Ventures and each of ISC's, the Subsidiaries' and the Ventures' officers,
directors, employees, agents, representatives, accountants and counsel shall:
(i) afford the officers, employees and authorized agents,
43
accountants, counsel, financing sources and representatives of Ispat reasonable
access, during normal business hours, to the offices, properties, plants, other
facilities, books and records of ISC, each Subsidiary and each Venture and to
those officers, directors, employees, agents, accountants and counsel of ISC, of
each Subsidiary and of each Venture who have any knowledge relating to ISC, any
Subsidiary, any Venture or the Business and (ii) furnish to the officers,
employees and authorized agents, accountants, counsel, financing sources and
representatives of Ispat such additional financial and operating data and other
information regarding the assets, properties and goodwill of ISC, the
Subsidiaries, the Ventures and the Business (or legible copies thereof) as Ispat
may from time to time reasonably request. ISI shall cooperate with Ispat and the
Surviving Corporation and shall provide any information, including financial
information, reasonably requested by Ispat related to the Business, operations,
financial condition and results of operations of ISC for any period in
connection with any public offering or private placement of securities by Ispat,
any subsidiary of Ispat or the Surviving Corporation after the date hereof.
(b) In order to facilitate the resolution of any claims made against
or incurred by ISI, for a period of seven years after the Closing, Ispat shall
(i) retain the books and records of ISC, the Subsidiaries and the Ventures
relating to periods prior to the Effective Time in a manner reasonably
consistent with the prior practice of ISC, the Subsidiaries and the Ventures and
(ii) upon reasonable notice, afford the officers, employees and authorized
agents, accountants, counsel and representatives of ISI reasonable access
(including the right to make, at ISI's expense, photocopies), during normal
business hours, to such books and records. The rights of access to books and
records granted under this Section 5.02(b) shall not include rights to examine
books and records to the extent such access would result in the loss of any
attorney-client, attorney work product or other similar privilege otherwise
applicable to such books and records.
(c) In order to facilitate the resolution of any claims made by or
against or incurred by Ispat, ISC, any Subsidiary or any Venture after the
Closing or for any other reasonable purpose relating to the Business, for a
period of seven years following the Effective Time, ISI shall (i) retain the
books and records of ISI which relate to ISC, the Subsidiaries and the Ventures
and their operations for periods prior to the Closing and which shall not
otherwise have been delivered to Ispat, ISC, any Subsidiary or any Venture and
(ii) upon reasonable notice, afford the officers, employees and authorized
agents, accountants, counsel and representatives of Ispat, ISC, any Subsidiary
or any Venture reasonable access (including the right to make photocopies, at
the expense of Ispat, ISC, such Subsidiary or such Venture), during normal
business hours, to such books and records. The rights of access to books and
records granted under this Section 5.02(c) shall not include rights to examine
books and records to the extent such access would result in the loss of any
attorney-client, attorney work product or other similar privilege otherwise
applicable to such books and records.
SECTION 5.03. Confidentiality. (a) ISI agrees to, and shall cause its
agents, representatives, Affiliates, employees, officers and directors to: (i)
treat and hold as confidential (and not disclose or provide access to any Person
to) all information relating to trade secrets,
44
processes, patent and trademark applications, product development, price,
customer and supplier lists, pricing and marketing plans, policies and
strategies, details of client and consultant contracts, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and all other confidential information with respect to the
Business, ISC, each Subsidiary and each Venture, (ii) in the event that ISI or
any such agent, representative, Affiliate, employee, officer or director becomes
legally compelled to disclose any such information, provide Ispat with prompt
written notice of such requirement so that Ispat, ISC, any Subsidiary or any
Venture may seek a protective order or other remedy, (iii) in the event that
such protective order or other remedy is not obtained, furnish only that portion
of such confidential information which is legally required to be provided and
exercise all reasonable efforts to obtain assurances that confidential treatment
will be accorded such information, (iv) promptly furnish (prior to, at or as
soon as practicable following, the effective Time) to ISC or Ispat any and all
copies (in whatever form or medium) of all such confidential information then in
the possession of ISI or any of its agents, representatives, Affiliates,
employees, officers and directors and, except as otherwise required by Section
5.02(c), destroy any and all additional copies then in the possession of ISI or
any of its agents, representatives, Affiliates, employees, officers and
directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided,
however, that this sentence shall not apply to (x) any information that, at the
time of disclosure, is available publicly and was not disclosed in breach of
this Agreement by ISI, its agents, representatives, Affiliates, employees,
officers or directors, or (y) any information that relates solely to the
business, operations, properties and assets of ISI. ISI agrees and acknowledges
that remedies at law for any breach of its obligations under this Section 5.03
are inadequate and that in addition thereto Ispat shall be entitled to seek
equitable relief, including injunction and specific performance, in the event of
any such breach.
(b) The terms of the Confidentiality Agreement are hereby incorporated
herein by reference and shall continue in full force and effect until the
Closing, at which time such Confidentiality Agreement shall terminate, except
for the provisions of Section A and Sections B. 8, B. 9, C. 2, C. 3, C. 4 and C.
5, which shall remain in full force and effect. If this Agreement is, for any
reason, terminated prior to the consummation of the Merger, the Confidentiality
Agreement shall continue in full force and effect in all respects.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. (a) ISI and Ispat shall use their respective reasonable efforts to
obtain (or cause ISC, the Subsidiaries and the Ventures to obtain) all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials that may be or become necessary for its execution and delivery of,
and the performance of their respective obligations pursuant to, this Agreement
and each will cooperate fully with the other in promptly seeking to obtain all
such authorizations, consents, orders and approvals. Each party hereto agrees to
supply as promptly as practicable to the appropriate Governmental Authorities
any additional information and documentary material that may be requested
pursuant to the HSR Act.
45
(b) ISI shall or shall cause ISC, the Subsidiaries and the Ventures to
give promptly such notices to third parties and use its or their reasonable
efforts to obtain such third party consents as may be necessary or desirable in
connection with the transactions contemplated by this Agreement. Ispat shall
cooperate and use all reasonable efforts to assist ISI in giving such notices
and obtaining such consents; provided, however, that, except as provided in
Section 5.09(b), Ispat shall have no obligation to give any guarantee or other
consideration of any nature in connection with any such notice or consent or to
consent to any change in the terms of any agreement or arrangement which Ispat
in its sole discretion may deem adverse to the interests of Ispat, ISC, any
Subsidiary, any Venture or the Business.
(c) ISI and Ispat agree that, in the event any consent, approval or
authorization necessary or desirable to preserve for the Business, ISC, any
Subsidiary or any Venture any right or benefit under any lease, license,
contract, commitment or other agreement or arrangement to which ISI, ISC, any
Subsidiary or any Venture is a party is not obtained prior to the Closing, ISI
will, subsequent to the Closing, cooperate with Ispat and ISC in attempting to
obtain such consent, approval or authorization as promptly thereafter as
practicable. If such consent, approval or authorization cannot be obtained, ISI
shall use all reasonable efforts to provide ISC, such Subsidiary or such
Venture, as the case may be, with the rights and benefits of the affected lease,
license, contract, commitment or other agreement or arrangement for the term of
such lease, license, contract or other agreement or arrangement, and, if ISI
provides such rights and benefits, ISC, such Subsidiary or such Venture, as the
case may be, shall assume the obligations and burdens thereunder.
SECTION 5.05. Notice of Developments. Prior to the Closing, ISI shall
promptly notify Ispat in writing of (i) all events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement which could result
in any material breach of a representation or warranty or covenant of ISI or ISC
in this Agreement that is not qualified as to materiality or any breach of a
representation or warranty or covenant of ISI or ISC in this Agreement that is
already qualified as to materiality or which could have the effect of making any
representation or warranty of ISI or ISC in this Agreement that is not qualified
as to materiality untrue or incorrect in any material respect or any
representation or warranty that is already qualified by materiality untrue or
incorrect in any respect and (ii) all other material developments affecting the
Assets, Liabilities, business, financial condition, operations, results of
operations or customer, supplier or employee relations of ISC, any Subsidiary,
any Venture or the Business.
SECTION 5.06. No Solicitation or Negotiation. (a) ISI agrees that
between the date of this Agreement and the earlier of (i) the effective Time and
(ii) the termination of this Agreement, none of ISI, ISC, the Subsidiaries, the
Ventures nor any of their respective Affiliates, officers, directors,
representatives or agents will (a) solicit, initiate, encourage or accept any
other proposals or offers from any Person relating to any Acquisition Proposal
or (b) participate in any discussions, conversations, negotiations and other
communications regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate in any way, assist or
46
participate in, facilitate or encourage any effort or attempt by any other
Person to seek to consummate any Acquisition Proposal. ISI immediately shall
cease and cause to be terminated all existing discussions, conversations,
negotiations and other communications with any Persons conducted heretofore with
respect to any of the foregoing. ISI shall notify Ispat promptly if any inquiry
or other contact with any Person with respect to an Acquisition Proposal is made
and shall indicate the identity of the Person making such Acquisition Proposal,
inquiry or contact and the terms and conditions of such Acquisition Proposal,
inquiry or other contact. ISI agrees during the period provided for in the first
sentence of this Section 5.06 not to, and to cause ISC, each Subsidiary and each
Venture not to, without the prior written consent of Ispat, release any Person
from, or waive any provision of, any confidentiality or standstill agreement to
which ISI, ISC, any Subsidiary or any Venture is a party which would be
applicable to an Acquisition Proposal.
(b) Except as expressly permitted by this Section 5.06, neither the
Board of Directors of ISI nor any committee thereof shall (i) approve or
recommend, or propose publicly to approve or recommend, any Acquisition Proposal
or (ii) cause ISI or ISC to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement with respect to any
Acquisition Proposal.
(c) "Acquisition Proposal" means, other than the transactions
contemplated by this Agreement, (a) any proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of all or a majority
of the assets of ISC, its Subsidiaries and the Ventures or more than 50% of the
outstanding capital stock of ISC, or any merger, consolidation, business
combination, sale of all or substantially all of the assets of ISC, the
Subsidiaries and the Ventures or any similar transaction involving ISC or (b)
(i) any proposal or offer from any person or entity relating to any direct or
indirect acquisition or purchase of more than 50% of the outstanding common
stock of ISI or more than 50% of the assets of ISI and its subsidiaries, (ii)
any tender offer that if consummated would result in any person or entity
beneficially owning more than 50% of the outstanding common stock of ISI or
(iii) any merger, consolidation, business combination or similar transaction
involving ISI, as a result of which in any of the situations of (b)(i), (ii) or
(iii) the transactions contemplated by this Agreement are not consummated.
SECTION 5.07. Use of Intellectual Property. Except as set forth in
Section 5.07 of the Disclosure Schedule, from and after the Closing, neither ISI
nor any of its Affiliates shall use any of the Intellectual Property used or
held for use in the Business. From and after the Effective Time, Ispat will have
the right to use the name "Inland Steel Company", and variations thereof, and
ISI acknowledges that it shall have no rights in, and agrees that it shall not
use, the name "Inland Steel Company" or any variation thereof for any reason.
ISI shall cause the name of each of its Subsidiaries (other than ISC and its
subsidiaries) that includes the word "Inland" or any variation thereof to be
changed prior to the Closing so as not to include the word "Inland" or any
variation thereof. ISI shall change its name as soon as practicable after the
Effective Time, but no later than four months after the Effective Time so that
the word "Inland" is not included in the new name; provided, however, that
during the period until the earlier of such time as ISI changes
47
its name or the expiration of such four month period, ISI may continue to use
the name "Inland Steel Industries, Inc." for general corporate and holding
company purposes; provided further that ISI will not hold itself out to the
public (other than its stockholders), under the "Inland" name, and will conduct
no advertising, marketing or selling efforts under the "Inland" name; provided,
further, that Ispat will not unreasonably withhold its consent to a reasonable
extension of such four-month period if promptly after the Effective Time ISI
commences action reasonably calculated to result in its name being changed as
promptly as practicable thereafter.
SECTION 5.08. Non-Competition. (a) For a period of five years after
the Closing (the "Restricted Period"), ISI and its Subsidiaries shall not engage
in any business anywhere in the world that competes in any material respect with
the Business; provided, however, that:
(i) Nothing contained in this Section 5.08(a) shall relate to or
otherwise restrict the existing steel service, distribution and materials
processing business of Ryerson Xxxx, Inc., a subsidiary of ISI, and the
existing Subsidiaries of Ryerson Xxxx, Inc., or the existing business of
Magnetics International, Inc. or Inland International, Inc.;
(ii) Nothing contained in this Section 5.08(a) shall preclude ISI,
Ryerson Xxxx, Inc., its subsidiaries, Magnetics International, Inc. or
Inland International Inc., from expanding their existing business; provided
that no such expansion shall include, directly or through ownership of an
equity interest in any Person, any business engaged in steel manufacturing
or any steel manufacturing assets, except that ISI may acquire any interest
in any business (an "Acquired ISI Business") some or all of the operations
of which would otherwise violate the foregoing provision (the "Competing
ISI Operations") so long as (x) the annual revenues attributable to the
Competing ISI Operations do not exceed 20% of the annual revenues of the
Acquired ISI Business, or (y) if they do, the acquiring entity divests
itself of the Competing ISI Operations as soon as practicable, but no later
than 12 months after such acquisition; and
(iii) For the purposes of this Section 5.08(a), ownership of
securities having no more than two percent of the outstanding voting power
of any company which are listed on any national securities exchange or
traded actively in the national over-the-counter market shall not be deemed
to be in violation of this Section 5.08(a) so long as the Person owning
such securities has no other connection or relationship with such company.
For purposes of this Section 5.08(a), "steel manufacturing" means
manufacturing of steel from coke and ore until finished long and flat steel
products are produced, of the type currently produced by ISC on the date hereof.
(b) As a separate and independent covenant, during the Restricted
Period, ISI agrees that it shall not in any way, directly or indirectly, induce
or attempt to induce any officers,
48
employees, representatives or agents of Ispat or any Affiliate (including ISC or
any Subsidiary or Venture) thereof to leave their employer or violate the term
of their contracts, or any employment agreements, with such party; provided,
however, that this Section 5.08(b) shall not restrict either party from placing
general advertisements soliciting employees or from responding to unsolicited
approaches by such Persons.
(c) The Restricted Period shall be extended by the length of any
period during which ISI is in breach of the terms of this Section 5.08.
(d) ISI acknowledges that the covenants of ISI set forth in this
Section 5.08 are an essential element of this Agreement and that, but for the
agreement of ISI to comply with these covenants, Ispat would not have entered
into this Agreement. ISI acknowledges that this Section 5.08 constitutes an
independent covenant and shall not be affected by performance or nonperformance
of any other provision of this Agreement by Ispat. ISI has independently
consulted with its counsel and after such consultation agrees that the covenants
set forth in this Section 5.08 are reasonable and proper.
SECTION 5.09. Release of Obligations. (a) ISI covenants and agrees, on
or prior to the Closing, to execute and deliver to ISC, for the benefit of ISC,
each Subsidiary and each Venture, a general release and discharge, in form and
substance satisfactory to Ispat, releasing and discharging ISC, each Subsidiary
and each Venture from any and all obligations to indemnify ISI or otherwise hold
it harmless pursuant to any agreement or other arrangement entered into prior to
the Effective Time, except as otherwise provided in this Agreement.
(b) Ispat covenants and agrees, on or prior to the Effective Time, to
execute and deliver to ISI a general release and discharge, in form and in
substance satisfactory to ISI, releasing and discharging ISI from any and all
obligations to guaranty the payment or performance by ISC, any Subsidiary or any
Venture of any liability or obligation, or to indemnify ISC, any Subsidiary or
any Venture under any agreement or other arrangement entered into prior to the
Effective Time, except as otherwise provided in this Agreement.
SECTION 5.10. Certain Obligations. Neither ISI nor any of its material
subsidiaries shall enter into or permit any sale of all or substantially all the
assets of ISI or any of its material subsidiaries, any acquisition of a majority
of the capital stock of ISI or any of its material subsidiaries by any Person,
or any merger, consolidation, reorganization, spin-off, split-up,
recapitalization or similar transaction involving ISI or any of its material
subsidiaries, or pay or declare any extraordinary dividend (other than any
distribution by ISI of the proceeds of the transactions contemplated by this
Agreement) (each, an "ISI Monetization Transaction") without the express written
consent of Ispat, except where either (A) (i) ISI is the surviving company of
such ISI Monetization Transaction and (ii) the net worth of ISI immediately
after consummation of such ISI Monetization Transaction would be equal to or
greater than the net worth of ISI immediately prior to such ISI Monetization
Transaction or (B) both (x) the purchaser or other
49
acquiring entity in such ISI Monetization Transaction expressly assumes the
obligations of ISI under this Agreement and (y) (i) the net worth of such
purchaser or acquiring entity immediately after consummation of such ISI
Monetization Transaction would be equal to or greater than the net worth of ISI
immediately prior to such ISI Monetization Transaction or (ii) if ISI has
previously been combined with any of its subsidiaries, the net worth immediately
after such ISI Monetization Transaction of such ISI subsidiary that has
previously assumed the obligations of ISI under this Agreement that is entering
into such ISI Monetization Transaction would be equal to or greater than the net
worth of such ISI subsidiary immediately prior to such ISI Monetization
Transaction. ISI shall in any event use its reasonable efforts to ensure that
the counterparty or counterparties in any ISI Monetization Transaction expressly
assume ISI's indemnification obligations under this Agreement.
SECTION 5.11. ISC Directors and Officers. Ispat and ISC confirm and
agree that (a) the directors and officers of ISC, past and present, will
continue to be fully indemnified, and have legal expenses advanced, after the
Closing, to the fullest extent permitted by the Certificate of Incorporation and
By-laws of ISC as in effect at the Effective Time and (b) directors' and
officers' insurance will be maintained at or above current levels after the
Closing for a period of three years for the directors and officers of ISC in
office on the date of this Agreement; provided, however, that in no event shall
Ispat or ISC be required to expend in any one year an amount in excess of
$2,000,000; and provided further that if the annual premiums of such insurance
coverage exceed such amount, Ispat or ISC shall be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding such amount.
SECTION 5.12. Headquarters. Prior to the Closing, ISI will enter into
a sublease with ISC for the portion of the property located at 00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx that is occupied by ISC employees on the date hereof.
The rent and other charges payable under such sublease shall consist of those
amounts set forth in Section 5.12 of the Disclosure Schedule plus such other
amounts, if any, that Ispat and ISI shall mutually agree.
SECTION 5.13. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable Law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
50
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employment of Certain ISI Employees; Assumption of
Certain Agreements. (a) Prior to, or effective as of, the Effective Time, ISC
shall (i) employ the ISI employees listed in a schedule to be agreed between ISI
and Ispat prior to the Effective Time (collectively, the "ISI Transferred
Employees") in the positions indicated in such schedule, (ii) assume the change
in control agreements relating to such employees, and (iii) assume all salary,
severance and employee benefit obligations with respect to such employees.
Except as specifically provided in the preceding sentence, each ISI Transferred
Employee shall be treated in a manner consistent with persons who were employed
by ISC immediately prior to the Effective Time.
(b) Prior to, but effective as of, the Effective Time, ISC shall
assume the change in control agreements listed on Section 6.01(b) of the
Disclosure Schedule.
(c) Subject to Ispat and Xx. Xxxxxx X. Xxxxxxx entering into an
employment agreement on or prior to the Effective Time, Ispat shall retain Xx.
Xxxxxxx as Chief Executive Officer of ISC and shall assign him responsibility
for Ispat's North American steel operations.
SECTION 6.02. Pension Plan. Prior to, or effective as of, the
Effective Time, ISI shall establish a new trust which shall form a part of the
ISI Pension Plan (the "New Pension Trust") and, at the time the New Pension
Trust is established, ISI shall cause the trustee of the ISI Pension Trust to
transfer to the trustee of the New Pension Trust the assets of the ISI Pension
Trust attributable to the ISI Pension Plan; provided, however, that any assets
which cannot be reasonably transferred as of the date the New Pension Trust is
established shall be transferred as soon as practicable thereafter. The assets
to be transferred from the ISI Pension Trust to the New Pension Trust shall
consist of cash and such other property as mutually agreed between ISI and
Ispat; provided, however, that if ISI and Ispat cannot agree on the assets to be
transferred, a pro rata portion of each class or category of the assets held in
the ISI Pension Trust shall be transferred to the New Pension Trust. For periods
after the establishment of the New Pension Trust, the ISI Pension Trust shall no
longer form a part of the ISI Pension Plan. Prior to, or effective as of, the
Effective Time but after the transfer of assets from the ISI Pension Trust to
the New Pension Trust, ISI shall take all actions that it deems necessary or
desirable to transfer to an ISI Non-Transferred Employee Defined Benefit Plan
the assets and liabilities under the ISI Pension Plan attributable to the
accrued benefits of all ISI Employees other than ISI Transferred Employees and,
for periods thereafter, ISI Employees other than ISI Transferred Employees shall
not be eligible to participate in the ISI Pension Plan. The transfer of assets
and liabilities from the ISI Pension Plan to the ISI Non-Transferred Employee
Defined Benefit Plan shall be made in accordance with Section 414(l) of the Code
and applicable Treasury regulations thereunder, as determined by an actuary
selected by ISI and agreed to by an actuary selected by Ispat. In the
51
event that the actuaries selected by ISI and Ispat cannot agree on the
calculation required under this Section 6.02, an independent actuary shall be
selected by the parties (at the shared expense of ISI and Ispat) and such
actuary's determination as to the calculation shall be binding on the parties.
Prior to, or effective as of, the Effective Time, ISC shall assume sponsorship
of, and all of ISI's rights, powers, duties, liabilities and obligations under
and with respect to, the ISI Pension Plan.
SECTION 6.03. Thrift Plan. Prior to, or effective as of, the Effective
Time, ISI shall cause ISC to establish a defined contribution plan (as defined
in section 3(34) of ERISA) (the "New Defined Contribution Plan") for the benefit
of ISC Employees who, as of the Closing Date, have account balances under the
ISI Thrift Plan (including the employee stock ownership ("ESOP") component
thereof). The New Defined Contribution Plan shall be substantially similar in
all material respects to the ISI Thrift Plan; provided, however, that the New
Defined Contribution Plan shall not constitute an ESOP. ISC Employees shall not
be eligible to participate in the ISI Thrift Plan for periods after the
establishment of the New Defined Contribution Plan. Prior to, or effective as
of, the Effective Time, the assets of the ISI Thrift Plan attributable to the
accrued benefits of the ISC Employees shall be transferred to the trustee of the
New Defined Contribution Plan. The transfer of assets and liabilities from the
ISI Thrift Plan to the New Defined Contribution Plan shall conform in all
respects with Section 411(d)(6) and Section 414(l) of the Code and the assets to
be transferred shall consist of the assets held in the trust which form a part
of the ISI Thrift Plan in which the account balances of ISC Employees are
invested, other than Series E Preferred Stock of ISI, and including, but not
limited to, promissory notes evidencing outstanding loans to ISC Employees.
SECTION 6.04. Other Employee Plans. (a) Effective as of the Effective
Time, ISI Employees shall cease to be eligible to participate in all Plans set
forth in Section 6.04(a) of the Disclosure Schedule (the "ISC Plans") and, prior
to, but effective as of, the Effective Time, ISI shall cause ISC to assume
sponsorship of, and all of ISI's rights, powers, duties, liabilities and
obligations under and with respect to, the ISC Plans.
(b) Section 6.04(b) of the Disclosure Schedule sets forth, to the
extent applicable, a complete and correct list of all insurance policies of any
kind or nature whatsoever currently in force with respect to each ISC Plan, and
each contract with any service provider, third party administrator, vendor or
other person who provides material services in connection with the operation or
administration of such ISC Plan. With respect to each such ISC Plan, ISI shall
use its best efforts to cause to be assigned to ISC such policies of insurance
or other contracts as Ispat designates in writing and as pertain to the funding
of benefits in respect of ISC Employees under any such ISC Plan, or in any case
where such assignment is commercially impracticable, ISI shall cooperate with
Ispat in arranging for the issuance of new or modified policies or contracts.
52
SECTION 6.05. Continuation of Current Bargaining Agreements,
Employment and Benefits. (a) Prior to or simultaneously with the Effective Time,
Ispat shall have caused ISC to comply with all provisions of Appendix U, the
Memorandum of Understanding on Successorship, of that certain collective
bargaining agreement dated August 1, 1993 between United Steelworkers of America
and ISC and the counterpart provisions, if any, of those collective bargaining
agreements between United Steelworkers of America, Great Lakes Xxxxxx Local 5000
and ISC; between American Maritime Officers and ISC; between United Steelworkers
of America and Inland Steel Mining; between United Steelworkers of America and
I/N Tek and I/N Kote; and between Bricklayers Local No. 6 and ISC. Prior to or
simultaneously with the Effective Time, Ispat shall have required ISC, the
Subsidiaries and Ventures to continue to recognize those labor organizations
that currently represent employees of ISC, the Subsidiaries and the Ventures
("Labor Organizations") and to honor the collective bargaining agreements to
which they are bound, to the extent, if any, such agreements are modified as a
result of the negotiations referred to in Section 6.05(b) below ("Collective
Bargaining Agreements") subsequent to the Effective Time.
(b) Prior to or simultaneously with the Effective Time, Ispat shall
have caused ISC, the Subsidiaries and the Ventures to negotiate in good faith
with the Labor Organizations to modify their Collective Bargaining Agreements to
the extent necessary to ensure the continuation of the terms and conditions of
employment set forth in the Collective Bargaining Agreements, including, without
limitation, the recognition of responsibility for certain benefits now provided
by ISI, the methods of determining profit sharing entitlement and payment, and
the nomination of an individual designated by the United Steelworkers of America
to the ISC Board of Directors. If the Labor Organizations have not entered into
modifications of their Collective Bargaining Agreements regarding successorship
and other appropriate matters prior to the Effective Time, Ispat shall have
entered into, as of the Effective Time, a unilateral binding commitment to the
Labor Organizations to cause to occur the provisions of Section 6.05(a) above.
(c) Until at least the respective termination dates of the Collective
Bargaining Agreements, Ispat shall cause ISC, the Subsidiaries and Ventures to
operate in the same business in which ISC, the Subsidiaries and Ventures
previously operated.
(d) Subject to termination for cause or layoff in accordance with the
Collective Bargaining Agreements, Ispat shall cause ISC and the Subsidiaries,
and shall use its best efforts to cause the Ventures, to continue the employment
of individuals who are employed with the bargaining units covered by the
Collective Bargaining Agreements immediately prior to the Effective Time, under
the terms and conditions of the Collective Bargaining Agreements, and,
subsequent to the Effective Time, to recognize for all purposes, including, but
not limited to, benefit eligibility, benefit vesting, benefit accrual and
seniority, the past service with ISC, the Subsidiaries and the Ventures, as the
case may be, of individuals employed within the bargaining units.
53
(e) Ispat shall, from the Effective Time through December 31, 1998,
cause ISC and the Subsidiaries, and shall use its best efforts to cause the
Ventures, to provide employees of ISC, the Subsidiaries and the Ventures who are
not employed with bargaining units covered by the Collective Bargaining
Agreements, with terms and conditions of employment, including, but not limited
to, compensation levels, bonus opportunities and employee benefit plans and
programs that are not materially less favorable in the aggregate than the terms
and conditions of employment of such ISC, Subsidiary and Venture employees
immediately prior to the Effective Time, and, subsequent to the Effective Time,
to recognize for all purposes, including, but not limited to, benefit
eligibility, benefit vesting, benefit accrual and length of service, the past
service with ISI, ISC, the Subsidiaries, the Ventures, and, if applicable
affiliates of ISI other than the Subsidiaries and the Ventures, as the case may
be, of individuals not employed with the bargaining units; provided, however,
that nothing in this Section 6.05(e) shall restrict the ability of Ispat, ISI,
ISC, the Subsidiaries or the Ventures to terminate the employment of any
employees who are not employed within bargaining units covered by the Collective
Bargaining Agreements subsequent to the Effective Time.
(f) Ispat and ISI agree that no action, condition or circumstance
contemplated by this Agreement is presently intended to result in a lay off or
shut down, closure or discontinuance of a plant, department or subdivision
thereof, or any similar event, or the termination of any employee.
SECTION 6.06. No Third Party Beneficiaries. It is understood and
agreed among the parties hereto that all provisions contained in this Agreement
with respect to employee benefit plans or employee compensation are included for
the sole benefit of the respective parties hereto and do not and shall not
create any right in any other person, including, but not limited to, any ISC
Employee or ISI Employee, any participant in any benefit or compensation plan or
any beneficiary thereof.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity. (a) ISI agrees to indemnify and hold harmless
ISC and each Subsidiary against the following Taxes and, except as otherwise
provided in Section 7.04, against any loss, damage, liability or expense,
including reasonable fees for attorneys and other outside consultants, incurred
in contesting or otherwise in connection with any such Taxes: (i) Taxes imposed
on ISC or any Subsidiary with respect to taxable periods of such Person ending
at or before the Closing Date (including, for the avoidance of doubt, Taxes
imposed on ISC or any Subsidiary resulting from the making of an election under
Section 338(h)(10) of the Code or any similar election under applicable state or
local laws); (ii) with respect to taxable periods beginning before the Closing
Date and ending after the Closing Date,
54
Taxes imposed on ISC or any Subsidiary which are allocable, pursuant to Section
7.01(b), to the portion of such period ending at the Closing Date; (iii) Taxes
imposed on any member of any affiliated group with which any of ISC and the
Subsidiaries file or have filed a Return on a consolidated or combined basis for
a taxable period ending at or before the Closing Date or that includes the
Closing Date (including, without limitation, by reason of the application of
Treasury Regulation Section 1.1502-6 or any similar provision of state, local or
foreign tax law or regulation); and (iv) Taxes imposed on ISC or any Subsidiary
as a result of any breach of warranty or misrepresentation under Section 3.22;
provided, however, that the amount of Taxes for which ISI may be liable under
this Section 7.01 shall be net of any reserves or allowances for such Taxes on
the Closing Balance Sheet. ISC shall be responsible for Taxes and associated
expenses not allocated to ISI pursuant to the first sentence of this Section
7.01(a). To the extent the provisions of this Section 7.01(a) are inconsistent
with the provisions of Section 7.08, the latter shall govern. Notwithstanding
any other provision of this Agreement to the contrary, ISI will not indemnify
ISC for any legal or other consulting fees with respect to a tax deficiency
asserted to be the liability of ISI pursuant to this Agreement unless Ispat has
requested in writing that ISI confirm that ISI is liable under this Agreement in
the event that a tax deficiency is determined to be due and ISI refuses to
provide such confirmation.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax that is allocable to the portion of the period ending on
the Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts or (y) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as provided
under Section 7.07), deemed equal to the amount which would be payable if
the taxable year ended at the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect to
the assets of ISC or any Subsidiary, or otherwise measured by the level of
any item, deemed to be the amount of such Taxes for the entire period (or,
in the case of such Taxes determined on an arrears basis, the amount of
such Taxes for the immediately preceding period), multiplied by a fraction
the numerator of which is the number of calendar days in the period ending
at the Closing Date and the denominator of which is the number of calendar
days in the entire period.
SECTION 7.02. Returns and Payments. (a) From the date of this
Agreement through and after the Closing Date, ISI shall prepare and file or
otherwise furnish in proper form to the appropriate Governmental Authority (or
cause to be prepared and filed or so furnished) in a timely manner all Tax
returns, reports and forms ("Returns") relating to ISC and the Subsidiaries that
are due on or before or relate to any taxable period ending at or before the
Closing Date (and ISC shall do the same with respect to any taxable period
ending after the Closing Date). Returns
55
of ISC and the Subsidiaries not yet filed for any taxable period that begins
before the Closing Date shall be prepared in a manner consistent with past
practices employed with respect to ISC and the Subsidiaries (except in the case
of an intervening change in law). With respect to any Return required to be
filed by ISI or ISC with respect to ISC and the Subsidiaries and as to which an
amount of Tax is allocable to the other party under Section 7.01(b), the filing
party shall provide the other party and its authorized representatives with a
copy of such completed Return and a statement indicating the amount of Tax shown
on such Return that is allocable to such other party pursuant to Section
7.01(b), together with appropriate supporting information and schedules at least
20 Business Days prior to the due date (including any extension thereof) for the
filing of such Return, and such other party and its authorized representatives
shall have the right to review and comment on such Return and statement prior to
the filing of such Return. In the event that ISI pays any Taxes for which a
reserve or allowance was made on the Closing Balance Sheet, ISC within 10 days
of a receipt of proof of such payment shall reimburse ISI for such payment.
(b) ISI shall pay or cause to be paid when due and payable all Taxes
with respect to ISC and the Subsidiaries for any taxable period ending at or
before the Closing Date, and ISC shall so pay or cause to be paid Taxes for any
taxable period ending after the Closing Date (subject to its right of
indemnification from ISI by the date set forth in Section 7.05 for Taxes
attributable to the portion of any Tax period that includes the Closing Date
pursuant to Sections 7.01(a) and 7.01(b)).
SECTION 7.03. Refunds. Any Tax refund (including any interest with
respect thereto) relating to ISC or any Subsidiary for any taxable period ending
at or prior to the Closing Date shall be the property of ISI, and if received by
ISC or any Subsidiary shall be paid over promptly to ISI; provided, however,
that the amount of any Tax refund to be paid to ISI pursuant to this Section
7.03 shall be net of any reserves or allowances for such Tax refund on the
Closing Balance Sheet. Notwithstanding the foregoing sentence: (i) any Tax
refund (or equivalent benefit to ISI through a reduction in Tax liability) for a
period before the Closing Date arising out of the carryback of a loss or credit
incurred by ISC or any Subsidiary in a taxable year ending after the Closing
Date shall be the property of ISC and, if received by ISI, shall be paid over
promptly to ISC; and (ii) if, and to the extent that, as of such time, if any,
as ISC shall receive a refund that would be the property of ISI and payable to
ISI under the immediately preceding sentence, Taxes have been asserted in
writing that would be required to be indemnified by ISI hereunder, all or part
of such refund up to an amount equal to 120% of such asserted Taxes shall, at
the option of ISC, be retained by ISC for satisfaction of any amounts
indemnifiable under this Article VII which have been asserted or subsequently
are asserted, until the time set forth in clause (ii) of Section 7.05 of this
Agreement with respect to any such asserted amounts (or, if earlier, expiration
of the applicable statute of limitations), at which time any balance remaining
from such retained amount after payment of any claims shall be paid to ISI.
SECTION 7.04. Contests. (a) After the Closing, ISC shall notify ISI in
writing within 10 days of receipt of any written notice of a proposed assessment
or claim in an audit or
56
administrative or judicial proceeding of any of ISC and the Subsidiaries which,
if determined adversely to the taxpayer, would be grounds for indemnification
under this Article VII; provided, however, that a failure to give such notice
will not affect ISC's right to indemnification under this Article VII except to
the extent, if any, that, but for such failure, ISI could have avoided all or a
portion of the Tax liability in question.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, provided that ISI
acknowledges in writing its liability under this Agreement to hold ISC and the
Subsidiaries harmless against the full amount of any adjustment which may be
made as a result of such audit or proceeding that relates to periods ending at
or before the Closing Date (or, in the case of any taxable year that includes
the Closing Date, against an adjustment allocable under Section 7.01(b) to the
portion of such year ending on or before the Closing Date), ISI shall have the
right at its expense to participate in and control the conduct of such audit or
proceeding but only to the extent that such audit or proceeding relates solely
to a potential adjustment for which ISI has acknowledged its liability; ISC also
may participate in any such audit or proceeding and, if ISI does not assume the
defense of any such audit or proceeding, ISC may defend the same in such manner
as it may deem appropriate, including, but not limited to, settling such audit
or proceeding after giving five days' prior written notice to ISI setting forth
the terms and conditions of settlement. In the event that issues relating to a
potential adjustment for which ISI has acknowledged its liability are required
to be dealt with in the same proceeding as separate issues relating to a
potential adjustment for which ISC would be liable, ISC shall have the right, at
its expense, to control the audit or proceeding with respect to the latter
issues.
(c) With respect to issues relating to a potential adjustment for
which both ISI (as evidenced by its acknowledgment under this Section 7.04) and
ISC or any Subsidiary could be liable, (i) each party may participate in the
audit or proceeding and (ii) the audit or proceeding shall be controlled by that
party which would bear the burden of the greater portion of the sum of the
adjustment and any corresponding adjustments that may reasonably be anticipated
for future Tax periods. The principle set forth in the immediately preceding
sentence shall govern also for purposes of deciding any issue that must be
decided jointly (including, without limitation, choice of judicial forum) in
situations in which separate issues are otherwise controlled under this Article
VII by ISI and ISC.
(d) Neither ISI nor ISC shall enter into any compromise or agree to
settle any claim pursuant to any Tax audit or proceeding which would adversely
affect the other party for such year or a subsequent year without the written
consent of the other party, which consent may not be unreasonably withheld;
provided, however, that nothing herein will require ISI to seek ISC's agreement
concerning the resolution of disputes about the value of ISC's property for
property tax purposes for periods prior to the Effective Date. ISI and ISC agree
to cooperate in the defense against or compromise of any claim in any audit or
proceeding.
57
SECTION 7.05. Time of Payment. Payment by ISI of any amounts due under
this Article VII in respect of Taxes shall be made (i) at least three Business
Days before the due date of the applicable estimated or final Return required to
be filed by ISC on which is required to be reported income for a period ending
after the Closing Date for which ISI is responsible under Sections 7.01(a) and
7.01(b) without regard to whether the Return shows overall net income or loss
for such period, and (ii) within three Business Days following an agreement
between ISC and ISI that an indemnity amount is payable, an assessment of a Tax
by a taxing authority, or a "determination" as defined in Section 1313(a) of the
Code. If liability under this Article VII is in respect of costs or expenses
other than Taxes, payment by ISI of any amounts due under this Article VII shall
be made within five Business Days after the date when ISI has been notified by
ISC that ISI has a liability for a determinable amount under this Article VII
and is provided with calculations or other materials supporting such liability.
SECTION 7.06. Cooperation and Exchange of Information. ISC and ISI
will provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Return, amended Return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, participating in or conducting any audit or other proceeding in respect
of Taxes or making representations to or furnishing information to parties
subsequently desiring to purchase any of ISC or the Subsidiaries or any part of
the Business from Ispat. Such cooperation and information shall include
providing copies of relevant Returns or portions thereof, together with
accompanying schedules, related work papers and documents relating to rulings or
other determinations by Tax authorities. ISI shall make its employees available
on a basis mutually convenient to both parties to provide explanations of any
documents or information provided hereunder. Each of ISC and ISI shall retain
all Returns, schedules and work papers, records and other documents in its
possession relating to Tax matters of ISC and the Subsidiaries for each taxable
period first ending after the Closing Date and for all prior taxable periods
until the later of (i) the expiration of the statute of limitations of the
taxable periods to which such Returns and other documents relate, without regard
to extensions except to the extent notified by the other party in writing of
such extensions for the respective Tax periods, or (ii) eight years following
the due date (without extension) for such Returns. Any information obtained
under this Section 7.06 shall be kept confidential except as may be otherwise
necessary in connection with the filing of Returns or claims for refund or in
conducting an audit or other proceeding.
SECTION 7.07. Conveyance Taxes. ISI shall be liable for and shall hold
ISC and each of the Subsidiaries harmless against any real property transfer or
gains, sales, use, transfer, value added, stock transfer, and stamp taxes, any
transfer, recording, registration, and other fees, and any similar Taxes which
become payable in connection with the transactions contemplated by this
Agreement, and shall file such applications and documents as shall permit any
such Tax to be assessed and paid on or prior to the Closing Date in accordance
with any available pre-sale filing procedure. ISC shall execute and deliver all
instruments and certificates necessary to enable ISI to comply with the
foregoing.
58
SECTION 7.08. Section 338(h)(10) Election. (a) ISI, Ispat and any
subsidiary of Ispat that might be deemed to be a purchasing corporation for
purposes of Code Section 338 shall jointly make a deemed asset sale election
described under Code Section 338(h)(10) (the "Section 338(h)(10) Election") and
shall make all corresponding or similar elections under applicable state or
local law with respect to ISC and each Subsidiary in connection with the
qualified stock purchase of the stock of ISC by Ispat hereunder and deemed
purchase of the stock of the Subsidiaries (collectively, "Elections"). Ispat and
ISI shall file all such Elections on a timely basis and comply with all rules
and regulations applicable to such Elections. Ispat and ISI shall cooperate with
each other to take all actions necessary and appropriate (including filing such
forms, returns, elections, schedules and documents on a joint or separate basis
as may be required) to effect and preserve timely Elections in accordance with
applicable Treasury Regulations under Section 338 and comparable state or local
laws.
(b) For the purpose of making the Section 338(h)(10) Election, Ispat
shall compute and allocate the "modified aggregate deemed sales price" among the
assets of ISC and each Subsidiary in accordance with the provisions of Section
338 and the Treasury Regulations thereunder (the "Allocation"), and shall
deliver to ISI the Allocation within 120 days after the Closing for ISI's review
and comment. ISI may dispute amounts set forth on the Allocation within 30
Business Days of delivery of the Allocation by Ispat to ISI. In the event of
such a dispute, the parties along with the counsel to ISI or ISI's Accountants
and counsel to Ispat or Ispat's Accountants shall attempt in good faith to
resolve such dispute and any resolution shall be final and binding on them. If
the parties cannot resolve any such dispute within 30 Business Days after ISI
notifies Ispat that it does not agree with the computation and calculation of
the modified aggregate sales price, the items remaining in dispute shall be
submitted to an independent accounting firm of international reputation selected
by, and mutually acceptable to ISI and Ispat or, if they cannot agree, ISI's
Accountants and Ispat's Accountants shall select such an independent firm. If
the independent accounting firm so selected determines that the items remaining
in dispute are not materially incorrect, then Ispat and ISI shall be bound by
the Allocation as prepared by Ispat. If the independent accounting firm so
selected determines that one or more of the items remaining in dispute are
materially incorrect, then ISI and Ispat shall be bound by the allocation of
such items as determined by the independent accounting firm. The independent
accounting firm shall make any such determination within 30 Business Days after
submission of the remaining disputed items. Any subsequent adjustments to the
modified aggregate deemed sales price shall be reflected in the Allocation in a
manner consistent with Section 338 of the Code and the Treasury Regulations
promulgated thereunder. ISI shall calculate gain or loss, if any, resulting from
the Elections and Ispat shall calculate tax basis in ISC's and the Subsidiaries'
assets in a manner consistent with the Allocation (as determined pursuant to the
preceding four sentences) and neither party nor ISC nor any Subsidiary shall
take any position inconsistent with the Allocation in any tax return, schedule,
estimate or otherwise; provided, however, that ISI shall be entitled to subtract
its selling costs from the "modified aggregate deemed sales price" for purposes
of calculating gain or loss and Ispat shall be entitled to add its acquisition
costs to the "adjusted grossed-up basis" of the assets of ISC and the
59
Subsidiaries for purposes of determining the basis of ISC's and the
Subsidiaries' assets. Ispat will not make an election under Section 338(g) of
the Code with respect to the sale of the stock of ISC and the Subsidiaries
hereunder except in connection with the Section 338(h)(10) Election that will be
made by Ispat jointly with ISI.
(c) The election to treat the transactions contemplated by this
Agreement as an asset sale pursuant to Code Section 338(h)(10) is not intended
to affect and shall not affect the essential character of the transaction as a
merger in which ISC shall remain the Surviving Corporation.
SECTION 7.09. Miscellaneous. (a) The parties agree to treat all
payments made under this Article VII, under any other indemnity provision
contained in this Agreement, and for any misrepresentations or breaches of
warranties or covenants as adjustments to the Common Stock Merger Consideration
for Tax purposes and that such treatment shall govern for purposes hereof except
to the extent that the Laws of a particular jurisdiction provide otherwise, in
which case such payments shall be made in an amount sufficient to indemnify the
relevant party on an after-Tax basis.
(b) All payments payable under any tax sharing agreement or
arrangement between ISI and ISC or any Subsidiary for any taxable period ending
on or prior to the Closing Date shall be calculated on a basis consistent with
that used to date and be payable in full at the Closing Date (or a reasonable
estimate thereof, with any required adjusting payment to be payable together
with the amount, if any, paid pursuant to the Purchase Price adjustment
contained in Section 2.11(c), including interest in accordance with the
provisions thereof), notwithstanding any later time for payment set forth in any
such agreement. Any tax sharing agreement or arrangement between ISI and ISC or
any Subsidiary shall be terminated immediately prior to the Closing.
(c) Notwithstanding any provision of this Agreement to the contrary,
the obligations of ISI to indemnify and hold harmless ISC and the Subsidiaries
pursuant to this Article VII, and the representations and warranties contained
in Section 3.22, shall terminate at the close of business on the 90th day
following the expiration of the applicable statute of limitations with respect
to the Tax liabilities in question (giving effect to any waiver, mitigation or
extension thereof).
(d) From and after the date of this Agreement, ISI shall not without
the prior written consent of Ispat (which may, in its sole and absolute
discretion, withhold such consent) make, or cause or permit to be made, any Tax
election that would affect ISC or any Subsidiary.
(e) ISC shall be entitled to recover professional fees and related
costs that it may reasonably incur to enforce the provisions of this Article
VII.
60
Article VIII.
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of ISI and ISC. The
obligations of ISI and ISC to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver, at or prior to the
Effective Time, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of Ispat and Merger Sub contained in this Agreement shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects as of the Effective Time, with the same force
and effect as if made as of the Effective Time, other than such representations
and warranties as are made as of another date, which shall be true and correct
as of such date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 8.01(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects), and the covenants and
agreements contained in this Agreement to be complied with by Ispat at or before
the Effective Time shall have been complied with in all material respects, and
ISI shall have received a certificate from Ispat to such effect signed by an
executive officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the consummation of the Merger shall have expired or shall
have been terminated;
(c) No Proceeding or Litigation. No Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions;
(d) Ispat Resolutions. ISI shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of Ispat, of the
resolutions duly and validly adopted by the Board of Directors of Ispat
evidencing its authorization of the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby;
(e) Ispat Incumbency Certificate. ISI shall have received a
certificate of the Secretary or an Assistant Secretary of Ispat certifying the
names and signatures of the officers of Ispat authorized to sign this Agreement
and the other documents to be delivered hereunder;
(f) Merger Sub Resolutions. ISI shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of Merger
Sub, of the resolutions duly and validly adopted by the Board of Directors and
stockholders of Merger Sub evidencing their
61
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(g) Merger Sub Incumbency Certificate. ISI shall have received a
certificate of the Secretary or an Assistant Secretary of Merger Sub certifying
the names and signatures of the officers of Merger Sub authorized to sign this
Agreement and the other documents to be delivered hereunder;
(h) Legal Opinions. ISI shall have received from each of (i) De Brauw
Blackstone Westbroek, Netherlands counsel to Ispat, and (ii) Shearman &
Sterling, special counsel to Ispat and Merger Sub, legal opinions, addressed to
ISI and dated the date of the Closing, substantially in the form of Exhibits
8.01(h)(i) and 8.01(h)(ii), respectively;
(i) Release of Indemnity Obligations. ISI shall have received the
general release and discharge from Ispat referred to in Section 5.09(b) in form
and substance satisfactory to ISI in its sole discretion;
(j) ISI Guaranties. ISI shall have received appropriate documentation
under which Ispat is substituted for ISI under the guaranties and related
commitments described in Section 8.01(j) of the Disclosure Schedule or, if such
substitution is not obtained after reasonable efforts by the parties prior to
the Closing, Ispat otherwise provides an equivalent indemnity to ISI for the
obligations of ISI thereunder in form and substance satisfactory to ISI in its
sole discretion;
(k) PBGC. Any conditions that may have been imposed by the PBGC on the
transactions contemplated hereby shall have been resolved to the mutual
satisfaction of Ispat, ISI and the PBGC; and
(l) Transition Services. An agreement regarding transition services
shall have been entered into by ISI and Ispat reasonably satisfactory to each of
ISI and Ispat.
SECTION 8.02. Conditions to Obligations of Ispat and Merger Sub. The
obligations of Ispat and Merger Sub to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction or waiver, at or prior to
the Effective Time, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of ISI contained in this Agreement shall have been true and correct
in all material respects when made and shall be true and correct in all material
respects as of the Effective Time, with the same force and effect as if made as
of the Effective Time, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or warranty is
already qualified by
62
materiality (including, without limitation, by the use of any "Material Adverse
Effect" qualification), for purposes of determining whether this Section 8.02(a)
has been satisfied with respect to such portion of such representation or
warranty, such portion of such representation or warranty as so qualified must
be true and correct in all respects), and the covenants and agreements contained
in this Agreement to be complied with by ISI and ISC at or before the Effective
Time shall have been complied with in all material respects, and Ispat shall
have received a certificate from ISI to such effect signed by an executive
officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the consummation of the Merger shall have expired or shall
have been terminated;
(c) No Proceeding or Litigation. No Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions;
(d) ISI Resolutions. Ispat shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of ISI, of the
resolutions duly and validly adopted by the Board of Directors of ISI evidencing
its authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(e) ISI Incumbency Certificate. Ispat shall have received a
certificate of the Secretary or an Assistant Secretary of ISI certifying the
names and signatures of the officers of ISI authorized to sign this Agreement
and the other documents to be delivered hereunder;
(f) ISC Resolutions. Ispat shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of ISC, of the
resolutions duly and validly adopted by the Board of Directors and stockholders
of ISC evidencing their authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby;
(g) ISC Incumbency Certificate. Ispat shall have received a
certificate of the Secretary or an Assistant Secretary of ISC certifying the
names and signatures of the officers of ISC authorized to sign this Agreement
and the other documents to be delivered hereunder;
(h) Legal Opinions. Ispat shall have received from each of (i) the
Vice President and General Counsel of ISI and (ii) Xxxxx, Xxxxx and Xxxxx,
counsel to ISI and ISC, legal opinions, addressed to Ispat and dated the date of
the Closing, substantially in the form of Exhibits 8.02(h)(i) and 8.02(h)(ii),
respectively;
(i) Consents and Approvals. Ispat and ISI shall have received, each in
form and substance satisfactory to Ispat in its sole discretion, all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials and all third party consents which Ispat in its sole discretion
deems necessary or desirable for the consummation of the transactions
contemplated by this Agreement;
(j) Resignations of ISC's Directors. Ispat shall have received the
resignations, effective as of the Closing, of all the directors of ISC, each
Subsidiary and each Venture, except for such persons as shall have been
designated in writing prior to the Effective Time by Ispat to ISI;
(k) Organizational Documents. Ispat shall have received a copy of
(i) the Certificates of Incorporation, as amended (or similar organizational
documents), of ISC, each Subsidiary and each Venture, with respect to ISC and
each Subsidiary certified by the secretary of state of the jurisdiction in which
each such entity is incorporated or organized, as of a date not earlier than
five Business Days prior to the Closing Date and with respect to ISC, each
Subsidiary and each Venture, accompanied by a certificate of the Secretary or an
Assistant Secretary of each such entity, dated as of the Closing Date, stating
that no amendments have been made to such Certificate of Incorporation (or
similar organizational documents) since such date, and (ii) the By-laws (or
similar organizational documents) of ISC, each Subsidiary and each Venture,
certified by the Secretary or an Assistant Secretary of each such entity;
(l) Minute Books. Ispat shall have received a copy of the minute books
and stock register of ISC, each Subsidiary and each Venture, certified by their
respective Secretaries or Assistant Secretaries as of the Closing Date.
(m) Certificate of Non-Foreign Status. Ispat shall have received a
certificate from ISI (which complies with Section 1445 of the Code) of non-
foreign status executed in accordance with the provisions of the Foreign
Investment in Real Property Tax Act;
(n) Good Standing; Qualification to Do Business. Ispat shall have
received good standing certificates for ISC and for each Subsidiary from the
secretary of state of the jurisdiction in which each such entity is incorporated
or organized and from the secretary of state of each other jurisdiction in which
the properties owned or leased by ISC, any Subsidiary or any Venture, or the
operation of its business in such jurisdiction, requires ISC, any Subsidiary or
any Venture to qualify to do business as a foreign corporation, in each case
dated as of a date not earlier than five Business Days prior to the Closing Date
and accompanied by bring-down telegrams or facsimiles dated the Closing Date;
(o) Release of Indemnity Obligations. Ispat shall have received the
general release and discharge from ISI referred to in Section 5.09(a) in form
and substance satisfactory to Ispat in its sole discretion;
64
(p) No Material Adverse Effect. No event or events shall have occurred
since the Reference Balance Sheet Date, or be reasonably likely to occur, which,
individually or in the aggregate, had, have, or would have, a Material Adverse
Effect;
(q) Settlement Agreement Resolution. Any issue under the successorship
provisions in any applicable agreement with USWA shall have been satisfactorily
resolved in the sole discretion of Ispat;
(r) Joint Venture Arrangements. The put and call and other change of
control provisions contained in the Tek Agreements and the Kote Agreements shall
have been waived by Nippon Steel Corporation with respect to the Merger, and
there shall have been no changes to the Tek Agreements or the Kote Agreements or
the relationships created thereby and the rights and benefits to ISC, its
Subsidiaries and the Ventures under all such agreements shall be in full force
and effect at the Effective Time;
(s) PBGC. Any conditions that may have been imposed by the PBGC on the
transactions contemplated hereby shall have been resolved to the mutual
satisfaction of Ispat, ISI and the PBGC;
(t) Shipping Vessels. Prior to the Effective Time, ISC shall have
transferred the title of each of the U.S. vessels "Xxxxxx X. Block", "Xxxxxxx
Xxxxx" and "Xxxxxx X. Xxxxxxx" in a manner acceptable to Ispat in its sole
discretion such that Ispat and ISC are permitted to continue using such shipping
vessels following the Closing in the Business;
(u) Lease. ISI shall have entered into the sublease described in
Section 5.12; and
(v) Transition Services. An agreement regarding transition services
shall have been entered into by ISI and Ispat reasonably satisfactory to each of
ISI and Ispat.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. The
representations and warranties of ISI contained in this Agreement shall survive
the Closing until March 31, 2000; provided, however, that (a) the
representations and warranties dealing with Tax matters shall survive until 90
days after the expiration of the applicable statute of limitations period, (b)
the representations and warranties in Section 3.14 shall survive the Closing
until the fifth anniversary of the Effective Time and (c) the representations
and warranties contained in Sections 3.01, 3.02, 3.03, 3.04 and 3.18 shall
survive the Closing until 90 days after the expiration of the applicable
65
statute of limitations period. Neither the period of survival nor the liability
of ISI with respect to ISI's representations and warranties shall be reduced by
any investigation made at any time by or on behalf of Ispat. If written notice
of a claim has been given prior to the expiration of the applicable
representations and warranties by Ispat to ISI, then the relevant
representations and warranties shall survive as to such claim, until the tenth
anniversary of the Effective Time.
SECTION 9.02. Indemnification. (a) Ispat, its Affiliates and their
successors and assigns, and the officers, directors, employees, stockholders,
representatives and agents of Ispat, its Affiliates and their successors and
assigns (each an "Ispat Indemnified Party") shall be indemnified and held
harmless by ISI for any and all Liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by them (including, without limitation, any Action brought or otherwise
initiated by any of them) (hereinafter a "Loss"), arising out of or resulting
from:
(i) the breach of any representation or warranty made by ISI contained
in this Agreement;
(ii) the breach of any covenant or agreement by ISI contained in this
Agreement; or
(iii) (A) any Hazardous Materials at, on, under, migrating to or from,
or transported to or from the Real Property, or any property formerly
owned, leased, occupied or used by ISC, the Subsidiaries or the Business,
at or prior to the Closing, or any additional migration or transportation
of such Hazardous Materials after the Closing (including, without
limitation, any Remedial Action at any time after the Closing relating to
such Hazardous Materials); (B) any Environmental Claim arising at any time
that relates to ISC, the Subsidiaries, the Business or the Real Property at
or prior to the Closing; or (C) any noncompliance with or violation of any
applicable Environmental Law or Environmental Permit relating in any way to
ISC, the Subsidiaries or the Business at or prior to the Closing, or any
continuation of such violation or noncompliance after the Closing;
provided that ISI shall indemnify any Ispat Indemnified Party for Losses
pursuant to this Section 9.02(a) only to the extent that such Losses are in
excess of (i) any amounts recovered by such Ispat Indemnified Party pursuant to
any contract (other than a contract of insurance) to which such Ispat
Indemnified Party is a party or (ii) amounts recovered by counterclaim or
otherwise from any third party based on any claims such Ispat Indemnified Party
has against any such third party that reduces the Losses that would otherwise be
sustained (in each case net of the costs of recovery thereof), to the extent
such claims arise out of the same or substantially similar facts and
circumstances as those resulting in such Losses.
66
To the extent that ISI's undertakings set forth in this Section 9.02(a) may be
unenforceable, ISI shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all Losses
incurred by Ispat, ISC, the Subsidiaries and the Ventures.
(b) ISI, its Affiliates and their successors and assigns, and the
officers, directors, employees and agents of ISI, its Affiliates and their
successors and assigns (each an "ISI Indemnified Party") shall be indemnified
and held harmless by Ispat for any and all Losses arising out of or resulting
from:
(i) the breach of any representation or warranty made by Ispat
contained in this Agreement;
(ii) the breach of any covenant or agreement by Ispat contained in
this Agreement; or
(iii) any liability or obligation relating to the Surviving
Corporation, any Subsidiary, any Venture or the Business arising from the
operation of the Business after the Closing other than any such liability
or obligation arising out of a breach of any representation, warranty,
covenant or agreement of ISI contained in this Agreement;
provided that Ispat shall indemnify any ISI Indemnified Party for Losses
pursuant to this Section 9.02(b) only to the extent that such Losses are in
excess of (i) any amounts recovered by such ISI Indemnified Party pursuant to
any contract (other than a contract of insurance) to which such ISI Indemnified
Party is a party or (ii) amounts recovered by counterclaim or otherwise from any
third party based on any claims such ISI Indemnified Party has against any such
third party that reduces the Losses that would otherwise be sustained (in each
case net of the costs of recovery thereof), to the extent such claims arise out
of the same or substantially similar facts and circumstances as those resulting
in such Losses.
To the extent that Ispat's undertakings set forth in this Section 9.02(b) may be
unenforceable, Ispat shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all Losses
incurred by ISI.
(c) Any party entitled to indemnification hereunder (an "Indemnified
Party") shall give the party from whom indemnification is sought (the
"Indemnifying Party") notice of any matter which an Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement, within 60 days of such determination, stating the amount of the Loss,
if known, and method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises. The obligations and Liabilities of the Indemnifying Party
under this Article IX with respect to Losses arising from claims of any third
party which are subject to the indemnification provided for in this Article IX
("Third Party Claims") shall be governed by and contingent upon the following
67
additional terms and conditions: If an Indemnified Party shall receive notice of
any Third Party Claim, the Indemnified Party shall give the Indemnifying Party
notice of such Third Party Claim within 30 days of the receipt by the
Indemnified Party of such notice; provided, however, that the failure to provide
such notice shall not release the Indemnifying Party from any of its obligations
under this Article IX except to the extent the Indemnifying Party is materially
prejudiced by such failure and shall not relieve the Indemnifying Party from any
other obligation or Liability that it may have to any Indemnified Party
otherwise than under this Article IX. If the Indemnifying Party acknowledges in
writing its obligation to indemnify the Indemnified Party hereunder against any
Losses that may result from such Third Party Claim, then the Indemnifying Party
shall be entitled to assume and control the defense of such Third Party Claim at
its expense and through counsel of its choice if it gives notice of its
intention to do so to the Indemnified Party within five days of the receipt of
such notice from the Indemnified Party; provided, however, that if there exists
or is reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Indemnified Party, in its sole discretion,
for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain its
own counsel, in each jurisdiction for which the Indemnified Party determines
counsel is required, at the expense of the Indemnifying Party. In the event the
Indemnifying Party exercises the right to undertake any such defense against any
such Third Party Claim as provided above, the Indemnified Party shall cooperate
with the Indemnifying Party in such defense and make available to the
Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Indemnifying Party. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably required by the Indemnified
Party. No such Third Party Claim may be settled by the Indemnifying Party
without the prior written consent of the Indemnified Party.
SECTION 9.03. Limits on Indemnification. Notwithstanding anything to
the contrary contained in this Agreement, (a) with respect to representations,
warranties, covenants and agreements that do not contain any standard,
qualification or exception with respect to "materiality" or "Material Adverse
Effect", no claim for indemnification may be made by the Ispat Indemnified
Parties or ISI Indemnified Parties, as the case may be, under Section 9.02, and
no payment in respect thereof shall be required of ISI or Ispat, as the case may
be, unless the amount of the indemnifiable Loss for such claim is in excess of
$50,000 and the aggregate amount of all such Losses incurred by the Ispat
Indemnified Parties or the ISI Indemnified Parties, as the case may be, is at
least $2,000,000, provided that, in the event such Losses exceed $2,000,000, ISI
or Ispat, as the case may be, shall indemnify the Ispat Indemnified Parties or
the ISI Indemnified Parties, as the case may be, for the full amount of such
Losses, (b) the maximum amount of indemnifiable Losses which may be recovered
from ISI under Section 9.02 arising out of or
68
resulting from the causes enumerated in clauses (i) and (iii) of Section 9.02(a)
shall be $90,000,000, and (c) the maximum amount of indemnifiable Losses which
may be recovered from Ispat under Section 9.02 arising out of or resulting from
the causes enumerated in clause (i) of Section 9.02(b) shall be $90,000,000.
SECTION 9.04. Tax Matters. The rights and obligations of the parties
with respect to indemnification for any and all Tax matters shall be governed by
Article VII, subject to the limitations in Section 9.03 and except for the
specific reference to Tax matters in Section 9.01.
SECTION 9.05. Environmental Matters. With respect to indemnification
for matters regarding the Environment arising under Section 9.02(a)(i) and
Section 9.02(a)(iii), ISI's indemnification obligations shall be subject to
Section 9.03 and shall, with respect to the categories of Losses described in
clauses (i) through (iv) below, be limited as set forth in this Section 9.05:
(i) with respect to corrective action required under the 1993
Consent Decree not related to the Sediment Characterization and
Remediation Supplemental Environmental Project, ISI's
indemnification obligation shall apply to amounts exceeding
$3,350,000 in the aggregate in any one year;
(ii) with respect to the Supplemental Environmental Project required
under the 1993 Consent Decree related to the Sediment
Characterization and Remediation Supplemental Environmental
Project, ISI's indemnification obligation shall apply to amounts
exceeding the environmental reserve existing therefor on the
Closing Balance Sheet;
(iii) with respect of the clean up of off-site disposal of Hazardous
Materials prior to the Closing, ISI's indemnification obligation
shall apply to amounts exceeding $1,000,000 in the aggregate in
any one year; and
(iv) with respect to the removal of asbestos and PCB's located on the
Owned Real Property prior to the Closing, ISI's indemnification
obligation shall apply to any Losses exceeding $3,000,000 in the
aggregate in any one year.
The Losses covered by Section 9.02(a)(iii) shall exclude (a) increases in any
liabilities to the extent they arise out of changes in Environmental Laws that
become effective only after the Effective Time, (b) Losses resulting from
actions taken by Ispat to place or expand facilities at locations at the Indiana
Harbor Works Facility of ISC without reasonable efforts to minimize the present
value of any resulting environmental indemnification expenses or without due
consideration of alternate locations, or Losses resulting from Ispat actions
taken without a legitimate business purpose or in significant
69
part for the purpose of collecting indemnity payments, and (c) amounts expended
by ISC to operate and maintain existing pollution control equipment, as
described by ISC in its Annual Reports on Form 10-K filed prior to the date of
this Agreement.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by Ispat if, between the date hereof and the Effective Time: (i)
an event or condition occurs that has resulted in or that may reasonably be
expected to result in a Material Adverse Effect, (ii) any representation or
warranty of ISI contained in this Agreement that is not qualified as to
materiality shall not have been true and correct in all material respects when
made or any representation or warranty that is already qualified by materiality
shall not have been true and correct in all respects, (iii) ISI shall not have
complied with any material covenant or agreement to be complied with by it and
contained in this Agreement, and, if such noncompliance is of a nature such that
it is capable of being cured and ISI shall have complied with the provisions of
Section 5.05 regarding prompt notice, such noncompliance shall have continued
for a period of five days after notice of such noncompliance is given to ISI by
Ispat, (iv) ISI, ISC, any Subsidiary or any Venture makes a general assignment
for the benefit of creditors, or any proceeding shall be instituted by or
against ISI, ISC, any Subsidiary or any Venture seeking to adjudicate any of
them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any Law relating to bankruptcy, insolvency or reorganization,
(v) ISI or any of its Affiliates shall enter into an agreement providing for an
Acquisition Proposal or an Acquisition Proposal shall be consummated; or
(b) by either ISI or Ispat if the Closing shall not have occurred by
August 31, 1998; provided, however, that the right to terminate this Agreement
under this Section 10.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the Closing to occur on or prior to such
date; or
(c) by either Ispat or ISI in the event that any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; or
(d) by the mutual written consent of ISI and Ispat.
70
SECTION 10.02. Effect of Termination. (a) In the event of termination
of this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except (a) as set forth in Sections 5.03, 10.02(b) and 11.01 and (b) that
nothing herein shall relieve any party from liability for any breach of this
Agreement.
(b) Notwithstanding the foregoing, ISI (or its successors and assigns)
shall pay, or cause to be paid, in immediately available funds, to Ispat, the
sum of $20,000,000 (the "Termination Fee") if (i) this Agreement is terminated
pursuant to Section 10.01(a), (ii) prior to such termination an Acquisition
Proposal shall have been made and shall be pending, (iii) at the time of such
termination Ispat shall not be in breach in any material respect of its
obligations under this Agreement, and (iv) within 12 months of such termination,
either ISC, ISI or any of its Affiliates shall enter into an agreement providing
for an Acquisition Proposal which is later consummated or an Acquisition
Proposal shall be consummated, in either case at a purchase price per share in
excess of the implied per share price derived by the sum of the Merger
Consideration and the amount of the Intercompany Indebtedness payable by Ispat
pursuant to Section 2.08(a). ISI (or its successors and assigns) shall pay the
Termination Fee concurrently with the consummation of such Acquisition Proposal.
SECTION 10.03. Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of any other
party, (b) waive any inaccuracies in the representations and warranties of
another party contained herein or in any document delivered by another party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of another party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by all of the parties
hereto. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
71
SECTION 11.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 11.02):
(a) if to ISI:
Inland Steel Industries, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Xx., Esq.
Vice President and General Counsel
(b) if to Ispat or the Surviving Corporation:
Ispat International N.V.
Rotterdam Building
Aert Xxx Xxxxxxxxx 00
0000 XX
Xxxxxxxxx, Xxx Xxxxxxxxxxx
Telecopy: (00-00) 000-0000
Attention: Xx. Xxxxxxxx Xxxxxxx
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq. and
Xxxx X. Xxxxxxx, Esq.
SECTION 11.03. Public Announcements. No party to this Agreement shall
make, or cause to be made, any press release or public announcement in respect
of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party, and the parties shall cooperate as to the timing and contents of any such
press release or public announcement except to the extent required by applicable
Law or any stock exchange regulation.
72
SECTION 11.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. Except for the Confidentiality
Agreement and the Letter Agreement, this Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersedes all prior agreements and undertakings, both written and
oral, between ISI and Ispat with respect to the subject matter hereof and
thereof.
SECTION 11.07. Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of ISI and
Ispat (which consent may be granted or withheld in the sole discretion of ISI or
Ispat); provided, however, that Ispat shall be permitted to assign this
Agreement to any of its wholly owned subsidiaries, provided that in the event of
any such assignment Ispat shall remain fully liable to perform all of its
obligations hereunder.
SECTION 11.08. No Third Party Beneficiaries. Except for the provisions
of Article IX relating to Indemnified Parties and Section 5.11, this Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 10.03.
SECTION 11.10. Governing Law. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the laws of the State of Delaware are required to be applied
hereto, in which case Delaware law shall govern to the extent so required.
73
(b) All actions and proceedings arising out of or relating to this
Agreement shall be instituted in the courts of the State of New York or of the
United States sitting in The City of New York. Each party to this Agreement
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York and of the United States sitting in The City of New York in connection
with any such action or proceeding arising out of or relating to this Agreement.
Ispat irrevocably appoints CT Corporation System as its agent for the sole
purpose of receiving service of process or other legal summons in connection
with any such action or proceeding brought in any such court. Each party to this
Agreement will maintain at all times a duly appointed agent in the State of New
York for the service of any process or summons in connection with any such
action or proceeding brought in any such court and, if it fails to maintain such
an agent during any period, any such process or summons may be served on it by
mailing a copy of such process or summons to it at its address set forth, and in
the manner provided, in Section 11.02, with such service deemed effective on the
fifth day after the date of such mailing.
(c) Each party to this Agreement irrevocably waives the right to a
trial by jury in connection with any action or proceeding arising out of this
Agreement and, to the fullest extent permitted by applicable law, any defense or
objection it may now or hereafter have to the laying of venue of any action or
proceeding under this Agreement brought in the courts of the State of New York
or of the United States sitting in The City of New York and any claim that any
action or proceeding under this Agreement brought in any such court has been
brought in an inconvenient forum.
SECTION 11.11. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 11.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.13. Other Actions. To the extent that a Venture is not
controlled by ISI, ISI will use its reasonable efforts to cause such Venture to
take all actions that are required to be taken by such Venture under this
Agreement.
74
IN WITNESS WHEREOF, Ispat, Merger Sub, ISI and ISC have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ISPAT INTERNATIONAL N.V.
By:
------------------------------
Name:
Title:
INLAND MERGER SUB, INC.
By:
------------------------------
Name:
Title:
INLAND STEEL INDUSTRIES, INC.
By:
------------------------------
Name:
Title:
INLAND STEEL COMPANY
By:
------------------------------
Name:
Title:
Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and schedules
referenced in the Agreement and Plan of Merger are omitted from this filing. The
Registrant hereby agrees to furnish supplementally a copy of any of the omitted
exhibits and schedules upon the request of the Securities and Exchange
Commission.
