<PAGE> 1
As filed with the Securities and Exchange Commission on September 11, 1997
Registration No. 333-18829
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Post-Effective Amendment No. 2 on Form S-3
to
Form S-1
REGISTRATION STATEMENT ON FORM S-3 UNDER THE SECURITIES ACT OF 1933
--------------------
Titanium Metals Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 3339 13-5630895
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
TIMET Capital Trust I
(Exact name of registrant as specified in its charter)
DELAWARE 9999 84-6301426
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
TELEPHONE: (303) 296-5600
(Address, including zip code, and telephone number,
including area code, of Registrant's principal offices)
ROBERT E. MUSGRAVES, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
TELEPHONE: (303) 296-5600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
copy to:
JAMES L. PALENCHAR, Esq.
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street, Suite 700
Denver, Colorado 80202
Telephone: (303) 592-3100
Approximate date of commencement of proposed sale to the public:
May 14, 1997.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [x]
<PAGE> 2
PROSPECTUS
4,025,000 BUCSSM*
TIMET CAPITAL TRUST I
6 5/8% CONVERTIBLE PREFERRED SECURITIES
BENEFICIAL UNSECURED CONVERTIBLE SECURITIES (BUCS)SM*
(LIQUIDATION AMOUNT $50 PER CONVERTIBLE PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO THE COMMON
STOCK OF, TITANIUM METALS CORPORATION
2,661,305 shares
Titanium Metals Corporation Common Stock
This Prospectus relates to (i) the 6 5/8% Convertible Preferred
Securities, Beneficial Unsecured Convertible Securities (BUCS) (the
"Convertible Preferred Securities"), liquidation preference $50 per Convertible
Preferred Security, which represent undivided beneficial ownership interests in
the assets of TIMET Capital Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), and the shares of the common
stock, par value $.01 per share ("Common Stock") of Titanium Metals
Corporation, a Delaware corporation ("TIMET" or the "Company"), issuable upon
conversion of the Convertible Preferred Securities, and (ii) 2,661,305 shares
of Common Stock offered hereby (the "Offered Common") by two selling
stockholders (see "Selling Stockholders"). The Convertible Preferred Securities
were issued and sold on November 26, 1996 in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), to persons reasonably believed by Salomon Brothers Inc,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.,
Incorporated (the "Initial Purchasers") of the Convertible Preferred Securities
to be (i) qualified institutional buyers as defined in Rule 144A under the
Securities Act, (ii) institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act), (iii) outside the United
States to non-U.S. persons in offshore transactions in reliance on Regulation S
under the Securities Act and (iv) to (a) executive officers and directors of
the Company who are "accredited investors" as defined in Rule 501(a)(4) under
the Securities Act and (b) certain individuals having relationships with the
Company (or an executive officer or director thereof) who either (x) are
"accredited investors" as defined in Rule 501(a)(5) or (6) under the Securities
Act or (y) have such knowledge and experience in financial and business matters
that such individuals are capable of evaluating the merits and risks of any
prospective investment in the Convertible Preferred Securities.
The Company directly owns all the common securities issued by the
Trust (the "Trust Common Securities" and, together with the Convertible
Preferred Securities, the "Trust Securities"). The Trust exists for the sole
purpose of issuing the Trust Securities and using the proceeds thereof to
purchase from the Company its 6 5/8% Convertible Junior Subordinated Debentures
due 2026 (the "Convertible Debentures") having the terms described herein. Upon
a Declaration Event of Default (as defined herein), the holders of Convertible
Preferred Securities will have a preference over the holders of the Trust
Common Securities with respect to distributions and payments upon redemption,
liquidation and otherwise.
(continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES BEING OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
*Salomon Inc has filed applications with the United States Patent and Trademark
Office for the registration of the Beneficial Unsecured Convertible Securities
(BUCS) and BUCS service marks.
The date of this Prospectus is September , 1997.
<PAGE> 3
(Continued from previous page)
The Convertible Preferred Securities and the Common Stock issuable
upon conversion of the Convertible Preferred Securities (the "Offered
Securities") may be offered and sold from time to time by the holders named
herein or by their transferees, pledgees, donees or their successors
(collectively, the "Selling Holders") pursuant to this Prospectus, and the
Offered Common may be offered and sold from time to time by the Selling
Stockholders or by their transferees, pledgees, donees or their successors. The
Offered Securities may be sold by the Selling Holders from time to time
directly to purchasers or through agents, underwriters or dealers. The Offered
Common may be sold by the Selling Stockholders from time to time on the Nasdaq
National Market or directly to purchasers or through agents, underwriters or
dealers. See "Plan of Distribution." If required, the names of any such agents
or underwriters involved in the sale of the Offered Securities or the Offered
Common and the applicable agent's commission, dealer's purchase price or
underwriter's discount, if any, will be set forth in an accompanying supplement
to this Prospectus (the "Prospectus Supplement"). The Selling Holders will
receive all of the net proceeds from the sale of the Offered Securities and
will pay all underwriting discounts and selling commissions, if any, applicable
to any such sale. The Selling Stockholders will receive all of the net proceeds
from the sale of the Offered Common and will pay all underwriting discounts and
selling commissions, if any, applicable to any such sale. The Company is
responsible for payment of all other expenses incident to the offer and sale of
the Offered Securities and the Offered Common and will not receive any proceeds
from such sale. The Selling Holders and any broker-dealers, agents or
underwriters which participate in the distribution of the Offered Securities
may be deemed to be "underwriters" within the meaning of the Securities Act,
and any commission received by them and any profit on the resale of the Offered
Securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The Selling Stockholders and any
broker-dealers, agents or underwriters which participate in the distribution of
the Offered Common may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them and any profit on the
resale of the Offered Common purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
The Convertible Preferred Securities became convertible, at the option
of the holder thereof, on February 24, 1997 and will remain convertible prior to
redemption. The Convertible Preferred Securities are convertible into shares of
common stock, par value $.01 per share (the "Common Stock"), of the Company, at
a conversion rate of 1.339 shares of Common Stock for each Convertible Preferred
Security (equivalent to approximately $37.34 per share of Common Stock), subject
to adjustment in certain circumstances. The Common Stock is listed on the Nasdaq
National Market under the symbol "TIMT." On September 10, 1997, the last
reported sale price of the Common Stock on the Nasdaq National Market was
$34 3/4.
Holders of Convertible Preferred Securities are entitled to receive
cumulative cash distributions at an annual rate of 6.625% of the liquidation
amount of $50 per Convertible Preferred Security payable quarterly in arrears
on March 1, June 1, September 1 and December 1 of each year. Such distributions
began accumulating on November 26, 1996 for the distribution paid March 1,
1997. See "Description of the Convertible Preferred Securities--Distributions."
The payment of distributions out of moneys held by the Trust and payments on
liquidation of the Trust or the redemption of Convertible Preferred Securities,
as set forth below, are guaranteed by the Company (the "Guarantee") to the
extent described under "Description of the Guarantee." The Guarantee covers
payments of distributions and other payments on the Convertible Preferred
Securities only if the Trust holds assets that are available for distribution
to holders of Convertible Preferred Securities, and then only to the extent of
such assets. The Guarantee, when taken together with the Company's obligations
under the Convertible Debentures and the Indenture (as defined herein) and its
obligations under the Declaration (as defined herein), including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), provide a full and unconditional
guarantee of amounts due on the Convertible Preferred Securities. See "Risk
Factors--Rights Under the Guarantee." The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company and pari passu with the most senior preferred stock,
if any, issued from time to time by the Company. The obligations of the Company
under the Convertible Debentures are subordinate and junior in right of payment
to all present and future Senior Indebtedness (as defined herein) of the
Company (less than $1 million of which was outstanding at December 31, 1996),
and rank pari passu with the Company's other general unsecured creditors. The
obligations of the Company under the Convertible Debentures and Guarantee are
also effectively subordinated to all existing and future indebtedness and other
liabilities, including trade payables, of the Company's subsidiaries. As of
December 31, 1996, the total indebtedness and other liabilities of such
subsidiaries aggregated approximately $80 million. The
- 2 -
<PAGE> 4
Convertible Debentures purchased by the Trust may be subsequently distributed
pro rata to holders of the Convertible Preferred Securities and Trust Common
Securities in connection with the dissolution of the Trust upon the occurrence
of certain events.
The distribution rate and the distribution payment dates and other
payment dates for the Convertible Preferred Securities correspond to the
interest rate and interest payment dates and other payment dates on the
Convertible Debentures, which are the sole assets of the Trust. As a result, if
principal or interest is not paid on the Convertible Debentures, no amounts
will be paid on the Convertible Preferred Securities. If the Company does not
make principal or interest payments on the Convertible Debentures, the Trust
will not have sufficient funds to make distributions on the Convertible
Preferred Securities, in which event the Guarantee will not apply to such
distributions until the Trust has sufficient funds available therefor.
The Company has the right to defer payments of interest on the
Convertible Debentures by extending the interest payment period on the
Convertible Debentures at any time for up to 20 consecutive quarters (an
"Extension Period") during which no interest shall be due and payable; provided
that no such Extension Period may extend beyond the maturity date of the
Convertible Debentures. If interest payments are so deferred, distributions on
the Convertible Preferred Securities will also be deferred. During such
Extension Period, distributions will continue to accumulate, compounded
quarterly at the distribution rate (to the extent permitted by applicable law).
Because TIMET has the right to defer payments of interest for one or more
periods of up to 20 consecutive quarters each, all of the stated interest
payments on the Convertible Debentures will be treated as "original issue
discount" ("OID"). Holders of the Convertible Preferred Securities must include
that OID (which OID continues to accrue during an Extension Period) in income
daily on an economic accrual basis before the receipt of cash attributable to
the interest, regardless of their method of tax accounting. Moreover, if a
holder of a Convertible Preferred Security converts such security into Common
Stock during an Extension Period, such holder will not be entitled to receive,
subject to certain exceptions, any accumulated and unpaid distributions with
respect to such security. There could be multiple Extension Periods of varying
lengths throughout the term of the Convertible Debentures. See "Risk
Factors--Option to Extend Interest Payment Period," "Description of the
Convertible Debentures--Option to Extend Interest Payment Period" and
"United States Federal Income Taxation--Original Issue Discount."
The Convertible Debentures are redeemable by the Company, in whole or
in part, from time to time, on or after December 1, 1999 at the redemption
prices specified herein or at any time in whole (but not in part) in certain
circumstances upon the occurrence of a Tax Event (as defined herein) at 100% of
the principal amount thereof together with accrued and unpaid interest. If the
Company redeems Convertible Debentures, the proceeds thereof will
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Convertible Debentures so redeemed at the
applicable redemption price specified herein, together with accumulated and
unpaid distributions to the date fixed for redemption. See "Description of the
Convertible Preferred Securities--Mandatory Redemption Upon Optional Redemption
or Maturity of Convertible Debentures." The Convertible Preferred Securities
will be redeemed upon maturity of the Convertible Debentures on December 1,
2026. In addition, upon the occurrence of a Special Event (as defined herein),
unless the Convertible Debentures are redeemed in the limited circumstances
described herein, the Trust will be dissolved, with the result that the
Convertible Debentures will be distributed pro rata to the holders of the Trust
Securities in lieu of any cash distribution. See "Description of the
Convertible Preferred Securities--Special Event Redemption or Distribution." In
the case of the occurrence of a Special Event that is a Tax Event, the Company
will have the right in certain circumstances to redeem the Convertible
Debentures, which would result in the redemption by the Trust of Trust
Securities in the same amount on a pro rata basis. See "Description of the
Convertible Preferred Securities--Special Event Redemption or Distribution" and
"Description of the Convertible Debentures."
In the event of the involuntary or voluntary dissolution, winding up
or termination of the Trust, the holders of the Convertible Preferred
Securities will be entitled to receive for each Convertible Preferred Security
the liquidation amount of $50 plus accumulated and unpaid distributions thereon
(compounded quarterly at the distribution rate, if applicable) to the date of
payment, unless, in connection with such dissolution, winding up or termination
of the Trust, the Convertible Debentures are distributed to the holders of the
Trust Securities. See "Description of the Convertible Preferred Securities--
Liquidation Distribution Upon Dissolution."
- 3 -
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and at Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a World Wide Web site that contains
reports, proxy and information statements and other information that are filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
System. This Web site may be accessed at http://www.sec.gov.
The Company has agreed that, if at any time while the Offered
Securities are "restricted securities" within the meaning of the Securities Act
and the Company is not subject to the reporting requirements of the Exchange
Act, the Company will furnish to holders of the Offered Securities and to
prospective purchasers designated by such holders the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit
compliance with Rule 144A in connection with resales of Offered Securities.
No separate financial statements of the Trust have been included
herein. TIMET does not consider that such financial statements would be
material to holders of the Convertible Preferred Securities because (i) all of
the voting securities of the Trust are owned, directly or indirectly, by TIMET,
a reporting company under the Exchange Act, (ii) the Trust has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in Convertible Debentures issued by TIMET and (iii) the
obligations of the Trust under the Trust Securities are fully and
unconditionally guaranteed by TIMET to the extent that the Trust has funds
available to meet such obligations. See "TIMET Capital Trust I" and
"Description of the Guarantee."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1996 which has been filed by the Company with the Commission and the
description of the securities contained in the Company's Registration Statement
on Form S-1 (Registration No. 333-18829), as amended on May 29, 1997, are
hereby incorporated by reference in this Prospectus.
In addition, all documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act since December 31, 1996, and any
such documents subsequently filed by the Company prior to the termination of
the offering shall be deemed to be incorporated by reference and to be a part
hereof from the date of filing of such documents.
TIMET hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon the written or oral request
of any such person, a copy of any of the above documents or of any other
document incorporated by reference in this Prospectus. Such requests should be
addressed to General Counsel, Titanium Metals Corporation, 1999 Broadway, Suite
4300, Denver, Colorado 80202, telephone number (303) 296-5600.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the caption "Summary," and incorporated in
this Prospectus are forward-looking statements or discussions of trends which by
their nature involve substantial risks and uncertainties that could
significantly impact expected results. Actual future results could differ
materially from those described in such forward-looking statements depending on
a variety of factors, including those detailed under the caption "Risk Factors,"
under the captions noted above and elsewhere in this Prospectus. Such factors
include the cyclicality of the Company's business and its dependence on the
aerospace industry, the sensitivity of the Company's business to industry
capacity, the possibility of labor disruptions, control by certain stockholders
and possible conflicts of interest, potential difficulties in integrating
acquisitions, uncertainties associated with new product development and the
supply of raw materials and services.
- 4 -
<PAGE> 6
THE COMPANY
Titanium Metals Corporation ("TIMET" or the "Company") is one of the
world's leading integrated producers of titanium sponge and mill products, has
the largest sales volume worldwide and is the largest supplier of titanium to
the aerospace and industrial markets. The Company believes it is the low-cost
producer of titanium sponge and melt products. Due to its economies of scale,
manufacturing expertise and past investment in technology, TIMET believes that
it is well-positioned to capitalize on the improved fundamentals in the titanium
industry. TIMET's products include: titanium sponge, the basic form of titanium
metal used in processed titanium products; titanium ingot and slab, the result
of melting sponge and titanium scrap, either alone or with various other
alloying elements; and forged and cast products produced from ingot or slab,
including billet, bar, flat products (plate, sheet, and strip), extrusions,
wire and castings.
- 5 -
<PAGE> 7
The Company completed its initial public offering of Common Stock in
June 1996 (the "Stock Offering"). As a result of the Stock Offering, the
outstanding Common Stock is currently held 30.3% by Tremont, 2.1% by UTSC, a
consortium of Japanese companies, and 6.4% by IMI. In addition, Tremont and
UTSC hold options to acquire all of the outstanding Common Stock held by IMI,
shares which are equal to the number of Offered Common ("IMI Options").
References to the "Company" or "TIMET" in this Prospectus, except where
otherwise indicated, (i) include the businesses acquired by the Company from IMI
(the "IMI Titanium Business") pursuant to an acquisition completed on
February 15, 1996 (the "IMI Titanium Acquisition"), and (ii) include the assets
acquired by the Company from Axel Johnson Metals, Inc. ("AJM") pursuant to an
acquisition completed on October 1, 1996 (the "AJM Acquisition"). References to
the "Company" or "TIMET" in this Prospectus for periods prior to and including
December 31, 1995, except when otherwise indicated, exclude the IMI Titanium
Business, and such references for periods prior to October 1, 1995, except where
otherwise indicated, exclude the businesses acquired in the AJM Acquisition.
The Company is incorporated in Delaware and its principal offices are
located at 1999 Broadway, Suite 4300, Denver, Colorado 80202. Its telephone
number is (303) 296-5600.
- 6 -
<PAGE> 8
RISK FACTORS
See "Risk Factors" beginning on page 12 for a discussion of certain
factors that should be considered by prospective purchasers of the securities
being offered pursuant to this Prospectus.
THE OFFERING
OFFERED SECURITIES
The Issuer TIMET Capital Trust I (the "Trust"), a
Delaware statutory business trust. The assets
of the Trust consist solely of the
Convertible Debentures of the Company.
Securities Offered 4,025,000 6 5/8% Convertible Preferred
Securities, Beneficial Unsecured Convertible
Securities (BUCS) (the "Convertible Preferred
Securities").
Distributions Distributions on the Convertible Preferred
Securities accumulate from November 26, 1996
and are payable at the annual rate of
6.625% of the liquidation amount of $50 per
Convertible Preferred Security. Subject to
the extension of distribution payment periods
described below, distributions will be
payable quarterly in arrears on each March 1,
June 1, September 1 and December 1,
commencing March 1, 1997. Because income
accruing with respect to the Convertible
Preferred Securities constitutes interest for
Federal income tax purposes, corporate
holders thereof will not be entitled to a
dividends-received deduction for any
distributions received on the Convertible
Preferred Securities.
Option to Extend
Distribution Payment
Periods The ability of the Trust to pay distributions
on the Convertible Preferred Securities is
solely dependent on its receipt of interest
payments from the Company on the Convertible
Debentures. The Company has the right to
defer interest payments at any time and from
time to time on the Convertible Debentures
for successive periods not exceeding 20
consecutive quarters (each, an "Extension
Period"), during which no interest shall be
due and payable; provided that no such
Extension Period may extend beyond the
maturity date of the Convertible Debentures.
As a consequence of any such extension,
quarterly distributions on the Convertible
Preferred Securities will not be made by the
Trust (but will continue to accumulate,
compounded quarterly at the distribution
rate) during any such Extension Period. The
Company will give written notice of its
extension of an interest payment to the Trust
and shall cause the Trust to give such notice
to the holders of the Convertible Preferred
Securities. See "Risk Factors--Option to
Extend Interest Payment Period," "Description
of the Convertible Preferred Securities--
Distributions" and "Description of the
Convertible Debentures--Option to Extend
Interest Payment Period." Because TIMET has
the right to defer payments of interest for
one or more periods of up to 20 consecutive
quarters each, all of the stated interest
payments on the Convertible Debentures will
be treated as OID. Holders of the Preferred
Convertible Securities must include that OID
(which OID continues to accrue during an
Extension Period) in income daily on an
economic accrual basis before the receipt of
cash attributable to the interest, regardless
of their method of tax accounting. Moreover,
if a holder of a Convertible Preferred
Security converts such security into Common
Stock during an Extension Period, such holder
will not be entitled to receive, subject to
certain exceptions, any accumulated and
unpaid distributions with respect to such
security. See "Risk Factors--Option to Extend
Interest Payment Period," "Description of the
Convertible Preferred Securities-- Conversion
Rights" and
- 7 -
<PAGE> 9
"-- Mandatory Redemption Upon Optional
Redemption or Maturity of Convertible
Debentures" and "United States Federal Income
Taxation-- Original Issue Discount."
Rights Upon Extension of
Distribution Payment
Periods During any Extension Period, interest on the
Convertible Debentures will compound
quarterly and quarterly distributions
(compounded quarterly at the distribution
rate) will accumulate on the Convertible
Preferred Securities, and the Company has
agreed, among other things, (a) not to
declare or pay dividends on, or make a
distribution with respect to, or redeem,
purchase or acquire, or make a liquidation
payment with respect to, any of its capital
stock (other than (i) purchases or
acquisitions of shares of Common Stock in
connection with the satisfaction by the
Company of its obligations under any employee
benefit plans or the satisfaction by the
Company of its obligations pursuant to any
contract or security requiring the Company to
purchase shares of Common Stock, (ii) as a
result of a reclassification of the Company's
capital stock or the exchange or conversion
of one class or series of the Company's
capital stock for another class or series of
the Company's capital stock or (iii) the
purchase of fractional interests in shares of
the Company's capital stock pursuant to the
conversion or exchange provisions of such
capital stock or the security being converted
or exchanged, (b) not to make any payment of
interest, principal or premium, if any, on or
repay, repurchase or redeem any debt
securities (including guarantees) issued by
the Company that rank pari passu with or
junior to the Convertible Debentures and (c)
not to make any guarantee payments with
respect to the foregoing (other than pursuant
to the Guarantee). See "Description of the
Guarantee--Certain Covenants of the Company"
and "Description of the Convertible
Debentures--Option to Extend Interest Payment
Period."
Conversion into Common
Stock Each Convertible Preferred Security is
convertible at the option of the holder into
shares of Common Stock, at a conversion rate
of 1.339 shares of Common Stock for each
Convertible Preferred Security (equivalent to
a conversion price of approximately $37.34
per share of Common Stock), subject to
adjustment in certain circumstances. At the
pricing of the Convertible Preferred
Securities on November 20, 1996, the last
reported sale price of the Common Stock on
the Nasdaq National Market was $29.875. The
last reported sale price of the Common Stock
on the Nasdaq National Market on April 29,
1997 was $26.25 per share. In connection with
any conversion of a Convertible Preferred
Security, the Conversion Agent (as defined
herein) will exchange such Convertible
Preferred Security for the appropriate
principal amount of Convertible Debentures
held by the Trust and immediately convert
such Convertible Debentures into shares of
Common Stock. No fractional shares of Common
Stock will be issued as a result of
conversion, but in lieu thereof such
fractional interest will be paid by the
Company in cash. See "Description of the
Convertible Preferred Securities--Conversion
Rights." In addition, no additional shares of
Common Stock will be issued upon conversion
of the Convertible Preferred Securities to
account for any accumulated and unpaid
distributions on the Convertible Preferred
Securities at the time of conversion;
provided, however, that any holder of
Convertible Preferred Securities who delivers
such Convertible Preferred Securities for
conversion after receiving a notice of
redemption from the Property Trustee (as
defined herein) during an Extension Period
will be entitled to receive all accumulated
and unpaid distributions to the date of
conversion. See "Description of the
Convertible Debentures--Redemption at the
Option of TIMET," "Description of the
Convertible Preferred Securities--Conversion
Rights" and "--Mandatory Redemption Upon
Optional Redemption or Maturity of
Convertible Debentures."
- 8 -
<PAGE> 10
Liquidation Amount In the event of the liquidation of the Trust,
holders will be entitled to receive the
liquidation amount of $50 per Convertible
Preferred Security plus an amount equal to
any accumulated and unpaid distributions
thereon to the date of payment, unless
Convertible Debentures are distributed to
such holders. See "Description of the
Convertible Preferred Securities--
Liquidation Distribution Upon Dissolution."
Redemption The Convertible Debentures will be redeemable
for cash, at the option of the Company, in
whole or in part, from time to time, after
December 1, 1999, at the redemption prices
specified herein. Upon any redemption of the
Convertible Debentures, Trust Securities
having an aggregate liquidation amount equal
to the aggregate principal amount of the
Convertible Debentures so redeemed will be
redeemed on a pro rata basis at a redemption
price corresponding to the redemption price
of the Convertible Debentures plus accrued
and unpaid interest thereon (the "Redemption
Price"). The Convertible Preferred
Securities do not have a stated maturity
date, although they are subject to mandatory
redemption upon the repayment of the
Convertible Debentures at their stated
maturity (i.e., December 1, 2026), upon
acceleration of the Convertible Debentures,
or upon early redemption of the Convertible
Debentures. See "Description of the
Convertible Preferred Securities--Mandatory
Redemption Upon Optional Redemption or
Maturity of Convertible Debentures."
Guarantee The Company has irrevocably guaranteed, on a
subordinated basis and to the extent set
forth herein, the payment in full of (i) any
accumulated and unpaid distributions on the
Convertible Preferred Securities to the
extent of funds of the Trust available
therefor, (ii) the amount payable upon
redemption of the Convertible Preferred
Securities to the extent of funds of the
Trust available therefor and (iii) generally,
the liquidation amount of the Convertible
Preferred Securities to the extent of the
assets of the Trust available for
distribution to holders of Convertible
Preferred Securities. The Guarantee is
unsecured and will be (i) subordinate and
junior in right of payment to all other
liabilities of the Company except any
liabilities that may be made pari passu
expressly by their terms, (ii) pari passu
with the most senior preferred stock, if any,
issued from time to time by the Company and
with any guarantee now or hereafter entered
into by the Company in respect of any
preferred or preference stock or preferred
securities of any affiliate of the Company,
(iii) senior to the Common Stock and (iv)
effectively subordinated to all existing and
future indebtedness and liabilities,
including trade payables, of the Company's
subsidiaries. Upon the liquidation,
dissolution or winding up of the Company, its
obligations under the Guarantee will rank
junior to all of its other liabilities,
except as aforesaid, and, as a result, funds
may not be available for payment under the
Guarantee. See "Risk Factors--Subordination
of Obligations Under the Guarantee and
Convertible Debentures" and "Description of
the Guarantee."
Voting Rights Generally, holders of the Convertible
Preferred Securities have no voting rights.
See "Description of the Convertible Preferred
Securities--Voting Rights."
Tax Event Redemption;
Distribution Upon a Tax
Event or Investment
Company Event Upon the occurrence of a Tax Event or an
Investment Company Event (each as defined
herein), except in certain limited
circumstances, the Company will cause the
Issuer Trustees (as defined herein) to
liquidate the Trust and cause Convertible
Debentures to be distributed to the holders
of the Convertible Preferred Securities. In
certain circumstances involving a Tax Event,
the Company will have the right to redeem the
Convertible Debentures, in whole (but not in
part), at 100% of the principal amount plus
accrued and unpaid interest, in lieu of a
distribution of the Convertible Debentures,
in which event the Trust Securities will be
redeemed at the
- 9 -
<PAGE> 11
Redemption Price. See "Description of the
Convertible Preferred Securities--Special
Event Redemption or Distribution."
Convertible Debentures The Convertible Debentures mature on December
1, 2026 and bear interest at the rate of
6.625% per annum, payable quarterly in
arrears. The Convertible Debentures have
provisions with respect to interest,
redemption, conversion into the Common Stock
and certain other terms substantially similar
or analogous to those of the Convertible
Preferred Securities. Interest payment
periods may be extended from time to time by
the Company for successive periods not
exceeding 20 consecutive quarters for each
such period (during which interest will
continue to accrue and compound quarterly).
Prior to the termination of any Extension
Period, the Company may further extend such
Extension Period; provided that such
Extension Period may not exceed 20
consecutive quarters and may not extend
beyond the maturity date of the Convertible
Debentures. Upon the termination of any
Extension Period and the payment of all
amounts then due, the Company may commence a
new Extension Period, subject to certain
limitations. No interest shall be due and
payable during an Extension Period. During
an Extension Period, the Company has agreed,
among other things, (a) not to declare or pay
dividends on, or make a distribution with
respect to, or redeem or purchase or acquire,
or make a liquidation payment with respect
to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by
the Company of its obligations under any
employee benefit plans or the satisfaction by
the Company of its obligations pursuant to
any contract or security requiring the
Company to purchase shares of Common Stock,
(ii) as a result of a reclassification of the
Company's capital stock or the exchange or
conversion of one class or series of the
Company's capital stock for another class or
series of the Company's capital stock or
(iii) the purchase of fractional interests in
shares of the Company's capital stock
pursuant to the conversion or exchange
provisions of such capital stock or the
security being converted or exchanged), (b)
not to make any payment of interest,
principal or premium, if any, on or repay,
repurchase or redeem any debt securities
(including guarantees) issued by the Company
that rank pari passu with or junior to the
Convertible Debentures and (c) not to make
any guarantee payments with respect to the
foregoing (other than pursuant to the
Guarantee). The Convertible Debentures will
be subordinate to all Senior Indebtedness (as
defined herein) of the Company and
effectively subordinated to all existing and
future indebtedness and liabilities,
including trade payables, of the Company's
subsidiaries.
Use of Proceeds Neither the Company nor the Trust will
receive any proceeds of the sale of the
Offered Securities.
OFFERED COMMON
Common Stock offered by the
Selling Stockholders: 2,661,305
Common Stock outstanding
after the sale of the Offered
Common(1): 31,456,655 Shares
Use of Proceeds: The Company will not receive any proceeds
from the sale of the Offered Common
Nasdaq National Market Symbol: TIMT
- 10 -
<PAGE> 12
(1) The number of outstanding shares of Common Stock as of September 1, 1997.
Does not include 5,389,475 shares of Common Stock reserved for issuance upon
conversion of the Convertible Preferred Securities and approximately 900,000
shares of Common Stock reserved for issuance upon exercise of outstanding stock
options held by the Company's directors and employees.
- 11 -
<PAGE> 13
RISK FACTORS
In addition to the other information contained in, or incorporated by
reference into, this Prospectus, prospective investors should consider
carefully the risk factors set forth below before making an investment in the
securities offered pursuant to this Prospectus.
CYCLICALITY; DEPENDENCE ON AEROSPACE INDUSTRY
Demand for the Company's titanium products is cyclical and is affected
by, among other things, the cyclical activity in the commercial and military
aerospace industry, particularly the strength of orders from commercial
airlines and aircraft leasing companies. Sales of the Company's products
(excluding sponge) to the commercial and military aerospace industry accounted
for approximately 70%, 60%, 60%, 62% and 60% of the Company's total sales in
1992, 1993, 1994, 1995 and 1996, respectively. Historically, commercial
airlines' orders for new aircraft have tended to be driven by the operating
profits or losses of the respective airlines. Purchases by customers in the
military aerospace sector tend to be driven by defense budgets. Events
adversely affecting the aerospace industry, such as reduced orders from
commercial airlines resulting from operating losses at the airlines, or reduced
military spending, could have a material adverse effect on the business,
financial condition, results of operations and cash flows of the Company.
HISTORY OF LOSSES PRIOR TO 1996; DEFICIENCY OF EARNINGS AVAILABLE TO COVER
FIXED CHARGES PRIOR TO 1996
During the early 1990s, when the titanium industry was in a severe
downturn, the Company incurred net losses of $.1 million, $25.7 million, $20.2
million, $43.1 million and $4.2 million in 1991, 1992, 1993, 1994 and 1995,
respectively. Similarly, the IMI Titanium Business reported net losses of $11.2
million, $15.0 million and $32.8 million in 1993, 1994 and 1995, respectively.
On a pro forma basis, giving effect to the IMI Titanium Acquisition and the AJM
Acquisition, the Company incurred a net loss of $48.6 million in 1995, including
restructuring and other special charges. From 1993 to 1995 the combined losses
of the Company, the IMI Titanium Business, RMI Titanium Company ("RMI") and
Oregon Metallurgical Company ("Oremet") were $181.3 million. Prior to the last
industry upturn in 1988 through 1990, the Company, excluding the IMI Titanium
Business, reported aggregate losses from continuing operations of $18.1 million
from 1984 through 1987. The Company's earnings were insufficient to cover its
fixed charges in each of 1991 through 1995. The amount of coverage deficiency
for the five fiscal years was $.1 million in 1991, $18.3 million in 1992, $25.6
million in 1993, $42.4 million in 1994 and $5.1 million in 1995. While there can
be no assurance that additional losses will not be incurred in future periods,
the Company had net income of $47.6 million during 1996 and $36 million during
the six months ended June 30, 1997.
The ability of the Company to continue to be profitable in the future
is dependent upon, among other things: market demand and prices for titanium
products, particularly demand and pricing in the aerospace industry; the
Company's ability to increase prices for titanium products to a level that
exceeds any increases in production costs; avoidance of any material adverse
developments in the capacity utilization for the production of titanium sponge
or availability of titanium scrap; the absence of titanium market instabilities
associated with titanium sponge and scrap from Russia and other countries
comprising the former Soviet Union; and the absence of a general economic
downturn in North America, Europe or the rest of the world.
HIGHLY COMPETITIVE INDUSTRY
The titanium metals industry is highly competitive on a worldwide
basis as a result of many factors, particularly the historical presence of
excess capacity in the industry, which has intensified price competition for
available business at low points in the business cycle. Integrated and
non-integrated producers of mill products are located primarily in the United
States, Japan, Russia, Europe and China (the Company considers an integrated
producer one that produces both titanium sponge and ingot). The Company is one
of two integrated producers in the United States and one of four in the world.
There are also a number of non-integrated producers that produce mill products
from purchased sponge, scrap or ingot. The Company believes that the sponge
production capacity and actual production in the former Soviet Union may be as
much as one-half of aggregate worldwide levels and that significant unused
production capacity may exist in this region. Russia is also known to have
significant melting and mill products production capacity.
- 12 -
<PAGE> 14
SUBORDINATION OF OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE DEBENTURES;
DEPENDENCE UPON PAYMENTS ON CONVERTIBLE DEBENTURES
TIMET's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of TIMET and pari passu in right of payment
with the most senior preferred stock issued, from time to time, if any, by
TIMET. The obligations of TIMET under the Convertible Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of TIMET. No payment of principal (including redemption payments,
if any), premium, if any, or interest on the Convertible Debentures may be made
if (i) any Senior Indebtedness of TIMET is not paid when due and any applicable
grace period with respect to such default has ended with such default not
having been cured or waived or ceasing to exist, (ii) the maturity of any
Senior Indebtedness has been accelerated because of a default or (iii) if an
event of default has occurred and is continuing under the Company's U.S. credit
facility or any refinancing of the U.S. credit facility in the bank credit
market (including institutional participants therein) that would permit the
lenders under the U.S. credit facility or such refinancing to accelerate the
maturity thereof or demand payment in full. As of June 30, 1997, TIMET had no
Senior Indebtedness outstanding under its U.S. credit facility. The obligations
of the Company under the Guarantee and the Convertible Debentures are also
effectively subordinated to all existing and future indebtedness, including
trade payables, of the Company's subsidiaries. There are no terms in the
Convertible Preferred Securities, the Convertible Debentures or the Guarantee
that limit the ability of TIMET or its subsidiaries to incur additional
- 13 -
<PAGE> 15
indebtedness, including indebtedness that ranks senior to or pari passu with
the Convertible Debentures and the Guarantee, or to grant security interests to
secure outstanding or new indebtedness. See "Description of the Guarantee--
Status of the Guarantee; Subordination," and "Description of the Convertible
Debentures--Subordination." The ability of the Trust to pay amounts due on the
Convertible Preferred Securities is wholly dependent upon TIMET's making
payments on the Convertible Debentures as and when required.
RIGHTS UNDER THE GUARANTEE
It is expected that, at the time this Registration Statement becomes
effective, the Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Chase
Manhattan Bank is acting as indenture trustee under the Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the provisions of the
Trust Indenture Act. The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Convertible Preferred Securities.
Under the Guarantee, TIMET guarantees the holders of the Convertible
Preferred Securities the payment of (i) any accumulated and unpaid
distributions that are required to be paid on the Convertible Preferred
Securities, to the extent the Trust has funds available therefor, (ii) the
Redemption Price, including all accumulated and unpaid distributions with
respect to Convertible Preferred Securities called for redemption by the Trust,
to the extent the Trust has funds available therefor, and (iii) upon a
voluntary or involuntary dissolution, winding up or termination of the Trust
(other than in connection with the distribution of Convertible Debentures to
the holders of Convertible Preferred Securities or a redemption of all the
Convertible Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accumulated and unpaid distributions on the
Convertible Preferred Securities to the date of the payment, to the extent the
Trust has funds available therefor or (b) the amount of assets of the Trust
remaining available for distribution to holders of the Convertible Preferred
Securities in liquidation of the Trust. The holders of a majority in
liquidation amount of the Convertible Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee. In addition,
any record holder of Convertible Preferred Securities may institute a legal
proceeding directly against TIMET to enforce the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If TIMET were to default on its obligation to pay
amounts payable on the Convertible Debentures, the Trust would lack available
funds for the payment of distributions or amounts payable on redemption of the
Convertible Preferred Securities or otherwise, and, in such event, holders of
the Convertible Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, holders of the Convertible
Preferred Securities would rely on the enforcement (1) by the Property Trustee
of its rights as registered holder of the Convertible Debentures against TIMET
pursuant to the terms of the Convertible Debentures or (2) by such holder of
its right of direct action against TIMET to enforce payments on a portion of
the Convertible Debentures. See "Description of the Guarantee" and "Description
of the Convertible Debentures." The Declaration (as defined herein) provides
that each holder of Convertible Preferred Securities, by acceptance thereof,
agrees to the provisions of the Guarantee, including the subordination
provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CONVERTIBLE PREFERRED SECURITIES
If (i) the Trust fails to pay distributions in full on the Convertible
Preferred Securities (other than pursuant to a permitted deferral) or (ii) a
Declaration Event of Default occurs and is continuing, then the holders of
Convertible Preferred Securities would rely on the enforcement by the Property
Trustee of its rights as holder of the Convertible Debentures against TIMET. In
addition, the holders of a majority in liquidation amount of the Convertible
Preferred Securities have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee or
to direct the exercise of any trust or power conferred upon the Property
Trustee under the Declaration, including the right to direct the Property
Trustee to exercise the remedies available to it as a holder of the Convertible
Debentures. Notwithstanding the foregoing, if a Declaration Event of Default
has occurred and is continuing and such event is attributable to the failure of
TIMET to pay interest or principal on the Convertible Debentures on the date
such interest or principal is otherwise payable (or in the case of redemption,
on the redemption date), then the registered holder of Convertible Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Debentures
having a principal amount equal to the aggregate liquidation amount of the
Convertible Preferred Securities of such holder (a "Direct Action") on or after
the respective due date specified in the Convertible Debentures. In connection
with such Direct Action, TIMET will be subrogated to the rights of such holders
of
- 14 -
<PAGE> 16
Convertible Preferred Securities under the Declaration to the extent of any
payment made by TIMET to such holder of Convertible Preferred Securities in
such Direct Action. The holders of Convertible Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Convertible Debentures. The Indenture provides that the Indenture Trustee (as
defined herein) shall give holders of the Convertible Debentures notice of all
uncured defaults or events of default within 30 days after occurrence. However,
except in the case of a default or an event of default in payment on the
Convertible Debentures, the Indenture Trustee is protected in withholding such
notice if its officers or directors in good faith determine that withholding of
such notice is in the best interests of the holders. See "Description of the
Convertible Preferred Securities--Declaration Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as TIMET shall not be in default in the payment of interest on
the Convertible Debentures, TIMET has the right under the Indenture (as defined
herein) to defer payments of interest on the Convertible Debentures by
extending the interest payment period at any time, and from time to time, on
the Convertible Debentures. As a consequence of such an extension, quarterly
distributions on the Convertible Preferred Securities would be deferred (but
despite such deferral would continue to accumulate with interest thereon at the
distribution rate, compounded quarterly) by the Trust during any such extended
interest payment period (an "Extension Period"). Such right to extend the
interest payment period for the Convertible Debentures is limited to a period
not exceeding 20 consecutive quarters (although new Extension Periods may be
commenced as described below). In the event that TIMET exercises this right to
defer interest payments, then (a) TIMET shall not declare or pay dividends on,
or make a distribution with respect to, or redeem, purchase or acquire, or make
a liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by TIMET of its obligations under any employee benefit plans, (ii)
as a result of a reclassification of TIMET capital stock or the exchange or
conversion of one class or series of TIMET capital stock for another class or
series of TIMET capital stock or (iii) the purchase of fractional interests in
shares of TIMET capital stock pursuant to the conversion or exchange provisions
of such TIMET capital stock or the security being converted or exchanged), (b)
TIMET shall not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by TIMET that rank
pari passu with or junior to the Convertible Debentures and (c) TIMET shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee). Prior to the termination of any such Extension Period, TIMET
may further extend such Extension Period; provided that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters or extend beyond the maturity of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, TIMET may commence a new Extension Period, subject to the
foregoing restrictions. See "Description of the Convertible Preferred
Securities-- Distributions" and "Description of the Convertible
Debentures--Option to Extend Interest Payment Period."
ORIGINAL ISSUE DISCOUNT
Because TIMET has the right to defer payments of interest for one or
more periods of up to 20 consecutive quarters each, all of the stated interest
payments on the Convertible Debentures will be treated as OID. As a result,
each holder of Convertible Preferred Securities will recognize income for
United States Federal income tax purposes in advance of the receipt of cash and
will not receive the cash from the Trust related to such income if such holder
disposes of its Convertible Preferred Securities prior to the record date for
the date on which distributions of such amounts are made. Should TIMET exercise
its right to defer payments of interest by extending the interest payment
period, each holder of Convertible Preferred Securities will continue to accrue
income as OID in respect of the deferred and compounded interest allocable to
its Convertible Preferred Securities for United States Federal income tax
purposes, which will be allocated but not distributed, to holders of record of
Convertible Preferred Securities. See "United States Federal Income
Taxation--Original Issue Discount."
TIMET has no current intention of exercising its right to defer
payments of interest by extending the interest payment period of the
Convertible Debentures. However, should TIMET determine to exercise such right
in the future, the market price of the Convertible Preferred Securities (which
represent an undivided beneficial interest in the Convertible Debentures) is
likely to be adversely affected. A holder that disposes of its Convertible
Preferred Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Convertible Preferred Securities. In addition, as a result of the existence of
TIMET's right to defer interest payments, the market price of the Convertible
Preferred Securities may be more volatile than other securities on which OID
accrues that do not have such rights.
- 15 -
<PAGE> 17
TAX LEGISLATION
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (H.R. 2014), that among other things, contained legislation
that denies the tax deduction for interest or OID on certain debt instruments
that may be payable in equity of the issuer or a related party. While the scope
of this provision is uncertain, this provision is only effective for
instruments issued after June 8, 1997 and accordingly not applicable to the
Convertible Debentures. If legislation were enacted that adversely affects the
tax treatment of the Convertible Debentures, the Trust might distribute the
Convertible Debentures to holders of the Convertible Preferred Securities or,
in certain circumstances, TIMET might redeem the Convertible Debentures, in
which case the Trust would distribute the resulting cash in redemption of the
Convertible Preferred Securities. See "Description of the Convertible Preferred
Securities -- Special Event Redemption or Distribution."
SPECIAL EVENT DISTRIBUTION; TAX EVENT REDEMPTION
Upon the occurrence of a Special Event (as defined herein), the Trust
could be dissolved (with the consent of TIMET), except in the limited
circumstance described below, with the result that the Convertible Debentures
would be distributed to the holders of the Trust Securities in connection with
the liquidation of the Trust. In certain circumstances, TIMET would have the
right to redeem the Convertible Debentures, in whole or in part, in lieu of a
distribution of the Convertible Debentures by the Trust, in which event the
Trust would redeem the Trust Securities on a pro rata basis to the same extent
as the Convertible Debentures are redeemed by TIMET. See "Description of the
Convertible Preferred Securities--Special Event Redemption or Distribution."
Under current United States Federal income tax law, a distribution of
Convertible Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Convertible Preferred Securities. Upon occurrence of a
Special Event, however, a dissolution of the Trust in which holders of the
Convertible Preferred Securities receive cash would be a taxable event to such
holders. See "United States Federal Income Taxation--Receipt of Convertible
Debentures or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Convertible
Preferred Securities or the Convertible Debentures that may be distributed in
exchange for Convertible Preferred Securities if a dissolution or liquidation
of the Trust were to occur. Accordingly, the Convertible Preferred Securities
that an investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Convertible Debentures that a holder of
Convertible Preferred Securities may receive on dissolution and liquidation of
the Trust, may trade at a discount to the price that the investor paid to
purchase the Convertible Preferred Securities offered hereby. Because holders
of Convertible Preferred Securities may receive Convertible Debentures upon the
occurrence of a Special Event, prospective purchasers of Convertible Preferred
Securities are also making an investment decision with regard to the
Convertible Debentures and should carefully review all the information
regarding the Convertible Debentures contained in this Prospectus. See
"Description of the Convertible Preferred Securities--Special Event Redemption
or Distribution" and "Description of the Convertible Debentures--General."
VOTING RIGHTS
Except as provided under the Trust Act (as defined herein) and the
Trust Indenture Act, as described under "Description of the Convertible
Preferred Securities--Voting Rights" and "Description of the Guarantee--
Amendments and Assignment," and as otherwise required by law and the
Declaration, the holders of Convertible Preferred Securities have no voting
rights and are not
- 16 -
<PAGE> 18
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, Issuer Trustees, which voting rights are vested exclusively in the
holder of the Trust Common Securities.
TRADING CHARACTERISTICS OF CONVERTIBLE PREFERRED SECURITIES
The Convertible Preferred Securities may trade at a price that does
not fully reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Debentures. In addition, as a result of TIMET's right to
defer interest payments on the Convertible Debentures, which would result in a
corresponding deferral of distributions in the Convertible Preferred
Securities, the market price of the Convertible Preferred Securities may be
more volatile than other similar securities where the issuer does not have such
right to defer distributions. A holder who disposes of his Convertible
Preferred Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Convertible
Debentures through the date of disposition in income as ordinary income (i.e.,
OID) and to add such amount to his adjusted tax basis in his pro rata share of
the underlying Convertible Debentures deemed disposed of, but will not be
entitled to receive the cash from the Trust related to such income. To the
extent the selling price is less than the holder's adjusted tax basis (which
will include, in the form of OID, all accrued but unpaid interest), a holder
will recognize a capital loss. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for Federal income tax
purposes. See "United States Federal Income Taxation--Original Issue Discount"
and "--Sales of Convertible Preferred Securities."
LACK OF PUBLIC MARKET FOR THE CONVERTIBLE PREFERRED SECURITIES;
LIMITATIONS ON TRANSFER
There is no existing trading market for the Convertible Preferred
Securities, and there can be no assurance regarding the future development of a
market for the Convertible Preferred Securities, or the ability of holders of
the Convertible Preferred Securities to sell such securities or the price at
which such holders may be able to sell such securities. If such a market were
to develop, the Convertible Preferred Securities could trade at prices that may
be higher or lower than the initial offering price depending on many factors,
including prevailing interest rates, the price of TIMET's Common Stock, TIMET's
financial condition and results of operations and the market for similar
securities. The Initial Purchasers have advised TIMET that they currently
intend to make a market in the Convertible Preferred Securities. The Initial
Purchasers are not obligated to do so, however, and any market making with
respect to the Convertible Preferred Securities may be discontinued at any time
without notice. Therefore, there can be no assurance as to the liquidity of any
trading market for the Convertible Preferred Securities or that an active
public market for such securities will develop. In addition, the Company does
not intend to apply (and is not obligated to apply) for listing or quotation of
the Convertible Preferred Securities on any securities exchange or stock
market.
LABOR
A significant portion of the Company's employees work under
collectively bargained agreements. The Company's sales and operating results
were adversely affected from late 1993 through the beginning of 1995 due to work
stoppages at its Henderson, Nevada and Ohio plants. The work stoppage at the
Nevada facility lasted for nine months and the work stoppage at the Ohio
facility lasted for ten weeks. Each of these facilities is material to the
Company's operations, and the Henderson facility includes all of the Company's
titanium sponge production capacity. The Company's current labor agreements in
Henderson, Nevada and Ohio expire in 2000 and 2002, respectively.
While the Company currently considers its employee relations to be
satisfactory, there can be no assurance that new collective bargaining
agreements will be negotiated or that the results of such new agreements or any
work stoppages in connection with the expiration of such agreements would not
have a material and adverse effect on the business, financial condition, results
of operations or cash flows of the Company.
- 17 -
<PAGE> 19
CONTROL BY CERTAIN STOCKHOLDERS; POSSIBLE CONFLICTS OF INTEREST
Of the 31.5 million shares of Common Stock outstanding, approximately
30.3% is held by Tremont, 2.1% by UTSC, 6.4% by IMI and .4% by members of the
Company's management. Tremont and UTSC have an option expiring in 1999 to
acquire the balance of the shares held by IMI at $7.95 per share (Tremont's
option applies to approximately 75% of such shares and UTSC's option applies to
approximately 25% of such shares). Pursuant to an agreement entered into among
the Company, IMI and Tremont, IMI is currently obligated to vote its shares of
Common Stock in favor of four Tremont nominees to the TIMET Board of Directors.
The Board of Directors is entitled to fill any vacancies on the Board of
Directors. Tremont may be deemed to control the Company. Approximately 47.6%
of Tremont's outstanding common stock is held by Contran Corporation
("Contran"), subsidiaries of Contran, and entities or persons related to Harold
C. Simmons, which may be deemed to control Tremont. Contran may be deemed to be
controlled by Harold C. Simmons. Certain of the Company's executive officers
and directors also serve as executive officers and directors of Tremont.
ENVIRONMENTAL REGULATION
Risk of environmental damage is inherent in the Company's operations.
The Company uses and produces substantial quantities of substances, chemicals
and compounds that are considered hazardous or toxic under Federal, state and
local environmental and worker safety and health laws and regulations. In
addition, at the Company's Henderson, Nevada facility, the Company produces and
uses substantial quantities of titanium tetrachloride, a material classified as
extremely hazardous under Federal environmental laws. The Company has used such
substances and compounds throughout the history of its operations and may be
responsible for remediation as a result of past releases or disposal practices.
Moreover, the Company's Henderson, Nevada facility is located within an area
that is potentially contaminated as a result of the historical operations of
the Company and other industrial and chemical manufacturing businesses. While
the Company takes environmental, safety and health precautions appropriate for
the industry, the Company's operations pose an ongoing risk of accidental
releases of, and worker exposure to, hazardous or toxic substances. In
addition, the Company is subject to a wide range of government environmental
requirements, including the extensive regulation of air and water emissions and
waste management. There is a risk that such requirements, or enforcement
thereof, may become more stringent in the future. There can be no assurances
that some, or all, of the risks discussed under this heading will not result in
liabilities that would be material to the Company's business, results of
operations, financial condition or cash flows.
- 18 -
<PAGE> 20
NO ASSURANCE OF NEW PRODUCT DEVELOPMENT
In an effort to lessen its dependence on the aerospace industry and to
increase participation in other markets, the Company, its competitors and
end-users are devoting significant efforts and resources to developing new
markets and applications for titanium, certain of which are still in the
preliminary stages. Developing these emerging applications involves substantial
risk and uncertainties due to the fact that titanium must compete with less
expensive alternative materials in these potential applications. There can be
no assurances the Company will be able to develop new markets and applications
for its products, or as to the time required for such development, or as to the
extent to which it will face competition in this regard. If the Company is
unable to develop these markets to a substantial degree, management expects the
Company's business to be largely dependent on the cyclical aerospace industry.
DEPENDENCE ON OTHERS FOR CERTAIN RAW MATERIALS AND SERVICES
While the Company is one of six major worldwide producers of titanium
sponge, a basic raw material in the production of titanium ingot and mill
products, under current market conditions it cannot supply all of its needs for
titanium sponge internally and is dependent, therefore, on third parties for a
portion of its titanium sponge needs. Substantially all of the Company's supply
of titanium-containing rutile ore, one of the primary raw materials used in the
production of titanium sponge, is currently purchased from a limited number of
suppliers. Although the Company believes that the availability of rutile is
adequate in the near-term, there can be no assurance that the Company will not
experience interruptions of its raw material supplies. An interruption in the
Company's supply of rutile and titanium sponge could have a material adverse
effect on the Company's business, operating results, financial condition and
cash flows.
The Company is dependent upon the services of outside processors to
perform important processing functions with respect to certain of its products.
In particular, the Company currently relies upon a limited number of processors
to perform certain rolling steps with respect to some of its plate, sheet, and
strip products, and upon a single processor to perform certain finishing and
conditioning steps with respect to certain slab products. Although the Company
believes that there are numerous metal producers with the capability to perform
these same processing functions, arranging for an alternative processor or, in
the case of the slab products, possibly installing comparable capabilities,
could take several months and any interruption in these functions could have a
material and adverse effect on the Company's business, results of operations,
financial condition and cash flows in the short term.
VOLATILITY OF SHARE PRICE
The trading price of TIMET's shares may be affected by the factors
noted above as well as prevailing economic and financial trends and conditions
in the public securities markets. Shortfalls in revenues or earnings from the
levels anticipated by the public markets could have an immediate and
significant effect on the trading price of TIMET's shares in any given period.
Such shortfalls may result from events that are beyond TIMET's immediate
control and can be unpredictable. In addition, the prices at which the Common
Stock trades and the volatility thereof may be affected by trading in the
common stocks of Tremont and NL Industries, Inc. ("NL"), a company which may be
deemed to be, with TIMET, under common control by Tremont and subsidiaries of
Contran. Further, factors such as announcements by TIMET of quarterly
variations in its financial results and changes in general market conditions,
among other things, could cause the market price of the Common Stock to
fluctuate significantly. In recent years, the stock market has experienced
significant price and volume fluctuations.
- 19 -
<PAGE> 21
USE OF PROCEEDS
Neither the Company nor the Trust will receive any proceeds from the
sale of the Offered Securities or the Offered Common.
TIMET CAPITAL TRUST I
The Trust is a statutory business trust formed under the laws of the
State of Delaware pursuant to (i) a declaration of trust (as amended and
restated, the "Declaration") executed by the Company as sponsor of the Trust,
and the trustees of the Trust (the "Issuer Trustees"), and (ii) a certificate
of trust filed with the Secretary of State of the State of Delaware. The
Company directly owns Trust Common Securities in an aggregate liquidation
amount equal to 3% of the total capital of the Trust. The Trust Common
Securities rank pari passu, and payment will be made thereon pro rata, with the
Convertible Preferred Securities, except that, upon the occurrence and during
the continuance of a Declaration Event of Default, the rights of the holders of
the Trust Common Securities to payment in respect of distributions and payments
upon liquidation, redemption and otherwise will be subordinated to the rights
of the holders of the Convertible Preferred Securities. See "Description of the
Convertible Preferred Securities--Subordination of Trust Common Securities."
The assets of the Trust consist solely of the Convertible Debentures. The Trust
exists for the exclusive purpose of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Convertible
Debentures and (iii) engaging in only those other activities necessary or
incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees initially
is five. Three of the Issuer Trustees (the "Regular Trustees") are and will
continue to be individuals who are employees or officers of or who are
affiliated with the Company. The fourth trustee will be a financial institution
that is unaffiliated with the Company (the "Property Trustee"). The fifth
trustee will be an entity that maintains its principal place of business in the
State of Delaware (the "Delaware Trustee"). Currently, Joseph
- 20 -
<PAGE> 22
S. Compofelice, Vice President and Chief Financial Officer, Robert E.
Musgraves, Vice President, General Counsel and Secretary, and Mark A. Wallace,
Vice President--Strategic Change, are acting as Regular Trustees. Currently,
The Chase Manhattan Bank, a New York banking corporation, will act as Property
Trustee and Chase Manhattan Bank Delaware, a Delaware banking corporation, are
acting as Delaware Trustee, until, in each case, removed or replaced by the
holder of the Trust Common Securities. The Chase Manhattan Bank is also acting
as indenture trustee under the Guarantee (the "Guarantee Trustee") and under
the Indenture (the "Indenture Trustee"). See "Description of the Convertible
Preferred Securities" and "Description of the Guarantee."
The Property Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers and privileges under the Indenture as the holder of
the Convertible Debentures. In addition, the Property Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Trustee Account") to hold all payments made in respect of the
Convertible Debentures for the benefit of the holders of the Trust Securities.
The Guarantee Trustee holds the Guarantee for the benefit of the holders of the
Convertible Preferred Securities. The Company, as the holder of all the Trust
Common Securities, has the right to appoint, remove or replace any of the
Issuer Trustees and to increase or decrease the number of trustees, provided
that the number of trustees shall be at least two. The Company will pay all
fees and expenses related to the Trust and the offering of the Convertible
Preferred Securities. See "Description of the Convertible Debentures."
The rights of the holders of the Convertible Preferred Securities,
including economic rights, rights to information and voting rights, are as set
forth in the Declaration and the Delaware Business Trust Act, as amended (the
"Trust Act"). See "Description of the Convertible Preferred Securities." The
Declaration, the Indenture and the Guarantee also incorporate by reference the
terms of the Trust Indenture Act. It is expected that, at the time this
Registration Statement becomes effective, the Declaration, the Indenture and
the Guarantee will be qualified under the Trust Indenture Act.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of the Company.
- 21 -
<PAGE> 23
DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
The Convertible Preferred Securities were issued pursuant to the terms
of the Declaration. The Declaration incorporates by reference certain terms of
the Trust Indenture Act, and is qualified under the Trust Indenture Act. The
Property Trustee, The Chase Manhattan Bank, is acting as indenture trustee for
the Convertible Preferred Securities under the Declaration for purposes of
compliance with the provisions of the Trust Indenture Act. The terms of the
Convertible Preferred Securities include those stated in the Declaration and
those made part of the Declaration by the Trust Indenture Act. The following
summary of the material terms and provisions of the Convertible Preferred
Securities is subject to, and qualified in its entirety by reference to, the
Declaration, which is included as an exhibit to the Registration Statement of
which this Prospectus is a part.
GENERAL
The Declaration authorizes the Regular Trustees to issue the Trust
Securities on behalf of the Trust. The Convertible Preferred Securities
represent undivided beneficial ownership interests in the assets of the Trust
and entitle the holders thereof to a preference in certain circumstances with
respect to distributions and amounts payable on redemption or liquidation over
the Trust Common Securities, as well as other benefits as described in the
Declaration. The Convertible Preferred Securities were issued in fully
registered form without coupons.
All of the Trust Common Securities are owned by the Company. The Trust
Common Securities rank pari passu, and payments will be made thereon on a pro
rata basis, with the Convertible Preferred Securities, except that upon the
occurrence of a Declaration Event of Default, the rights of the holders of the
- 22 -
<PAGE> 24
Trust Common Securities to receive payment of periodic distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of Convertible Preferred Securities. See "--
Subordination of Trust Common Securities." Title to the Convertible Debentures
will be held by the Property Trustee for the benefit of the holders of the
Trust Securities. The Declaration does not permit the issuance by the Trust of
any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. The payment of distributions out of money held by
the Trust, and payments upon redemption of the Convertible Preferred Securities
or liquidation of the Trust, are guaranteed by the Company to the extent
described under "Description of the Guarantee." The Guarantee will be held by
The Chase Manhattan Bank, as the Guarantee Trustee, for the benefit of the
holders of the Convertible Preferred Securities. The Guarantee does not cover
the payment of distributions when the Trust does not have sufficient available
funds to pay such distributions. In such event, the remedy of a holder of
Convertible Preferred Securities is (i) to vote to direct the Property Trustee
to enforce the Property Trustee's rights under the Convertible Debentures or
(ii) if the failure of the Trust to pay distributions is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures, to institute a proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on the
Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the Convertible Preferred Securities of such holder on or
after the respective due date specified in the Convertible Debentures. See "--
Voting Rights."
The Declaration does not contain covenants or provisions (such as
limitations on the incurrence of indebtedness or liens, asset sales or the
issuance and sale of subsidiary stock) that afford holders of Convertible
Preferred Securities protection in the event of a highly leveraged transaction
or other similar transactions involving TIMET that could adversely affect such
holders.
DISTRIBUTIONS
Distributions on Convertible Preferred Securities are fixed at a rate
per annum of 6.625% of the stated liquidation amount of $50 per Convertible
Preferred Security. Distributions in arrears for more than one quarter will
bear interest thereon at a rate per annum of 6.625% thereof compounded
quarterly. The amount of distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months.
Distributions on the Convertible Preferred Securities are cumulative
and will be payable quarterly in arrears on each March 1, June 1, September 1
and December 1, when, as and if available for payment, by the
- 23 -
<PAGE> 25
Property Trustee, except as otherwise described below. The Company has the
right under the Indenture to defer interest payments from time to time on the
Convertible Debentures for successive periods not exceeding 20 consecutive
quarterly interest periods (each, an "Extension Period") during which no
interest (excluding for such purposes, Additional Interest, if any) shall be
due and payable; provided that no such Extension Period may extend beyond the
maturity date of the Convertible Debentures. As a consequence of such
extension, quarterly distributions on the Convertible Preferred Securities will
be deferred during any such Extension Period (although such distributions will
continue to accumulate with interest since interest will continue to accrue on
the Convertible Debentures and will be compounded quarterly). The Company has
agreed that, in the event that the Company exercises this right, during such
Extension Period it will, among other things (a) not declare or pay dividends
on, or make a distribution with respect to, or redeem or purchase or acquire,
or make a liquidation payment with respect to, any of its capital stock (other
than (i) purchases or acquisitions of shares of Common Stock in connection with
the satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of the Common
Stock, (ii) as a result of a reclassification of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock or (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged), (b) not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company that rank pari passu
with or junior to the Convertible Debentures and (c) not make any guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee).
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period, together
with all previous and further extensions thereof, may not exceed 20 consecutive
quarters and that such Extension Period may not extend beyond the maturity date
of the Convertible Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may commence a new Extension
Period of up to 20 consecutive quarters, subject to the above restrictions.
Consequently, there could be multiple Extension Periods of varying lengths
throughout the term of the Convertible Debentures. See "Description of the
Convertible Debentures--Interest" and "Description of the Convertible
Debentures--Option to Extend Interest Payment Period." If distributions are
deferred, the accumulated distributions and accrued interest thereon shall be
paid to the holders of record of Convertible Preferred Securities as they
appear on the books and records of the Trust on the record date next following
the termination of such deferral period.
Distributions on the Convertible Preferred Securities will be made to
the extent that the Trust has funds available for the payment of such
distributions in the Property Trustee Account. Amounts available to the Trust
for distribution to the holders of the Convertible Preferred Securities will be
limited to payments received by the Trust from the Company in respect of the
Convertible Debentures. See "Description of the Convertible Debentures." The
- 24 -
<PAGE> 26
payment of distributions out of funds held by the Trust is guaranteed by the
Company, as set forth under "Description of the Guarantee."
Distributions on the Convertible Preferred Securities will be payable
to the holders thereof as they appear on the books and records of the Trust on
the relevant record dates, which generally will be the February 15, May 15,
August 15 and November 15 prior to the relevant payment dates. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
such payment will be made as described under "--Payment and Paying Agents"
below. In the event that any date on which distributions are payable on the
Convertible Preferred Securities is not a Business Day, payment of the
distribution payable on such date will be made on the next succeeding day that
is a Business Day (without any distribution or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than a day on which banking
institutions in The City of New York or in Chicago, Illinois are authorized or
required by law to close.
CONVERSION RIGHTS
General. Convertible Preferred Securities are convertible at any time
after 90 days following November 26, 1996 and prior to 5:00 p.m. (New York City
time) on the fifth Business Day immediately preceding the date of repayment of
such Convertible Preferred Securities, whether at maturity or upon redemption
(either at the option of the Company or pursuant to a Tax Event), at the option
of the holder thereof and in the manner described below, into shares of Common
Stock at an initial conversion rate of 1.339 shares of Common Stock for each
Convertible Preferred Security (equivalent to a conversion price of
approximately $37.34 per share of Common Stock), subject to adjustment as
described under "--Conversion Price Adjustments" below. The Trust has
covenanted in the Declaration not to convert Convertible Debentures held by it
except pursuant to a notice of conversion delivered to the Property Trustee, as
conversion agent (the "Conversion Agent"), by a holder of Convertible Preferred
Securities. A holder of a Convertible Preferred Security wishing to exercise
its conversion right must deliver an irrevocable notice of conversion,
together, if the Convertible Preferred Security is a Certificated Security (as
defined herein), with such Certificated Security, to the Conversion Agent,
which shall, on behalf of such holder, exchange such Convertible Preferred
Security for a portion of the Convertible Debentures and immediately convert
such Convertible Debentures into Common Stock. Holders may obtain copies of the
required form of the notice of conversion from the Conversion Agent. Procedures
for converting book-entry Convertible Preferred Securities into
- 25 -
<PAGE> 27
shares of Common Stock differ, as described under "--Book-Entry Only Issuance--
The Depository Trust Company."
Holders of Convertible Preferred Securities at 5:00 p.m. (New York
City time) on a distribution record date will be entitled to receive the
distribution payable on such Convertible Preferred Securities on the
corresponding distribution payment date notwithstanding the conversion of such
Convertible Preferred Securities following such distribution record date but
prior to such distribution payment date. Except as provided in the immediately
preceding sentence, neither the Trust nor the Company will make, or be required
to make, any payment, allowance or adjustment for accumulated and unpaid
distributions, whether or not in arrears, on converted Convertible Preferred
Securities; provided, however, that any holder of Convertible Preferred
Securities who delivers such Convertible Preferred Securities for conversion
after receiving a notice of redemption from the Property Trustee during an
Extension Period will be entitled to receive all accumulated and unpaid
distributions to the date of conversion. Each conversion will be deemed to have
been effected immediately prior to 5:00 p.m. (New York City time) on the day on
which the related conversion notice was received by the Conversion Agent.
Shares of Common Stock issued upon conversion of Convertible Preferred
Securities will be validly issued, fully paid and nonassessable. No fractional
shares of Common Stock will be issued as a result of conversion, but in lieu
thereof such fractional interest will be paid by the Company in cash based on
the last reported sale price of Common Stock on the date such Convertible
Preferred Securities are surrendered for conversion.
Conversion Price Adjustments--General. The conversion price is subject
to adjustment in certain events, including (a) the issuance of shares of Common
Stock as a dividend or a distribution with respect to any class of capital
stock of the Company, (b) subdivisions, combinations and reclassification of
Common Stock, (c) the issuance to all holders of Common Stock of rights or
warrants entitling them to subscribe for shares of Common Stock at less than
the then Current Market Price (as defined below) of the Common Stock, (d) the
distribution to holders of Common Stock of evidences of indebtedness of the
Company, securities or capital stock, cash or assets (including securities, but
excluding those rights, warrants, dividends and distributions referred to above
and dividends and distributions paid exclusively in cash), (e) the payment of
dividends (and other distributions) on Common Stock paid exclusively in cash,
excluding cash dividends if the annualized per share amount thereof does not
exceed 15% of the Current Market Price of Common Stock as of the trading day
immediately preceding the date of declaration of such dividend, and (f) payment
to holders of Common Stock in respect of a tender or exchange offer (other than
an odd-lot offer) by the Company for Common Stock at a price in excess of 110%
of the then Current Market Price of Common Stock as of the trading day next
succeeding the last date tenders or exchanges may be made pursuant to such
tender or exchange offer. "Current Market Price" means the average of
- 26 -
<PAGE> 28
the daily closing prices for the five consecutive trading days selected by the
Company commencing not more than 20 trading days before, and ending not later
than, the earlier of the day in question or, if applicable, the day before the
"ex" date with respect to the issuance or distribution in question.
The Company may, at its option, make such reductions in the conversion
price as the Company's Board of Directors deems advisable to avoid or diminish
any income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes. See "United States Federal Income Taxation--
Adjustment of Conversion Price."
No adjustment of the conversion price will be made upon the issuance
of any shares of Common Stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on securities of the
Company and the investment of additional optional amounts in shares of Common
Stock under any such plan. No adjustment in the conversion price will be
required unless adjustment would require a change of at least 1% in the price
then in effect; provided, however, that any adjustment that would not be
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any action would require adjustment of the conversion
price pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value to the holder of the Convertible Preferred
Securities.
Conversion Price Adjustments--Merger, Consolidation or Sale of Assets
of the Company. In the event that the Company shall be a party to any
transaction (including, without limitation, and with certain exceptions (a) a
recapitalization or reclassification of the Common Stock, (b) consolidation of
the Company with, or merger of the Company into, any other Person, or any
merger of another Person into the Company, (c) any sale, transfer or lease of
all or substantially all of the assets of the Company or (d) any compulsory
share exchange) pursuant to which the Common Stock is converted into the right
to receive other securities, cash or other property (each of the foregoing
being referred to as a "Transaction"), then the holders of Convertible
Preferred Securities then outstanding shall have the right to convert the
Convertible Preferred Securities into the kind and amount of securities, cash
or other property receivable upon the consummation of such Transaction by a
holder of the number of shares of Common Stock issuable upon conversion of such
Convertible Preferred Securities immediately prior to such Transaction. This
change could substantially lessen or eliminate the value of the conversion
privilege associated with the Convertible Preferred Securities in the future.
For example, if the Company were acquired in a cash merger, each Convertible
Preferred Security would become convertible solely into cash and would no
longer be convertible into securities whose value would vary depending on the
future prospects of the Company and other factors.
- 27 -
<PAGE> 29
Conversion price adjustments or omissions in making such adjustments
may, under certain circumstances, be deemed to be distributions that could be
taxable as dividends to holders of Convertible Preferred Securities or to the
holders of Common Stock. See "United States Federal Income Taxation--
Adjustment of Conversion Price."
MANDATORY REDEMPTION UPON OPTIONAL REDEMPTION OR MATURITY OF CONVERTIBLE
DEBENTURES
The Convertible Debentures mature on December 1, 2026 and may be
redeemed, in whole or in part, at any time after December 1, 1999 or at any
time in certain circumstances upon the occurrence of a Tax Event. Upon the
repayment of the Convertible Debentures, whether at maturity or upon redemption
(either at the option of the Company or pursuant to a Tax Event), the proceeds
from such repayment shall simultaneously be applied to redeem Trust Securities
having an aggregate liquidation amount equal to the Convertible Debentures so
repaid or redeemed at the applicable Redemption Price; provided that holders of
the Trust Securities shall be given not less than 15 nor more than 60 days'
notice of such redemption. See "--Special Event Redemption or Distribution,"
"--Redemption Procedures," and "Description of the Convertible Debentures--
General" and "--Redemption at the Option of TIMET."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event (each, a
"Special Event") shall occur and be continuing, the Trust shall, unless the
Convertible Debentures are redeemed in the limited circumstances described
below, be dissolved with the result that, after satisfaction of creditors, if
any, of the Trust, Convertible Debentures with an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
the accumulated and unpaid distributions on, and having the same record date
for payment as, the Convertible Preferred Securities and the Trust Common
Securities outstanding at such time would be distributed on a pro rata basis to
the holders of the Convertible Preferred Securities and the Trust Common
Securities in liquidation of such holders' interests in the Trust, within 90
days following the occurrence of such Special Event; provided, however, that in
the case of the occurrence of a Tax Event, as a condition of such dissolution
and distribution, the Regular Trustees shall have received an opinion of
nationally recognized independent tax counsel experienced in such matters (a
"No Recognition Opinion"), which opinion may rely on published revenue rulings
of the Internal Revenue Service, to the effect that the holders of the
Convertible Preferred Securities will not recognize any income, gain or loss
for Federal income tax purposes as a result of such dissolution and
distribution of Convertible Debentures; and, provided further, that if at the
- 28 -
<PAGE> 30
time there is available to the Trust the opportunity to eliminate, within such
90-day period, the Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar reasonable
measure that, in the sole judgment of the Company, has or will cause no adverse
effect on the Trust, the Company or the holders of the Trust Securities and
will involve no material cost, the Trust will pursue such measure in lieu of
dissolution. Furthermore, if in the case of the occurrence of a Tax Event, (i)
the Regular Trustees have received an opinion (a "Redemption Tax Opinion") of
nationally recognized independent tax counsel experienced in such matters that,
as a result of a Tax Event, there is more than an insubstantial risk that the
Company would be precluded from deducting the interest on the Convertible
Debentures for Federal income tax purposes (determined without regard to the
use made by the Company of the proceeds from the sale of the Convertible
Debentures) even if the Convertible Debentures were distributed to the holders
of Convertible Preferred Securities and Trust Common Securities in liquidation
of such holders' interests in the Trust as described above or (ii) the Regular
Trustees shall have been informed by such tax counsel that a No Recognition
Opinion cannot be delivered to the Trust, the Company shall have the right,
upon not less than 15 nor more than 60 days' notice, to redeem the Convertible
Debentures, in whole (but not in part), at 100% of the principal amount plus
accrued and unpaid interest, within 90 days following the occurrence of such
Tax Event, and promptly following such redemption, the Convertible Preferred
Securities and Trust Common Securities will be redeemed by the Trust; provided,
however, that if at the time there is available to the Company or the Trust the
opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that, in the sole judgment of
the Company, has or will cause no adverse effect on the Trust, the Company or
the holders of the Trust Securities and will involve no material cost, the
Company or the Trust will pursue such measure in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an
opinion of nationally recognized independent tax counsel experienced in such
matters (a "Dissolution Tax Opinion") to the effect that as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (b) any amendment to, or
change in, an interpretation or application of any such laws or regulations by
any legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any judicial
decision or regulatory determination), (c) any interpretation or pronouncement
that provides for a position with respect to such laws or regulations that
differs from the theretofore generally accepted position or (d) any action
taken by any governmental agency or regulatory authority, which amendment or
change is enacted, promulgated or issued or which interpretation or
pronouncement is issued or adopted or which action is taken, in each case,
after November 20, 1996 (collectively, a "Change in Tax Law"), there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days of
the date thereof, subject to Federal income tax with respect to income accrued
or received on the Convertible Debentures, (ii) the Trust is, or will be within
90 days of the date thereof, subject to more than a de minimis amount of other
- 29 -
<PAGE> 31
taxes, duties or other governmental charges or (iii) interest payable by the
Company to the Trust on the Convertible Debentures is not, or within 90 days of
the date thereof will not be, deductible by the Company for Federal income tax
purposes (determined without regard to the use made by the Company of the
proceeds of the Convertible Debentures). Notwithstanding anything in the
previous sentence to the contrary, a Tax Event shall not include any Change in
Tax Law that requires the Company for Federal income tax purposes to defer
taking a deduction for any OID that accrues with respect to the Convertible
Debentures until the interest payment related to such OID is paid by the
Company in money; provided that such Change in Tax Law does not create more
than an insubstantial risk that the Company will be prevented from taking a
deduction for OID accruing with respect to the Convertible Debentures at a date
that is no later than the date the interest payment related to such OID is
actually paid by the Company in money.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act to the effect that, as a result of
the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court,
governmental agency or regulatory authority (a "Change in Investment Company
Law"), there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" which is required to be registered under the
Investment Company Act, which Change in Investment Company Law becomes
effective on or after November 20, 1996.
On the date fixed for any distribution of Convertible Debentures, upon
dissolution of the Trust, (i) the Convertible Preferred Securities and the
Trust Common Securities will no longer be deemed to be outstanding and (ii)
certificates representing Trust Securities will be deemed to represent
beneficial interests in the Convertible Debentures having an aggregate
principal amount equal to the stated liquidation amount of, and bearing accrued
and unpaid interest equal to the accumulated and unpaid distributions on, such
Trust Securities until such certificates are presented to the Company or its
agent for transfer or reissuance.
There can be no assurance as to the market price for the Convertible
Debentures that may be distributed in exchange for Trust Securities if a
dissolution and liquidation of the Trust were to occur. Accordingly, the
Convertible Debentures that an investor may subsequently receive on dissolution
and liquidation of the Trust may trade at a discount to the price of the Trust
Securities exchanged.
- 30 -
<PAGE> 32
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Convertible
Preferred Securities unless all accumulated and unpaid distributions have been
paid on all Convertible Preferred Securities for all quarterly distribution
periods terminating on or prior to the date fixed for redemption.
In the event of any redemption in part, the Trust shall not be
required (i) to issue, register the transfer of or exchange any Convertible
Preferred Security during a period beginning at the opening of business 15 days
before any selection for redemption of Convertible Preferred Securities and
ending at 5:00 p.m. New York City time on the earliest date on which the
relevant notice of redemption is deemed to have been given to all holders of
Convertible Preferred Securities to be so redeemed or (ii) to register the
transfer of or exchange any Convertible Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed portion of any
Convertible Preferred Securities being redeemed in part.
If the Trust gives a notice of redemption in respect of Convertible
Preferred Securities (which notice will be irrevocable), and if the Company has
paid to the Property Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Convertible Debentures, then, by 12:00
noon, New York City time, on the redemption date, the Trust will irrevocably
deposit with DTC funds sufficient to pay the amount payable on redemption of
all book-entry certificates and will give DTC irrevocable instructions and
authority to pay such amount in respect of Convertible Preferred Securities
represented by the Global Certificates (as defined herein) and will irrevocably
deposit with the paying agent for the Convertible Preferred Securities funds
sufficient to pay such amount in respect of any Certificated Securities and
will give such paying agent irrevocable instructions and authority to pay such
amount to the holders of Certificated Securities upon surrender of their
certificates. If notice of redemption shall have been given and funds are
deposited as required, then upon the date of such deposit, all rights of
holders of such Convertible Preferred Securities so called for redemption will
cease, except the right of the holders of such Convertible Preferred Securities
to receive the Redemption Price, but without interest on such Redemption Price.
In the event that any date fixed for redemption of Convertible Preferred
Securities is not a Business Day, then payment of the amount payable on such
date will be made on the next succeeding day that is a Business Day (without
any interest or other payment in respect of any such delay), except that, if
such Business Day falls in the next calendar year, such payment will be made on
the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Convertible Preferred Securities is improperly
withheld or refused and not paid either by the Trust or by the Company pursuant
to the Guarantee described under "Description of the Guarantee," distributions
on such Convertible Preferred Securities will continue to accumulate at the
then applicable rate, from the original redemption date to the date of payment,
- 31 -
<PAGE> 33
in which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the amount payable upon redemption
(other than for calculating any premium).
In the event that fewer than all of the outstanding Convertible
Preferred Securities are to be redeemed, the Convertible Preferred Securities
will be redeemed pro rata.
Subject to the foregoing and applicable law (including, without
limitation, Federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Convertible Preferred
Securities by tender, in the open market or by private agreement.
SUBORDINATION OF TRUST COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption
of, the Trust Securities, as applicable, shall be made pro rata based on the
liquidation amount of the Trust Securities; provided, however, that, if on any
distribution date or redemption date a Declaration Event of Default shall have
occurred and be continuing, no payment of any distribution on, or amount
payable upon redemption of, any Trust Common Security, and no other payment on
account of the redemption, liquidation or other acquisition of Trust Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid distributions on all outstanding Convertible Preferred Securities for
all distribution periods terminating on or prior thereto, or in the case of
payment of the amount payable upon redemption of the Convertible Preferred
Securities, the full amount of such amount in respect of all outstanding
Convertible Preferred Securities shall have been made or provided for, and all
funds available to the Property Trustee shall first be applied to the payment
in full in cash of all distributions on, or the amount payable upon redemption
of, Convertible Preferred Securities then due and payable.
In the case of any Declaration Event of Default, the holder of Trust
Common Securities will be deemed to have waived any such Declaration Event of
Default until all such Declaration Events of Default with respect to the
Convertible Preferred Securities have been cured, waived or otherwise
eliminated. Until any such Declaration Events of Default with respect to the
Convertible Preferred Securities have been so cured, waived or otherwise
eliminated, the Property Trustee will act solely on behalf of the holders of
the Convertible Preferred Securities and not the holder of the Trust Common
Securities, and only the holders of the Convertible Preferred Securities will
have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding up or termination of the Trust (each a "Liquidation"), the then holders
of the Convertible Preferred Securities will be entitled to receive out of the
assets of the Trust, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
- 32 -
<PAGE> 34
amount of $50 per Convertible Preferred Security plus accumulated and unpaid
distributions thereon to the date of payment (the "Liquidation Distribution"),
unless, in connection with such Liquidation, Convertible Debentures in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to the accumulated and unpaid distributions
on, the Convertible Preferred Securities have been distributed on a pro rata
basis to the holders of the Convertible Preferred Securities.
If, upon any such Liquidation Distribution, the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Convertible Preferred Securities
shall be paid on a pro rata basis. The holders of the Trust Common Securities
will be entitled to receive distributions upon any such dissolution pro rata
with the holders of the Convertible Preferred Securities, except that if a
Declaration Event of Default has occurred and is continuing, the Convertible
Preferred Securities shall have a preference over the Trust Common Securities
with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) upon the
bankruptcy of the Company; (ii) upon the filing of a certificate of dissolution
or its equivalent with respect to the Company, the filing of a certificate of
cancellation with respect to the Trust after having obtained the consent of at
least a majority in liquidation amount of the Convertible Preferred Securities,
voting together as a single class, to file such certificate of cancellation, or
the revocation of the certificate of incorporation of the Company and the
expiration of 90 days after the date of revocation without a reinstatement
thereof; (iii) upon the entry of a decree of judicial dissolution of the
Company or the Trust; (iv) when all of the Trust Securities shall have been
called for redemption and the amounts necessary for redemption thereof, shall
have been paid to the Holders in accordance with the terms of the Trust
Securities; (v) upon the occurrence and continuation of a Tax Event pursuant to
which the Trust shall have been dissolved in accordance with the terms of the
Declaration and all of the Convertible Debentures shall have been distributed
to the holders of Trust Securities in exchange for all of the Trust Securities;
or (vi) the expiration of the term of the Trust on December 1, 2033.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity or person,
- 33 -
<PAGE> 35
except as described below. The Trust may, with the consent of a majority of the
Regular Trustees and without the consent of the holders of the Trust
Securities, the Property Trustee or the Delaware Trustee consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state of the United States or the District of Columbia;
provided that (i) the Convertible Preferred Securities or any substitute
securities having substantially the same terms as the Convertible Preferred
Securities (the "Successor Securities") are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or with another organization on which the Convertible Preferred
Securities are then listed or quoted, (ii) such merger, consolidation,
amalgamation or replacement does not cause the Convertible Preferred Securities
(including any Successor Securities) to be downgraded by any nationally
recognized statistical rating organization, (iii) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights, preferences
and privileges of the holders of the Convertible Preferred Securities
(including any Successor Securities) in any material respect and (iv) prior to
such merger, consolidation, amalgamation or replacement, the Company has
received an opinion of a nationally recognized independent counsel to the Trust
reasonably acceptable to the Property Trustee and experienced in such matters
to the effect that (A) such merger, consolidation, amalgamation or replacement
will not adversely affect the rights, preferences and privileges of the holders
of the Convertible Preferred Securities (including any Successor Securities),
including the limited liability of such holders, in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
(B) following such merger, consolidation, amalgamation or replacement, neither
the Trust nor such successor entity will be required to register as an
"investment company" under the Investment Company Act and (C) following such
merger, consolidation, amalgamation or replacement, the Trust (or such
successor entity) will be treated as a grantor trust for Federal income tax
purposes; and, provided further, that if the Trust is not the survivor, (i)
such successor entity either (x) expressly assumes all of the obligations of
the Trust under the Trust Securities or (y) substitutes Successor Securities
for the Convertible Preferred Securities, so long as the Successor Securities
rank the same as the Convertible Preferred Securities rank with respect to
distributions, assets and payments upon liquidation, redemption and otherwise,
(ii) the Company expressly acknowledges a trustee of such successor entity
possessing the same powers and duties as the Property Trustee as the holder of
the Convertible Debentures, (iii) such successor entity has a purpose
substantially identical to that of the Trust and (iv) the Company guarantees
the obligations of such successor entity under the Successor Securities to the
same extent as provided by the Guarantee. Notwithstanding the foregoing, the
Trust shall not, except with the consent of holders of 100% in liquidation
amount of the Trust Common Securities, consolidate, amalgamate, merge with or
into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if such
consolidation, amalgamation, merger or replacement would cause the Trust or the
successor entity to be classified as other than a grantor trust for Federal
income tax purposes.
- 34 -
<PAGE> 36
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default (as defined under "Description of
Convertible Debentures--Indenture Events of Default") constitutes a
"Declaration Event of Default"; provided that pursuant to the Declaration, the
holder of the Trust Common Securities will be deemed to have waived any
Declaration Event of Default with respect to the Trust Common Securities until
all Declaration Events of Default with respect to the Convertible Preferred
Securities have been cured, waived or otherwise eliminated. Until all such
Declaration Events of Default with respect to the Convertible Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee will be deemed to be acting solely on behalf of the holders of the
Convertible Preferred Securities, and only the holders of the Convertible
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under the Declaration and, therefore, the Indenture.
The Property Trustee shall notify all holders of the Convertible Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Convertible Debentures. Such notice shall state that such
Indenture Event of Default also constitutes a Declaration Event of Default.
If a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Convertible Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, the redemption date), then
a holder of Convertible Preferred Securities may directly institute a
proceeding for enforcement of payment to such holder directly of the principal
of or interest on the Convertible Debentures having a principal amount equal to
the aggregate liquidation amount of the Convertible Preferred Securities of
such holder on or after the respective due date specified in the Convertible
Debentures (a "Direct Action"). In connection with such Direct Action, the
Company will be subrogated to the rights of such holder of Convertible
Preferred Securities under the Declaration to the extent of any payment made by
the Company to such holder of Convertible Preferred Securities in such Direct
Action. The holders of Convertible Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Convertible
Debentures.
Upon the occurrence of a Declaration Event of Default, the Property
Trustee, as the holder of the Convertible Debentures, will have the right under
the Indenture to declare the principal of and interest on the Convertible
Debentures to be immediately due and payable. The Company and the Trust are
each required to file annually with the Property Trustee an officers'
certificate as to its compliance with all conditions and covenants under the
Declaration.
- 35 -
<PAGE> 37
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture
Act and under "Description of the Guarantee--Amendments and Assignment," and as
otherwise required by law and the Declaration, the holders of the Convertible
Preferred Securities have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in liquidation amount of the Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee and
direct the exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property Trustee, as
holder of the Convertible Debentures, to (i) exercise the remedies available to
it under the Indenture as a holder of the Convertible Debentures, (ii) waive
any past Indenture Event of Default that is waivable under the Indenture, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Convertible Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Convertible
Debentures where such consent shall be required; provided, however, that where
a consent or action under the Indenture would require the consent or act of the
holders of more than a majority of the aggregate principal amount of
Convertible Debentures affected thereby, only the holders of the percentage of
the aggregate stated liquidation amount of the Convertible Preferred Securities
that is at least equal to the percentage required under the Indenture may
direct the Property Trustee to give such consent or take such action. The
Property Trustee shall be under no obligation to revoke any action previously
authorized or approved by a vote of the holders of the Convertible Preferred
Securities or take any action in accordance with the directions of the holders
of the Convertible Preferred Securities unless the Property Trustee has
obtained an opinion of independent tax counsel to the effect that as a result
of such action, the Trust will not fail to be classified as a grantor trust for
United States Federal income tax purposes and each holder will be treated as
owning an undivided beneficial interest in the Convertible Debentures.
In the event the consent of the Property Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment, modification or termination as directed by a majority in
liquidation amount of the Trust Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Convertible Debentures, the Property Trustee may only
give such consent at the direction of each holder of Trust Securities. The
Property Trustee shall not take any such action in accordance with the
direction of the holders of the Trust Securities unless the Property Trustee
has obtained an opinion of independent tax counsel to the effect that, as a
result of such action, the Trust will not be classified as other than a grantor
trust for United States Federal income tax purposes.
- 36 -
<PAGE> 38
A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Declaration Event of Default.
Any required approval or direction of holders of Convertible Preferred
Securities may be given at a separate meeting of holders of Convertible
Preferred Securities convened for such purpose, at a meeting of all of the
holders of Trust Securities or pursuant to written consent. The Regular
Trustees will cause a notice of any meeting at which holders of Convertible
Preferred Securities are entitled to vote, or of any matter upon which action
by written consent of such holders is to be taken, to be mailed to each holder
of record of Convertible Preferred Securities. Each such notice will include a
statement setting forth: (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought, and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of
Convertible Preferred Securities will be required for the Trust to redeem and
cancel Convertible Preferred Securities or distribute Convertible Debentures in
accordance with the Declaration.
Notwithstanding that holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned at such time by the
Company or any entity directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the Company, shall not be
entitled to vote or consent and shall, for purposes of such vote or consent, be
treated as if such Convertible Preferred Securities were not outstanding.
The procedures by which holders of Convertible Preferred Securities
represented by the Global Certificates may exercise their voting rights are
described below. See "--Book-Entry Only Issuance--The Depository Trust
Company."
Holders of the Convertible Preferred Securities have no right to
appoint or remove the Regular Trustees, who may be appointed, removed or
replaced solely by the Company as the holder of the Trust Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority
of the Regular Trustees (and, in certain circumstances, the Property Trustee
and the Delaware Trustee); provided that if any proposed amendment provides
for, or the Regular Trustees otherwise propose to effect, (i) any action that
would adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or (ii)
the dissolution, winding up or termination of the Trust other than pursuant to
the terms of the Declaration, then the holders of the Trust Securities voting
- 37 -
<PAGE> 39
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities
affected thereby; provided, however, that if any amendment or proposal referred
to in clause (i) above would adversely affect only the Convertible Preferred
Securities or the Trust Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a majority in liquidation
amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be
made to the Declaration if such amendment or modification would (i) cause the
Trust to be classified for Federal income tax purposes as other than a grantor
trust, (ii) reduce or otherwise adversely affect the powers of the Property
Trustee in contravention of the Trust Indenture Act or (iii) cause the Trust to
be deemed an "investment company" that is required to be registered under the
Investment Company Act.
REGISTRATION RIGHTS
The Company and the Trust have agreed, pursuant to a registration
agreement (the "Registration Agreement") with the Initial Purchasers, for the
benefit of the holders of the Convertible Preferred Securities, that (i) the
Company and the Trust would, at the Company's expense, within 90 days after
November 26, 1996, file a registration statement (a "Shelf Registration
Statement") covering resales of the Convertible Preferred Securities (together
with the Guarantee), the Convertible Debentures and the Common Stock issuable
upon conversion thereof pursuant to Rule 415 under the Securities Act, (ii) the
Company and the Trust would use best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission within 180 days after
November 26, 1996 and (iii) the Company and the Trust would maintain such Shelf
Registration Statement continuously effective under the Securities Act until the
earliest of (x) November 26, 1999, (y) such date as restrictions on resales
shall terminate pursuant to Rule 144(k) under the Securities Act or any
successor rule thereto or (z) such date as of which all the Convertible
Preferred Securities, Convertible Debentures or the Common Stock issued upon
conversion thereof have been sold pursuant to such Shelf Registration Statement.
This Prospectus is part of the Shelf Registration Statement filed in connection
with these requirements.
- 38 -
<PAGE> 40
Pursuant to clause (iii) above, however, if the Company and the Trust fail to
keep the Shelf Registration Statement continuously effective for the period
specified above, then at such time as the Shelf Registration Statement is no
longer effective and on each date thereafter that is the 30th day subsequent to
such time and until the earlier of (i) the date that the Shelf Registration
Statement is again deemed effective, (ii) November 26, 1999, (iii) such date as
restrictions on resales shall terminate pursuant to Rule 144(k) under the
Securities Act or any successor rule thereto or (iv) such date as of which all
of the Convertible Preferred Securities, Convertible Debentures or the Common
Stock issued upon conversion thereof are sold pursuant to the Shelf Registration
Statement, the per annum interest rate on the Convertible Debentures will
increase by an additional 25 basis points; provided that the interest rate will
not increase by more than 50 basis points pursuant to this sentence. Any
increase in the interest rate on the Convertible Debentures will result in a
corresponding increase in the rate at which distributions will accumulate on the
Convertible Preferred Securities. The Company shall have the right, however, to
suspend the use of the prospectus which forms part of the Shelf Registration
Statement, as more fully described below.
The Company and the Trust will provide or cause to be provided to each
holder of the Convertible Preferred Securities, Convertible Debentures or the
Common Stock issued upon conversion thereof, copies of this Prospectus, notify
or cause to be notified each such holder when the Shelf Registration Statement
has become effective and take certain other actions as are required to permit
unrestricted resales of the Convertible Preferred Securities, Convertible
Debentures, and the Common Stock issued upon conversion thereof. A holder of
Convertible Preferred Securities, Convertible Debentures, or the Common Stock
issued upon conversion thereof that sells such securities pursuant to the Shelf
Registration Statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement that are applicable to a holder
(including certain indemnification and contribution rights and obligations).
The Company will be permitted to suspend the use of this Prospectus
for a period not to exceed 30 days in any three-month period or two periods not
to exceed an aggregate of 60 days in any 12-month period under certain
circumstances relating to pending corporate developments, public filings with
the Commission and similar events. The Company will pay all expenses of the
Shelf Registration Statement, provide to each registered holder of Convertible
Preferred Securities, Convertible Debentures or the Common Stock issued upon
conversion thereof copies of this Prospectus, notify each such registered
holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit, subject to the foregoing,
- 39 -
<PAGE> 41
unrestricted resales of the Convertible Preferred Securities, Convertible
Debentures and the Common Stock issued upon conversion thereof.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
Except as described in the next paragraph, the Depository Trust
Company ("DTC") will act as securities depositary for the Convertible Preferred
Securities, and the Convertible Preferred Securities will be issued only as
fully registered securities registered in the name of Cede & Co., as DTC's
nominee. One or more fully registered global Convertible Preferred Securities
certificates (the "Global Certificates"), will be issued, representing, in the
aggregate, Convertible Preferred Securities sold in reliance on Rule 144A, and
will be deposited with DTC.
Convertible Preferred Securities initially sold (i) to certain
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act), (ii) to executive officers and directors of the
Company or other individuals having relationships with the Company or such
executive officers and directors or (iii) in offshore transactions pursuant to
Regulation S under the Securities Act were issued in fully registered,
certificated form ("Certificated Securities"). Upon the transfer of any such
Certificated Securities, such Certificated Securities shall , unless the Global
Certificates have previously been exchanged for Certificated Securities, be
exchanged for an interest in the Global Certificates representing the number of
Convertible Preferred Securities being transferred. Any such transfers will
generally require the delivery by the transferee of a transfer certificate in
the form set forth in the Declaration.
Upon the transfer of an interest in the Global Certificates by a
Beneficial Owner (as defined herein) pursuant to Regulation S, the interest in
the Global Certificates being transferred may not continue to be held in
book-entry form through DTC, will be exchanged for definitive, legended
certificates only and will require the delivery by the transferee of a transfer
certificate in the form set forth in the Declaration.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the Convertible
Preferred Securities as represented by a Global Certificate.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of New York Banking
- 40 -
<PAGE> 42
Law, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Convertible Preferred Securities within the DTC system
must be made by or through Participants, which will receive a credit for the
Convertible Preferred Securities on DTC's records. The ownership interest of
each actual purchaser of Convertible Preferred Securities (a "Beneficial
Owner") is in turn to be recorded on the Participants' and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written conformations providing details of the transactions, as well as
periodic statements of their holdings, from the Participants or Indirect
Participants through which the Beneficial Owners purchased Convertible
Preferred Securities. Transfers of ownership interests in the Convertible
Preferred Securities are to be accomplished by entries made on the books of
Participants and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Convertible Preferred Securities, except in the event that use of
the book-entry system for the Convertible Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the
Convertible Preferred Securities; DTC's records reflect only the identity of
the Participants to whose accounts such Convertible Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants and
Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Convertible Preferred Securities represented
thereby for all purposes under the Declaration and the Convertible Preferred
Securities. No beneficial owner of an interest in a Global Certificate will be
able to transfer that interest except in accordance with DTC's applicable
procedures, in addition to those provided for under the Declaration.
- 41 -
<PAGE> 43
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Convertible Preferred Securities (including the
presentation of Convertible Preferred Securities for exchange as described
below) only at the direction of one or more Participants to whose account the
DTC interests in the Global Certificates are credited and only in respect of
such portion of the aggregate liquidation amount of Convertible Preferred
Securities as to which such Participant or Participants has or have given such
direction. However, if there is Declaration Event of Default with respect to
the Convertible Preferred Securities, DTC will exchange the Global Certificates
for Certificated Securities, which it will distribute to its Participants.
Conveyance of notices and other communications by DTC to Participants,
by Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Convertible Preferred Securities
held in book-entry form will be sent to Cede & Co. If less than all of the
Convertible Preferred Securities are being redeemed, DTC will determine the
amount of the interest of each Participant to be redeemed in accordance with
its procedures.
Although voting with respect to the Convertible Preferred Securities
is limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to the Convertible Preferred
Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to the
Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede
& Co.'s consenting or voting rights to those Participants to whose accounts the
Convertible Preferred Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy).
Distributions with respect to the Global Certificates will be made to
DTC in immediately available funds. DTC's practice is to credit Participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust or the
Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the responsibility
of the Trust, disbursement of such payments to Participants is the
responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Participants and Indirect Participants.
- 42 -
<PAGE> 44
Except as provided herein, a Beneficial Owner of an interest in a
Global Certificate will not be entitled to receive physical delivery of
Convertible Preferred Securities. Accordingly, each Beneficial Owner must rely
on the procedures of DTC to exercise any rights under the Convertible Preferred
Securities.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interest in the Global Certificates among Participants
of DTC, DTC is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company, the Trust nor the Property Trustee will have any responsibility for
the performance by DTC or its Participants or Indirect Participants under the
rules and procedures governing DTC. DTC may discontinue providing its services
as securities depositary with respect to the Convertible Preferred Securities
at any time by giving notice to the Trust. Under such circumstances, in the
event that a successor securities depositary is not obtained, Convertible
Preferred Security certificates are required to be printed and delivered.
Additionally, the Trust (with the consent of the Company) may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depository). In that event, certificates for the Convertible
Preferred Securities will be printed and delivered. In each of the above
circumstances, payments with respect to such Convertible Preferred Securities
will be made by the Paying Agent. See "--Payment and Paying Agents".
PAYMENT AND PAYING AGENTS
Payments in respect of the Convertible Preferred Securities
represented by the Global Certificates will be made to DTC, which will credit
the relevant accounts at DTC on the applicable distribution dates or, in the
case of Certificated Securities, such payments shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear on the
register of the Convertible Preferred Securities. The Paying Agent initially is
First Chicago Trust Company of New York. The Paying Agent will be permitted to
resign as Paying Agent upon 30 days' written notice to the Issuer Trustees. In
the event that First Chicago Trust Company of New York will no longer be the
Paying Agent, the Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company).
- 43 -
<PAGE> 45
REGISTRAR, TRANSFER AGENT, PAYING AGENT AND CONVERSION AGENT
First Chicago Trust Company of New York initially is the Registrar,
Transfer Agent, Paying Agent and Conversion Agent for the Convertible Preferred
Securities.
Registration of transfers of Convertible Preferred Securities will be
effected without charge by or on behalf of the Trust, but upon payment (with
the giving of such indemnity as the Trust or the Company may require) in
respect of any tax or other government charges that may be imposed in relation
to it.
The Trust will not be required to register or cause to be registered
the transfer of Convertible Preferred Securities after such Convertible
Preferred Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and certain of its subsidiaries may maintain deposit
accounts and conduct other banking transactions with the Property Trustee in
the ordinary course of their business. The Property Trustee, prior to the
occurrence of a default with respect to the Trust Securities, undertakes to
perform only such duties as are specifically set forth in the Declaration and,
after default, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Declaration at the request of any holder of
Convertible Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Convertible Preferred Securities will not be required
to offer such indemnity in the event such holders, by exercising their voting
rights, direct the Property Trustee to take any action following a Declaration
Event of Default.
GOVERNING LAW
The Declaration and the Convertible Preferred Securities are governed
by, and will be construed in accordance with, the internal laws of the State of
Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or characterized as other than a grantor trust for
Federal income tax purposes so that the Convertible Debentures will be treated
as indebtedness of the Company for Federal income tax purposes. In this
connection, the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Declaration
that the Regular Trustees determine in their discretion to be necessary or
desirable for such purposes as long as such action does not adversely affect
the interests of the holders of the Convertible Preferred Securities.
- 44 -
<PAGE> 46
Holders of the Trust Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee
executed and delivered by the Company for the benefit of the holders from time
to time of Convertible Preferred Securities. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Guarantee, which is included as an exhibit
to the Registration Statement of which this Prospectus is a part. The Guarantee
incorporates by reference the terms of the Trust Indenture Act. It is expected
that at the time this Registration Statement becomes effective, the Guarantee
will be qualified under the Trust Indenture Act. The Chase Manhattan Bank, as
the Guarantee Trustee, will hold the Guarantee for the benefit of the holders
of the Convertible Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company
has irrevocably and unconditionally agreed to pay in full to the holders of the
Convertible Preferred Securities (except to the extent paid by the Trust), as
and when due, regardless of any defense, right of set off or counterclaim that
the Trust may have or assert, the following payments (the "Guarantee
Payments"), without duplication: (i) any accumulated and unpaid distributions
that are required to be paid on the Convertible Preferred Securities to the
extent the Trust has funds available therefor, (ii) the Redemption Price, with
respect to any Convertible Preferred Securities called for redemption by the
Trust, to the extent the Trust has funds available therefor and (iii) upon a
voluntary or involuntary dissolution, winding up or termination of the Trust
(other than in connection with the distribution of Convertible Debentures to
the holders of Convertible Preferred Securities or the redemption of all the
Convertible Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accumulated and unpaid distributions on the
Convertible Preferred Securities to the date of payment to the extent the Trust
has funds available therefor and (b) the amount of assets of the Trust
remaining available for distribution to holders of Convertible Preferred
Securities upon the liquidation of the Trust. The Company's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of Convertible Preferred Securities or by causing
the Trust to pay such amounts to such holders, and the Company would be
subrogated to the rights of the holders of such Convertible Preferred
Securities to the extent of any payments made by the Company to such holder.
The holders of a majority in liquidation amount of the Convertible Preferred
- 45 -
<PAGE> 47
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee or to direct
the exercise of any trust or power conferred upon the Guarantee Trustee under
the Guarantee. Any holder of Convertible Preferred Securities may directly
institute a legal proceeding against the Company to enforce the obligations of
the Company under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity. If the
Company were to default on its obligation to pay amounts payable on the
Convertible Debentures, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Convertible Preferred
Securities or otherwise, and in such event holders of the Convertible Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. Instead, a holder of the Convertible Preferred Securities would be
required to rely on the enforcement (i) by the Property Trustee of its rights,
as registered holder of the Convertible Debentures, against the Company
pursuant to the terms of the Convertible Debentures or (ii) by such holder of
Convertible Preferred Securities of its right of Direct Action against the
Company. See "Description of the Convertible Preferred Securities--Declaration
Events of Default." The Declaration provides that each holder of Convertible
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Guarantee, including the subordination provisions thereof, and the Indenture.
The Guarantee is a guarantee on a subordinated basis with respect to
the Convertible Preferred Securities from the time of issuance of such
Convertible Preferred Securities but will not apply to any payment of
distributions or Redemption Price, or to payments upon the dissolution, winding
up or termination of the Trust, except to the extent the Trust shall have funds
available therefor. If the Company does not make interest payments on the
Convertible Debentures, the Trust will not pay distributions on the Convertible
Preferred Securities and will not have funds available therefor. See
"Description of the Convertible Debentures." The Guarantee, when taken together
with the Company's obligations under the Indenture, the Convertible Debentures
and the Declaration, including its obligations to pay costs, expenses, debts
and liabilities of the Trust (other than with respect to the Trust Securities),
provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Convertible Preferred Securities issued by the
Trust. See "Effect of Obligation Under the Convertible Debentures and the
Guarantee."
CERTAIN COVENANTS OF THE COMPANY
So long as any Convertible Preferred Securities remain outstanding, if
(i) the Company has exercised its option to defer interest payments on the
Convertible Debentures by extending the interest payment period and such
extension shall be continuing, (ii) the Company shall be in default with
respect to its payment or other obligations under the Guarantee or (iii) there
shall have occurred and be continuing any event that, with the giving of notice
or the lapse of time or both, would constitute an Indenture Event of Default,
then the Company has agreed under the Guarantee (a) not to declare or pay
dividends on, or make a distribution with
- 46 -
<PAGE> 48
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of Common Stock in connection with the satisfaction by the Company of
its obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock or (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged), (b) not to make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company
(including guarantees) that rank pari passu with or junior to the Convertible
Debentures and (c) not to make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee).
As part of the Guarantee, the Company agreed that it will honor all
obligations described therein relating to the conversion of the Convertible
Preferred Securities into Common Stock as described in "Description of the
Convertible Preferred Securities--Conversion Rights."
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the
rights of holders of Convertible Preferred Securities (in which case no vote
will be required), the Guarantee may be amended only with the prior approval of
the holders of at least a majority in liquidation amount of all the outstanding
Convertible Preferred Securities. The manner of obtaining any such approval of
holders of the Convertible Preferred Securities will be as set forth under
"Description of the Convertible Preferred Securities--Voting Rights." All
guarantees and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall inure
to the benefit of the holders of the Convertible Preferred Securities then
outstanding. Except in connection with any permitted merger or consolidation of
the Company with or into another entity or any permitted sale, transfer or
lease of the Company's assets to another entity as described under "Description
of the Convertible Debentures--Consolidation, Merger and Sale of Assets," the
Company may not assign its rights or delegate its obligations under the
Guarantee without the prior approval of the holders of at least a majority of
the aggregate stated liquidation amount of the Convertible Preferred Securities
then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of Convertible
Preferred Securities upon (i) full payment of the Redemption Price of all
- 47 -
<PAGE> 49
Convertible Preferred Securities; (ii) distribution of the Convertible
Debentures held by the Trust to the holders of the Convertible Preferred
Securities; (iii) liquidation of the Trust; or (iv) distribution of Common
Stock to such holder in respect of conversion of such holder's Convertible
Preferred Securities into Common Stock. The Guarantee also will terminate
completely upon full payment of the amounts payable in accordance with the
Declaration. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of Convertible Preferred
Securities must restore payment of any sum paid under such Convertible
Preferred Securities or such Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
The Guarantee constitutes an unsecured obligation of the Company and
will rank (i) subordinate and junior to all other liabilities of the Company
except any liabilities that may be pari passu expressly by their terms, (ii)
pari passu with the most senior preferred stock, if any, issued from time to
time by the Company and with any guarantee now or hereafter entered into by the
Company in respect of any preferred or preference stock or preferred securities
of any affiliate of the Company, (iii) senior to the Common Stock and (iv)
effectively subordinated to all existing and future indebtedness and
liabilities, including trade payables, of the Company's subsidiaries. The terms
of the Convertible Preferred Securities provide that each holder of Convertible
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee.
The Guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may directly institute a legal proceeding against
the Company to enforce its rights under a Guarantee without instituting a legal
proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with
respect to the Guarantee, undertakes to perform only such duties as are
specifically set forth in the Guarantee and, after default with respect to the
Guarantee, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provision,
the Guarantee Trustee is under no obligation to exercise any of the powers
vested in it by the Guarantee at the request of any holder of Convertible
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
- 48 -
<PAGE> 50
GOVERNING LAW
The Guarantee is governed by, and will be construed in accordance
with, the internal laws of the State of New York.
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the
Convertible Debentures in which the Trust invested the proceeds from the
issuance and sale of the Trust Securities. The Indenture incorporates by
reference certain terms of the Trust Indenture Act. The Company expects that at
the time this Registration Statement becomes effective, the Indenture will be
qualified under the Trust Indenture Act. The following description does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture, which is included as an exhibit to the
Registration Statement of which this Prospectus is a part.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Convertible Debentures may be
distributed to the holders of the Trust Securities in liquidation of the Trust.
See "Description of the Convertible Preferred Securities--Special Event
Redemption or Distribution."
GENERAL
The Convertible Debentures were issued as unsecured debt under the
Indenture. The Convertible Debentures are limited in aggregate principal amount
to 103.092784% of the aggregate liquidation amount of the Convertible Preferred
Securities, such amount being the sum of the aggregate liquidation amounts of
the Convertible Preferred Securities and the Trust Common Securities.
The Convertible Debentures are not subject to a sinking fund
provision. The entire principal amount of the Convertible Debentures will
mature and become due and payable, together with any accrued and unpaid
interest thereon, including Compound Interest (as defined herein) and
Additional Interest (as defined herein), if any, on December 1, 2026.
If Convertible Debentures are distributed to holders of Convertible
Preferred Securities in liquidation of such holders' interests in the Trust,
such Convertible Debentures will initially be issued in the same form as the
Convertible Preferred Securities that such Convertible Debentures replace.
Under certain limited circumstances, Convertible Debentures may be issued in
certificated form in exchange for a Global Security (as defined herein). See
"--Book-Entry and Settlement" below. In the event that Convertible Debentures
are issued in certificated form, such Convertible Debentures will be in
denominations of $50 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Convertible Debentures
issued as a Global Security will be made to DTC, a successor depositary or, in
the event that no depositary is used, to a Paying Agent for the Convertible
Debentures. In the event Convertible Debentures are issued in certificated
form, principal and interest will be payable, the transfer of the Convertible
Debentures will be registrable and Convertible Debentures will be exchangeable
- 49 -
<PAGE> 51
for Convertible Debentures of other denominations of a like aggregate principal
amount at the corporate trust office of the Indenture Trustee in New York, New
York; provided that payment of interest may be made at the option of TIMET by
check mailed to the address of the holder entitled thereto or by wire transfer
to an account appropriately designated by the holder entitled thereto.
Notwithstanding the foregoing, so long as the holder of any Convertible
Debentures is the Property Trustee, the payment of principal and interest on
the Convertible Debentures held by the Property Trustee will be made at such
place and to such account as may be designated by the Property Trustee.
The Indenture does not contain covenants or provisions (such as
limitations on the incurrence of indebtedness or liens, asset sales or the
issuance and sale of subsidiary stock) that afford holders of Convertible
Debentures protection in the event of a highly leveraged transaction or other
similar transactions involving TIMET that could adversely affect such holders.
SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinate
and junior in right of payment to all existing and future Senior Indebtedness
of TIMET. No payment of principal (including redemption payments, if any) of,
premium, if any, or interest (including Additional Interest and Compound
Interest) on, the Convertible Debentures may be made (i) if any Senior
Indebtedness of TIMET is not paid when due and any applicable grace period with
respect to such default has ended and such default has not been cured or waived
or ceased to exist, (ii) if the maturity of any Senior Indebtedness of TIMET
has been accelerated because of a default or (iii) if an event of default has
occurred and is continuing under the Company's U.S. credit facility or any
refinancing of the U.S. credit facility in the bank credit market (including
institutional participants therein) that would permit the lenders under the
U.S. credit facility or such refinancing to accelerate the maturity thereof or
demand payment in full. At March 31, 1997, the Company had no Senior
Indebtedness outstanding under its U.S. credit facility. Upon any distribution
of assets of TIMET to creditors upon any dissolution, winding up, liquidation
or reorganization, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings, all principal of, and premium,
if any, and interest due or to become due on, all Senior Indebtedness of TIMET
must be paid in full before the holders of Convertible Debentures are entitled
to receive or retain any payment. Upon satisfaction of all claims related to
all Senior Indebtedness then outstanding, the rights of the holders of the
Convertible Debentures will be subrogated to the rights of the holders of
Senior
- 50 -
<PAGE> 52
Indebtedness of TIMET to receive payments or distributions applicable to Senior
Indebtedness until all amounts owing on the Convertible Debentures are paid in
full.
The term "Senior Indebtedness" means, with respect to TIMET, (i) the
principal of, premium, if any, and interest in respect of, (A) indebtedness of
such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor,
including interest accruing on or after a bankruptcy or other similar event,
whether or not an allowed claim therein, (ii) all indebtedness, and all
obligations of TIMET to pay fees and other amounts, under the U.S. credit
facility and any refinancing of the U.S. credit facility in the bank credit
market (including institutional participants therein), (iii) all capital lease
obligations of such obligor, (iv) all obligations of such obligor issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such obligor and all obligations of such obligor under any title
retention agreement (but excluding obligations to trade creditors), (v) all
obligations of such obligor for reimbursement on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (vi) all
obligations of the types referred to in clauses (i) through (v) above of other
persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise and (vii) all obligations of the types referred
to in clauses (i) through (vi) above of other persons secured by any lien on
any property or asset of such obligor (whether or not such obligation is
assumed by such obligor), except in the cases of each of clauses (i) through
(vii) above for (1) any such indebtedness that is by its terms subordinated to
or pari passu with the Convertible Debentures and (2) any indebtedness between
or among such obligor or its affiliates, including all other debt securities
and guarantees in respect of those debt securities, issued to (a) the Trust or
a trustee of such Trust or (b) any other trust, or a trustee of such trust,
partnership or other entity affiliated with TIMET that is a financing vehicle
of TIMET (a "financing entity") in connection with the issuance by such
financing entity of preferred securities or other securities that rank pari
passu with, or junior to, the Convertible Preferred Securities.
The Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued by TIMET. Borrowings pursuant to the U.S.
credit facility would constitute Senior Indebtedness. The U.S. credit facility
currently provides for facilities aggregating $200 million.
- 51 -
<PAGE> 53
REDEMPTION AT THE OPTION OF TIMET
TIMET shall have the right to redeem the Convertible Debentures, in
whole or in part, at any time or from time to time, on or after December 1,
1999, upon not less than 15 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount of the
Convertible Debentures) together with accrued and unpaid interest (including
Additional Interest and Compound Interest) to, but excluding, the redemption
date, if redeemed during the 12-month period beginning December 1:
<TABLE>
<CAPTION>
YEAR PRICES
---- ------
<S> <C>
1999 104.6375%
2000 103.9750
2001 103.3125
2002 102.6500
2003 101.9875
2004 101.3250
2005 100.6625
</TABLE>
and 100% if redeemed on or after December 1, 2006.
If Convertible Debentures are redeemed on any March 1, June 1,
September 1, or December 1, accrued and unpaid interest shall be payable to
holders of record on the relevant record date.
TIMET shall also have the right to redeem the Convertible Debentures
at any time in whole (but not in part) in certain circumstances upon the
occurrence of a Special Event as described under "Description of the
Convertible Preferred Securities--Special Event Redemption or Distribution" at
100% of the principal amount thereof together with accrued and unpaid interest
(including Additional Interest and Compound Interest) to the redemption date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of any of the Convertible
Debentures will be used to redeem Convertible Preferred Securities.
INTEREST
Each Convertible Debenture bears interest at the rate of 6.625% per
annum (subject to adjustment as described under "Description of the Convertible
Preferred Securities--Registration Rights"), payable quarterly in arrears on
March 1, June 1, September 1 and December 1 of each year (each an "Interest
Payment Date"), to the person in whose name such Convertible Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. Interest accrued from
November 26, 1996 for the payment made on March 1, 1997. In the event the
Convertible Debentures shall not continue to remain in book-entry only form,
TIMET shall have the right to select record dates, which shall be more than one
Business Day prior to the Interest Payment Date.
- 52 -
<PAGE> 54
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. The amount of interest payable
for any period shorter than a full quarterly period for which interest is
computed will be computed on the basis of the actual number of days elapsed per
30-day month. In the event that any date on which interest is payable on the
Convertible Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
TAX LEGISLATION
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (H.R. 2014), that among other things, contained legislation
that denies the tax deduction for interest or OID on certain debt instruments
that may be payable in equity of the issuer or a related party. While the scope
of this provision is uncertain, this provision is only effective for
instruments issued after June 8, 1997 and accordingly not applicable to the
Convertible Debentures. If legislation were enacted that adversely affects the
tax treatment of the Convertible Debentures, the Trust might distribute the
Convertible Debentures to holders of the Convertible Preferred Securities or,
in certain circumstances, TIMET might redeem the Convertible Debentures, in
which case the Trust would distribute the resulting cash in redemption of the
Convertible Preferred Securities. See "Description of the Convertible Preferred
Securities -- Special Event Redemption or Distribution."
- 53 -
<PAGE> 55
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time during the term of the
Convertible Debentures to defer interest payments (excluding, for such
purposes, payments with respect to Additional Interest, if any) from time to
time by extending the interest payment period for successive periods not
exceeding 20 consecutive quarters for each such period; provided no Extension
Period may extend beyond the maturity date of the Convertible Debentures. At
the end of each Extension Period, the Company shall pay all interest then
accrued and unpaid interest (including any accrued and unpaid Additional
Interest), together with interest thereon compounded quarterly at the rate
specified for the Convertible Debentures to the extent permitted by applicable
law ("Compound Interest"); provided that during any Extension Period, the
Company has agreed, among other things (a) not to declare or pay dividends on,
or make a distribution with respect to, or redeem or purchase or acquire, or
make a liquidation payment with respect to, any of its capital stock (other
than (i) purchases or acquisitions of shares of Common Stock in connection with
the satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of the Common
Stock, (ii) as a result of a reclassification of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock or (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged), (b) not to make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees) issued by the Company that rank pari
passu with or junior to the Convertible Debentures and (c) not to make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided that such Extension Period
together with all previous and further extensions thereof may not exceed 20
consecutive quarters and may not extend beyond the maturity of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may commence a new Extension Period of up to 20
consecutive quarters, subject to the above requirements. No interest or any
other payment with respect to the Convertible Debentures (other than payments
with respect to any applicable Additional Interest, which the Company shall not
have the right to defer) shall be due and payable during an Extension Period.
The Company has no current intention of exercising its right to defer payments
of interest by extending the interest payment period on the Convertible
Debentures. If the Property Trustee shall be the sole holder of the Convertible
Debentures, the Company shall give the Regular Trustees, the Property Trustee
and the Indenture Trustee notice of its selection of such Extension Period at
least one Business Day prior to the earlier of (i) the date the distributions
on the Convertible Preferred Securities are payable or (ii) the date the Trust
is required to give notice to the Nasdaq National Market (or any applicable
self-regulatory organization) or to holders of the Convertible Preferred
Securities of the record date or the date
- 54 -
<PAGE> 56
such distribution is payable, but in any event not less than ten Business Days
prior to such record date. The Company shall cause the Trust to give notice of
the Company's selection of such Extension Period to the holders of the
Convertible Preferred Securities. If the Property Trustee shall not be the sole
holder of the Convertible Debentures, the Company shall give the holders of the
Convertible Debentures and the Indenture Trustee notice of its selection of
such Extension Period at least ten Business Days prior to the earlier of (i)
the next succeeding Interest Payment Date or (ii) the date the Company is
required to give notice to the Nasdaq National Market (or any applicable
self-regulatory organization) or to holders of the Convertible Debentures on
the record or payment date of such related interest payment, but in any event
not less than two Business Days prior to such record date.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures are convertible into Common Stock at the
option of the holders of the Convertible Debentures at any time beginning 90
days following November 26, 1996 and prior to the close of business on December
1, 2026 (or, in the case of Convertible Debentures called for redemption, the
close of business on the fifth Business Day prior to the Redemption Date) at
the initial conversion price of approximately $37.34 per share subject to the
conversion price adjustments described under "Description of the Convertible
Preferred Securities--Conversion Rights." The Trust has agreed not to convert
Convertible Debentures held by it except pursuant to a notice of conversion
delivered to the Conversion Agent by a holder of Convertible Preferred
Securities. Upon surrender of a Convertible Preferred Security to the
Conversion Agent for conversion, the Trust will distribute $50 principal amount
of the Convertible Debentures to the Conversion Agent on behalf of the holder
of the Convertible Preferred Security so converted, whereupon the Conversion
Agent will convert such Convertible Debentures to Common Stock on behalf of
such holder. TIMET's delivery to the holders of the Convertible Debentures
(through the Conversion Agent) of the fixed number of shares of Common Stock
into which the Convertible Debentures are convertible (together with the cash
payment, if any, in lieu of fractional shares) will be deemed to satisfy
TIMET's obligation to pay the principal amount of the Convertible Debentures so
converted, and the accrued and unpaid interest thereon attributable to the
period from the last date to which interest has been paid or duly provided for;
provided, however, that if any Convertible Debenture is converted after a
record date for payment of interest, the interest payable on the related
interest payment date with respect to such Convertible Debenture shall be paid
to the Trust (which will distribute such interest to the converting holder) or
other holder of Convertible Debentures, as the case may be, despite such
conversion.
- 55 -
<PAGE> 57
ADDITIONAL INTEREST
If at any time prior to the conversion of all of the Convertible
Debentures or the redemption or distribution of the Convertible Debentures as
described in "Description of Convertible Preferred Securities--Special Event
Redemption or Distribution," the Trust shall be required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, TIMET will pay as additional interest ("Additional
Interest") on the Convertible Debentures such additional amounts as shall be
required so that the net amounts received and retained by the Trust after
paying any such taxes, duties, assessments or other governmental charges will
be not less than the amounts the Trust would have received had no such taxes,
duties, assessments or other governmental charges been imposed. The Company
shall not have the right to defer the payment of such Additional Interest,
including during an Extension Period. See "--Option to Extend Interest Payment
Period."
CERTAIN COVENANTS
So long as any Convertible Debentures are outstanding, if (i) there
shall have occurred and be continuing any event that with the giving of notice
or the lapse of time or both, would constitute an Indenture Event of Default,
(ii) the Company shall be in default with respect to its payment of any
obligations under the Guarantee, or (iii) the Company has exercised its option
to defer interest payments on the Convertible Debentures by extending the
interest payment period and such period, or any extension thereof, shall be
continuing, then the Company has agreed under the Indenture (a) not to declare
or pay dividends on, or make a distribution with respect to, or redeem or
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by the Company of its obligations
under any employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any contract or security requiring the Company to
purchase shares of the Common Stock, (ii) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock or (iii) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged),
(b) not to make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeemed any debt securities (including guarantees) issued
by the Company that rank pari passu with or junior to the Convertible
Debentures and (c) not to make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee).
- 56 -
<PAGE> 58
The Company has covenanted (i) to directly or indirectly maintain 100%
ownership of the Trust Common Securities; provided, however, that any permitted
successor of the Company under the Indenture may succeed to the Company's
ownership of such Trust Common Securities, and (ii) to use its reasonable
efforts to cause the Trust (x) to remain a statutory business trust, except in
connection with the distribution of Convertible Debentures to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the
Trust Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, and (y) to otherwise
continue to be classified as a grantor trust for Federal income tax purposes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company shall not consolidate with or
merge with or into any other entity or person or, directly or indirectly
convey, transfer or lease all or substantially all of its assets unless (a) if
the Company is not the survivor, the successor is a corporation organized under
the laws of the United States, any state thereof or the District of Columbia
and expressly assumes the due and punctual payment of the principal of,
premium, if any, and interest on all Convertible Debentures issued thereunder
and the performance of every other covenant of the Indenture on the part of the
Company and (b) immediately thereafter no Indenture Event of Default and no
event which, after notice or lapse of time, or both, would become an Indenture
Event of Default, shall have occurred and be continuing. Upon any such
consolidation, merger, conveyance or transfer, the successor entity or person
shall succeed to and be substituted for the Company under the Indenture and
thereafter the predecessor entity or person shall be relieved of all
obligations and covenants under the Indenture and the Convertible Debentures.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event
of Default" with respect to the Convertible Debentures: (i) failure for 30 days
to pay interest on the Convertible Debentures, including any Additional
Interest and Compound Interest in respect thereof, when due; provided that a
valid extension of an interest payment period will not constitute a default in
the payment of interest (including Compound Interest, but excluding Additional
Interest, if any) for this purpose; (ii) failure to pay principal of or
premium, if any, on the Convertible Debentures when due whether at maturity,
upon redemption, by declaration or otherwise; (iii) failure to observe or
perform any other covenant contained in the Indenture for 90 days after notice
to the Company by the Indenture Trustee or by the holders of not less than 25%
in aggregate outstanding principal amount of the Convertible Debentures; (iv)
failure by the Company to deliver shares of Common Stock upon an election by a
holder of Convertible Preferred Securities to convert such Convertible
Preferred Securities; (v) the voluntary or involuntary dissolution, winding up
or termination of the Trust, except in connection with the distribution of
Convertible Debentures to the holders of Convertible Preferred Securities in
liquidation of the Trust or upon the redemption of all outstanding Convertible
Preferred Securities or in connection with certain mergers, consolidations or
- 57 -
<PAGE> 59
amalgamations permitted by the Declaration; or (vi) certain events of
bankruptcy, insolvency or reorganization of the Company.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Debentures may declare the
principal of and interest on the Convertible Debentures due and payable
immediately on the occurrence of an Indenture Event of Default; provided,
however, that, after such acceleration, but before a judgment or decree based
on acceleration, the holders of a majority in aggregate principal amount of
outstanding Convertible Debentures may, under certain circumstances, rescind
and annul such acceleration if all Indenture Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived as provided in
the Indenture.
Notwithstanding the foregoing, if an Indenture Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures on the date
such interest or principal is otherwise payable, the Company acknowledges that,
in such event, a holder of Convertible Preferred Securities may institute a
Direct Action for payment on or after the respective due date specified in the
Convertible Debentures. The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
all the holders of Convertible Preferred Securities. Notwithstanding any
payment made to such holder of Convertible Preferred Securities by the Company
in connection with a Direct Action, the Company shall remain obligated to pay
the principal of and interest (including Additional Interest and Compound
Interest) on the Convertible Debentures held by the Trust or the Property
Trustee, and the Company shall be subrogated to the rights of the holder of
such Convertible Preferred Securities with respect to payments on the
Convertible Preferred Securities to the extent of any payments made by the
Company to such holder in any Direct Action. The holders of Convertible
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Convertible Debentures.
The holders of not less than a majority in principal amount of the
outstanding Convertible Debentures may on behalf of the holders of all the
Convertible Debentures waive any past defaults except (a) a default in payment
of the principal of, premium, if any, or interest (including Additional
Interest and Compound Interest) on, any Convertible Debentures and (b) a
default in respect of a covenant or provision of the Indenture which cannot be
amended or modified without the consent of the holder of each Convertible
Debenture; provided, however, that if the Convertible Debentures are held by
the Trust or a trustee of such Trust, such waiver or modification to such
- 58 -
<PAGE> 60
waiver shall not be effective until the holders of a majority in liquidation
amount of Convertible Preferred Securities shall have consented to such waiver
or modification to such waiver; provided, further, that if the consent of the
holder of each outstanding Convertible Debenture is required, such waiver shall
not be effective until each holder of Convertible Preferred Securities shall
have consented to such waiver.
A default under any other indebtedness of the Company or the Trust
would not constitute an Indenture Event of Default under the Convertible
Debentures.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee in case an Indenture Event of Default shall occur and be
continuing, the Indenture Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request or direction of any
holders of Convertible Debentures, unless such holders shall have offered to
the Indenture Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Indenture Trustee, the holders of a majority in
aggregate principal amount of the Convertible Debentures then outstanding will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustee, or exercising any
trust or power conferred on the Indenture Trustee with respect to such series.
Subject to the right of holders of Convertible Preferred Securities to
institute a Direct Action, no holder of any Convertible Debenture will have any
right to institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless (i) such holder shall have previously given to the
Indenture Trustee written notice of a continuing Indenture Event of Default,
(ii) if the Trust is not the sole holder of Convertible Debentures, the holders
of at least 25% in aggregate principal amount of the Convertible Debentures
then outstanding shall also have made a written request, (iii) such holder has
offered reasonable indemnity to the Indenture Trustee to institute such
proceeding as Indenture Trustee, (iv) the Indenture Trustee shall have failed
to institute such proceeding within 60 days of such notice, and (v) the
Indenture Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Convertible Debentures a
direction inconsistent with such request.
The Company is required to file annually with the Indenture Trustee
and the Property Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Indenture Trustee, with the consent of the holders of not less than a majority
in aggregate principal amount of the outstanding Convertible Debentures, to
modify the Indenture or the rights of the holders of Convertible Debentures;
provided, however, that no such modification may, without the consent of the
holder of each outstanding Convertible Debenture affected thereby, (i) extend
the stated maturity of the Convertible Debentures or reduce the principal
- 59 -
<PAGE> 61
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, or
adversely affect (as to such holder) the right to convert Convertible
Debentures or the subordination provisions of the Indenture, or (ii) reduce the
percentage in aggregate principal amount of outstanding Convertible Debentures
the holders of which are required to consent to any such supplemental
indenture.
The Indenture further provides that none of (i) the definitions of
"Senior Indebtedness" or "U.S. credit facility," (ii) any other defined term
used in the article of the Indenture concerning subordination of the
Convertible Debentures and (iii) the provisions of the Indenture concerning
subordination of the Convertible Debentures shall be modified or amended
without the written consent of the lenders under the Company's U.S. credit
facility (and any refinancings thereof).
In addition, the Company and the Indenture Trustee may execute,
without the consent of any holder of Convertible Debentures, any supplemental
indenture to cure any ambiguities, comply with the Trust Indenture Act and for
certain other customary purposes.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Convertible Preferred Securities in
connection with the involuntary or voluntary dissolution, winding up or
liquidation of the Trust as a result of the occurrence of a Special Event, the
Convertible Debentures will be issued in the same form as the Convertible
Preferred Securities which such Convertible Debentures replace. Any Global
Certificate will be replaced by one or more global certificates (each a "Global
Security") registered in the name of the depositary or its nominee. Except
under the limited circumstances described below, Convertible Debentures
represented by the Global Security will not be exchangeable for, and will not
otherwise be issuable as, Convertible Debentures in definitive form. The Global
Securities described above may not be transferred except by the depositary to a
nominee of the depositary or by a nominee of the depositary to the depositary
or another nominee of the depositary or to a successor depositary or its
nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
- 60 -
<PAGE> 62
Except as provided below under "--Discontinuance of the Depository's
Services," owners of beneficial interests in such a Global Security will not be
entitled to receive physical delivery of Convertible Debentures in definitive
form and will not be considered the holders (as defined in the Indenture)
thereof for any purpose under the Indenture, and no Global Security
representing Convertible Debentures shall be exchangeable, except for another
Global Security of like denomination and tenor to be registered in the name of
the Depositary or its nominee or to a successor Depositary or its nominee.
Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary or, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest to exercise any rights
of a holder under the Indenture.
THE DEPOSITARY
If Convertible Debentures are distributed to holders of Convertible
Preferred Securities in liquidation of such holders' interests in the Trust,
DTC will act as securities depositary for the Convertible Debentures. For a
description of DTC and the specific terms of the depositary arrangements, see
"Description of the Convertible Preferred Securities--Book-Entry Only Issuance-
- -The Depository Trust Company." As of the date of this Prospectus, the
description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the
Convertible Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. TIMET may
appoint a successor to DTC or any successor depositary in the event DTC or such
successor depositary is unable or unwilling to continue as a depositary for the
Global Securities.
None of TIMET, the Trust, the Property Trustee, any paying agent or
any other agent of TIMET or the Debt Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Security for such Convertible
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than the depositary or its nominee
only if (i) the depositary notifies TIMET that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed, (iii) TIMET, in its sole discretion,
- 61 -
<PAGE> 63
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Indenture Event of Default with respect to such
Convertible Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Convertible Debentures
registered in such names as the depositary shall direct.
GOVERNING LAW
The Indenture and the Convertible Debentures are governed by, and will
be construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Indenture provides that TIMET will pay all fees and expenses
related to (i) the initial sale of the Trust Securities and the Convertible
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Regular Trustees and (iv) the enforcement by the
Property Trustee of the rights of the holders of the Convertible Preferred
Securities. The payment of such fees and expenses are fully and unconditionally
guaranteed by TIMET.
TIMET will have the right at all times to assign any of its respective
rights or obligations under the Indenture to a direct or indirect wholly owned
subsidiary of TIMET; provided that, in the event of any such assignment, TIMET
will remain liable for all of their respective obligations. Subject to the
foregoing, the Indenture will be binding upon and inure to the benefit of the
parties thereto and their respective successors and assigns. The Indenture
provides that it may not otherwise be assigned by the parties thereto.
EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to
issue the Trust Securities evidencing undivided beneficial interests in the
assets of the Trust, and to invest the proceeds from such issuance and sale in
the Convertible Debentures.
As long as payments of interest and other payments are made when due
on the Convertible Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Convertible Debentures will be
equal to the sum of the aggregate liquidation amount of the Trust Securities;
(ii) the interest rate and the interest and other payment dates on the
Convertible Debentures will match the distribution rate and distribution and
other payment dates for the Convertible Preferred Securities; (iii) TIMET shall
pay all, and the Trust shall not be obligated to pay, directly or indirectly,
any costs, expenses, debt, and obligations of the Trust (other than with
respect to the Trust Securities); and (iv) the Declaration further provides
that the Regular Trustees shall not take or cause or permit the Trust to, among
other things, engage in any activity that is not consistent with the purposes
of the Trust.
- 62 -
<PAGE> 64
Payments of distributions (to the extent the Trust has funds therefor)
and other payments due on the Convertible Preferred Securities (to the extent
the Trust has funds therefor) are guaranteed by TIMET as and to the extent set
forth under "Description of the Guarantee." If TIMET does not make interest
payments on the Convertible Debentures purchased by the Trust, it is expected
that the Trust will not have sufficient funds to pay distributions on the
Convertible Preferred Securities. The Guarantee is a full and unconditional
guarantee on a subordinated basis with respect to the Convertible Preferred
Securities issued by the Trust from the time of its issuance but does not apply
to any payment of distributions unless and until the Trust has sufficient funds
for the payment of such distributions. The Guarantee covers the payment of
distributions and other payments on the Convertible Preferred Securities
only if and to the extent that TIMET has made a payment of interest or
principal on the Convertible Debentures held by the Trust as its sole asset.
The Guarantee, when taken together with TIMET's obligations under the
Convertible Debentures, the Indenture and the Declaration, including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), provides a full and unconditional
guarantee of amounts on the Convertible Preferred Securities.
If TIMET fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby a holder of the Convertible Preferred Securities,
using the procedures described in "Description of the Convertible Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company" and "--
Voting Rights," may direct the Property Trustee to enforce its rights under the
Convertible Debentures. Notwithstanding the foregoing, if a Declaration Event
of Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date) in such circumstances a holder
of Convertible Preferred Securities may institute a Direct Action for payment
on or after the respective due date specified in the Convertible Debentures. In
connection with such Direct Action, TIMET will be subrogated to the rights of
such holder of Convertible Preferred Securities under the Declaration to the
extent of any payment made by TIMET to such holder of Convertible Preferred
Securities in such Direct Action. TIMET, under the Guarantee, acknowledges that
the Guarantee Trustee shall enforce the Guarantee on behalf of the holders of
the Convertible Preferred Securities. If TIMET fails to make payments under the
Guarantee, the Guarantee provides a mechanism whereby the holders of the
Convertible Preferred Securities may direct the Guarantee Trustee to enforce
its rights thereunder. Any holder of Convertible Preferred Securities may
institute a legal proceeding directly against TIMET to enforce the obligations
of the Company under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee, or any other person or entity.
- 63 -
<PAGE> 65
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain material United States Federal
income tax consequences of the purchase, ownership and disposition of
Convertible Preferred Securities. Unless otherwise stated, this summary deals
only with Convertible Preferred Securities held as capital assets by holders
who purchase the Convertible Preferred Securities upon original issuance
("Initial Holders"). It does not deal with special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or persons that will hold the Convertible Preferred Securities as a position in
a "straddle," as part of a "synthetic security" or "hedge" or as part of a
"conversion transaction" or other integrated investment. This summary also does
not address the tax consequences to persons that have a functional
- 64 -
<PAGE> 66
currency other than the U.S. Dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Convertible Preferred Securities.
Further, it does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Convertible Preferred Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly on
a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
In connection with the issuance of the Convertible Debentures,
Kirkland & Ellis, special tax counsel to the Company and the Trust, rendered
its opinion generally to the effect that, under then current law and assuming
full compliance with the terms of the Indenture (and certain other documents),
and based upon certain facts and assumptions contained in such opinion and upon
certain representations made by the Company and the Property Trustee, the
Convertible Debentures held by the Trust will be classified for United States
Federal income tax purposes as indebtedness of the Company.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Convertible Preferred
Securities, Kirkland & Ellis, special tax counsel to TIMET and the Trust,
rendered its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Trust will be classified for United States
Federal income tax purposes as a grantor trust and not as a partnership or
association taxable as a corporation. Accordingly, for United States Federal
income tax purposes, each holder of Convertible Preferred Securities generally
will be considered the owner of an undivided interest in the Convertible
Debentures, and pursuant to the agreement to treat the Convertible Debentures
as indebtedness, each holder will be required to include in its gross income
any OID accrued or other income or gain with respect to its allocable share of
those Convertible Debentures.
ORIGINAL ISSUE DISCOUNT
Because TIMET has the option, under the terms of the Convertible
Debentures, to defer payments of interest for one or more periods of up to 20
consecutive quarters each, all of the stated interest payments on the
Convertible Debentures will be treated as OID. Holders of debt instruments
issued with OID must include that OID in income daily on an economic accrual
- 65 -
<PAGE> 67
basis before the receipt of cash attributable to the interest, regardless of
their method of tax accounting. Generally, all of a holder's taxable interest
income with respect to the Convertible Debentures will be accounted for as OID,
and actual distributions of stated interest will not be separately reported as
taxable income. The amount of OID that accrues in any month will approximately
equal the amount of the interest that accrues on the Convertible Debentures in
that month at the stated interest rate. In the event that the interest payment
is deferred, holders will continue to accrue OID approximately equal to the
amount of the interest payment due at the end of the extended interest payment
period on an economic accrual basis over the length of the extended interest
period.
Because income on the Convertible Debentures will constitute OID,
corporate holders of Convertible Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Convertible Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Convertible Preferred Securities that purchase the
Convertible Preferred Securities at a price other than the issue price may be
considered to have acquired their undivided interests in the Convertible
Debentures with market discount or acquisition premium as such phrases are
defined for United States Federal income tax purposes. Such holders are advised
to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Convertible Preferred Securities.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption
"Description of the Convertible Preferred Securities--Special Event Redemption
or Distribution," Convertible Debentures may be distributed to holders in
exchange for the Convertible Preferred Securities and in liquidation of the
Trust. Such a distribution, for United States Federal income tax purposes,
would be treated as a non-taxable event to each holder, and each holder would
receive an aggregate tax basis in the Convertible Debentures equal to such
holder's aggregate tax basis in its Convertible Preferred Securities. A
holder's holding period in the Convertible Debentures so received in
liquidation of the Trust would include the period during which the Convertible
Preferred Securities were held by such holder. If, however, the related special
event is a Tax Event which results in the Trust being treated as an association
taxable as a corporation, the distribution would likely constitute a taxable
event to holders of the Convertible Preferred Securities.
Under certain circumstances described herein (see "Description of the
Convertible Preferred Securities"), the Convertible Debentures may be redeemed
or retired for cash and the proceeds of such redemption or retirement
distributed to holders in redemption of their Convertible Preferred Securities.
Such a redemption would, for United States Federal income tax purposes,
constitute a taxable disposition of the redeemed Convertible Preferred
Securities, and a holder could recognize gain or loss as if it sold such
- 66 -
<PAGE> 68
redeemed Convertible Preferred Securities for cash. See "--Sales of
Convertible Preferred Securities" immediately below.
SALES OF CONVERTIBLE PREFERRED SECURITIES
A holder that sells Convertible Preferred Securities will recognize
gain or loss equal to the difference between (i) the amount realized on the
sale of such Convertible Preferred Securities and (ii) such holder's adjusted
tax basis in the Convertible Preferred Securities. A holder's adjusted tax
basis in the Convertible Preferred Securities generally will be its initial
purchase price increased by OID previously includable in such holder's gross
income to the date of disposition and decreased by payments received on the
Convertible Preferred Securities. Such gain or loss generally will be a capital
gain or loss and generally will be a long-term capital gain or loss if the
Convertible Preferred Securities have been held for more than one year.
A holder who disposes of Convertible Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Convertible Debentures through the date of
disposition in income as ordinary OID income, and to add such amount to its
adjusted tax basis in its pro rata share of the underlying Convertible
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all
accrued but unpaid interest) a holder will recognize a capital loss. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States Federal income tax purposes.
CONVERSION OF CONVERTIBLE PREFERRED SECURITIES INTO COMMON STOCK
A holder of Convertible Preferred Securities will not recognize
income, gain or loss upon the conversion, through the Conversion Agent, of
Convertible Debentures into Common Stock. A holder of Convertible Preferred
Securities will, however, recognize gain or loss upon the receipt of cash in
lieu of a fractional share of Common Stock equal to the difference between the
amount of cash received and such holder's tax basis in such fractional share.
Such a holder's tax basis in the Common Stock received upon conversion should
generally be equal to such holder's tax basis in the Convertible Preferred
Securities delivered to the Conversion Agent for exchange less the basis
allocated to any fractional share for which cash is received and such holder's
holding period in the Common Stock received upon conversion should generally
begin on the date such holder acquired the Convertible Preferred Securities
delivered to the Conversion Agent for exchange.
- 67 -
<PAGE> 69
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under section 305 of the Code would
treat holders of Convertible Preferred Securities as having received a
constructive distribution from TIMET in the event the conversion ratio of the
Convertible Debentures were adjusted if (i) as result of such adjustment, the
proportionate interest (measured by the amount of Common Stock into which the
Convertible Debentures are convertible) of the holders of the Convertible
Preferred Securities in the assets or earnings and profits of TIMET were
increased, and (ii) the adjustment was not made pursuant to a bona fide,
reasonable anti- dilution formula. An adjustment in the conversion ratio would
not be considered made pursuant to such a formula if the adjustment were made
to compensate for certain taxable distributions with respect to the Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in deemed dividend income to holders to the extent
of the current or accumulated earnings and profits of TIMET. Holders of the
Convertible Preferred Securities would be required to include their allocable
share of such deemed dividend in gross income but will not receive any cash
related thereto. Subject to certain limitations, corporate holders would be
entitled to a dividends-received deduction (generally 70%) with respect to such
deemed dividend.
PROPOSED TAX LEGISLATION
Please refer to discussion above under the heading "Description of the
Convertible Debentures--Proposed Tax Legislation."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust.
Under present United States Federal income tax law: (i) payments by
the Trust or any of its paying agents to any holder of a Convertible Preferred
Security who or which is a United States Alien Holder would not be subject to
United States Federal withholding tax; provided that, (a) the beneficial owner
of the Convertible Preferred Security does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of TIMET
entitled to vote, (b) the beneficial owner of the Convertible Preferred
Security is not a controlled foreign corporation that is related to TIMET
through stock ownership, and (c) either (A) the beneficial owner of the
Convertible Preferred Security certifies to the Trust or its agent, under
penalties of perjury, that it is not a United States holder and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
- 68 -
<PAGE> 70
of its trade or business (a "Financial Institution"), and holds the Convertible
Preferred Security in such capacity, certifies to the Trust or its agent, under
penalties of perjury, that such statement has been received from the beneficial
owner by it or by a Financial Institution between it and the beneficial owner
and furnishes the Trust or its agent with a copy thereof; and (ii) a United
States Alien Holder of a Convertible Preferred Security generally would not be
subject to United States Federal withholding tax on any gain realized upon the
sale or other disposition of a Convertible Preferred Security.
However, a United States Alien Holder of a Convertible Preferred
Security would be subject to United States Federal income tax (including, in
the case of a corporate United States Alien Holder, possibly the branch profits
tax) on gain realized on the sale, exchange or other disposition of the
security if (i) the United States Alien Holder is an individual who is present
in the United States for 183 days or more in the taxable year of disposition,
and certain other conditions apply, (ii) the gain is effectively connected with
the conduct by the United States Alien Holder of a trade or business in the
United States or (iii) the Company is, or during the preceding five years has
been, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code and either (a) if the Convertible Preferred
Securities are considered to be "regularly traded interests," the United States
Alien Holder beneficially owns (actually or constructively), or during the
preceding five years has beneficially owned (actually or constructively), more
than five percent of the Convertible Preferred Securities or (b) if the
Convertible Preferred Securities are not considered to be regularly traded
interests, the United States Alien Holder beneficially owned (actually or
constructively), on the date it acquired any Convertible Preferred Security,
Convertible Preferred Securities having a fair market value greater than the
fair market value of five percent of the Company's Common Stock.
The Company has not made a determination as to whether it is, or
whether during the last five years it has been, a United States real property
holding corporation. Moreover, there can be no assurance that the Company will
not be a United States real property holding corporation in the future. It is
also unclear whether the Convertible Preferred Securities are now or will
become regularly traded interests. Accordingly, a United States Alien Holder of
an Convertible Preferred Security could be subject to United States Federal
income tax on any gain realized upon a disposition (including, under certain
circumstances, a conversion) of such security if the conditions described above
are satisfied or of any Common Stock received upon conversion. United States
Alien Holders should consult their tax advisors concerning the tax consequences
of such a disposition.
If a United States Alien Holder is treated as receiving a deemed
dividend as a result of an adjustment of the conversion price of the
Convertible Debentures, as described above under "--Adjustment of Conversion
Price," such deemed dividend will be subject to United States Federal
withholding tax at a 30% (or lower treaty) rate.
On April 22, 1996, the Internal Revenue Service proposed regulations
(the "Proposed Regulations") that could affect the procedures to be followed by
- 69 -
<PAGE> 71
a United States Alien Holder in establishing such United States Alien Holder's
non-United States person status. The Proposed Regulations would generally be
effective for payments made after December 31, 1997. United States Alien
Holders should consult their tax advisors regarding the effect, if any, of the
Proposed Regulations on their purchase, ownership, and disposition of the
Convertible Preferred Securities.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the
Convertible Preferred Securities will be reported to holders on Forms 1099,
which forms should be mailed to holders of Convertible Preferred Securities by
January 31 following each calendar year.
The Trust is obligated to report annually to Cede & Co. and any other
record holders of the Convertible Preferred Securities the OID that accrued on
the Convertible Debentures during the year. The Trust currently intends to
report such information on Form 1099 prior to January 31 following each
calendar year even though the Trust is not legally required to report to record
holders until April 15 following each calendar year. The Initial Purchasers
have indicated to the Trust that, to the extent that they hold Convertible
Preferred Securities as nominees for beneficial holders, they currently expect
to report to such beneficial holders on Forms 1099 by January 31 following each
calendar year. Under current law, holders of Convertible Preferred Securities
who hold as nominees for beneficial holders will not have any obligation to
report information regarding the beneficial holders to the Trust. The Trust,
moreover, does not have any obligation to report to beneficial holders who are
not also record holders. Thus, beneficial holders of Convertible Preferred
Securities who hold their Convertible Preferred Securities through a nominee
account will receive Forms 1099 reflecting the income on their Convertible
Preferred Securities from such nominee holders rather than the Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Convertible
Preferred Securities or the Convertible Debentures distributed to holders of
the Convertible Preferred Securities may be subject to a "backup" withholding
tax of 31% unless the holder complies with certain identification requirements.
Any withheld amounts will be allowed as a refund or a credit against the
holder's United States Federal income tax, provided the required information is
provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON
A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS
- 70 -
<PAGE> 72
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CONVERTIBLE PREFERRED SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS (WITH POSSIBLE
RETROACTIVE EFFECT).
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on employee benefit plans
and certain other retirement plans and arrangements, including individual
retirement accounts and annuities, that are subject to ERISA and the Code (all
of which are hereinafter referred to as "Plans") and on persons who are
fiduciaries with respect to such Plans. In accordance with ERISA's general
fiduciary standards, before investing in Convertible Preferred Securities, a
Plan fiduciary should determine whether such an investment is permitted under
the governing Plan instruments and is appropriate for the Plan in view of its
overall investment policy and the composition and diversification of its
portfolio. Other provisions of ERISA and the Code prohibit certain transactions
involving the assets of a Plan and persons who have certain specified
relationships to the Plan ("parties in interest" within the meaning of ERISA or
"disqualified persons" within the meaning of the Code). Accordingly, any Plan
with respect to which TIMET or any of its affiliates would be considered a
party in interest or a disqualified person should not purchase Convertible
Preferred Securities.
In addition, under United States Department of Labor Regulation
Section 2510.3-101 (the "Regulation"), if immediately after any acquisition of
Convertible Preferred Securities, 25% or more of the value of the Convertible
Preferred Securities is held by Plans, employee benefit plans not subject to
ERISA (for example, governmental plans) and entities whose underlying assets
include Plan assets by reason of a Plan's investment in the entity, then the
assets of the Trust would be treated as assets of Plans holding Convertible
Preferred Securities, unless another exemption applied.
ANY PLAN PROPOSING TO PURCHASE CONVERTIBLE PREFERRED SECURITIES SHOULD
CONSULT WITH ITS COUNSEL REGARDING THE APPLICATION OF ERISA, THE CODE AND THE
REGULATION WITH RESPECT TO INVESTMENT IN CONVERTIBLE PREFERRED SECURITIES.
SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the
Trust and sold by the Initial Purchasers in a transaction exempt from the
registration requirements of the Securities Act, to persons reasonably believed
- 71 -
<PAGE> 73
by such Initial Purchasers to be (i) qualified institutional buyers as defined
in Rule 144A under the Securities Act, (ii) institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act), (iii) outside the United States to non-U.S. persons in offshore
transactions in reliance on Regulation S under the Securities Act and (iv) to
(a) executive officers and directors of the Company who are "accredited
investors" as defined in Rule 501(a)(4) under the Securities Act and (b)
certain individuals having relationships with the Company (or an executive
officer or director thereof) who either (x) are "accredited investors" as
defined in Rule 501(a)(5) or (6) under the Securities Act or (y) have such
knowledge and experience in financial and business matters that such
individuals are capable of evaluating the merits and risks of any prospective
investment in the Convertible Preferred Securities. The Selling Holders may
from time to time offer and sell pursuant to this Prospectus any or all of the
Convertible Preferred Securities, any Debentures and Common Stock issued upon
conversion of the Convertible Preferred Securities.
The following table sets forth information with respect to the holders
of the Convertible Preferred Securities received by the Company as of the date
of this Prospectus. The term Selling Holder includes the holders listed below
and the beneficial owners of the Convertible Preferred Securities and their
transferees, pledgees, donees or other successors.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Selling Holder Number of Convertible
Preferred Securities
- -------------------------------------------------------------------------------
<S> <C>
Allstate Insurance Company 50,000
- -------------------------------------------------------------------------------
Alpine Associates 50,000
- -------------------------------------------------------------------------------
Ameritech Pension Plan 100,000
- -------------------------------------------------------------------------------
Argent Classic Convertible Arbitrage Fund (Bermuda) L.P. 10,000
- -------------------------------------------------------------------------------
Austin Firefighters Convertible 1,300
- -------------------------------------------------------------------------------
Baptist Hospital of Miami 1,300
- -------------------------------------------------------------------------------
Bostik Inc. 400
- -------------------------------------------------------------------------------
Boston College Endowment 4,800
- -------------------------------------------------------------------------------
Boston Museum of Fine Arts 600
- -------------------------------------------------------------------------------
Castle Convertible Fund, Inc. 10,000
- -------------------------------------------------------------------------------
Chrysler Corp Employee Pension Plan (Bankers Trust Company TTEE) 52,000
- -------------------------------------------------------------------------------
</TABLE>
- 72 -
<PAGE> 74
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Colonial Penn Insurance 2,500
- -------------------------------------------------------------------------------
Colonial Penn Life Insurance 2,500
- -------------------------------------------------------------------------------
Commonwealth Life Ins. Company - Stock TRAC (Teamsters I) 20,000
- -------------------------------------------------------------------------------
Compofelice, Joseph S. 2,000
- -------------------------------------------------------------------------------
Delaware State Retirement Fund 14,500
- -------------------------------------------------------------------------------
Delta Air Lines Master Trust 30,700
- -------------------------------------------------------------------------------
Employers' Reinsurance Corporation 15,000
- -------------------------------------------------------------------------------
Engineers Joint Pension Fund 2,100
- -------------------------------------------------------------------------------
Epstein, James C. and Lisa Simmons 2,000
- -------------------------------------------------------------------------------
Equi-Select Growth & Income Portfolio 7,500
- -------------------------------------------------------------------------------
Equitable Total Return 1,900
- -------------------------------------------------------------------------------
Evergreen American Retirement Fund 20,000
- -------------------------------------------------------------------------------
Evergreen Foundation Fund 100,000
- -------------------------------------------------------------------------------
Evergreen Total Return Fund 120,000
- -------------------------------------------------------------------------------
FCF - Franklin Income Series 441,900
- -------------------------------------------------------------------------------
FVF - Income Securities Fund 32,300
- -------------------------------------------------------------------------------
Forest Fulcrum Fd Ltd 22,500
- -------------------------------------------------------------------------------
Forest Fulcrum Fund LP 47,500
- -------------------------------------------------------------------------------
Franklin Investors Securities Trust Convertible Securities Fund 20,000
- -------------------------------------------------------------------------------
Franklin Strategic Series - Natural Resource Fund 20,800
- -------------------------------------------------------------------------------
GPZ Trading 40,000
- -------------------------------------------------------------------------------
Greyhound Lines, Inc. Pension Fund 5,000
- -------------------------------------------------------------------------------
Hartford Fire Insurance Company 10,240
- -------------------------------------------------------------------------------
Hawaiian Airlines Employee Retirement IAM 1,500
- -------------------------------------------------------------------------------
Hawaiian Airlines Pilot Retirement 2,500
- -------------------------------------------------------------------------------
Highbridge Capital Corporation 52,500
- -------------------------------------------------------------------------------
Hughes Aircraft Company Master Retirement Trust 17,200
- -------------------------------------------------------------------------------
IBM Corp Retirement Plan Tr. (Chase Manhattan Bank TTEE) 78,000
- -------------------------------------------------------------------------------
ICI American Holdings Pension 5,800
- -------------------------------------------------------------------------------
</TABLE>
- 73 -
<PAGE> 75
<TABLE>
<S> <C>
IDEX II Equity Income Portfolio 4,600
- -------------------------------------------------------------------------------
KA Trading L.P. 5,700
- -------------------------------------------------------------------------------
KA Management Limited 4,300
- -------------------------------------------------------------------------------
Kapiolani Medical Center 3,000
- -------------------------------------------------------------------------------
LB Series Fund, Inc. - High Yield Portfolio 75,000
- -------------------------------------------------------------------------------
LDG Limited Fund 7,500
- -------------------------------------------------------------------------------
LLT Limited 5,000
- -------------------------------------------------------------------------------
Lincoln National Convertible Securities Fund 48,690
- -------------------------------------------------------------------------------
Lincoln National Life Insurance 119,080
- -------------------------------------------------------------------------------
Lipper Convertibles, L.P. 75,000
- -------------------------------------------------------------------------------
London Pacific Total Return 50
- -------------------------------------------------------------------------------
Lutheran Brotherhood High Yield Fund 50,000
- -------------------------------------------------------------------------------
Martin, J. Landis 3,000
- -------------------------------------------------------------------------------
McMahan Securities Co. L.P. 10,250
- -------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith 45,000
- -------------------------------------------------------------------------------
MFS Convertible Securities Fund 200
- -------------------------------------------------------------------------------
MFS/Sun Total Return Series 27,600
- -------------------------------------------------------------------------------
MFS Total Return Fund 70,800
- -------------------------------------------------------------------------------
MFS Total Return - Variable Insurance Trust 700
- -------------------------------------------------------------------------------
Museum of Fine Arts, Boston 2,070
- -------------------------------------------------------------------------------
Nalco Chemical Retirement 2,500
- -------------------------------------------------------------------------------
New Hampshire State Retirement System 12,715
- -------------------------------------------------------------------------------
Nicholas-Applegate Income & Growth Fund 12,400
- -------------------------------------------------------------------------------
Northwestern Mutual Life Insurance Company 165,000
- -------------------------------------------------------------------------------
Northwestern Mutual Life Insurance Company Group Annuity
Separate Account 10,000
- -------------------------------------------------------------------------------
Occidental College 1,100
- -------------------------------------------------------------------------------
OCM Convertible Limited Partnership 1,200
- -------------------------------------------------------------------------------
OCM Convertible Trust 63,400
- -------------------------------------------------------------------------------
</TABLE>
- 74 -
<PAGE> 76
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Oregon Equity Fund 50,000
- -------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company 10,000
- -------------------------------------------------------------------------------
Paloma Securities LLC 127,500
- -------------------------------------------------------------------------------
Phoenix Duff & Phelps -- Phoenix Equity Opportunity Fund/
Phoenix Convertible Fund 50,000
- -------------------------------------------------------------------------------
PRIM Board 22,500
- -------------------------------------------------------------------------------
Promutual 10,630
- -------------------------------------------------------------------------------
Putnam Balanced Retirement Fund 5,000
- -------------------------------------------------------------------------------
Putnam Convertible Income-Growth Trust 70,000
- -------------------------------------------------------------------------------
Putnam Convertible Opportunities and Income Trust 9,545
- -------------------------------------------------------------------------------
Reliant Trading 3,838
- -------------------------------------------------------------------------------
Robertson Stephens Growth & Income Fund 45,000
- -------------------------------------------------------------------------------
SAIF Corporation 40,000
- -------------------------------------------------------------------------------
SBC Warburg Dillon Read Inc. 90,000
- -------------------------------------------------------------------------------
Salomon Brothers Inc 14,000
- -------------------------------------------------------------------------------
San Diego City Retirement 3,900
- -------------------------------------------------------------------------------
San Diego County Convertible 14,200
- -------------------------------------------------------------------------------
Shepherd Investments International, Ltd. 38,975
- -------------------------------------------------------------------------------
Shepherd Trading Ltd. 3,662
- -------------------------------------------------------------------------------
Stark International 59,525
- -------------------------------------------------------------------------------
Starvest 6,000
- -------------------------------------------------------------------------------
State Employees' Retirement Fund of the State of Delaware 12,500
- -------------------------------------------------------------------------------
State of Connecticut Combined Investment Funds 49,300
- -------------------------------------------------------------------------------
State Street Bank & Trust C/F GE Pension Trust 20,000
- -------------------------------------------------------------------------------
Swiss Bank Corporation - London Branch 20,000
- -------------------------------------------------------------------------------
TQA Leverage Fund, L.P. 10,000
- -------------------------------------------------------------------------------
TQA Vantage Fund, L.P. 12,500
- -------------------------------------------------------------------------------
Travelers Total Return Series Trust 3,900
- -------------------------------------------------------------------------------
</TABLE>
- 75 -
<PAGE> 77
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
United National Life Insurance 2,180
- -------------------------------------------------------------------------------
Value Line Convertible Fund 15,000
- -------------------------------------------------------------------------------
Van Kampen American Capital Convertible Securities Fund 8,700
- -------------------------------------------------------------------------------
Van Kampen American Capital Harbor Fund 49,000
- -------------------------------------------------------------------------------
Vanguard Convertible Securities Fund, Inc. 30,700
- -------------------------------------------------------------------------------
Wake Forest University 3,100
- -------------------------------------------------------------------------------
Walker Art Center 6,300
- -------------------------------------------------------------------------------
Weirton Trust 13,750
- -------------------------------------------------------------------------------
Zeneca Holdings Pension 5,800
- -------------------------------------------------------------------------------
Total 3,705,850
- -------------------------------------------------------------------------------
</TABLE>
None of the Selling Holders has, or within the past three years has
had, any position, office or other material relationship with the Trust or the
Company or any of their affiliates, except with respect to J. Landis Martin,
the Company's Chairman and CEO and Joseph S. Compofelice, the Company's Vice
President and Chief Financial Officer and a Regular Trustee of the Trust. In
addition, James O. Epstein and Lisa Simmons are the son-in-law and daughter,
respectively, of Harold C. Simmons. Because the Selling Holders may, pursuant
to this Prospectus, offer all or some portion of the Convertible Preferred
Securities, the Convertible Debentures or the Common Stock issuable upon
conversion of the Convertible Preferred Securities, no estimate can be given as
to the amount of the Convertible Preferred Securities, the Convertible
Debentures or the Common Stock issuable upon conversion of the Convertible
Preferred Securities that will be held by the Selling Holders upon termination
of any such sales. In addition, the Selling Holders identified above may have
sold, transferred or otherwise disposed of all or a portion of their
Convertible Preferred Securities, since the date on which they provided the
information regarding their Convertible Preferred Securities, in transactions
exempt from the registration requirements of the Securities Act.
SELLING STOCKHOLDERS
The following table sets forth information with respect to ownership of
the Common Stock by the Selling Stockholders as of the date of, and as adjusted
to reflect, the sale of the Offered Common. See the Company's 1997 Proxy
Statement for information concerning individuals and entities which may be
deemed to indirectly beneficially own those shares of Common Stock directly
beneficially owned by the Selling Stockholders.
- 76 -
<PAGE> 78
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED BEFORE THE BENEFICIALLY OWNED AFTER THE
SALE OF THE OFFERED COMMON SALE OF THE OFFERED COMMON
- ------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER Number Percent of Number Percent of
Class Class
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tremont Corporation (1) 11,033,075 35.1% 9,525,000 30.3%
- ------------------------------------------------------------------------------------------------------------------------
Union Titanium Sponge Corporation (1) 1,153,230 3.7% 0 --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The shares of Common Stock shown as beneficially owned by Tremont and
UTSC include 1,508,075 shares and 503,230 shares, respectively,
obtainable within 60 days of the date of this Prospectus upon exercise
of the IMI Options held by Tremont and UTSC. Tremont intends to
exercise such option in connection with the sale of the Offered
Common. As a result, any sale of the Offered Common will not result in
any change in the number of shares of Common Stock directly held by
Tremont. UTSC has, as of the date of this Prospectus, previously sold
2,500,000 shares of Offered Common Stock.
PLAN OF DISTRIBUTION
OFFERED SECURITIES
The Offered Securities may be sold from time to time to purchasers
directly by the Selling Holders pursuant to this Prospectus or Rule 144 under
the Securities Act. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of the
- 77 -
<PAGE> 79
Securities Act and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such
underwriter, broker/ dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act. The Company is not aware of any
Selling Holder who plans or intends to engage in any offering of Offered
Securities.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market or (iv)
through the writing of options. At the time a particular offering of the
Offered Securities is made, a Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount and type of Offered
Securities being offered and the terms of the offering, including the name or
names of any underwriters, broker/dealers or agents, any discounts, commissions
and other terms constituting compensation from the Selling Holders and any
discounts, commissions or concessions allowed or reallowed or paid to
broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the Offered Securities must be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Offered Securities may not be offered or
sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Securities by the
Selling Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that the Selling
Holders will pay all underwriting discounts and selling commissions, if any.
The Selling Holders will be indemnified by the Company and the Trust, jointly
and severally, against certain civil liabilities, including certain liabilities
under the Securities Act, or will be entitled to contribution in connection
therewith. The Company and the Trust will be indemnified
- 78 -
<PAGE> 80
by the Selling Holders severally against certain civil liabilities, including
certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
OFFERED COMMON
The Offered Common may be sold from time to time by the Selling
Stockholders in transactions executed on the Nasdaq National Market or
otherwise, either directly or through brokers or to dealers, at market prices
prevailing at the time of sale or at prices related to such market prices, or
at such other prices as may be negotiated and agreed to by the Selling
Stockholders and any purchaser. Alternatively, the Selling Stockholders may,
from time to time, offer the Common Stock through underwriters. The Selling
Stockholders, brokers executing selling orders on behalf of the Selling
Stockholders, dealers to whom the Selling Stockholders may sell and any
underwriters may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any profit represented by the excess of the
selling price over the cost of the shares sold, and any commission, discount or
concession received may be deemed to be an underwriting discount or commission
under the Securities Act. At the time a particular offer of shares of Common
Stock is made, to the extent required, a supplement to this Prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, any discounts, commissions and other items constituting compensation
and any discounts, commissions or concessions allowed or reallowed or paid to
dealers, including the proposed selling price to the public. Under contractual
arrangements between the Company and the Selling Stockholders, the Company is
obligated to indemnify the Selling Stockholders and any underwriters of the
shares offered hereby against certain civil liabilities under the Securities
Act.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation provides that no director
shall be liable personally to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director; provided that, the
Certificate of Incorporation does not eliminate the liability of a director for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) acts or omissions
in respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (iv) any transaction from which such director derives improper
personal benefit. The effect of this provision is to eliminate the rights of
the Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for
breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The limitations
summarized above, however, do not affect the ability of the Company or its
stockholders to seek non-monetary remedies, such as an injunction or
rescission, against a director for breach of his fiduciary duty.
The Company's Bylaws provide that the Company shall indemnify and
advance expenses to the currently acting and former directors, officers,
employees and agents of the Company or of another corporation, partnership,
joint venture, trust or other enterprise if serving at the request of the
Company arising in connection with their acting in such capacities. In
addition, Section 145 of the Delaware General Corporation Law permits the
Company to indemnify an officer or director who was or is a party or is
threatened to be made a party to any proceeding because of his or her position,
if the officer or director acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
LEGAL MATTERS
Certain legal matters regarding the validity of the Convertible
Preferred Securities, Convertible Debentures, the Guarantee and the Common
Stock issuable upon conversion of the Convertible Debentures and the Common
Stock constituting the Offered Common, under laws other than federal or state
securities laws, will be passed upon by Bartlit Beck Herman Palenchar & Scott,
a partnership including professional corporations, Denver, Colorado. Certain
matters related to certain United States federal income taxation matters will
be passed upon for the Company and the Trust by Kirkland & Ellis, a partnership
including professional corporations, New York, New York.
EXPERTS;
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of the Company and its subsidiaries as
of December 31, 1995 and 1996, the consolidated statements of
- 79 -
<PAGE> 81
operations, stockholders' equity and cash flows for each of the three fiscal
years in the period ended December 31, 1996, and the related consolidated
financial statement schedules, incorporated by reference, have been
incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
- 80 -
<PAGE> 82
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE
HEREBY EXCEPT AS CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, NO SUCH
INFORMATION OR REPRESENTATIONS SHOULD BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF ITS AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
CONVERTIBLE PREFERRED SECURITIES OR THE COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information .................................................... 4
Incorporation of Certain Documents by Reference .......................... 4
Special Note Regarding Forward Looking Statements ........................ 4
The Company............................................................... 5
Risk Factors ............................................................. 12
Use of Proceeds .......................................................... 20
TIMET Capital Trust I .................................................... 20
Description of the Convertible Preferred Securities ...................... 22
Description of the Guarantee ............................................. 45
Description of the Convertible Debentures ................................ 49
Effect of Obligations Under the Convertible Debentures and the Guarantee . 62
United States Federal Income Taxation .................................... 64
Selling Holders .......................................................... 71
Selling Stockholders ..................................................... 76
Plan of Distribution ..................................................... 77
Legal Matters............................................................. 79
Experts; Independent Public Accountants .................................. 79
</TABLE>
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses of the Registrant in connection with the issuance and
distribution of the securities being registered, other than underwriting
discounts, are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 115,822.10
Printing and Engraving 450,000.00
Legal Fees and Expenses 550,000.00
Accounting Fees and Expenses 450,000.00
Miscellaneous Expenses 735,000.00
-------------
Total $2,300,822.10
=============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
Section 102(b)(7) of the General Corporation Law of the State of
Delaware permits a Delaware corporation to limit the personal liability of its
directors in accordance with the provisions set forth therein. The Amended and
Restated Certificate of Incorporation of Titanium Metals Corporation provides
that the personal liability of its directors shall be limited to the fullest
extent permitted by applicable law.
Section 145 of the General Corporation Law of the State of Delaware
contains provisions permitting corporations organized thereunder to indemnify
directors, officers, employees or agents against expenses, judgments and fines
reasonably incurred and against certain other liabilities in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person was or is a director, officer, employee or agent of the corporation. The
Amended and Restated Certificate of Incorporation and the By-Laws of Titanium
Metals Corporation provide for indemnification of its directors and officers to
the fullest extent permitted by applicable law.
In addition, Titanium Metals Corporation maintains an officers and
directors liability insurance policy.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE TRUST
The Declaration of the Trust provides that no Trustee, affiliate of
any Regular Trustee, or any officers, directors, shareholders, members,
partners, employees, representatives or agent of the Trust, or any employee or
agent of the trust or its affiliates (each an "Indemnified Person") shall be
liable, responsible or accountable in damages or otherwise to the Trust or any
employee or agent of the trust or its affiliates for any loss, damage or claim
incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by the Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or, in the
case of the Trustee, negligence) or willful misconduct with respect to such
acts or omissions. The Declaration of the Trust also provides that to the
fullest extent permitted by applicable law, TIMET shall indemnify and hold
harmless each Indemnified Person from and against any loss, damage or claim
incurred by such Indemnified Person by reason of any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the scope
of authority conferred on such Indemnified Person by the Declaration, except
that
II - 1
<PAGE> 84
no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of gross
negligence (or, in the case of the Trustee, negligence) or willful misconduct
with respect to such acts or omissions. The Declaration of the Trust further
provides that, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be advanced
by TIMET prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by or an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified for the underlying cause of action as
authorized by the Declaration. The directors and officers of TIMET and the
Regular Trustees are covered by insurance policies indemnifying them against
certain liabilities, including certain liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), which might be incurred by them
in such capacities and against which they cannot be indemnified by the Company
or the Trust. The Selling Holders will be indemnified by the Company and the
Trust, jointly and severally, against certain civil liabilities, including
certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith. The Company and the Trust will be
indemnified by the Selling Holders severally against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
II - 2
<PAGE> 85
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed pursuant to Item 601 of Regulation
S-K.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--- -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of Titanium
Metals Corporation, incorporated by reference to Exhibit 3.1
to Titanium Metals Corporation's Registration Statement on S-1
(No. 333-2940).
3.2* Bylaws of Titanium Metals Corporation, incorporated by
reference to Exhibit 3.2 to Titanium Metals Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
4.1* Specimen Certificate of Common Stock, incorporated by
reference to Exhibit 4.1 to Titanium Metals Corporation's
Registration Statement on S-1 (No. 333-2940).
4.2* Certificate of Trust of TIMET Capital Trust I dated November
13, 1996, incorporated by reference to Exhibit 4.1 to Titanium
Metals Corporation's Current Report on Form 8-K filed with the
Commission on December 5, 1996.
4.3* Amended and Restated Declaration of Trust of TIMET Capital
Trust I, dated as of November 20, 1996 among Titanium Metals
Corporation, as Sponsor, The Chase Manhattan Bank, as Property
Trustee, Chase Manhattan Bank (Delaware), as Delaware Trustee
and Joseph S. Compofelice, Robert E. Musgraves and Mark A.
Wallace, as Regular Trustees, incorporated by reference to
Exhibit 4.2 to Titanium Metals Corporation's Current Report on
Form 8-K filed with the Commission on December 5, 1996.
4.4* Indenture for the 6 5/8% Convertible Subordinated Debentures,
dated as of November 20, 1996 among Titanium Metals
Corporation and The Chase Manhattan Bank, as Trustee,
incorporated by reference to Exhibit 4.3 to Titanium Metals
Corporation's Current Report on Form 8-K filed with the
Commission on December 5, 1996.
4.5* Form of 6 5/8% Convertible Preferred Securities (included in
Exhibit 4.2 above), incorporated by reference to Exhibit 4.4
to Titanium Metals Corporation's Current Report on Form 8-K
filed with the Commission on December 5, 1996.
4.6* Form of 6 5/8% Convertible Subordinated Debentures (included
in Exhibit 4.3 above), incorporated by reference to Exhibit
4.5 to Titanium Metals Corporation's Current Report on Form 8-
K filed with the Commission on December 5, 1996.
4.7* Form of 6 5/8% Trust Common Securities (included in Exhibit
4.3 above), incorporated by reference to Exhibit 4.5 to
Titanium Metals Corporation's Current Report on Form 8-K filed
with the Commission on December 5, 1996.
4.8* Convertible Preferred Securities Guarantee, dated as of
November 20, 1996, between Titanium Metals Corporation, as
Guarantor, and The Chase Manhattan Bank, as Guarantee Trustee,
incorporated by reference to Exhibit 4.6 to Titanium Metals
Corporation's Current Report on Form 8-K filed with the
Commission on December 5, 1996.
5.1* Opinion of Bartlit Beck Herman Palenchar & Scott as to the
legality of the Common Stock, the Convertible Preferred
Securities, Debentures and Convertible Preferred Guarantee
being registered hereby.
8.1* Opinion of Kirkland & Ellis as to certain tax matters
</TABLE>
II - 3
<PAGE> 86
<TABLE>
<S> <C>
12.1* Statement Regarding Computation of Ratios.
23.1* Consent of Bartlit Beck Herman Palenchar & Scott is contained
in the opinion filed as Exhibit 5.1.
23.2* Consent of Kirkland & Ellis is contained in the opinion filed
as Exhibit 8.1.
23.3* Consent of Coopers & Lybrand L.L.P.
23.4* Consent of KPMG Peat Marwick LLP.
23.5* Consent of Price Waterhouse LLP.
23.6* Consent of Price Waterhouse LLP.
23.7* Awareness Letter of Price Waterhouse LLP.
23.8 Consent of Coopers & Lybrand L.L.P.
24.1* Limited Powers of Attorney -- included in Part II of the
Registration Statement.
25.1* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, as
Trustee under the 6 5/8% Convertible Subordinated Debentures
Indenture, Property Trustee under the Amended and Restated
Declaration of Trust and Guarantee Trustee under the
Convertible Preferred Securities Guarantee
27.1* Financial Data Schedule.
</TABLE>
* Previously filed
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, post-effective amendment to this registration statement:
II - 4
<PAGE> 87
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof)which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the Trust
Indenture Act.
II - 5
<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Titanium Metals Corporation certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, as of
September 11, 1997.
TITANIUM METALS CORPORATION
By: /s/ ROBERT E. MUSGRAVES
---------------------------------
Its: Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Chairman of the Board and September 11, 1997
- ----------------------------- Chief Executive Officer
J. Landis Martin
* President, Chief Operating September 11, 1997
- ----------------------------- Officer and Director
Andrew R. Dixey
/s/ JOSEPH S. COMPOFELICE Vice President, Chief Financial September 11, 1997
- ----------------------------- Officer and Director
Joseph S. Compofelice (Principal Financial Officer)
* Director September 11, 1997
- -----------------------------
Edward C. Hutcheson, Jr.
* Director September 11, 1997
- -----------------------------
General Thomas P. Stafford
Director
- -----------------------------
Hiroomi Mikami
/s/ J. THOMAS MONTGOMERY, JR. Vice President--Finance and September 11, 1997
- ----------------------------- Treasurer (Principal Accounting
J. Thomas Montgomery, Jr. Officer)
</TABLE>
* By /s/ ROBERT E. MUSGRAVES
--------------------------------
Robert E. Musgraves, Attorney-in-Fact
II - 6
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
TIMET Capital Trust I certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Denver, State of Colorado, as of September 11,
1997.
TIMET CAPITAL TRUST I
By: /s/ JOSEPH S. COMPOFELICE
-----------------------------------
Joseph S. Compofelice, Regular Trustee
By: /s/ ROBERT E. MUSGRAVES
-----------------------------------
Robert E. Musgraves, Regular Trustee
By: /s/ MARK A. WALLACE
-----------------------------------
Mark A. Wallace, Regular Trustee
II - 7
<PAGE> 90
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
23.8 Consent of Coopers & Lybrand L.L.P.
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our reports dated January 21, 1997, on our audits of the
consolidated financial statements and financial statement schedules of Titanium
Metals Corporation as of December 31, 1995 and 1996, and for the three years in
the period ended December 31, 1996. We also consent to the reference to our
firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Denver, Colorado
September 11, 1997
