<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RENCO STEEL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
OHIO 3312 34-1854775
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1040 PINE AVENUE, S.E.
WARREN, OHIO 44483
(330) 841-8312
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
ROGER L. FAY
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
RENCO STEEL HOLDINGS, INC.
C/O THE RENCO GROUP, INC.
30 ROCKEFELLER PLAZA, SUITE 4225
NEW YORK, NEW YORK 10112
(212) 541-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
MICHAEL C. RYAN, ESQ.
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 504-6177
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE+ REGISTRATION FEE
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10 7/8% Senior Secured Notes due 2005, Series
B.............................................. $120,000,000 100% $120,000,000 $35,400
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+ Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(f).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 19, 1998
RENCO STEEL HOLDINGS, INC.
OFFER TO EXCHANGE ITS 10 7/8% SENIOR SECURED NOTES DUE 2005, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING
10 7/8% SENIOR SECURED NOTES DUE 2005, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
Renco Steel Holdings, Inc., an Ohio corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and together with this Prospectus, the "Exchange Offer"), to
exchange its 10 7/8% Senior Secured Notes due 2005, Series B (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement (as defined) of
which this Prospectus is a part, for an equal principal amount of its
outstanding 10 7/8% Senior Secured Notes due 2005, Series A (the "Old Notes"),
of which $120.0 million principal amount is outstanding. The Exchange Notes and
the Old Notes are collectively referred to herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on
, 1998, unless the Exchange Offer is extended (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Notes will be issued and
delivered promptly after the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer." Old Notes may be tendered only in integral
multiples of $1,000. The Company has agreed to pay the expenses of the Exchange
Offer.
The Exchange Notes will be obligations of the Company evidencing the same
debt as the Old Notes and will be entitled to the benefits of the same
indenture, dated as of February 3, 1998 (the "Indenture"), between the Company
and State Street Bank and Trust Company, as trustee (the "Trustee"). The form
and terms of the Exchange Notes are substantially the same as the form and terms
of the Old Notes except that the Exchange Notes have been registered under the
Securities Act. See "The Exchange Offer."
The Exchange Notes will bear interest from February 3, 1998. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
up until the date of the issuance of the Exchange Notes. Such waiver will not
result in the loss of interest income to such holders, since the Exchange Notes
will bear interest from the issue date of the Old Notes.
Interest on the Exchange Notes will be payable semi-annually on February 1
and August 1 of each year, commencing on August 1, 1998. The Exchange Notes will
mature on February 1, 2005. Except as set forth below, the Exchange Notes will
not be redeemable prior to February 1, 2002. Thereafter, the Exchange Notes will
be redeemable at the option of the Company, in whole or in part, at the
redemption prices set forth herein, together with accrued and unpaid interest,
if any, to the date of redemption. In addition, at any time on or prior to
February 1, 2001, the Company may, subject to certain requirements, redeem up to
33 1/3% of the original aggregate principal amount of the Exchange Notes with
the net cash proceeds of one or more Equity Offerings (as defined), at 111% of
the principal amount thereof, together with accrued and unpaid interest, if any,
to the date of redemption; PROVIDED that at least $80 million of Notes remain
outstanding immediately after any such redemption. Upon the occurrence of a
Change of Control (as defined), each holder of the Exchange Notes may require
the Company to repurchase such holder's Exchange Notes at 101% of the principal
amount thereof plus accrued interest to the date of repurchase. The Company is
obligated in certain instances to make offers to repurchase Exchange Notes with
the net cash proceeds of certain sales and other dispositions of assets. See
"Description of the Notes."
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a Prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that, by so acknowledging and by
delivering a Prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making or other trading activities. The Company has agreed that
for a period of 180 days after consummation of the Exchange Offer, it will make
this Prospectus, as it may be amended or supplemented from time to time,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
There has been no public market for the Old Notes. If a market for the
Exchange Notes should develop, the Exchange Notes could trade at a discount from
their principal amount. The Company does not intend to list the Exchange Notes
on a national securities exchange or quotation system. There can be no assurance
that an active public market for the Exchange Notes will develop.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE EXCHANGE
NOTES.
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.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Exchange Notes offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information with respect to the Company, and the
Exchange Notes offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of certain documents
filed as exhibits to the Registration Statement are not necessarily complete
and, in each case, are qualified by reference to the copy of the document so
filed. The Registration Statement can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material also
can be reviewed through the Commission's Electronic Data Gathering, Analysis,
and Retrieval System, which is publicly available through the Commission's web
site (http://www.sec.gov).
The Company intends to furnish to each holder of the Exchange Notes annual
reports containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. The Company also will furnish to each holder of the Exchange Notes such
other reports as may be required by applicable law.
The principal executive offices of the Company are located at 1040 Pine
Avenue, S.E., Warren, Ohio 44483, telephone number: (330) 841-8312.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and "Business" and elsewhere constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company to differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such risks, uncertainties and other important
factors include, among others: general economic and business conditions;
increasing industry capacity and levels of imports of steel or steel products;
industry trends, including product pricing; competition; currency fluctuations;
the loss of any significant customers; availability of qualified personnel;
major equipment failures; changes in, or the failure or inability to comply
with, government regulation, including, without limitation, environmental
regulations; the outcome of pending environmental and other legal proceedings;
and other factors referenced in this Prospectus. See "Risk Factors." These
forward-looking statements speak only as of the date of this Prospectus. The
Company expressly disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
2
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PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS ARE URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY BEFORE INVESTING IN THE EXCHANGE NOTES. THE COMPANY'S
AND WCI'S (AS DEFINED) FISCAL YEAR ENDS OCTOBER 31, AND THUS, FOR EXAMPLE,
"FISCAL 1997" REFERS TO THE FISCAL YEAR ENDED OCTOBER 31, 1997.
THE COMPANY
GENERAL
The Company is a holding company formed by The Renco Group, Inc. ("Renco")
under the laws of Ohio in January 1998, which owns all the outstanding shares of
capital stock (the "WCI Pledged Stock") of WCI Steel, Inc. ("WCI"). On February
3, 1998, the Company sold and issued the Old Notes (the "Old Notes Offering").
The Company used the net proceeds of the Old Notes Offering to pay a dividend to
Renco, provide cash to the Company and pay related fees and expenses. Currently,
the assets of the Company consist of (i) the WCI Pledged Stock and (ii) cash and
investments estimated to be $15.6 million representing the remaining proceeds
from the Old Notes Offering, net of estimated transaction fees and expenses paid
or accrued.
The Company intends to meet its debt service obligations from its cash and
investment balances and earnings thereon and through distributions from WCI,
including payments pursuant to a tax sharing agreement and dividends as
permitted under WCI's outstanding indebtedness. In addition, Renco may make
contributions or advances to the Company to meet its debt service obligations.
Renco, however, has no obligation to do so.
WCI
WCI is a niche oriented integrated producer of value-added custom steel,
producing approximately 170 grades of custom and commodity steel products. WCI
produces a wide range of custom flat rolled products, including high carbon,
alloy, high strength, silicon electrical, terne coated and galvanized steel.
These custom grades typically sell at higher prices than commodity products,
resulting in higher operating margins. Since fiscal 1991, the price of WCI's
custom products has averaged $543 per ton, while commodity products have
averaged $387 per ton. Since fiscal 1991, custom products have increased from
47.2% of total shipments to 67.6% in fiscal 1997 and comprised 62.2% of total
shipments for the three months ended January 31, 1998.
WCI shipped approximately 1.3 million tons of steel products in fiscal 1997.
Such shipments resulted in net sales of $668.5 million and EBITDA of $91.7
million.
WCI believes that it operates at a distinct competitive advantage to other
integrated steel manufacturers due to its niche oriented custom product mix, its
experience and technical expertise in producing these products and its
experienced management team. WCI also maintains a low overhead structure and
believes that it has one of the lowest selling, general and administrative
expense structures in the industry. WCI believes that the combination of these
factors has permitted WCI to generate one of the highest operating margins per
net ton in the domestic steel industry.
WCI's business strategy consists of three principal elements: (a) continue
to increase sales of custom products, thereby further improving operating
margins; (b) continue to build and maintain strong relationships with strategic
customers, targeting customers for which it can supply at least 25% of such
customers' custom steel needs; and (c) continue to improve operating efficiency
and product quality through strategic cost reduction initiatives, as well as a
significant capital investment program.
3
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INDUSTRY DEVELOPMENTS
In late 1997, the flat rolled steel industry experienced a decline in spot
selling prices due to, among other things, increasing domestic capacity and a
high level of imports. As a result of the foregoing conditions, sales prices are
expected to be lower through mid-1998 as compared to 1997, resulting in reduced
profitability and cash flows for the industry, including WCI. Several integrated
and minimill producers have announced price increases effective April 1, 1998;
however, there can be no assurance that such announced price increases will be
implemented. If the announced price increases are not implemented and the
downward pricing trends continue and result in a prolonged period of reduced
prices, WCI may not be able to pay dividends to the Company in amounts that
would permit the Company to meet fully its debt service requirements under the
Exchange Notes. See "Risk Factors--Relating to the Industry-- Cyclicality."
CONTROL OF THE COMPANY
All of the Company's issued and outstanding common stock is owned by Renco,
which is 97.9% owned by Mr. Ira Leon Rennert, the Chairman of the Company and
Chairman and Chief Executive Officer of Renco, and by trusts established by him
for himself and members of his family (but of which he is not a trustee). As a
result of such ownership, Mr. Rennert controls the Company and its subsidiaries.
Mr. Rennert is the sole Director of the Company.
CORPORATE STRUCTURE
The following sets forth certain aspects of the corporate structure of
Renco, the Company and WCI.
[LOGO]
4
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THE EXCHANGE OFFER
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THE EXCHANGE OFFER..................... $1,000 principal amount of Exchange Notes will be
issued in exchange for each $1,000 principal amount
of Old Notes validly tendered pursuant to the
Exchange Offer. As of the date hereof, $120.0
million in aggregate principal amount of Old Notes
are outstanding. The Company will issue the
Exchange Notes to tendering holders of Old Notes
promptly after the Expiration Date.
RESALES................................ Based on an interpretation by the staff of the
Commission set forth in Morgan Stanley & Co.
Incorporated, SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter"), Exxon
Capital Holdings Corporation, SEC No-Action Letter
(available May 13, 1988) (the "Exxon Capital
Letter") and similar letters, the Company believes
that Exchange Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any
person receiving such Exchange Notes, whether or
not such person is the holder (other than any such
holder or other person which is (i) a broker-dealer
that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of
market-making or other trading activities, or (ii)
an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act (collectively,
"Restricted Holders")) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, PROVIDED that (a) such Exchange
Notes are acquired in the ordinary course of
business of such holder or other person (b) neither
such holder nor such other person is engaged in or
intends to engage in a distribution of such
Exchange Notes and (c) neither such holder nor
other person has any arrangement or understanding
with any person to participate in the distribution
of such Exchange Notes. If any person were to be
participating in the Exchange Offer for the
purposes of participating in a distribution of the
Exchange Notes in a manner not permitted by the
Commission's interpretation, such person (a) could
not rely upon the Morgan Stanley Letter, the Exxon
Capital Letter or similar letters and (b) must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Each broker or dealer that receives Exchange Notes
for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker
or dealer as a result of market-making or other
activities, must acknowledge that it will deliver a
Prospectus in
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5
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connection with any sale of such Exchange Notes.
See "Plan of Distribution."
EXPIRATION DATE........................ 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
ACCRUED INTEREST ON THE EXCHANGE NOTES
AND OLD NOTES........................ The Exchange Notes will bear interest from February
3, 1998. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived
the right to receive any payment in respect of
interest on such Old Notes accrued to the date of
issuance of the Exchange Notes.
CONDITIONS TO THE EXCHANGE OFFER....... The Exchange Offer is subject to certain customary
conditions. The conditions are limited and relate
in general to proceedings which have been
instituted or laws which have been adopted that
might impair the ability of the Company to proceed
with the Exchange Offer. As of the date of this
Prospectus, none of these events had occurred, and
the Company believes their occurrence to be
unlikely. If any such conditions exist prior to the
Expiration Date, the Company may (a) refuse to
accept any Old Notes and return all previously
tendered Old Notes, (b) extend the Exchange Offer
or (c) waive such conditions. See "The Exchange
Offer--Conditions."
PROCEDURES FOR TENDERING OLD NOTES..... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes to be exchanged and any other
required documentation to the Exchange Agent (as
defined) at the address set forth herein and
therein. Tendered Old Notes, the Letter of
Transmittal and accompanying documents must be
received by the Exchange Agent by 5:00 p.m. New
York City time, on the Expiration Date. See "The
Exchange Offer--Procedures for Tendering." By
executing the Letter of Transmittal, each holder
will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such
Exchange Notes, whether or not such person is the
holder, that neither the holder nor any such other
person is engaged in or intends to engage in a
distribution of the Exchange Notes or has an
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes, and that neither the holder nor any such
other person is an
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6
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"affiliate," as defined under Rule 405 of the
Securities Act, of the Company.
SPECIAL PROCEDURES FOR BENEFICIAL
HOLDERS.............................. Any beneficial holder whose Old Notes are
registered in the name of his broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on his
behalf. If such beneficial holder wishes to tender
on his own behalf, such beneficial holder must,
prior to completing and executing the Letter of
Transmittal and delivering his Old Notes, either
make appropriate arrangements to register ownership
of the Old Notes in such holder's name or obtain a
properly completed bond power from the registered
holder. The transfer of record ownership may take
considerable time. See "The Exchange
Offer--Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES......... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes and
a properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS...................... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF OLD NOTES AND DELIVERY OF
EXCHANGE NOTES....................... Subject to certain conditions, the Company will
accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. The Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly after the
Expiration Date. See "The Exchange Offer--Terms of
the Exchange Offer."
CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS....................... The exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be a
taxable event for federal income tax purposes. A
holder's holding period for Exchange Notes will
include the holding period for Old Notes. For a
discussion summarizing certain U.S. federal income
tax consequences to holders of the Exchange Notes,
see "Certain U.S. Federal Income Tax
Considerations."
EXCHANGE AGENT......................... State Street Bank and Trust Company is serving as
exchange agent (the "Exchange Agent") in connection
with the Exchange Offer. The mailing address of the
Exchange Agent is State Street Bank and Trust
Company,
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7
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Two International Place, 4th Floor, Boston,
Massachusetts 02110, Attention: Claire
Young--Corporate Trust Department. Deliveries by
hand or overnight courier should be addressed to
State Street Bank and Trust Company, 61 Broadway,
15th Floor, New York, New York 10016, Attention:
Corporate Trust Department. For information with
respect to the Exchange Offer, call the Exchange
Agent at telephone number: (860) 244-1846 or
facsimile number: (860) 244-1881.
USE OF PROCEEDS........................ The Company will not receive any proceeds from the
Exchange Offer. See "Use of Proceeds." The Company
has agreed to bear the expenses of the Exchange
Offer pursuant to the Registration Rights Agreement
(as defined). No underwriter is being used in
connection with the Exchange Offer.
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SUMMARY OF TERMS OF EXCHANGE NOTES
The Exchange Offer constitutes an offer to exchange up to $120.0 million
aggregate principal amount of the Exchange Notes for up to an equal aggregate
principal amount of Old Notes. The Exchange Notes will be obligations of the
Company evidencing the same indebtedness as the Old Notes, and will be entitled
to the benefit of the same Indenture. The form and terms of the Exchange Notes
are substantially the same as the form and terms of the Old Notes except that
the Exchange Notes have been registered under the Securities Act. See
"Description of the Notes."
COMPARISON WITH OLD NOTES
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FREELY TRANSFERABLE.................... The Exchange Notes will be freely transferable
under the Securities Act by holders who are not
Restricted Holders. Restricted Holders are
restricted from transferring the Exchange Notes
without compliance with the registration and
prospectus delivery requirements of the Securities
Act. The Exchange Notes will be identical in all
material respects (including interest rate,
maturity and restrictive covenants) to the Old
Notes, with the exception that the Exchange Notes
will be registered under the Securities Act. See
"The Exchange Offer--Terms of the Exchange Offer."
REGISTRATION RIGHTS.................... The holders of Old Notes currently are entitled to
certain registration rights pursuant to the
Registration Rights Agreement, dated as of February
3, 1998 (the "Registration Rights Agreement"), by
and between the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, the initial
purchaser of the Old Notes ("DLJ"), including the
right to cause the Company to register the Old
Notes under the Securities Act if the Exchange
Offer is not consummated prior to the Exchange
Offer Termination Date (as defined). See "The
Exchange
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8
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<S> <C>
Offer--Conditions." However, pursuant to the
Registration Rights Agreement, such registration
rights will expire upon consummation of the
Exchange Offer. Accordingly, holders of Old Notes
who do not exchange their Old Notes for Exchange
Notes in the Exchange Offer will not be able to
reoffer, resell or otherwise dispose of their Old
Notes unless such Old Notes are subsequently
registered under the Securities Act or unless an
exemption from the registration requirements of the
Securities Act is available.
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TERMS OF THE EXCHANGE NOTES
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<S> <C>
MATURITY DATE.......................... February 1, 2005.
INTEREST PAYMENT DATES................. February 1 and August 1, commencing August 1, 1998.
OPTIONAL REDEMPTION.................... The Exchange Notes will be redeemable at the
Company's option, in whole or in part, at any time
on or after February 1, 2002, at the redemption
prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption.
In addition, on or prior to February 1, 2001, in
the event of one or more Equity Offerings, the
Company may, at its option, redeem up to 33 1/3% of
the principal amount of Exchange Notes originally
issued from the net proceeds thereof at a
redemption price equal to 111% of the principal
amount thereof, together with accrued and unpaid
interest, if any, to the date of redemption;
provided that at least $80 million of Notes remain
outstanding immediately after such redemption and
any such redemption occurs not more than 120 days
after the consummation of any such Equity Offering.
CHANGE OF CONTROL...................... Upon a Change of Control, each holder of the
Exchange Notes will have the right to require the
Company to repurchase all or a portion of such
holder's Exchange Notes at a price of 101% of the
principal amount thereof plus accrued interest to
the repurchase date. See "Description of the
Notes--Certain Covenants--Change of Control."
ASSET SALE PROCEEDS.................... The Company is obligated in certain instances to
make offers to purchase the Exchange Notes at a
redemption price of 100% of the principal amount
thereof (plus, in the case of the WCI Pledged
Stock, the Applicable Premium (as defined)) plus
accrued interest to the repurchase date with the
net cash proceeds of certain sales or other
dispositions of assets. See "Description of the
Notes-- Certain Covenants--Limitation on Sale of
Assets."
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
SECURITY............................... The Exchange Notes will be secured by a pledge of
all the WCI Pledged Stock; however, WCI will not be
an obligor of the Exchange Notes. The Exchange
Notes will be structurally subordinated to all
existing and future liabilities of WCI and any
future subsidiaries of the Company, and holders of
the Exchange Notes will have no direct recourse to
the assets of WCI upon an Event of Default under
the Indenture. WCI will not be obligated to make
distributions to the Company sufficient to pay
interest or principal on the Exchange Notes. As of
January 31, 1998, WCI had outstanding indebtedness
of approximately $302.0 million and other
significant outstanding liabilities. See
"Description of the Notes-- Security."
RANKING................................ The Exchange Notes will be senior secured
obligations of the Company and will rank senior in
right of payment to all future senior subordinated
and subordinated indebtedness of the Company and
PARI PASSU with all other existing and future
senior indebtedness of the Company.
CERTAIN COVENANTS...................... The Indenture contains certain covenants,
including, without limitation, covenants with
respect to the following matters: (a) limitation on
indebtedness; (b) limitation on liens; (c)
limitation on restricted payments; (d) limitation
on transactions with affiliates; (e) impairment of
security interest; (f) consolidations, mergers and
transfers of all or substantially all of the assets
of the Company; (g) limitation on business
activities; and (h) limitation on the sale of the
WCI Pledged Stock. See "Description of the
Notes--Certain Covenants."
</TABLE>
RISK FACTORS
Prospective purchasers of the Exchange Notes should carefully consider all
of the information set forth in this Prospectus and, in particular, should
evaluate the specific factors set forth under "Risk Factors" for risks involved
with an investment in the Exchange Notes.
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The Company is a holding company formed by Renco in January 1998, which owns
the WCI Pledged Stock. The Company has no operating history. Accordingly, the
financial data presented below is the historical consolidated financial data of
WCI and the pro forma balance sheet data of the Company. See the Company's
audited balance sheet and the related notes thereto appearing elsewhere herein.
The consolidated statement of operations data for WCI for each of the years
in the five fiscal year period ended, and the balance sheet data for WCI as of,
October 31, 1997 have been derived from the consolidated financial statements of
WCI, which financial statements have been audited by KPMG Peat Marwick LLP. The
consolidated statement of operations data for WCI for the three months ended
January 31, 1997 and 1998, and the balance sheet data as of January 31, 1998,
have been derived from WCI's unaudited condensed consolidated financial
statements. The financial data set forth below should be read in conjunction
with WCI's audited consolidated financial statements and the related notes
thereto for the fiscal years ended October 31, 1995, 1996 and 1997 and the
unaudited condensed consolidated financial statements and the related notes
thereto for the three months ended January 31, 1997 and 1998 appearing elsewhere
herein and with "Management's Discussion and Analysis of Results of Operations
and Financial Condition."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED OCTOBER 31, JANUARY 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994(1) 1995(2) 1996(3) 1997(4) 1997(4) 1998
<CAPTION>
(DOLLARS AND TONS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $ 578,639 $ 709,363 $ 630,990 $ 660,801 $ 668,470 $ 160,907 $ 166,592
Gross margin............................... 86,639 134,753 86,201 110,192 120,925 29,298 24,744
Operating income........................... 46,517 79,996 45,348 65,571 68,396 9,738 14,279
Interest expense........................... 23,182 28,709 25,787 24,968 31,690 7,525 8,014
Interest and other income, net............. 301 1,505 6,212 6,545 1,239 651 299
Income before income taxes, extraordinary
losses on early retirement of debt and
cumulative effect of change in accounting
principle................................ 23,636 52,792 25,773 47,148 37,945 2,864 6,564
Income before extraordinary losses on early
retirement of debt and cumulative effect
of change in accounting principle........ 14,151 30,853 15,460 28,040 23,463 1,713 4,201
OTHER DATA:
EBITDA(5).................................. $ 67,796 $ 99,992 $ 67,297 $ 88,473 $ 91,691 $ 15,290 $ 20,799
Cash interest expense(6)................... 18,108 26,437 23,607 22,788 30,255(7) 7,121 7,677(7)
Capital expenditures....................... 14,639 14,371 26,173 35,384 39,902 12,548 4,192
Depreciation and amortization.............. 20,978 19,868 21,178 22,547 23,174 5,544 6,413
OTHER OPERATING DATA:
Net tons shipped........................... 1,302 1,468 1,222 1,397 1,329 324 348
Percent custom products.................... 53.9% 56.9% 59.4% 57.9% 67.6% 65.9% 62.2%
Average selling price per net ton shipped.. $ 445 $ 483 $ 516 $ 473 $ 503 $ 496 $ 479
Average cost per net ton shipped........... 378 391 446 394 412 406 408
Average gross margin per net ton shipped... 67 92 71 79 91 90 71
Average operating income per net ton
shipped.................................. 36 54 37 47 51 30 41
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AS OF JANUARY 31, 1998
-----------------------
<S> <C> <C>
THE
WCI COMPANY(8)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................................ $ 11,666 $ 27,233
Working capital (excluding cash and cash equivalents)................................................ 77,199 77,199
Property, plant and equipment, net................................................................... 223,057 223,057
Total assets......................................................................................... 458,274 477,841
Total debt (including current portion)............................................................... 301,972 421,538
Shareholder's equity (deficit)....................................................................... (91,965) (191,964)
</TABLE>
- ------------------------
(1) Fiscal 1994 Statement of Operations reflects $11.1 million of compensation
expenses related to WCI's initial public offering and the offering of the
WCI Senior Notes (as defined).
(2) Fiscal 1995 results were adversely impacted by a 54-day labor contract
dispute and resulting work stoppage commencing September 1, 1995 and a
36-day blast furnace reline commencing on April 1, 1995.
(3) WCI's custom product mix and the results for fiscal 1996 were adversely
impacted by a 54-day labor contract dispute and resulting work stoppage
which was concluded on October 24, 1995.
(4) Fiscal 1997 Statement of Operations reflects $8.6 million of compensation
expenses related to the November 1996 Transactions (as defined).
(5) EBITDA represents earnings before interest, income taxes and depreciation
and amortization. EBITDA includes other income of $301,000, $128,000,
$771,000, $355,000, $121,000, $8,000 and $107,000 for the fiscal years ended
October 31, 1993, 1994, 1995, 1996 and 1997 and the three months ended
January 31, 1997 and 1998, respectively. The trends of EBITDA generally
follow the trends of operating income. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition" for a discussion
of the recent trends of operating income. Information regarding EBITDA is
presented because management believes that certain investors use EBITDA as a
measure of an issuer's historical ability to service its debt. EBITDA should
not be considered alternatives to, or more meaningful than, operating income
or cash flow as indicators of an issuer's operating performance.
Furthermore, caution should be used in comparing EBITDA to similarly titled
measures of other companies, as the definitions of these measures may vary.
(6) Excludes non-cash amortization of financing costs.
(7) Does not include the cash interest expense that would have been payable by
the Company on the Old Notes of approximately $13.1 million and $3.3 million
for the fiscal year ended October 31, 1997 and the three months ended
January 31, 1998, respectively, had the Old Notes been outstanding for those
periods.
(8) Represents the balance sheet data of the Company as adjusted to give effect
to the Old Notes Offering and the application of the proceeds therefrom as
if they had occurred on January 31, 1998.
12
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET FORTH
BELOW AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS.
RELATING TO THE COMPANY
HOLDING COMPANY STRUCTURE; REFINANCING RISK; STRUCTURAL SUBORDINATION
The Company is a holding company that has no significant assets other than
the WCI Pledged Stock. The Company was formed solely for the purpose of serving
as the issuer of the Notes and, other than cash and investments estimated to be
$15.6 million representing the remaining proceeds from the Old Notes Offering,
net of estimated transaction fees and expenses paid or accrued, has no
operations or assets from which it will be able to repay the Exchange Notes.
Accordingly, the Company's cash flow and, consequently, its ability to repay the
Exchange Notes at maturity or otherwise, will be primarily dependent upon the
net income of WCI and its subsidiaries and the payment of funds by WCI in the
form of loans, dividends or otherwise. WCI has, and any future subsidiaries of
the Company will have, no obligation, contingent or otherwise, to pay amounts
due pursuant to the Exchange Notes or to make funds available therefor, whether
in the form of loans, dividends or otherwise. WCI is, and any future
subsidiaries of the Company may be, parties to agreements which contain
limitations on the ability of such subsidiaries to pay dividends or make loans
or advances to the Company, and the Indenture does not prohibit such agreements.
The indenture (the "WCI Senior Secured Notes Indenture") related to WCI's $300.0
million principal amount of 10% Senior Secured Notes due 2004 (the "WCI Senior
Secured Notes") contains provisions which, among other things, limit the amount
of distributions to the Company to amounts received from capital stock issuances
or capital contributions and 50% of consolidated net income of WCI. On January
28, 1998, WCI paid a dividend to Renco in the aggregate amount of $5.3 million,
which represented substantially all of the amount permitted under the WCI Senior
Secured Notes Indenture at that date. At January 31, 1998, WCI was permitted to
make dividend payments of approximately $1.1 million under the WCI Senior
Secured Notes Indenture. In addition, WCI's $100.0 million revolving credit
facility (the "WCI Revolving Credit Facility") imposes restrictions on WCI's
ability to make dividends or other distributions. Accordingly, the Company's
ability to repay the Exchange Notes at maturity or otherwise may be dependent
upon the Company's ability to refinance the Exchange Notes which will depend, in
large part, upon factors beyond the control of the Company. See "--Substantial
Indebtedness."
Because the Company is a holding company and conducts its business through
WCI, any right of the Company and its creditors, including holders of the
Exchange Notes, to participate in the assets of WCI upon any liquidation or
reorganization of WCI will be subject to the prior claims of WCI's creditors,
including holders of the WCI Senior Secured Notes and WCI's $0.3 million
principal amount of 10 1/2% Senior Notes Due 2002 (the "WCI Senior Notes" and
together with the WCI Senior Secured Notes, the "WCI Notes"), the lenders under
the WCI Revolving Credit Facility and a Voluntary Employee Beneficiaries
Association trust fund, a trust fund established to hold WCI contributions to
fund postretirement health care and life insurance obligations for the benefit
of hourly employees (the "VEBA Trust").
See "--Relating to WCI--Substantial Employee Postretirement Obligations." As of
January 31, 1998, holders of the Notes would have been effectively subordinated
to $302.0 million of indebtedness (excluding $100.0 million of undrawn
availability under the WCI Revolving Credit Facility) and other liabilities of
WCI (which as of January 31, 1998 were reported on WCI's balance sheet in
accordance with generally accepted accounting principles at $248.3 million). The
WCI Senior Secured Notes Indenture and the WCI Revolving Credit Facility limit,
but do not prohibit, the incurrence of additional indebtedness by WCI.
SUBSTANTIAL INDEBTEDNESS
The Company has substantial indebtedness and debt service requirements.
After giving effect to the Old Notes Offering and the application of the
proceeds therefrom, as of January 31, 1998, the Company
13
<PAGE>
would have had outstanding consolidated total debt of approximately $421.5
million (excluding $100.0 million of undrawn availability under the WCI
Revolving Credit Facility) and a shareholder's deficit of approximately $192.0
million. The Company's ability to meet its debt service obligations and to
reduce its total debt will be primarily dependent upon WCI's future performance,
which will be subject to economic, financial, political, competitive and other
factors, including market prices of flat rolled steel, many of which are beyond
the Company's and WCI's control.
CERTAIN CREDITORS' RIGHTS
The Old Notes Offering and the application of the proceeds therefrom may be
subject to review under relevant federal and state fraudulent conveyance laws if
a bankruptcy, reorganization or rehabilitation case or a lawsuit (including in
circumstances where bankruptcy is not involved) were commenced by or on behalf
of unpaid creditors of the Company at some future date. These laws vary among
the various jurisdictions. In general, under these laws, if a court were to find
that, at the time an obligation (such as the Old Notes) was incurred, either (a)
such obligation was incurred with the intent of hindering, delaying or
defrauding creditors or (b) the entity incurring the obligation received less
than reasonably equivalent or fair value consideration in exchange for the
incurrence of such obligation and (i) was insolvent or was rendered insolvent by
reason thereof, (ii) was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, (iii) intended to
incur, or believed, or reasonably should have believed, that it would incur,
debts beyond its ability to pay such debts as they matured (as all of the
foregoing terms are defined in or interpreted under the fraudulent conveyance
statutes) or (iv) such entity was a defendant in an action for money damages, or
had a judgment for money damages docketed against it (if, in either case, after
final judgment, the judgment is unsatisfied) (each of clauses (i)-(iv) above, a
"Fraudulent Conveyance"), such court could impose legal and equitable remedies,
including (x) subordination of the obligation to presently existing and future
indebtedness of the entity, (y) avoidance of the issuance of the obligation and
the liens, and direction of the repayment of any amounts paid from the proceeds
thereof to a fund for the benefit of the entity's creditors or (z) taking of
other action detrimental to the holders of the Notes.
The measures of insolvency for purposes of determining whether a Fraudulent
Conveyance occurred would vary depending upon the laws of the relevant
jurisdiction and upon the valuation assumptions and methodology applied by the
court. Generally, however, a company would be considered insolvent for purposes
of the foregoing if the sum of the company's debts, including contingent
unliquidated and unmatured liabilities, is greater than all of such company's
property at a fair valuation, or if the present fair saleable value of the
company's assets is less than the amount that will be required to pay the
probable liability on its existing debts as they become absolute and matured.
The Company believes that at the time of, or as a result of, the issuance of
the Old Notes and the use of proceeds therefrom, the Company (a) was not
insolvent or rendered insolvent under the foregoing standards, (b) was not
engaged in a business or transactions for which its remaining assets constitute
unreasonably small capital, (c) did not intend to incur, and does not believe
that it did incur, debts beyond its ability to pay such debts as they mature and
(d) had sufficient assets to satisfy any probable money judgment against it in
any pending actions. Consequently, the Company believes that even if one or more
elements of the Old Notes Offering were deemed to involve the incurrence of an
obligation for less than reasonably equivalent or fair value, a Fraudulent
Conveyance did not occur. The beliefs with regard to the solvency of the Company
are based in part on management's analysis of internal cash flow projections and
estimated values of assets and liabilities of the Company at the time of the Old
Notes Offering. There can be no assurance, however, that a court passing on
these issues would adopt the same methodology or assumptions, or arrive at the
same conclusions.
14
<PAGE>
RIGHTS OF THE COMPANY IN AND TO COLLATERAL; ABILITY OF HOLDERS TO REALIZE
UPON COLLATERAL
To secure the Notes, the Company has granted a first priority security
interest in (i) all of the WCI Pledged Stock and (ii) subject to the third
paragraph of this Risk Factor, all dividends, interest, cash, instruments and
other property and proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any of the foregoing and any
account, instrument or security in which any of the foregoing is deposited or
invested, including any earnings thereon (collectively, the "Collateral"). Under
certain circumstances described under "Description of the Notes--Certain
Covenants--Limitations on Sale of Assets," all of the capital stock of WCI may
be sold to third parties free of the security interest in favor of holders of
Notes, and the Company will be required to make an offer to purchase the Notes
at a premium with the net cash proceeds of such sale.
Absent any Event of Default and until written notice is given to the Company
by the Trustee under the Indenture, the Company will be able to exercise all
voting and other corporate rights pertaining to the WCI Pledged Stock. Once the
Trustee gives such written notice, all voting and other corporate rights
pertaining to the WCI Pledged Stock will become vested in the Trustee until such
Event of Default is cured or waived. If an Event of Default occurs under the
Indenture, the Trustee, on behalf of the holders of the Notes, in addition to
any rights or remedies available to it or the holder, may take such action as it
deems advisable to protect and enforce its rights in the Collateral, including
the institution of foreclosure proceedings. If voting rights in the WCI Pledged
Stock were to become vested in the Trustee, or if the Trustee were to foreclose
upon the Collateral, such vesting or foreclosure, as the case may be, may
constitute a "change of control" under instruments governing certain
indebtedness of WCI, including the WCI Senior Secured Notes Indenture. Such
occurrence could enable the holders of such indebtedness to require WCI to
repurchase or repay indebtedness and could adversely affect holders of the
Notes.
Unless an Event of Default has occurred and is continuing and until notice
is received from the Trustee, the Company is entitled to receive dividends and
other distributions (other than certain extraordinary distributions) on the WCI
Pledged Stock. The Pledge Agreement (as defined) provides that, upon receipt by
the Company or any of its subsidiaries of such an extraordinary distribution on
any WCI Pledged Stock, the Company shall deliver, or cause to be delivered, to
the Trustee (i) for deposit as Collateral into a cash collateral account all
cash or cash equivalents included in such extraordinary distribution and (ii)
for pledge to secure the Notes any of the extraordinary distribution which is in
a form other than cash or cash equivalents.
Upon the occurrence and during the continuance of an Event of Default, all
rights to receive and retain dividends and other distributions made on the WCI
Pledged Stock during such continuance will become vested in the Trustee and all
amounts received in respect of the WCI Pledged Stock (other than extraordinary
distributions, which shall be held as referred to above) shall be delivered to
the Trustee as Collateral and segregated from all other Collateral. Upon the
cure or waiver of any such Event of Default, so long as no other Event of
Default has occurred and is continuing, all rights which the Company has to
receive and retain dividends and distributions on the WCI Pledged Stock (other
than certain extraordinary distributions) will revert to the Company and all
such segregated collateral shall, at the written direction of the Company, be
delivered to the Company or applied to the payment of principal on the Notes.
There can be no assurance that the proceeds of any sale of the Collateral
pursuant to the Indenture following an Event of Default would be sufficient to
satisfy payments due on the Notes. In addition, the ability of the holders of
Notes to realize upon the Collateral may be subject to certain bankruptcy law
limitations in the event of a bankruptcy involving the Company. See "Description
of the Notes--Certain Bankruptcy Limitations."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The terms and conditions of the Indenture impose restrictions that will
affect, among other things, the ability of the Company to incur debt, pay
dividends, create liens and use the proceeds of certain asset sales.
15
<PAGE>
The ability of the Company to comply with the foregoing provisions can be
affected by events beyond the Company's control. The breach of any of these
covenants could result in a default under the Company's indebtedness, including
the Indenture. In the event of any such default, the Company may be unable to
make any payments of principal or interest on the Exchange Notes for a period of
time. See "Description of the Notes."
CONTROL BY RENCO
The Company is a wholly-owned subsidiary of Renco, of which Mr. Ira Leon
Rennert is the controlling stockholder. As a result of his indirect ownership of
all the capital stock of the Company, Mr. Rennert is, and will continue to be,
able to direct and control the policies of the Company and its subsidiaries,
including mergers, sales of assets and similar transactions and the election of
directors.
ABSENCE OF A PUBLIC MARKET
The Exchange Notes will be new securities for which there is currently no
public market. The Company does not intend to list the Exchange Notes on any
national securities exchange or quotation system. DLJ has advised the Company
that it currently intends to make a market in the Exchange Notes, but it is not
obligated to do so and, if commenced, may discontinue such market making at any
time. Accordingly, there can be no assurance as to the development of any market
or liquidity of any market that may develop for the Exchange Notes. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
aggregate principal amount of Old Notes outstanding will decrease, with a
resulting decrease in the liquidity of the market therefor.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of the Old Notes set forth in the legend thereon as a consequence of
the issuance of the Old Notes pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act. In general,
Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company currently
does not anticipate that it will register the Old Notes under the Securities
Act.
RELATING TO WCI
SUBSTANTIAL INDEBTEDNESS
WCI has substantial indebtedness and debt service requirements. As of
January 31, 1998, WCI had outstanding consolidated total debt of approximately
$302.0 million (excluding $100.0 million of undrawn availability under the WCI
Revolving Credit Facility) and a shareholder's deficit of approximately $92.0
million.
WCI's level of indebtedness will have several important effects on its
future operations, including the following: (a) a significant portion of WCI's
cash flow from operations will be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes; (b) the financial
covenants and other restrictions contained in the WCI Revolving Credit Facility
require WCI to meet certain financial tests and limit its ability to borrow
additional funds or to dispose of assets; and (c) WCI's ability to obtain
additional financing in the future for working capital, postretirement health
care and pension funding, capital expenditures, acquisitions, general corporate
purposes or other purposes may be impaired. Additionally, WCI's ability to meet
its debt service obligations and to reduce its total debt will be dependent upon
WCI's future performance, which will be subject to economic, financial,
political, competitive and other factors, including market prices of flat rolled
steel, many of which are beyond its control. Moreover, an inability of WCI to
meet the financial covenants contained in the WCI Revolving Credit Facility or
16
<PAGE>
other indebtedness could result in an acceleration of amounts due thereunder
which could have a material adverse effect on the financial condition and
results of operations of WCI.
RESTRICTIONS IMPOSED BY TERMS OF WCI'S INDEBTEDNESS
The terms and conditions of the WCI Senior Secured Notes Indenture and the
WCI Revolving Credit Facility impose on WCI restrictions that will affect, among
other things, the ability of WCI to incur debt, pay dividends, make
acquisitions, create liens, make capital expenditures and make certain
investments and advances.
The ability of WCI to comply with the foregoing provisions can be affected
by events beyond WCI's control. The breach of any of these covenants could
result in a default under WCI's indebtedness, including the WCI Senior Secured
Notes Indenture and the WCI Revolving Credit Facility. In the event of any such
default, depending on the actions taken by the holders of the WCI Notes and the
lenders under the WCI Revolving Credit Facility, WCI may be unable to make any
distributions to the Company for payments of principal or interest on the
Exchange Notes for a period of time. See "--Relating to the Company--Holding
Company Structure; Refinancing Risk; Structural Subordination." In addition, the
holders of the WCI Notes and the lenders under the WCI Revolving Credit Facility
could elect to declare all amounts borrowed, together with accrued and unpaid
interest, to be due and payable. If WCI were unable to repay such amounts, the
holders of the WCI Notes and the lenders under the WCI Revolving Credit Facility
could proceed against certain collateral securing indebtedness under the WCI
Notes and the WCI Revolving Credit Facility. If such indebtedness were to be
accelerated, there can be no assurance that the assets of WCI would be
sufficient to repay in full such indebtedness and the other indebtedness of WCI.
LABOR RELATIONS
The United Steelworkers of America (the "USWA") represents approximately 75%
of WCI's employees. WCI experienced a 54-day labor contract dispute and
resulting work stoppage in connection with the negotiation of the current
collective bargaining agreement. In October 1995, WCI negotiated a new
collective bargaining agreement with the USWA, which expires on September 1,
1999. There can be no assurance as to the results of negotiations of future
collective bargaining agreements, whether future collective bargaining
agreements will be negotiated without production interruptions or the possible
impact of future collective bargaining agreements, or the negotiation thereof,
on WCI's financial condition and results of operations.
SUBSTANTIAL EMPLOYEE POSTRETIREMENT OBLIGATIONS
WCI has substantial financial obligations related to its employee
postretirement plans for medical and life insurance and pensions. Statement of
Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106") requires accrual of retiree medical and life
insurance benefits rather than recognition of costs as claims are paid. In
accordance with SFAS 106, a liability has been established for the present value
of the estimated future unfunded medical and life insurance benefit obligations.
In addition, in accordance with the Statement of Financial Accounting Standards
No. 87, "Pensions," WCI has recognized a minimum liability equal to its unfunded
accumulated pension benefit obligations. As of October 31, 1997, WCI had an
accumulated postretirement health care and life insurance benefit obligation in
excess of plan assets of approximately $100.5 million, and WCI had a projected
pension benefit obligation in excess of plan assets of approximately $33.1
million. The cash payments for actual postretirement health care and life
insurance claims were approximately $2.4 million and $.7 million during fiscal
1997 and the three months ended January 31, 1998, respectively. WCI also has a
contractual agreement to contribute $.50 per hour worked by certain hourly
employees to the VEBA Trust, or a minimum of approximately $1.5 million per
year, and has certain minimum pension funding requirements under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). See
17
<PAGE>
"Business--WCI--Benefit Plans," "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Liquidity and Capital
Resources--WCI--Postretirement Benefit Plans" and Notes 7 and 8 to WCI's audited
consolidated financial statements.
ENVIRONMENTAL MATTERS
In common with much of the steel industry, WCI's facilities are located on
sites that have been used for heavy industrial purposes for decades. WCI is and
will continue to be subject to numerous federal, state and local environmental
laws and regulations governing, among other things, air emissions, waste water
discharge and solid and hazardous waste disposal. WCI believes it has made, and
intends to continue to make, the necessary expenditures for environmental
remediation and compliance with environmental laws and regulations.
Environmental laws and regulations have changed rapidly in recent years, and WCI
may be subject to more stringent environmental laws and regulations in the
future. During 1997, the EPA proposed new standards regulating particulate
matter and ozone emissions. Data relating to these standards is to be collected
and analyzed with implementation as early as 2004. These standards have been the
subject of significant discussion throughout federal and state governments, and
changes to the standards or the implementation date may be made prior to final
approval. Like much of the steel, utilities and other industries, WCI's current
operations are not expected to comply with these proposed standards. WCI cannot
currently assess the impact of these proposed standards on its results of
operations or financial condition. Compliance with more stringent environmental
laws and regulations could have a material adverse effect on WCI's financial
condition and results of operations.
On June 29, 1995, the Department of Justice, on behalf of the Environmental
Protection Agency (the "EPA"), instituted a civil action against WCI under the
Clean Water Act in the United States District Court for the Northern District of
Ohio (the "CWA Litigation"). The action alleges numerous violations of WCI's
National Pollution Discharge Elimination System ("NPDES") permit alleged to have
occurred during the years 1989 through 1996, inclusive. On March 29, 1996, the
Department of Justice on behalf of the EPA, instituted another civil action
against WCI in the same court under the Clean Air Act (the "CAA Litigation")
alleging violations by WCI of the work practice, inspection and notice
requirements for demolition and renovation of the National Emission Standard for
Hazardous Air Pollutants for Asbestos and also violations of the particulate
standard and the opacity limits applicable to WCI's facilities in Warren, Ohio.
Each action seeks a civil penalty not to exceed the statutory maximum of $25,000
per day per violation and also seeks an injunction against continuing
violations. WCI believes that imposition of the statutory maximum penalty for
the alleged violations is unlikely based upon past judicial penalties imposed
under the Clean Water Act and the Clean Air Act, and that it has defenses to
liability. However, no assurance can be given that WCI will not be found to have
liability and, if it has liability, that the statutory maximum penalty will not
be imposed. By letter dated November 1, 1996, EPA's Region V Water Division
Director requested information pursuant to the Clean Water Act from WCI relating
to the Warren facility, including information as to the effect of a prohibition
against federal procurement of WCI's products on WCI's business. WCI responded
to the EPA's request on December 2, 1996. WCI has not been notified that the EPA
will seek a federal procurement prohibition based on alleged permit violations.
However, there can be no assurance that a federal procurement prohibition will
not be imposed. WCI is negotiating with the EPA toward settlement of these
matters. If WCI is unable to reach a negotiated settlement and if a substantial
penalty similar to the statutory maximum penalty or federal procurement
prohibition were imposed, it could have a material adverse effect on the
financial condition or results of operations of WCI, the extent of which WCI is
unable to estimate at this time. Discovery has been completed in both of these
actions, and a trial date has been scheduled for April 1998 for the CWA
Litigation and for May 1998 for the CAA Litigation.
On December 17, 1997, WCI received a compliance order from the EPA alleging
certain violations of WCI's NPDES permit, including exceedances of permit limits
for pH and oil and grease and failure to
18
<PAGE>
identify and sample for residual chlorine. WCI currently is investigating the
alleged exceedances. WCI is unable at this time to estimate the cost which may
be incurred related to the compliance order, if any.
WCI has obtained a storage permit under the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), for waste pickle liquor at its Warren
facility acid regeneration plant. As a provision of the permit, WCI will be
required to undertake a corrective action program with respect to historical
material handling practices at the Warren facility. In April 1997, WCI received
notice from the EPA that it had approved a workplan for the first investigation
step of the corrective action program, the RCRA Facility Investigation ("RFI"),
which is expected to be completed in 1999. The workplan identifies thirteen
historical solid waste management units which are subject to the RFI. The final
scope of the corrective action required to remediate or reclaim any
contamination that may be present at or emanating from the Warren facility is
dependent upon the findings of the RFI and the development and approval of the
corrective action program. Accordingly, WCI is unable at this time to estimate
the final cost of the corrective action program or the period over which such
costs may be incurred, and there can be no assurance that it would not have a
material adverse effect on the financial condition of WCI.
The costs for environmental compliance may place domestic steel producers,
including WCI, at a competitive disadvantage with respect to certain foreign
steel producers and manufacturers of steel substitutes that are subject to less
stringent environmental requirements. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition--Liquidity and Capital
Resources--WCI-- Environmental Matters" and "Business--WCI--Environmental
Matters."
RELIANCE ON KEY MANUFACTURING EQUIPMENT
WCI's manufacturing processes are dependent upon certain critical pieces of
equipment, such as its blast furnace, basic oxygen furnace (the "BOF"), twin
strand continuous slab caster (the "Continuous Caster") and hot strip mill,
which on occasion may be out of service as the result of unexpected equipment
failure. This interruption in WCI's production capabilities could result in
fluctuations in WCI's sales and income. WCI believes that it maintains adequate
property damage insurance and business interruption insurance to cover losses
resulting from any production shutdown caused by an unexpected equipment
failure. Although WCI to date has experienced no such equipment failure that has
resulted in a complete shutdown of its steelmaking production for a significant
period of time, no assurance can be given that a material shutdown will not
occur in the future or that such a shutdown would not have a material adverse
effect on WCI. The most significant scheduled maintenance outage involves the
relining of WCI's blast furnace, which is scheduled approximately every six to
eight years and typically takes four to six weeks. WCI completed its most recent
blast furnace reline in May 1995. See "Business--WCI--Facilities."
RELATING TO THE INDUSTRY
CYCLICALITY
The steel industry is highly cyclical in nature and is affected
significantly by economic conditions generally. Factors that negatively impact
steel producers include high levels of steel imports, worldwide production
overcapacity, expansion of U.S. steel producing capacity, a strong U.S. dollar
and increased domestic and international competition. Recently, the steel
industry has experienced lower prices as a result of certain of these factors.
Moreover, there can no assurance that the U.S. steel industry will not be
negatively impacted by increased imports of steel from certain Asian countries
whose currencies have recently depreciated relative to the U.S. dollar.
Additionally, no assurance can be given that these and other factors will not
continue to have an adverse effect on the steel industry or WCI. See "Management
Discussion and Analysis of Financial Condition and Results of
Operations--Industry Developments."
19
<PAGE>
COMPETITION
The domestic steel industry is highly competitive. Despite significant
reductions in raw steel production capacity by major domestic producers in the
1980s, the domestic industry continues to be adversely affected by excess world
capacity.
In the United States, WCI competes with many other domestic steel companies.
WCI also faces increasing competitive pressures from minimills. Minimills are
generally smaller volume steel producers that use ferrous scrap metals as their
basic raw material. Compared to integrated producers, minimills, which rely on
less capital intensive hot metal sources, have certain advantages. Since
minimills typically are not unionized, they have more flexible work rules that
have resulted in lower employment costs per net ton shipped. Since 1989,
significant flat rolled minimill capacity has been constructed and these
minimills now compete with integrated producers in product areas that
traditionally have not faced significant competition from minimills. In
addition, there is significant additional flat rolled minimill capacity under
construction or announced with various planned commissioning dates through 1999.
These minimills are expected to compete with WCI in the commodity flat rolled
steel market and in certain custom steel markets. In addition, the increased
competition in commodity product markets has resulted in certain integrated
producers increasing product offerings to compete with WCI's custom products.
During 1996 and 1997, the domestic steel market experienced significant
increases in imports of foreign produced flat rolled products. The relative
strength of the U.S. dollar and economy versus the strength of foreign
currencies and economies can significantly affect the import/export trade
balance for flat rolled steel products. The status of the trade balance may
significantly affect the ability of new minimill capacity to come on-line
without disrupting the domestic flat rolled steel market.
Materials such as aluminum, cement, composites, glass and plastics compete
as substitutes for steel in many markets. In addition, certain lower cost steel
products, through technological developments, have and may continue to become
commercially viable substitutes for WCI's higher cost custom products.
AVAILABILITY AND FLUCTUATION IN COSTS OF RAW MATERIALS AND ENERGY
WCI's operations are heavily dependent on the supply of various raw
materials including iron ore pellets, coke and energy. WCI purchases all of its
iron ore pellets and coke requirements through contracts based in part on market
pricing. Supply interruptions or cost increases, to the extent that WCI could
not pass on these costs to its customers, could adversely affect WCI's future
results of operations. The domestic supply of coke has decreased significantly
over the last decade and is expected to decrease further in the future due to
the requirements of the Clean Air Act. As WCI does not own a coke battery, it is
dependent upon commercially available domestic or imported coke to sustain its
operations. WCI has contracts for the purchase of its estimated coke
requirements through 1999 and believes that there will be adequate supplies of
coke available domestically or from foreign sources thereafter for its purposes.
However, there can be no assurance that adequate supplies of coke will be
available to WCI in the future. See "Business--WCI--Raw Materials."
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive in exchange Old Notes of like principal amount, the
terms of which are identical in all material respects to the Exchange Notes. The
Old Notes surrendered in exchange for Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any increase in the indebtedness of the Company. The Company
has agreed to bear the expenses of the Exchange Offer pursuant to the
Registration Rights Agreement. No underwriter is being used in connection with
the Exchange Offer.
20
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents
and capitalization of WCI as of January 31, 1998 and of the Company as adjusted
to give effect to the Old Notes Offering and the application of the proceeds
therefrom. The table below should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition," the
Company's balance sheet and the related notes thereto and WCI's condensed
consolidated financial statements and the related notes thereto appearing
elsewhere herein.
<TABLE>
<CAPTION>
AS OF JANUARY 31, 1998
-----------------------
<S> <C> <C>
THE
WCI COMPANY
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................ $ 11,666 $ 27,233
---------- -----------
---------- -----------
Long-term debt, including current portion:
WCI Revolving Credit Facility(1)................................... $ 0 $ 0
WCI Senior Secured Notes........................................... 300,000 300,000
WCI Senior Notes................................................... 280 280
Old Notes.......................................................... -- 119,566(2)
Other WCI indebtedness............................................. 1,692 1,692
---------- -----------
Total long-term debt, including current portion.................. 301,972 421,538
Total shareholder's equity (deficit)................................. (91,965) (191,964)
---------- -----------
Total capitalization................................................. $ 210,007 $ 229,574
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Represents WCI's $100.0 million revolving credit facility, which is undrawn,
exclusive of $5.5 million in outstanding letters of credit, and expires on
December 29, 1999.
(2) Represents the $120.0 million aggregate principal amount of Old Notes less
the debt discount of approximately $434,400.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The Company is a holding company formed by Renco in January 1998, which owns
the WCI Pledged Stock. The Company has no operating history. Accordingly, the
financial data presented below is the historical consolidated financial data of
WCI. See the Company's audited balance sheet and the related notes thereto
appearing elsewhere herein.
The consolidated statement of operations data for WCI for, and the balance
sheet data for WCI as of, each of the years in the five fiscal year period ended
October 31, 1997 have been derived from the consolidated financial statements of
WCI, which financial statements have been audited by KPMG Peat Marwick LLP. The
consolidated statement of operations data for WCI for the three months ended
January 31, 1997 and 1998, and the balance sheet data as of January 31, 1998,
have been derived from WCI's unaudited condensed consolidated financial
statements. The financial data set forth below should be read in conjunction
with WCI's audited consolidated financial statements and the related notes
thereto for the fiscal years ended October 31, 1995, 1996 and 1997 and the
unaudited condensed consolidated financial statements and the related notes
thereto for the three months ended January 31, 1997 and 1998 appearing elsewhere
herein and with "Management's Discussion and Analysis of Results of Operations
and Financial Condition."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994(1) 1995(2) 1996(3) 1997(4) 1997(4) 1998
<CAPTION>
(DOLLARS AND TONS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $578,639 $709,363 $630,990 $660,801 $668,470 $ 160,907 $166,592
Cost of products sold............................. 492,000 574,610 544,789 550,609 547,545 131,609 141,848
-------- -------- -------- -------- -------- ------------ --------
Gross margin...................................... 86,639 134,753 86,201 110,192 120,925 29,298 24,744
Depreciation and amortization..................... 20,978 19,868 21,178 22,547 23,174 5,544 6,413
Selling, general and administrative expenses...... 19,144 34,889 19,675 22,074 29,355 14,016 4,052
-------- -------- -------- -------- -------- ------------ --------
Operating income.................................. 46,517 79,996 45,348 65,571 68,396 9,738 14,279
Interest expense.................................. 23,182 28,709 25,787 24,968 31,690 7,525 8,014
Interest and other income, net.................... 301 1,505 6,212 6,545 1,239 651 299
Income before income taxes, extraordinary losses
on early retirement of debt and cumulative
effect of change in accounting principle........ 23,636 52,792 25,773 47,148 37,945 2,864 6,564
Income taxes...................................... 9,485 21,939 10,313 19,108 14,482 1,151 2,363
Income before extraordinary losses on early
retirement of debt and cumulative effect of
change in accounting principle.................. 14,151 30,853 15,460 28,040 23,463 1,713 4,201
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(5)......................................... $ 67,796 $ 99,992 $ 67,297 $ 88,473 $ 91,691 $ 15,290 $ 20,799
Cash interest expense(6).......................... 18,108 26,437 23,607 22,788 30,255(7) 7,121 7,677(7)
Capital expenditures.............................. 14,639 14,371 26,173 35,384 39,902 12,548 4,192
Depreciation and amortization..................... 20,978 19,868 21,178 22,547 23,174 5,544 6,413
Ratio of earnings to fixed charges(8)............. 2.0x 2.8x 2.0x 2.9x 2.2x x1.4 1.8x
OTHER OPERATING DATA:
Net tons shipped.................................. 1,302 1,468 1,222 1,397 1,329 324 348
Percent custom products........................... 53.9% 56.9% 59.4% 57.9% 67.6% 65.9% 62.2%
Average selling price per net ton shipped......... $ 445 $ 483 $ 516 $ 473 $ 503 $ 496 $ 479
Average cost per net ton shipped.................. 378 391 446 394 412 406 408
Average gross margin per net ton shipped.......... 67 92 71 79 91 90 71
Average operating income per net ton shipped...... 36 54 37 47 51 30 41
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, AS OF
----------------------------------------------------- JANUARY 31,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments............ $ 9,366 $ 71,426 $ 106,548 $ 139,541 $ 18,989 $ 11,666
Working capital (excluding cash, cash equivalents and
short-term investments).................................... 49,510 69,193 61,881 42,093 66,913 77,199
Property, plant and equipment, net........................... 206,951 196,212 189,733 205,121 224,620 223,057
Total assets................................................. 396,342 481,596 519,159 567,453 470,751 458,274
Total debt (including current portion)....................... 136,858 216,108 213,854 211,506 302,937 301,972
Shareholder's equity (deficit)............................... 69,168 43,877 59,495 79,880 (90,866) (91,965)
</TABLE>
- ------------------------
(1) Fiscal 1994 Statement of Operations reflects $11.1 million of compensation
expenses related to WCI's initial public offering and the offering of the
WCI Senior Notes.
(2) Fiscal 1995 results were adversely impacted by a 54-day labor contract
dispute and resulting work stoppage commencing September 1, 1995 and a
36-day blast furnace reline commencing on April 1, 1995.
(3) WCI's custom product mix and the results for fiscal 1996 were adversely
impacted by a 54-day labor contract dispute and resulting work stoppage
which was concluded on October 24, 1995.
(4) Fiscal 1997 Statement of Operations reflects $8.6 million of compensation
expense related to the November 1996 Transactions.
(5) EBITDA represents earnings before interest, income taxes and depreciation
and amortization. EBITDA includes other income of $301,000, $128,000,
$771,000, $355,000, $121,000, $8,000 and $107,000 for the fiscal years ended
October 31, 1993, 1994, 1995, 1996 and 1997 and the three months ended
January 31, 1997 and 1998, respectively. The trends of EBITDA generally
follow the trends of operating income. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition" for a discussion
of the recent trends of operating income. Information regarding EBITDA is
presented because management believes that certain investors use EBITDA as a
measure of an issuer's historical ability to service its debt. EBITDA should
not be considered an alternative to, or more meaningful than, operating
income or cash flow as an indicator of an issuer's operating performance.
Furthermore, caution should be used in comparing EBITDA to similarly titled
measures of other companies as the definitions of these measures may vary.
(6) Excludes non-cash amortization of financing costs.
(7) Does not include the cash interest expense that would have been payable by
the Company on the Old Notes of approximately $13.1 million and $3.3 million
for the fiscal year ended October 31, 1997 and the three months ended
January 31, 1998, respectively, had the Old Notes been outstanding for those
periods.
(8) Fixed charges consist of interest expense, capitalized interest,
amortization of deferred financing costs and the portion of rental expense
that is representative of interest expense. Earnings consist of income
before taxes plus fixed charges less capitalized interest. On a pro forma
basis, as if the Company had been in existence and the November 1996
Transactions and the Old Notes Offering had been consummated on November 1,
1996, the Company's ratio of earnings to fixed charges would have been 1.5
to 1 for fiscal 1997. On a pro forma basis, as if the Offering had been
consummated on November 1, 1997, the Company's ratio of earnings to fixed
charges would have been 1.3 to 1 for the three months ended January 31,
1998.
23
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
GENERAL
In connection with the sale of Old Notes to the initial purchaser pursuant
to the Purchase Agreement, dated February 3, 1998, between the Company and DLJ,
the holders of the Old Notes became entitled to the benefits of the Registration
Rights Agreement.
Under the Registration Rights Agreement, the Company became obligated to (a)
file a registration statement in connection with a registered exchange offer
within 45 days after February 3, 1998, the date the Old Notes were issued (the
"Issue Date"), and (b) cause the registration statement relating to such
registered exchange offer to become effective within 120 days after the Issue
Date. The Exchange Offer being made hereby, if consummated within the required
time periods, will satisfy the Company's obligations under the Registration
Rights Agreement. The Company understands that there are approximately
beneficial owners of such Old Notes. This Prospectus, together with the
Letter of Transmittal, is being sent to all such beneficial holders known to the
Company.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer.
Based on an interpretation by the staff of the Commission set forth in the
Morgan Stanley Letter, the Exxon Capital Letter and similar letters, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by any
person who received such Exchange Notes, whether or not such person is the
holder (other than Restricted Holders) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's or other
person's business, neither such holder nor such other person is engaged in or
intends to engage in any distribution of the Exchange Notes and such holders or
other persons have no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
If any person were to be participating in the Exchange Offer for the
purposes of participating in a distribution of the Exchange Notes in a manner
not permitted by the Commission's interpretation, such person (a) could not rely
upon the Morgan Stanley Letter, the Exxon Capital Letter or similar letters and
(b) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after consummation of the Exchange Offer, it will
make this Prospectus, as it may be amended or supplemented from time to time,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. See "Use
of Proceeds." The Company has agreed to bear the expenses of the Exchange Offer
pursuant to the Registration Rights Agreement. No underwriter is being used in
connection with the Exchange Offer.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes for the purposes of receiving the Exchange Notes from the Company
and delivering Exchange Notes to such holders.
24
<PAGE>
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain conditions set forth herein under
"--Conditions" without waiver by the Company, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes,
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes in connection with the Exchange Offer. See
"--Fees and Expenses."
In the event the Exchange Offer is consummated, the Company will not be
required to register the Old Notes. In such event, holders of Old Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act. See "Risk
Factors--Relating to the Company--Consequences of Failure to Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The term "Expiration Date" shall mean the expiration date set forth on the
cover page of this Prospectus, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will issue a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Such announcement
may state that the Company is extending the Exchange Offer for a specified
period of time.
The Company reserves the right (a) to delay accepting any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept Old
Notes not previously accepted if any of the conditions set forth herein under
"--Conditions" shall have occurred and shall not have been waived by the Company
(if permitted to be waived by the Company), by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (b) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
holders of the Old Notes. Any such delay in acceptance, extension, termination
or amendment will be followed as promptly as practicable by oral or written
notice thereof. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment and the Company may extend the Exchange Offer for a
period of up to ten business days, depending upon the significance of the
amendment and the manner of disclosure to holders of the Old Notes, if the
Exchange Offer would otherwise expire during such extension period.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from February 3, 1998, payable
semiannually on February 1 and August 1 of each year, commencing August 1, 1998,
at the rate of 10 7/8% per annum. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued up until the date of the
issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by instruction 3 of the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes and any other required documents. To be validly tendered, such
documents must reach the Exchange Agent on or before 5:00 p.m., New York City
time, on the Expiration Date.
25
<PAGE>
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect such tender for such
holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery to the Exchange Agent on or before 5:00 p.m.
New York City time, on the Expiration Date. No Letter of Transmittal or Old
Notes should be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such registered holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (an "Eligible Institution") unless the Old Notes tendered pursuant
thereto are tendered (a) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (b) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers and a proxy which authorizes such person
to tender the Old Notes on behalf of the registered holder, in each case signed
as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority so to act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any irregularities or conditions of tender as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes must be cured within such time as the
Company shall determine. None of the Company, the Exchange Agent or any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the
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tendering holders of Old Notes, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth under "-- Conditions," to terminate the
Exchange Offer in accordance with the terms of the Registration Rights Agreement
and (b) to the extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers will differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (a) the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of such holder or other person, (b)
neither such holder nor such other person is engaged in or intends to engage in
a distribution of the Exchange Notes (c) neither such holder or other person has
any arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and (d) such holder or other person is not
an "affiliate," as defined under Rule 405 of the Securities Act, of the Company
or, if such holder or other person is such an affiliate, will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after consummation of the Exchange Offer, it will
make this Prospectus, as it may be amended or supplemented from time to time,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. See "Use
of Proceeds." The Company has agreed to bear the expenses of the Exchange Offer
pursuant to the Registration Rights Agreement. No underwriter is being used in
connection with the Exchange Offer.
The Old Notes were issued on February 3, 1998 and there is no public market
for them at present. To the extent Old Notes are tendered and accepted in the
Exchange Offer, the principal amount of outstanding Old Notes will decrease with
a resulting decrease in the liquidity in the market therefor. Following the
consummation of the Exchange Offer, holders of Old Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for the Old Notes could be adversely affected.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available or (b) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if: (i) the tender is make through an
Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby, and guaranteeing
that, within three business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s) representing
the Old Notes to be tendered in proper form for transfer and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
and all other documents required by the Letter of Transmittal are received by
the Exchange Agent within three business days after the Expiration Date.
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<PAGE>
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (a) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"), (b)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (c) be signed by the Depositor
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the Depositor withdrawing the tender and (d) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes not theretofore accepted for exchange, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Old Notes, if
the Company or the holders of at least a majority in principal amount of Old
Notes reasonably determine in good faith that any of the following conditions
exist: (a) the Exchange Notes to be received by such holders of Old Notes in the
Exchange Offer, upon receipt, will not be tradable by each such holder (other
than a holder which is an affiliate of the Company at any time on or prior to
the consummation of the Exchange Offer) without restriction under the Securities
Act and the Exchange Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States, (b) the
interests of the holders of the Old Notes, taken as a whole, would be materially
adversely affected by the consummation of the Exchange Offer or (c) after
conferring with counsel, the Commission is unlikely to permit the making of the
Exchange Offer prior to June 3, 1998.
Pursuant to the Registration Rights Agreement, if an Exchange Offer shall
not be consummated prior to the Exchange Offer Termination Date, the Company
will be obligated to cause to be filed with the Commission a shelf registration
statement with respect to the Old Notes (the "Shelf Registration Statement") as
promptly as practicable after the Exchange Offer Termination Date and thereafter
use its best efforts to have the Shelf Registration Statement declared
effective.
"Exchange Offer Termination Date" means the date on which the earliest of
any of the following events occurs: (a) applicable interpretations of the staff
of the Commission do not permit the Company to effect the Exchange Offer, (b)
any holder of Notes notifies the Company that either (i) such holder is not
eligible to participate in the Exchange Offer or (ii) such holder participates
in the Exchange Offer and does not receive freely transferable Exchange Notes in
exchange for tendered Old Notes or (c) the Exchange Offer is not consummated
within 120 days after the Issue Date.
If any of the conditions described above exist, the Company will refuse to
accept any Old Notes and will return all tendered Old Notes to exchanging
holders of the Old Notes.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter
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<PAGE>
of Transmittal and deliveries of completed Letters of Transmittal with tendered
Old Notes should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
BY MAIL BY HAND/OVERNIGHT DELIVERY
State Street Bank and Trust Company State Street Bank and Trust Company
Two International Place, 4th Floor 61 Broadway, 15th Floor
Boston, Massachusetts 02110 New York, New York 10006
Attention: Claire Young--Corporate Trust Attention: Corporate Trust Department
Department
</TABLE>
The Company will indemnify the Exchange Agent and its agents for any loss,
liability or expense incurred by them, including reasonable costs and expenses
of their defense, except for any such loss, liability or expense caused by
negligence or bad faith.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telephone or facsimile.
The Company will not make any payments to brokers, dealers, or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes, and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees and expenses, will be paid by the Company, and are estimated in the
aggregate to be approximately $250,000.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes (or Old Notes for principal amounts not tendered or
accepted for exchange) are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Company will not recognize any gain or loss for accounting purposes upon
the consummation of the Exchange Offer. The expense of the Exchange Offer will
be amortized by the Company over the term of the Exchange Notes under GAAP.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company is a holding company formed by Renco under the laws of Ohio in
January 1998, which owns the WCI Pledged Stock. On February 3, 1998, the Company
sold and issued the Old Notes. The Company used the net proceeds of the Old
Notes Offering to pay a dividend to Renco, provide cash to the Company and pay
related fees and expenses. Currently, the assets of the Company consist of (i)
the WCI Pledged Stock and (ii) cash and investments estimated to be $15.6
million representing the remaining proceeds from the Old Notes Offering, net of
estimated transaction fees and expenses paid or accrued.
INDUSTRY DEVELOPMENTS
In late 1997, the flat rolled steel industry experienced a decline in spot
selling prices due to, among other things, increasing domestic capacity and a
high level of imports. As a result of the foregoing conditions, sales prices are
expected to be lower through mid-1998 as compared to 1997, resulting in reduced
profitability and cash flows for the industry, including WCI. Several integrated
and minimill producers have announced price increases effective April 1, 1998;
however, there can be no assurance that such announced price increases will be
implemented. If the announced price increases are not implemented and the
downward pricing trends continue and result in a prolonged period of reduced
prices, WCI may not be able to pay dividends to the Company in amounts that
would permit the Company to meet fully its debt service requirements under the
Exchange Notes. See "Risk Factors--Relating to the Industry-- Cyclicality."
RESULTS OF OPERATIONS
The Company has no operating history. Accordingly, the results of operations
presented below are the historical information of WCI.
THREE MONTHS ENDED JANUARY 31, 1998 COMPARED TO THREE MONTHS ENDED JANUARY
31, 1997
Net sales for the three months ended January 31, 1998 were $166.6 million on
347,931 tons shipped, representing a 3.5% increase in net sales and a 7.4%
increase in tons shipped compared to the three months ended January 31, 1997.
Net sales per ton shipped decreased 3.6% to $479 compared to $496 for the 1997
quarter. This decrease is primarily the result of changes in product mix with
shipments of custom carbon, alloy and electrical steels accounting for 62.2% of
total shipments in the 1998 quarter compared to 65.9% in the 1997 quarter and a
decline in market selling prices in late 1997. In addition, shipments in the
1998 quarter included 9,394 tons of lower value added semi-finished steel.
Throughout the 1998 quarter, WCI experienced a high order entry rate, and as a
result, WCI's order backlog increased to 306,000 tons at January 31, 1998 from
232,000 tons at October 31, 1997. Because of the recent strength in the order
entry rate and backlog for the industry, management believes that market prices
should be more stable through the first half of 1998.
Gross margin (net sales less cost of products sold) was $24.7 million for
the three months ended January 31, 1998 compared to $29.3 million for the three
months ended January 31, 1997. The decrease in gross margin reflects the changes
in product mix and decreases in selling prices discussed above offset somewhat
by increased volume.
Operating income was $14.3 million for the three months ended January 31,
1998 compared to $9.7 million for the three months ended January 31, 1997. The
operating results for the 1997 quarter include $8.6 million of compensation
expenses related to the November 1996 Transactions. Excluding the expenses
incurred as a result of the November 1996 Transactions, operating income was
$18.3 million during the 1997 quarter or $57 per ton shipped compared to $41 per
ton shipped in the 1998 quarter. The decrease in operating income in the 1998
quarter (excluding the previously mentioned compensation charges in the 1997
quarter) reflects the lower gross margin discussed above and higher depreciation
expense as a result
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<PAGE>
of the hot strip mill upgrade substantially completed in late 1997 offset by a
decrease in selling, general and administrative expenses in the 1998 quarter as
a result of lower variable compensation and legal expenses.
Interest expense increased to $8.0 million in the 1998 quarter compared to
$7.5 million in the 1997 quarter as a result of the issuance of the $300 million
WCI Senior Secured Notes and the retirement of $206.1 million principal amount
of the WCI Senior Notes on November 27, 1996.
As a result of the items discussed above, income before extraordinary items
was $4.2 million in the 1998 quarter compared to $1.7 million in the 1997
quarter. During the 1997 quarter, WCI recognized an extraordinary loss of $19.6
million, net of income taxes, on the early retirement of $206.1 million
principal amount of the WCI Senior Notes. As a result, WCI had a net loss of
$17.9 million for the three months ended January 31, 1997.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales in fiscal 1997 were $668.5 million on 1,328,931 tons shipped,
representing a 1.2% increase in net sales and a 4.9% decrease in tons shipped
compared to fiscal 1996. The upgrade of the hot strip mill, substantially
completed during fiscal 1997, required several equipment outages and resulted in
lower shipping volume during the second and third quarters. Net sales per ton
shipped increased 6.3% to $503 compared to $473 for fiscal 1996. This increase
is primarily the result of changes in product mix with shipments of custom
carbon, alloy and electrical steels accounting for 67.6% in fiscal 1997 and
57.9% in fiscal 1996 and, to a lesser extent, increases in product selling
prices. WCI's custom product mix in fiscal 1996 was adversely effected by a
54-day labor contract dispute and resulting work stoppage which was concluded on
October 24, 1995. Selling prices were generally strong through the third quarter
of fiscal 1997 but began to decline late in the fourth quarter of fiscal 1997
due to minimill capacity additions, a high level of imports, and the reentry
into the market of a major integrated mill. As a result of the foregoing
conditions, sales prices are expected to remain lower in early 1998. In
addition, shipments during fiscal 1997 and 1996 included 22,642 tons and 45,904
tons, respectively, of lower value added semi-finished steel. WCI expects to
continue to ship semi-finished products during the first two quarters of 1998
while the upgrade to the hot strip mill is fully implemented.
Gross margin (net sales less cost of goods sold) was $120.9 million in
fiscal 1997 compared to $110.2 million in fiscal 1996. The increase in gross
margin reflects the increase in selling prices and improvement in product mix
offset somewhat by higher LIFO inventory charges and lower shipping volume in
fiscal 1997. Charges under the LIFO inventory valuation method amounted to $3.3
million in fiscal 1997, including $2.1 million in the fourth quarter, compared
to essentially no LIFO charge in fiscal 1996.
Operating income was $68.4 million, $51 per ton shipped, for fiscal 1997
compared to $65.6 million, $47 per ton shipped, for fiscal 1996. The operating
results for fiscal 1997 reflect the increase in gross margin discussed above
offset by $8.6 million of compensation expenses related to the November 1996
Transactions. Excluding the expenses incurred as a result of the November 1996
Transactions, operating income was $77.0 million during fiscal 1997 or $58 per
ton shipped.
Interest expense increased to $31.7 million in fiscal 1997 compared to $25.0
million in fiscal 1996 as a result of the issuance of $300 million WCI Senior
Secured Notes and the retirement of $206.1 million principal amount of WCI
Senior Notes on November 27, 1996. Interest income decreased to $1.1 million in
fiscal 1997 compared to $6.2 million in fiscal 1996 as a result of lower cash,
cash equivalent and short-term investments in fiscal 1997 due to the November
1996 Transactions.
As a result of the items discussed above, income before the extraordinary
loss was $23.5 million in fiscal 1997 compared to $28.0 million in fiscal 1996.
During fiscal 1997, WCI recognized an extraordinary loss of $19.6 million, net
of income taxes, on the early retirement of $206.1 million principal amount of
WCI Senior Notes. As a result, WCI had net income of $3.9 million in fiscal
1997.
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<PAGE>
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales in fiscal 1996 were $660.8 million on 1,396,732 tons shipped,
representing a 4.7% increase in net sales and a 14.3% increase in tons shipped
compared to fiscal 1995. Net sales per ton shipped declined 8.3% to $473
compared to $516 for fiscal 1995 due to lower prices realized in the spot market
as well as a change in product mix. The fiscal 1996 period included the sale of
approximately 46,000 tons of lower value added semi-finished steel and a lower
mix of custom carbon, alloy and electrical steel products, which accounted for
57.9% of total shipments in fiscal 1996 compared to 59.4% in fiscal 1995. The
sales mix and volume were adversely affected during the first two quarters of
fiscal 1996 by a labor contract dispute and resulting work stoppage which was
concluded October 24, 1995. During the third and fourth quarters of fiscal 1996,
WCI's product mix returned to a more traditional mix, with sales of custom
products accounting for 64.8% of shipments compared to 62.4% during the
comparable period in fiscal 1995. Shipments for the three months ended October
31, 1996 were 342,147 tons compared to 208,522 during the same period in fiscal
1995 which was adversely affected by the work stoppage.
Gross margin was $110.2 million in fiscal 1996 compared to $86.2 million in
fiscal 1995. The increase in gross margin reflects higher volume and improved
per ton operating costs, offset somewhat by the lower sales prices in fiscal
1996 and the changes in product mix mentioned above, and a loss of $13.6 million
of gross margin during the fourth quarter of fiscal 1995 as a result of work
stoppage.
Operating income was $65.6 million, or $47 per ton shipped, for fiscal 1996
compared to $45.3 million, or $37 per ton shipped, for fiscal 1995. The results
for fiscal 1996 and 1995 reflect the gross margin discussed above, higher
depreciation and amortization expense associated with the completion of a blast
furnace reline in May 1995 and higher selling, general and administrative
expenses in the fourth quarter of fiscal 1996 compared to the same period in
fiscal 1995. Selling, general and administrative expenses for the fourth quarter
of fiscal 1996 were $3.3 million higher than during the same period in fiscal
1995 due primarily to reductions in expense in the fourth quarter of fiscal 1995
under WCI's variable compensation programs as a result of the loss incurred
during that period.
As a result of the items discussed above, net income increased to $28.0
million for fiscal 1996 compared to net income of $15.5 million for fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
In February 1998, the Company issued $120.0 million principal amount of Old
Notes. Interest on the Old Notes is, and the Exchange Notes will be, payable
semiannually in arrears on February 1 and August 1 of each year commencing
August 1, 1998. The Company intends to meet its debt service obligations from
its cash and investment balances and earnings thereon and through distributions
from WCI, including payments pursuant to a tax sharing agreement and dividends
as permitted under WCI's outstanding indebtedness. However, the amount of
distributions that WCI may make to the Company are limited by the terms of its
indebtedness. On January 28, 1998, WCI paid a dividend to Renco in the aggregate
amount of $5.3 million, which represented substantially all of the amount
permitted under the WCI Senior Secured Notes Indenture at that date. At January
31, 1998, WCI was permitted to make dividend payments of approximately $1.1
million under the WCI Senior Secured Notes Indenture. In addition, Renco may
make contributions or advances to the Company. Renco, however, has no obligation
to do so. See "Risk Factors--Relating to the Company--Holding Company Structure;
Refinancing Risk; Structural Subordination."
The Indenture contains numerous covenants and prohibitions that limit the
financial activities of the Company, including, among others, limitations on the
incurrence of additional indebtedness and additional liens. The ability of the
Company to meet its debt service requirements and to comply with such covenants
will be dependent upon WCI's future performance, which will be subject to
financial, economic, political,
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<PAGE>
competitive and other factors, including market prices of flat rolled steel,
many of which are beyond the Company's and WCI's control. See "Risk
Factors--Relating to the Company--Substantial Indebtedness."
WCI
WCI's liquidity requirements result from capital expenditures, working
capital requirements, postretirement health care and pension funding, interest
expense and, to a lesser extent, principal payments on its indebtedness. WCI has
met these requirements in each fiscal year since 1992 from cash balances and
cash provided by operating activities. WCI's primary sources of liquidity as of
January 31, 1998 consisted of cash and cash equivalents of $11.7 million and
available borrowing under the WCI Revolving Credit Facility.
The WCI Revolving Credit Facility has a maximum borrowing limit of $100.0
million, is secured by eligible inventories and receivables of WCI, as defined
therein, and expires on December 29, 1999. As of January 31, 1998, WCI had no
borrowings outstanding under the WCI Revolving Credit Facility, with a borrowing
limit of $94.5 million net of $5.5 million in outstanding letters of credit.
During the first quarter of fiscal 1998, WCI declared and paid a dividend to
Renco of $5.3 million.
CASH FROM OPERATIONS
Cash provided by WCI's operating activities was $3.0 million for the three
months ended January 31, 1998 compared to cash used by operating activities of
$5.3 million for the three months ended January 31, 1997. Cash provided by
operating activities was $39.6 million, $78.0 million and $60.7 million for
fiscal 1997, 1996 and 1995, respectively. The increase in operating cash flow
for the three months ended January 31, 1998 compared to the three months ended
January 31, 1997 resulted from an increase in income before extraordinary loss
and changes in working capital elements in the 1998 quarter offset by an
increase in payments relating to interest as a result of the November 1996
Transactions. The decrease in operating cash flow in fiscal 1997 compared to
fiscal 1996 resulted from significantly higher in-process steel inventory in
fiscal 1997 as a result, in part, of the hot strip mill upgrade and a working
capital benefit experienced in fiscal 1996 following the resolution of a work
stoppage in late 1995.
As of January 31, 1998, at pricing then in effect, WCI had commitments under
raw material supply contracts of approximately $29.6 million and $33.8 million
for fiscal 1998 and 1999, respectively.
CAPITAL EXPENDITURES
Capital expenditures at WCI were $4.2 million, $39.9 million, $35.4 million
and $26.2 million during the three months ended January 31, 1998 and fiscal
1997, 1996 and 1995, respectively. Capital expenditures are estimated to be $25
million to $30 million in fiscal 1998. The higher level of capital investment in
fiscal 1997 and 1996 reflect expenditures on the hot strip mill upgrade and
hydrogen anneal facility, and expenditures in fiscal 1995 reflect the blast
furnace reline. Management has funded WCI's capital expenditures in fiscal 1998,
1997, 1996 and 1995 through cash balances and cash provided by operating
activities. At January 31, 1998, WCI had commitments for capital expenditures of
approximately $7.4 million.
THE NOVEMBER 1996 TRANSACTIONS
On November 27, 1996, WCI Steel Holdings, Inc. ("WCI Holdings"), a
wholly-owned subsidiary of Renco, completed a tender offer in which it purchased
substantially all the outstanding shares of common stock of WCI not held by
Renco (the "Equity Tender Offer"). Following the completion of the Equity Tender
Offer, WCI Holdings was merged with and into WCI (the "Merger") with WCI
surviving as a wholly-owned subsidiary of Renco. The total consideration paid
for the common stock tendered and to
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non-tendering shareholders pursuant to the Merger was approximately $56.9
million, including related expenses.
On the same date, WCI completed the sale of $300.0 million of the WCI Senior
Secured Notes. The proceeds from the WCI Senior Secured Notes, with existing
cash balances of WCI, were used to complete the Equity Tender Offer, complete a
tender offer in which WCI acquired $206.1 million of the $206.4 million
aggregate principal amount of the then outstanding WCI Senior Notes at a rate of
$1,125.00 per $1,000 principal amount outstanding plus accrued interest, pay a
$108.0 million dividend to Renco, make contractual compensation payments to
certain executives of WCI and pay related transaction costs (collectively, the
"November 1996 Transactions"). As a result of these November 1996 Transactions,
WCI recognized an extraordinary loss of $19.6 million, net of taxes, and
compensation expenses of $8.6 million in the first quarter of fiscal 1997. WCI's
liquidity was significantly reduced and its debt service requirements
significantly increased as a result of the November 1996 Transactions.
Management anticipates that cash flow from operations and availability under the
WCI Revolving Credit Facility will be sufficient to finance WCI's liquidity
needs for the foreseeable future.
The WCI Revolving Credit Facility and the WCI Senior Secured Notes Indenture
contain numerous covenants and prohibitions that limit the financial activities
of WCI, including requirements that WCI satisfy certain financial ratios and
limitations on the incurrence of additional indebtedness. The ability of WCI to
meet its debt service requirements and to comply with such covenants will be
dependent upon future operating performance and financial results of WCI, which
will be subject to financial, economic, political, competitive and other factors
affecting WCI, many of which are beyond its control.
POSTRETIREMENT BENEFIT PLANS
WCI provides postretirement health care and life insurance benefits to
substantially all employees who retire from WCI upon meeting certain age and
length of service eligibility requirements. Under terms of WCI's labor contract,
WCI is required to pay current claims and to contribute $.50 per hour worked by
certain hourly employees, or a minimum of $1.5 million annually to the VEBA
Trust established to fund future benefits. Claims paid by WCI totaled $2.4
million, $1.7 million and $0.5 million during fiscal 1997, 1996 and 1995,
respectively.
WCI has a defined benefit pension plan which covers substantially all
bargained for employees and provides a minimum level of pension benefits based
on age and years of service when combined with benefits provided under WCI's
defined contribution plan and a predecessor company's defined benefit plan.
Under the minimum funding requirements of ERISA, WCI is required to contribute
approximately $1.1 million in fiscal 1998 and $8.1 million in fiscal 1999 to
this plan. WCI has made no contributions to this plan during fiscal 1998 to date
and made minimal contributions during fiscal 1997.
ENVIRONMENTAL MATTERS
WCI has incurred and, in the future, will continue to incur capital
expenditures for matters relating to environmental control and monitoring.
Capital expenditures for environmental control and monitoring at WCI were $0.8
million, $0.8 million and $2.3 million in fiscal 1997, 1996 and 1995,
respectively.
Future environmental capital expenditures may be dependent in part upon the
outcome of certain pending environmental matters. Operating costs for control
and monitoring equipment, excluding depreciation and amortization expense, were
$10.8 million, $9.6 million and $8.9 million for fiscal 1997, 1996 and 1995,
respectively. Operating costs for fiscal 1998 for control and monitoring
equipment are not expected to increase significantly from the fiscal 1997 level.
Environmental laws and regulations have changed rapidly in recent years, and
WCI may be subject to more stringent environmental laws and regulations in the
future. Compliance with more stringent environmental laws and regulations could
have a material adverse effect on WCI's consolidated financial
34
<PAGE>
position and future results of operations. During fiscal 1997, the EPA proposed
new standards regulating particulate matter and ozone emissions. Data relating
to these standards is to be collected and analyzed with implementation as early
as 2004. These standards have been the subject of significant discussion
throughout federal and state governments, and changes to the standards or the
implementation date may be made prior to final approval. Like much of the steel,
utilities and other industries, WCI's current operations are not expected to
comply with these proposed standards. WCI cannot currently assess the impact of
these proposed standards on its results of operations or financial condition. In
addition, the EPA has asserted certain alleged environmental violations against
WCI which are described in Note 12 to the Consolidated Financial Statements.
YEAR 2000 BUSINESS MATTERS
Many information and process control systems used in the current business
environment were designed to use only two digits in the date field and thus may
not function properly in the year 2000. Over the past several years, WCI has
been assessing and modifying its business systems to be year 2000 compliant. WCI
has a thorough plan to achieve year 2000 compliance with respect to its business
systems, including systems and user testing scheduled to commence in 1998. WCI
does not currently expect year 2000 issues related to its business systems to
have any material effect on WCI's costs or to cause any significant disruption
in operations. WCI has initiated a program to assess its process control
environment for year 2000 compliance, which is expected to be completed by May
31, 1998, and intends to make the necessary modifications to prevent disruption
to its operations. WCI is unable at this time to estimate the cost or potential
effect on its operations of achieving year 2000 compliance in its process
control environment.
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BUSINESS
THE COMPANY
The Company is a holding company formed by Renco under the laws of Ohio in
January 1998, which owns the WCI Pledged Stock. On February 3, 1998, the Company
sold and issued the Old Notes. The Company used the net proceeds of the Old
Notes Offering to pay a dividend to Renco, provide cash to the Company and pay
related fees and expenses. Currently, the assets of the Company consist of (i)
the WCI Pledged Stock and (ii) cash and investments estimated to be $15.6
million representing the remaining proceeds from the Old Notes Offerings, net of
estimated transaction fees and expenses paid or accrued.
The Company intends to meet its debt service obligations from its cash and
investment balances and earnings thereon and through distributions from WCI,
including payments pursuant to a tax sharing agreement and dividends as
permitted under WCI's outstanding indebtedness. Notwithstanding the foregoing,
Renco may make contributions or advances to the Company. Renco, however, has no
obligation to do so.
WCI
WCI is a niche oriented integrated producer of value-added, custom steel
products. WCI was incorporated in Ohio in 1988 and commenced operations on
September 1, 1988. WCI's primary facility covers approximately 1,100 acres in
Warren, Ohio, with additional facilities located in Niles and Youngstown, Ohio,
all of which are situated between Cleveland and Pittsburgh. WCI currently
produces approximately 170 grades of flat rolled custom and commodity steel
products. Custom flat rolled products, which include high carbon, alloy and high
strength, silicon electrical, terne coated and galvanized steel, constituted
approximately 67.6% of the 1.3 million net tons shipped during fiscal 1997.
Major users of WCI products are steel converters, steel service centers,
construction product companies, electrical equipment manufacturers and, to a
lesser extent, automobile and automotive parts manufacturers.
BUSINESS STRATEGY
WCI's business strategy consists of three principal elements: (a) continue
to increase sales of custom products, thereby further improving operating
margins; (b) continue to build and maintain strong relationships with strategic
customers, targeting customers for which it can supply at least 25% of such
customers' custom steel needs; and (c) continue to improve operating efficiency
and product quality through strategic cost reduction initiatives, as well as a
significant capital investment program.
INCREASE SALES OF CUSTOM PRODUCTS
In response to intense competition in commodity steels from other integrated
mills (both domestic and international) and domestic minimills, WCI's strategy
is to increase sales of custom products. Custom products comprised 67.6% of net
tons shipped in fiscal 1997 and 62.2% for the three months ended January 31,
1998. With less competition in custom products, WCI believes it can sustain
higher prices and operating margins in these products compared to commodity
steel products. There can be no assurance, however, that WCI will be able to
sustain such prices or margins.
The Continuous Caster installed during fiscal 1992 enabled WCI to improve
the quality and mix of its products and to enter new markets. WCI offers
approximately 170 grades of custom and commodity steel with cast quality. With
the Continuous Caster, WCI has achieved substantial cost savings, as well as
gained the ability to offer products with higher quality standards to a broader
group of customers. In addition, in fiscal 1997, WCI substantially completed an
upgrade of its hot strip mill which is expected to improve WCI's product quality
and expand WCI's product range.
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BUILD AND MAINTAIN STRONG RELATIONSHIPS WITH STRATEGIC CUSTOMERS
The second component of WCI's strategy is to become a major supplier to its
strategic customer base. WCI targets accounts where it can supply 25% or more of
the customer's steel requirements. Specifically, WCI looks for custom steel
customers with needs that currently are incompatible with the market direction
or production capabilities of major integrated producers and minimills. Examples
of such needs are as follows: small order quantities; narrow widths; and
specialized chemistries and/or metallurgical properties. WCI invests significant
resources in these customers, building processing and product knowledge over
time. WCI believes that as a significant supplier, it will have a certain degree
of protection against competition due to WCI's investment in processing
knowledge, its high level of service to these customers and the difficulty
competitors have with the smaller order quantities, typical of WCI's custom
steel products.
IMPROVE OPERATING EFFICIENCIES AND PRODUCT QUALITY
WCI is committed to improving its operating efficiencies through focused
capital investment and the implementation of non-capital cost reduction programs
throughout its operations. Since its inception in 1988, WCI has completed over
$318 million of capital investments designed, in part, to decrease production
costs, increase product range and improve product quality, as well as increase
productivity. The cornerstone of this program was the installation of the
Continuous Caster and the ladle metallurgy facility (the "LMF") completed in
December 1991 at a combined cost of $135 million. Since May 1992, the Continuous
Caster has enabled WCI to offer a 100% continuously cast product line which has
substantially reduced WCI's operating costs, dramatically improved the quality
of its products, and enabled WCI to participate in new markets where the
superiority of continuously cast steel is a competitive strength. Another
capital investment was the reactivation of the Youngstown sinter plant, which
reduced WCI's dependence on iron ore pellets, as well as reduced manufacturing
costs by recycling waste streams from the steel making process. In May 1995, WCI
completed the reline of its blast furnace, a procedure which is performed on a
routine basis every six to eight years, thereby essentially completing the
upgrade of WCI's primary steelmaking capabilities.
Currently, WCI's capital investment program is focused on its finishing
facilities or the customer end of the mill. In fiscal 1997, WCI substantially
completed an upgrade of its hot strip mill, the scope of which included
enhancing virtually every element of the mill operation including the heating,
roughing, finishing, cooling and coiling processes. When fully operational, the
hot strip mill upgrade is expected to significantly improve product quality and
expand WCI's product range, in addition to reducing operating costs. Also, in
1997, WCI installed a high-temperature hydrogen anneal facility to upgrade its
product mix and to meet the rising demand for silicon electrical steels.
In addition to the ongoing capital investment program, WCI expended on
average approximately $68 per net ton shipped on maintenance expenditures during
the period fiscal 1992 through fiscal 1997 or an average of approximately $92
million annually. As a result of these expenditures, in addition to the ongoing
capital investment program, WCI believes that it operates and will continue to
maintain a modern and efficient integrated steel mill offering a diverse product
mix.
Consistent with WCI's commitment to improve product quality and operating
efficiencies, WCI obtained ISO 9002 certification in 1995 and QS 9000
certification (a quality standard used extensively in the auto industry) in
1997. WCI undergoes periodic audits to verify its continued compliance with the
standards.
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PRODUCTS
OVERVIEW
WCI produces a wide range of custom flat rolled steel products, including
high carbon, alloy and high strength, silicon electrical, terne coated and
galvanized steel. In these markets, WCI competes principally on the basis of (a)
customer and product requirements, including small order quantities, specialized
chemistries, narrow widths and delivery performance, (b) quality and (c) price.
WCI's commodity steel product sales consist principally of hot and cold rolled
low carbon sheet steel. In these markets, WCI competes principally on the basis
of price and delivery performance. Export sales were approximately 2.0% of net
sales during the last three fiscal years.
<TABLE>
<CAPTION>
NET TONS SHIPPED PERCENT OF TOTAL
---------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED OCTOBER 31, FISCAL YEAR ENDED OCTOBER 31,
---------------------------------- -------------------------------
<CAPTION>
1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Custom Products:
Hot and Cold Rolled........................ 358,556 426,945 481,740 29.3% 30.5% 36.2%
Coated..................................... 367,444 382,352 416,854 30.1 27.4 31.4
---------- ---------- ---------- --------- --------- ---------
Total Custom Products........................ 726,000 809,297 898,594 59.4 57.9 67.6
Total Commodity.............................. 495,940 587,435 430,337 40.6 42.1 32.4
---------- ---------- ---------- --------- --------- ---------
Total Steel Products......................... 1,221,940 1,396,732 1,328,931 100.0% 100.0% 100.0%
---------- ---------- ---------- --------- --------- ---------
---------- ---------- ---------- --------- --------- ---------
</TABLE>
HOT AND COLD ROLLED CUSTOM PRODUCTS
HIGH CARBON, ALLOY, HIGH STRENGTH. WCI has developed niche markets for high
carbon, alloy and high strength steel products that are sold to strip
converters, steel service centers, and automobile and automotive parts
manufacturers. Products required by the strip converter customers are
characterized by low order quantities, relatively narrow width and specific
metallurgical properties. WCI presently produces over 100 specialized
chemistries for these niche markets.
WCI's customers in this sector, in turn, supply end-users which have highly
specific and defined product needs requiring the strip converter to order steel
with close gauge tolerances, minimal crown profiles, critical surface qualities
and, in certain cases, narrow widths.
In the high carbon and alloy market, WCI competes with several other
domestic integrated producers, as well as various steel producers in Canada,
Europe and Japan. In the high strength market, WCI competes with various major
integrated mills.
COATED CUSTOM PRODUCTS
SILICON. Silicon electrical steel is sheet steel that exhibits certain
electrical or magnetic properties. The magnetic properties of this product
permit electric motors to run at high speeds for extended periods of time with
greater efficiency while minimizing heat loss.
The market for electrical sheet steel can be divided into two main segments:
grain oriented silicon sheet and non-grain oriented silicon sheet. The
distinction between grain and non-grain oriented silicon sheet pertains to the
electrical properties of the steel. WCI's silicon annealing line is designed for
production of non-grain oriented silicon sheet, and all of WCI's silicon
shipments are in this segment. Presently, there is one domestic competitor in
this category and other foreign competitors. In addition, WCI's product also
competes with cold rolled motor laminations produced by several other integrated
steel makers which have been developed as a substitute product for silicon
steels in certain applications.
GALVANIZED. Galvanized steel is zinc-coated sheet steel produced on WCI's
hot dipped galvanizing line. The market for galvanized sheet steel is divided
into two broad categories: heavy and light gauge steel.
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Heavy gauge galvanized steel is used in the manufacture of electrical boxes,
automotive bumpers, culvert coil and grain bins, as well as many other end uses.
WCI's galvanized finishing line is suited to produce heavy gauge steel, and
as a result, a majority of WCI's galvanized shipments are in this sector. WCI
competes with several other integrated producers and minimills, as well as
independent producers in the heavy gauge galvanized steel market.
TERNE. Terne steel is sheet steel coated with a mixture of lead and tin and
is principally used in the manufacture of gasoline tanks. As a result, the
demand for terne steel closely tracks trends in the automotive sector. Terne
steel also is being used in areas where the ability to weld, solder, paint and
resist corrosion is required to promote longer life and attractiveness of the
end product. Given the current regulatory concerns involving products containing
lead, demand for terne steel is expected to decrease. Terne steel accounted for
less than 1% of WCI's net sales in fiscal 1997. In the terne market, WCI
competes with two major integrated mills.
COMMODITY PRODUCTS
In fiscal 1997, WCI shipped 430,337 tons in the aggregate of hot and cold
rolled low carbon sheet and strip and low carbon semi-finished steel, which
represented approximately 32.4% of WCI's net tons shipped. Hot rolled low carbon
sheet is more price sensitive than custom hot rolled steels and is sold to steel
service centers or manufacturers producing a broad array of products, including
tubing, stampings and roll formed parts. Cold rolled sheet and strip is
purchased by service centers, container manufacturers, and the automotive and
appliance industries. In these commodity steel markets, WCI competes with all
major integrated producers and several minimills.
MARKETING AND CUSTOMER SERVICE
WCI's marketing, sales and customer service functions are coordinated
through three wholly-owned subsidiaries, WCI Steel Sales LP ("WCI Sales"), WCI
Steel Metallurgical Services Inc. ("WCI Metallurgical Services") and WCI Steel
Production Control Services Inc. ("WCI Production Services").
WCI Sales is responsible for developing and implementing a sales and
marketing strategy aimed at increasing the sales of custom steel products and
building the strategic customer base. At January 31, 1998, WCI Sales employed a
direct sales force of ten field representatives covering approximately 300
active accounts and other potential steel accounts within WCI's geographic
market. Over 50% of WCI Sales' shipments are to customers within 200 miles of
the Warren facility, and as a result of this concentration of active and
potential customers in its geographic area, WCI Sales believes that it has a
competitive advantage over competitors located farther away.
Sales outside WCI's geographic market are made through three independent
sales representatives on a commission basis. Although transportation costs can
be prohibitive at extreme distances from the Warren facility, select custom
products are competitively priced outside WCI Sales normal target markets. WCI
Sales believes that independent sales representatives provide the most cost
effective method to access these customers. Approximately 5% of WCI Sales volume
in fiscal 1997 was sold through the independent sales representatives.
Marketing and pricing are centralized at the Warren facility, where the
marketing strategy and pricing levels are established for all WCI products. WCI
Sales has two general managers of sales and a three-person marketing staff that
works closely with the sales and technical service representatives to coordinate
the implementation of the sales and marketing strategy.
WCI Metallurgical Services is responsible for developing the specialized
chemistries that support WCI's custom product mix. In addition, WCI
Metallurgical Services has a staff of eight technical service representatives
with strong metallurgical and technical backgrounds who assist the sales force
in the field.
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<PAGE>
Together, WCI believes the sales force and the technical staff comprise a
knowledgeable team qualified to identify and meet customer needs.
WCI Production Services provides order entry, production scheduling and
order status services to assist WCI Sales in meeting customer needs. As of
January 31, 1998, WCI Production Services employed 41 persons at the Warren
facility who provide customer service and utilize a fully-automated computerized
sales network that provides the sales force and customers with product
specifications and timely order status information.
CUSTOMERS
WCI Sales' customer strategy is to market to prospective accounts that have
special needs such as small order quantities, narrow widths, specialized
chemistries and other metallurgical properties not readily met by WCI's
competitors. WCI Sales targets customers for which it can supply at least 25% of
such customer's steel requirements. Nevertheless, WCI Sales attempts to minimize
its customer concentration by generally not having sales to a single customer
greater than 5% of net sales. Consistent with this strategy, WCI Sales' customer
base is dominated by steel converters and steel service centers, which in fiscal
1997 represented 65.8% of shipments. The remaining shipments were direct to end
users.
The following table sets forth the percentage of WCI's net tons shipped to
various markets for the past three fiscal years.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
-------------------------------
<S> <C> <C> <C>
CUSTOMER CATEGORY 1995 1996 1997
Conversion/further processing................................. 39.3% 44.6% 42.5%
Steel service centers......................................... 23.0 24.0 23.3
Construction.................................................. 13.1 11.5 15.8
Electrical equipment.......................................... 8.4 7.1 7.3
Direct automotive............................................. 11.1 8.1 6.3
Other......................................................... 5.1 4.7 4.8
--------- --------- ---------
Total....................................................... 100.0% 100.0% 100.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
In fiscal 1997, 1996 and 1995, WCI's twenty largest customers represented
approximately 57%, 56% and 56%, respectively, of net sales. No customer
accounted for more than 10% of the net sales in fiscal 1997.
BACKLOG
On January 31, 1998, WCI's order backlog was approximately 306,000 net tons
with an approximate value of $146 million compared to approximately 246,000 net
tons with an approximate value of $126 million at January 31, 1997, based in
each case on the then current prices. Under the applicable orders, WCI is
scheduled to ship substantially all of the orders in the January 31, 1998
backlog by June 30, 1998.
MANUFACTURING PROCESS
In WCI's primary steelmaking process, iron ore pellets, coke, limestone,
sinter and other raw materials are consumed in the blast furnace to produce "hot
metal." Hot metal is further converted into liquid steel through its BOF process
where impurities are removed, recycled scrap is added and metallurgical
properties for end use are determined on a batch-by-batch basis. WCI's BOF has
two vessels, each with a steelmaking capacity of 182 tons per heat. From the
BOF, the heats of steel are sent to the LMF, where the temperature and chemistry
of the steel are adjusted to precise tolerances. In addition, the steel may be
vacuum degassed to further improve its cleanliness. Liquid steel from the LMF
then is formed into slabs through the process of continuous casting. The
Continuous Caster allows WCI to cast all of its steel
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products. After continuous casting, slabs then are reheated, reduced and
finished by extensive rolling, shaping, tempering and, in certain cases, by the
application of coatings at WCI's downstream operations. Finished products are
normally shipped to customers in the form of coils. WCI has linked its
steelmaking and rolling equipment with a computer based integrated manufacturing
control system to coordinate production and sales activities.
RAW MATERIALS
WCI's steelmaking operations are dependent on reliable supplies of various
raw materials, principally iron ore pellets, coke and energy. WCI believes that
it has adequate sources of its principal raw materials to meet its present
needs.
IRON ORE PELLETS
WCI has a contract with a major supplier of iron ore pellets for all of its
requirements through fiscal 1998 and no less than half of its requirements in
fiscal 1999. Iron ore pellets satisfied approximately 71% of WCI's iron ore
requirements in fiscal 1997, while WCI's sinter plant provided the balance. The
iron ore pellet contract requires WCI to purchase all of its iron ore pellet
requirements from the contracting vendor. WCI carries an increased level of iron
ore pellet inventory immediately preceding the winter months, due to the
curtailment of vendor shipments during the winter as a result of the freezing of
the Great Lakes.
COKE
Coke is the principal fuel used to produce liquid iron and is an essential
ingredient in steelmaking. WCI has contracts with two integrated steel producers
for its estimated coke requirements through fiscal 1999. WCI's coke requirements
are approximately 600,000 tons per year. The domestic supply of coke has
decreased significantly over the last decade and is expected to decrease further
in the future due to the requirements of the Clean Air Act. As WCI does not own
a coke battery, it is dependent upon commercially available domestic or imported
coke to sustain its operations. WCI believes that there will be adequate
supplies of domestic or imported coke available for its purposes after the
expiration of its contracts in 1999. However, there can be no assurance that
adequate supplies of coke will be available to WCI in the future. See "Risk
Factors--Relating to the Industry--Availability and Fluctuation in Costs of Raw
Materials and Energy."
ENERGY AND GASES
WCI's steel operation consumes large amounts of electricity, natural gas,
oxygen and other industrial gases. WCI purchases its electrical power
requirements from a local utility under a contract that extends to 2002. WCI can
generate approximately 20% of its own electrical needs. Natural gas is also
purchased pursuant to a supply contract that extends to 2000. Oxygen is
delivered from supplier-owned plants located at the Warren facility. Pursuant to
a contract entered into in 1988, WCI is required to purchase all coke oven gas
produced at an adjoining coke plant, which is usable by WCI, at a price based
upon, but at a discount to, natural gas prices.
CAPITAL INVESTMENTS
WCI believes that it must continuously strive to improve product quality and
control manufacturing costs in order to remain competitive. Accordingly, WCI is
committed to continuing to make extensive capital investments with the objective
of reducing manufacturing costs per ton, improving the quality of steel produced
and broadening the array of products offered to WCI's served markets. Since its
inception, WCI has made approximately $318 million in capital investments, of
which approximately $212 million has
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been for capital improvements and approximately $106 million has been for
maintenance capital. Significant capital improvements made include the
installation of the Continuous Caster and the LMF in fiscal 1992, the restart of
the Youngstown sinter plant in fiscal 1992 and the substantial completion of the
hot strip mill upgrade in fiscal 1997.
In addition, since the installation of the Continuous Caster in fiscal 1992,
WCI has expensed (in addition to its maintenance capital expenditures) an
average of approximately $68 per net ton shipped on maintenance expenditures,
averaging approximately $92 million annually.
FACILITIES
WCI's Warren, Ohio facility, situated on approximately 1,100 acres, includes
a blast furnace, a two vessel BOF shop, an LMF and a vacuum degasser, the
Continuous Caster, a 56-inch hot strip mill, 54-inch tandem and temper mills,
annealing facilities, a silicon continuous anneal line, hot-dip galvanizing and
terne coating lines and other finishing facilities.
The blast furnace was relined in April and May 1995 as part of its planned
maintenance, a procedure which is performed on a routine basis every six to
eight years, which required WCI to shut down the blast furnace for 36 days. In
connection with the reline, WCI purchased and/or produced in advance sufficient
cast slabs such that there were no material interruptions in shipments to its
customers during the blast furnace reline.
Youngstown Sinter Company, a subsidiary of WCI, owns and operates a sinter
plant located in Youngstown, Ohio on 51 acres. The sinter plant converts plant
waste dusts and iron ore into resources usable in the blast furnace, reducing
iron ore pellet feed requirements by approximately 29% in fiscal 1997.
WCI's Niles Industrial Park is located approximately five miles from the
Warren facility, and has approximately 600,000 square feet of usable building
space. Presently, four steel users are tenants at the Niles facility, using 52%
of the space. WCI is continuing to seek other appropriate tenants.
WCI believes that its facilities are well maintained and they are considered
satisfactory for their purposes.
ENVIRONMENTAL MATTERS
In common with much of the steel industry, WCI's facilities are located on
sites that have been used for heavy industrial purposes for decades. WCI is
subject to numerous federal, state and local environmental laws and regulations
governing, among other things, air emissions, waste water discharge and solid
and hazardous waste disposal. WCI believes that it has made, and intends to
continue to make, the necessary expenditures for environmental remediation and
compliance with environmental laws and regulations. Environmental laws and
regulations have changed rapidly in recent years, and WCI may be subject to more
stringent environmental laws and regulations in the future. Compliance with more
stringent environmental laws and regulations could have a material adverse
effect on WCI's financial condition and results of operations.
On June 29, 1995, the Department of Justice, on behalf of the EPA,
instituted the CWA Litigation. The action alleges numerous violations of WCI's
NPDES permit alleged to have occurred during the years 1989 through 1996,
inclusive. On March 29, 1996, the Department of Justice on behalf of the EPA,
instituted the CAA Litigation alleging violations by WCI of the work practice,
inspection and notice requirements for demolition and renovation of the National
Emission Standard for Hazardous Air Pollutants for Asbestos and also violations
of the particulate standard and the opacity limits applicable to WCI's
facilities in Warren, Ohio. Each action seeks a civil penalty not to exceed the
statutory maximum of $25,000 per day per violation and also seeks an injunction
against continuing violations. WCI believes that imposition of the statutory
maximum penalty for the alleged violations is unlikely based upon past judicial
penalties imposed under the Clean Water Act and the Clean Air Act, and that it
has defenses to liability.
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By letter dated November 1, 1996, EPA's Region V Water Division Director
requested information pursuant to the Clean Water Act from WCI relating to the
Warren facility, including information as to the effect of a prohibition against
federal procurement of WCI's products on WCI's business. WCI responded to the
EPA's request on December 2, 1996. WCI has not been notified that the EPA will
seek a federal procurement prohibition based on alleged permit violations.
However, there can be no assurance that a federal procurement prohibition will
not be imposed. WCI is negotiating with the EPA toward settlement of these
matters. If WCI is unable to reach a negotiated settlement and if a substantial
penalty similar to the statutory maximum penalty or federal procurement
prohibition were imposed, it could have a material adverse effect on the
financial condition or results of operations of WCI, the extent of which WCI is
unable to estimate at this time. Discovery has been completed in both of these
actions, and a trial date has been scheduled for April 1998 for the CWA
Litigation and for May 1998 for the CAA Litigation.
On December 17, 1997, WCI received a compliance order from the EPA alleging
certain violations of WCI's NPDES permit, including exceedances of permit limits
for pH and oil and grease and failure to identify and sample for residual
chlorine. WCI currently is investigating the alleged exceedances. WCI is unable
at this time to estimate the cost which may be incurred related to the
compliance order, if any.
WCI has obtained a storage permit under the RCRA, for waste pickle liquor at
its Warren facility acid regeneration plant. As a provision of the permit, WCI
will be required to undertake a corrective action program with respect to
historical material handling practices at the Warren facility. In April 1997,
WCI received notice from the EPA that it had approved a workplan for the first
investigation step of the corrective action program, the RFI, which is expected
to be completed in 1999. The workplan identifies thirteen historical solid waste
management units which are subject to the RFI. The final scope of the corrective
action required to remediate or reclaim any contamination that may be present at
or emanating from the Warren facility is dependent upon the findings of the RFI
and the development and approval of the corrective action program. Accordingly,
WCI is unable at this time to estimate the final cost of the corrective action
program or the period over which such costs may be incurred, and there can be no
assurance that it would not have a material adverse effect on the financial
condition of WCI.
WCI received from the EPA a formal request dated April 1, 1994 for
information pursuant to Section 3007 of the RCRA and Section 104(e) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"). The request required WCI to submit information relating to
the generation, storage, treatment and disposal of solid or hazardous wastes or
hazardous substances at the Warren facility. The request also required WCI to
submit certain financial information and other information needed to evaluate
the facility's compliance with the RCRA and CERCLA requirements. WCI made the
requested information available to the EPA during 1994, and the EPA examined the
information in March 1997. The request did not identify violations, seek to
impose penalties or monetary sanctions or require the performance of remedial
activities or other capital expenditures. Among other items, the request sought
information about a specific area at which waste management occurred at the
Warren facility under a prior owner. This area was remediated by the prior owner
before the facility was sold to WCI, and the area is also scheduled to be
investigated under the corrective action RFI. Under EPA guidance, the area will
not be addressed under CERCLA when it is included in the corrective action
process. Because of the past remediation of the area by a prior owner and the
inclusion of the area in the corrective action process, WCI believes that the
area would not be regarded as a priority risk under CERCLA.
WCI operates a landfill at its Warren facility which receives waste
materials from the iron and steel-making operations. WCI has submitted a plan to
state environmental authorities to replace this landfill with a new lined
landfill. The plan involves closure by removal of the present landfill by
selling approximately one-third of its contents to established markets for
construction materials and recycling most of the remaining contents over an
extended period at the sinter plant in Youngstown, Ohio operated by WCI's
subsidiary, Youngstown Sinter Company, and disposing of any non-salable or
non-recyclable material in the new lined landfill. Youngstown Sinter Company is
presently exploring modifications to
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<PAGE>
sulfur dioxide emission regulations applicable to the Youngstown sinter plant to
enable it to comply with applicable sulfur dioxide emission levels, as well as
allow faster recycling of the present landfill contents. The Company does not
believe that the sinter plant's noncompliance will result in any material
expenditures. The new lined landfill construction and existing landfill closure,
if pursued, are expected to be completed in seven consecutive phases. The
estimated cost through Phase I is approximately $2.9 million to $4.1 million
expended over three years. The estimated cost for Phase II is approximately $1.6
million expended over six years, and the estimated cost for Phase III is
approximately $1.7 million expended over ten years. Construction is expected to
begin during fiscal 1998.
During 1997, the EPA proposed new standards regulating particulate matter
and ozone emissions. Data relating to these standards is to be collected and
analyzed with implementation as early as 2004. These standards have been the
subject of significant discussion throughout federal and state governments, and
changes to the standards or the implementation date may be made prior to final
approval. Like much of the steel, utilities and other industries, WCI's current
operations are not expected to comply with these proposed standards. WCI cannot
currently assess the impact of these proposed standards on its results of
operations or financial condition.
EMPLOYEES
As of January 31, 1998, WCI had 553 salaried employees and 1,677 hourly
employees. Most of the employees are located at the Warren facility and most of
the hourly employees are represented by the USWA with which WCI reached a
four-year collective bargaining agreement which expires September 1, 1999.
BENEFIT PLANS
HOURLY PROFIT SHARING PLAN
Certain hourly employees represented by the USWA participate in a profit
sharing plan under which WCI pays 12% of pretax income as defined in the profit
sharing agreement. WCI advances one-half of the amounts due under this plan on a
quarterly basis, within 45 days following the end of each fiscal quarter, and
pays the remaining amounts by February 15 of the subsequent year.
SALARIED VARIABLE COMPENSATION PLAN
WCI has a variable compensation plan for salaried employees known as the
Company Performance Compensation Program ("CPC"). Under the CPC, salaried
employees receive variable compensation based on WCI's pretax income as defined
in the plan. CPC payments are measured as a percentage of the employees base
salary and paid quarterly.
PENSION
WCI has defined contribution retirement plans that cover substantially all
employees. WCI funds these contributions as earned. WCI's contributions to the
plans are based on employee age, length of service and compensation.
WCI has a defined benefit floor offset pension plan which covers
substantially all hourly employees at the Warren facility. The plan, when
combined with benefits from WCI's defined contribution plan and benefits from a
predecessor company defined benefit pension plan, will provide a minimum level
of pension benefits for eligible employees. Benefits are based on age and years
of service, but not compensation. Under this plan, employees will receive upon
retirement a monthly benefit equal to $35 times the number of years of service
with WCI or its predecessors. If the employee has at least 30 years of service
at retirement, the monthly benefit is subject to certain minimums based on age
at retirement. Monthly benefits under the plan are reduced by any benefit from
WCI's defined contribution plan (as an annuity
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equivalent) and benefits payable from a defined benefit pension plan of a
predecessor company. No named executive officer is eligible to participate in
this plan.
POSTRETIREMENT HEALTH CARE
WCI provides postretirement health care benefits to employees who retire
while meeting certain age and service eligibility requirements. WCI has
established a VEBA Trust to hold WCI's contributions to fund future
postretirement health care and life insurance obligations. The VEBA Trust holds
liens on the Collateral and certain assets of WCI and one of its subsidiaries to
secure WCI's obligation for postretirement health care benefits. WCI
contributions are $.50 per hour or a minimum of approximately $1.5 million per
year. See "Risk Factors--Relating to WCI--Substantial Employee Postretirement
Obligations."
PENDING LITIGATION
On January 23, 1996, two retired employees instituted an action against WCI
and the USWA in the United States District Court for the Northern District of
Ohio alleging in substance that certain distributions made by WCI to employees
and benefit plans violated certain agreements, ERISA, the National Labor
Relations Act and common law. On July 31, 1997, the court granted WCI's motion
to dismiss this action and entered judgment in favor of WCI and the USWA. The
plaintiffs have filed an appeal regarding the court's decision to dismiss.
On April 5, 1996, an employee instituted an action for damages against WCI
in the Court of Common Pleas, Trumbull County, Ohio alleging that, under Ohio
common law, her privacy rights were violated and that she has been subjected to
sexual harassment. On April 28, 1997, the plaintiff filed for summary judgment,
which the court denied. WCI denies plaintiff's allegations of liability. The
court has set a trial date for August 1998.
For a description of pending litigation related to environmental matters,
see "--Environmental Matters."
In addition, WCI is involved in various claims and lawsuits incidental to
the ordinary course of its business, which WCI believes will not have a material
adverse effect on the consolidated financial condition of WCI.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Ira Leon Rennert................. 63 Chairman of the Board and Director
James N. Chapman................. 35 President
Roger L. Fay..................... 52 Vice President and Chief Financial Officer
</TABLE>
IRA LEON RENNERT has been Chairman, Chief Executive Officer and principal
shareholder of the Company's parent company, Renco (including predecessors),
since Renco's first acquisition in 1975 and Chairman of the Company since its
inception and of WCI since its formation in 1988. Renco holds controlling
interests in a number of manufacturing and distribution concerns operating in
businesses not competing with WCI, including Renco Metals, Inc. and AM General
Corporation, for both of which he serves as a Director.
JAMES N. CHAPMAN has been President of the Company since its inception and
Vice President-- Investment Banking of Renco since December 1996. Prior to
joining Renco, Mr. Chapman was a Principal with the investment banking firm of
Fieldstone FPCG Services, L.P. from August 1990 through May 1996. Mr. Chapman is
a director of Coinmach Laundry Corporation.
ROGER L. FAY has been Vice President and Chief Financial Officer of the
Company since its inception and Vice President--Finance of Renco since 1983. Mr.
Fay is a certified public accountant.
The executive officers of the Company do not receive any compensation from
the Company or its subsidiaries. Renco receives a management consultant fee from
WCI. See "Stock Ownership and Certain Relationships and Transactions."
EXECUTIVE OFFICERS OF WCI
The following sets forth the executive officers of WCI, who are not officers
of the Company and who are not involved in the management or day-to-day
operations of the Company:
EDWARD R. CAINE has been President and Chief Executive Officer of WCI since
April 1996. Mr. Caine was a Director of WCI from April 1996 through December
1996. Prior to joining WCI, Mr. Caine had 37 years of experience in the steel
industry with U.S. Steel, most recently as General Manager of U.S. Steel's
Fairfield, Alabama integrated steel operations from April 1991 to March 1996.
PATRICK T. KENNEY has been Vice President, Operations of WCI since June
1994. Prior to becoming Vice President of WCI, Mr. Kenney served as General
Superintendent of Finishing Operations of WCI since 1988.
PATRICK G. TATOM has been Vice President, Commercial of WCI since November
1995. He served as Vice President, Sales of WCI from February 1994 through
October 1995 and as General Manager of Sales of WCI from September 1988 to
February 1994.
BRET W. WISE has been Vice President, Finance and Chief Financial Officer of
WCI since September 1994. Prior to joining WCI, Mr. Wise was a partner with the
accounting and consulting firm of KPMG Peat Marwick LLP and had been with that
firm in various capacities from June 1982 through August 1994.
The executive officers of WCI do not receive any compensation from the
Company.
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<PAGE>
STOCK OWNERSHIP AND CERTAIN RELATIONSHIPS AND TRANSACTIONS
The following table sets forth certain information as of March 19, 1998
regarding the beneficial ownership of common stock of the Company by each
beneficial owner of 5% or more of the common stock of the Company, each director
and each named executive officer of the Company during the last fiscal year, and
by all directors and executive officers of the Company as a group. Except as
otherwise noted, the persons named in the table below have sole voting and
investment power with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
------------------------------
<S> <C> <C>
SHARES OF
NAME OF BENEFICIAL OWNERS AND ADDRESS OF 5% BENEFICIAL OWNERS COMMON STOCK PERCENT
The Renco Group, Inc. ............................................... 100 100.0%
30 Rockefeller Plaza, 42nd Floor
New York, NY 10112
Ira Leon Rennert(1).................................................. 100 100.0%
c/o The Renco Group, Inc.
30 Rockefeller Plaza, 42nd Floor
New York, NY 10112
James N. Chapman..................................................... -- --
Roger L. Fay......................................................... -- --
All directors and executive officers as a group (3 persons).......... 100 100.0%
</TABLE>
- ------------------------
(1) Mr. Rennert is deemed to beneficially own the Common Stock of the Company
owned by Renco due to the ownership by himself and trusts established by him
(but of which he is not a trustee) for himself and members of his family of
a total of 97.9% of the outstanding Common Stock of Renco.
By virtue of Renco's ownership of all the outstanding shares of Common
Stock, and Mr. Rennert's ownership of a majority of the stock of Renco, Mr.
Rennert is in position to control actions that require the consent of a majority
of the holders of the Company's outstanding shares of Common Stock, including
the election of the Board of Directors.
Under a Management Consultant Agreement, effective October 1, 1992, as
amended, between Renco and WCI, WCI pays a monthly fee of $100,000 to Renco. The
Management Consultant Agreement provides that WCI shall not make any payment
thereunder which would violate any of its agreements with respect to any of its
outstanding indebtedness. The Management Consultant Agreement extends to October
31, 1998 and thereafter shall continue for additional terms of three years each
unless sooner terminated by either party by giving six months prior written
notice. WCI and Renco expect that the Management Consultant Agreement will renew
to October 31, 2001 in accordance with its present terms. In the year ended
October 31, 1997, WCI paid management fees to Renco in the amount of $1,200,000.
WCI believes that the cost of obtaining the type and quality of services
rendered by Renco under the Management Consultant Agreement was, and continues
to be, no less favorable than that at which WCI could obtain such services from
unaffiliated entities.
The Company and WCI are included in the consolidated federal income tax
return of Renco. Under the terms of the Company's tax sharing agreement with
Renco, income taxes are allocated by Renco to the Company on a separate return
basis, consolidated with WCI and its subsidiaries, except that transactions
between the Company and its subsidiaries and Renco and its other subsidiaries
are accounted for on a cash basis and not on an accrual basis. Similarly, under
the terms of WCI's tax sharing agreements with the Company and Renco, income
taxes are allocated by the Company to WCI on a separate return basis, except
that transactions between WCI and the Company are accounted for on a cash basis
and not on an accrual basis. Neither the Company nor WCI is entitled to the
benefit of net tax loss carryforwards, unless such tax losses were a result of
timing differences between their respective accounting for tax and financial
47
<PAGE>
reporting purposes. As of October 31, 1997, WCI had no net operating tax loss
carryforwards. Renco has agreed to indemnify WCI for any tax imposed on or paid
by it in excess of the amount payable under its tax sharing agreement. As of
January 31, 1998, WCI had recoverable income taxes of $.8 million under its tax
sharing agreement.
To obtain the advantages of volume, Renco purchases certain insurance
coverages for its subsidiaries, including WCI, and the actual cost of such
insurance, without markup, is reimbursed by the covered subsidiaries. The major
areas of WCI's insurance coverage obtained under the Renco programs are
property, business interruption, general, product and auto liability and
workers' compensation (other than Ohio for which WCI is self insured). The
premiums for director and officer, fidelity, fiduciary, property, business
interruption, auto liability and casualty umbrella are allocated by Renco
substantially as indicated in the underlying policies. General and product
liability and workers' compensation coverages (excluding the Ohio self insured
program) are loss sensitive programs with both fixed and variable premium
components. The fixed premium component for this coverage is allocated to each
insured Renco subsidiary based on factors that include historical guaranteed
cost premium, the overall growth of each subsidiary and an assessment of risk
based on loss experience. The fixed component is subject to revision resulting
from the insurance carrier's audit of actual premium factors. As claims (the
variable component) are paid, each insured within the loss sensitive program is
charged for its claims up to a maximum amount and subject to an overall maximum
for all insured subsidiaries. Each insured Renco subsidiary has been assigned an
individual maximum cost based on historical guaranteed cost premiums. The
overall and individual subsidiary maximums are subject to revision based on
audit of actual premium factors. If an insured Renco subsidiary reaches its
individual maximum cost, the other insured subsidiaries are required to share
proportionately in the excess cost of the subsidiary which has reached its
individual maximum. In fiscal 1997, WCI incurred costs of approximately $1.7
million under the Renco insurance program. WCI believes that its insurance costs
under this program were less than it would have incurred if it had obtained its
insurance directly. In addition, the Company expects to participate in Renco's
insurance program to the extent of its insurance requirements.
Beginning in fiscal 1998, WCI has purchased, and may from time to time in
the future purchase, zinc and other materials from Doe Run Peru S.R. Ltda., an
indirect subsidiary of Renco. WCI believes that such purchase in the amount of
$.8 million was on an arm's length basis at a price no less favorable than that
at which WCI could obtain from unaffiliated entities.
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<PAGE>
DESCRIPTION OF THE NOTES
The Old Notes were and the Exchange Notes will be issued under the
Indenture, authorizing the issuance of up to $120.0 million in aggregate
principal amount of Notes. The following summary of the material provisions of
the Indenture does not purport to be complete and is subject to, and qualified
in its entirety by, reference to the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"), as in effect on the date of the Indenture. A copy of the Indenture is
filed as an exhibit to the Registration Statement. The definitions of certain
capitalized terms used in the following summary are set forth below under
"--Certain Definitions." References in this section to "the Company" refer only
to Renco Steel Holdings, Inc. and not to its Subsidiaries.
GENERAL
The Notes will mature on February 1, 2005. Each Note bears interest at the
rate of 10 7/8% per annum from the date of issuance or from the most recent
interest payment date to which interest has been paid, payable semiannually in
arrears on February 1 and August 1 of each year, commencing August 1, 1998, to
the person in whose name the Note (or any predecessor Note) is registered at the
close of business on the January 15 or July 15 next preceding such interest
payment date.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the Trustee or its agent); provided that payment of interest
may be made at the option of the Company by check mailed to the registered
holders of the Notes ("Holders") at their registered addresses. The Notes will
be issued only in fully registered form without coupons, in denominations of
$1,000 and any integral multiple thereof. No service charge will be made for any
registration of transfer, exchange or redemption of Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith. Interest will be computed on the basis of a 360 day year
comprised of twelve 30 day months.
OPTIONAL REDEMPTION
The Notes will be subject to redemption, in whole or in part, at the option
of the Company, at any time on or after February 1, 2002, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued interest to the redemption date, if redeemed during the twelve month
period beginning on February 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002.......................................................... 105.438%
2003.......................................................... 102.719%
2004 and thereafter........................................... 100.000%
</TABLE>
OPTIONAL REDEMPTION UPON EQUITY OFFERINGS
In addition, at any time prior to February 1, 2001, the Company may redeem
up to 33 1/3% of the aggregate principal amount of the Notes originally issued
with the proceeds of one or more Equity Offerings at a redemption price
(expressed as a percentage of principal amount) of 111% plus accrued interest to
the redemption date; PROVIDED that at least $80 million aggregate principal
amount of Notes remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with the proceeds of any Equity
Offering, the Company shall make such redemption not more than 120 days after
the consummation of any such Equity Offering. "Equity Offering" means an
offering of Qualified Capital Stock of the Company (other than to any Subsidiary
of the Company).
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<PAGE>
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which such Notes are listed or, if such Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED, HOWEVER, that (i) no Notes of
a principal amount of $1,000 or less shall be redeemed in part and (ii) a
redemption with the net cash proceeds of an Equity Offering shall be made on a
pro rata basis unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption.
RANKING; HOLDING COMPANY STRUCTURE
The indebtedness of the Company evidenced by the Notes ranks senior in right
of payment to all senior subordinated and subordinated indebtedness of the
Company, and PARI PASSU with all other existing and future senior indebtedness
of the Company.
The Company is a holding company with no material operations of its own and
only limited assets. Accordingly, the Company is dependent upon the distribution
of the earnings of WCI and any future Subsidiaries of the Company, whether in
the form of dividends, advances or payments on account of intercompany
obligations, to service its debt obligations, and on the earnings of the
Investments made with a portion of the proceeds of the Old Notes Offering. In
addition, the claims of the Holders of Notes are subject to the prior payment of
all liabilities (whether or not for borrowed money) and to any preferred stock
interest of WCI and any such Subsidiaries. There can be no assurance that, after
providing for all prior claims, there would be sufficient assets available from
the Company and its Subsidiaries to satisfy the claims of the Holders of Notes.
See "Risk Factors--Relating to the Company--Holding Company Structure;
Refinancing Risk; Structural Subordination."
SECURITY
The Old Notes are and the Exchange Notes will be secured by a first priority
security interest in (i) all of the Capital Stock of WCI now owned or from time
to time acquired by the Company (the "WCI Pledged Stock") and (ii) all
dividends, distributions, interests, cash, instruments and other property and
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for the WCI Pledged Stock and any account, instrument
or security in which the WCI Pledged Stock is deposited or invested, including
any earnings thereon (together with the WCI Pledged Stock, the "Collateral").
The Company has entered into a pledge agreement (the "Pledge Agreement")
providing for the first priority pledge by the Company to State Street Bank and
Trust Company, as collateral agent (the "Collateral Agent"), of all of the WCI
Pledged Stock. Such pledge secures the payment and performance when due of all
of the obligations of the Company under the Indenture and the Notes as provided
in the Pledge Agreement.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the Indenture and the Pledge
Agreement, the Company will be entitled to receive all cash dividends and other
distributions (other than Extraordinary Distributions) made upon or with respect
50
<PAGE>
to the WCI Pledged Stock and to exercise any voting and other consensual rights
pertaining to the WCI Pledged Stock. The Pledge Agreement provides that, upon
receipt by the Company of an Extraordinary Distribution on the WCI Pledged
Stock, the Company shall deliver such Extraordinary Distribution to the Trustee
to be held as Collateral (with any necessary endorsement and accompanied by any
documentation necessary to ensure that, and evidence that, a first priority
perfected security interest is being created therein). Upon the occurrence and
during the continuance of an Event of Default, (i) all rights of the Company to
exercise such voting or other consensual rights shall cease, and all such rights
shall become vested in the Collateral Agent, which, to the extent permitted by
law, shall have the sole right to exercise such voting and other consensual
rights, (ii) all rights of the Company to receive all cash dividends and other
distributions made upon or with respect to the WCI Pledged Stock will cease and
such cash dividends and other distributions (including Extraordinary
Distributions) will be paid to the Collateral Agent and (iii) the Collateral
Agent may sell the WCI Pledged Stock or any part thereof in accordance with the
terms of the Pledge Agreement. All funds distributed under the Pledge Agreement
and received by the Collateral Agent for the benefit of the Holders of the Notes
will be distributed by the Collateral Agent pro rata to the Holders of Notes in
accordance with the provisions of the Indenture and the Pledge Agreement.
Under the terms of the Pledge Agreement, the Collateral Agent will determine
the circumstances and manner in which the WCI Pledged Stock shall be disposed
of, including, but not limited to, the determination of whether to release all
or any portion of the WCI Pledged Stock from the Liens created by the Pledge
Agreement and whether to foreclose on the WCI Pledged Stock following an Event
of Default. Moreover, upon the full and final payment and performance of all
obligations of the Company under the Indenture and the Notes, the Pledge
Agreement shall terminate and the Lien on the WCI Pledged Stock shall be
released.
Upon satisfaction by the Company of the conditions to its legal defeasance
or covenant defeasance or the discharge of the Indenture in accordance with its
terms, the Lien of the Indenture on all of the Collateral will terminate and all
the Collateral will be released without any further action on the part of the
Collateral Agent or any other person. In addition, the Indenture and the Pledge
Agreement provide that the WCI Pledged Stock will be released from the Lien of
the Indenture and the Pledge Agreement in the event that all of the Capital
Stock of WCI owned by the Company is sold by the Company to a person who is not
an Affiliate of the Company and the sale complies with the provisions set forth
below under
"--Certain Covenants--Limitation on Sale of Assets."
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Trustee to repossess and dispose of the Collateral upon the
occurrence of an Event of Default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or
against the Company prior to the trustee having repossessed and disposed of the
Collateral. Under the United States Bankruptcy Code, a secured creditor such as
the Trustee is prohibited from repossessing its security from a debtor in a
bankruptcy case, or from disposing of security repossessed from such debtor,
without bankruptcy court approval. Moreover, the United States Bankruptcy Code
permits the debtor to continue to retain and to use collateral even though the
debtor is in default under the applicable debt instruments, provided that the
secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended in
general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional security,
if and at such times as the court in its discretion determines, for any
diminution in the value of the Collateral as a result of the stay of
repossession or disposition or any use of the collateral by the debtor during
the pendency of the bankruptcy case. In view of the lack of a precise definition
of the term "adequate protection" and the broad discretionary powers of a
bankruptcy court, it is impossible to predict how long payments under the Notes
could be delayed following commencement of a bankruptcy case, whether or when
the Trustee could repossess or dispose of
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<PAGE>
the Collateral or whether or to what extent holders of the Notes would be
compensated for any delay in payment or loss of value of the Collateral through
the requirement of "adequate protection."
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK
(a) The Company will not (i) create, incur, assume, guarantee, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for the payment of (collectively "incur") any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness or (ii)
issue any Disqualified Capital Stock.
(b) The Company shall not in any event incur any Indebtedness which by its
terms (or by the terms of any agreement governing such Indebtedness) is
subordinated to any other Indebtedness of the Company unless such Indebtedness
is also by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinated to the Notes to the same extent and in
the same manner as such Indebtedness is subordinated to such other Indebtedness
of the Company.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not after the Issue Date (a) declare or pay any dividend or
make any distribution on the Company's Capital Stock or make any payment to
holders of such Capital Stock (other than dividends or distributions payable in
Qualified Capital Stock of the Company, repayment of Indebtedness permitted to
be incurred under the Indenture or the reimbursement of expenses paid on behalf
of the Company) or (b) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company or any warrants, rights or options to purchase
or acquire shares of any class of such Capital Stock (each of the foregoing
actions set forth in clauses (a) and (b) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after giving
effect thereto, (i) a Default or an Event of Default shall have occurred and be
continuing or (ii) Restricted Payments made subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, shall be the Fair
Market Value of such property proposed to be transferred by the Company pursuant
to such Restricted Payment) shall exceed the sum of:
(x) 50% of the cumulative Net Cash Income (or if cumulative Net Cash
Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to January 31, 1998 and prior to the date the Restricted Payment
occurs (treating such period as a single accounting period); and
(y) 100% of the aggregate net proceeds, including the Fair Market Value
of property other than cash, received by the Company from any person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to
the Issue Date of Qualified Capital Stock of the Company (excluding (A)
Qualified Capital Stock paid as a dividend on any Capital Stock or as
interest on any Indebtedness, (B) any net proceeds from issuances and sales
financed directly or indirectly using funds borrowed from the Company or any
Subsidiary of the Company, until and to the extent such borrowing is repaid
and (C) any net proceeds from any Equity Offering which are used to redeem
Notes pursuant to, and in accordance with, the provisions described under
the caption "--Optional Redemption--Optional Redemption Upon Equity
Offerings" above);
The foregoing provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of its
declaration if the dividend would have been permitted on the date of
declaration;
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<PAGE>
(2) the acquisition of Capital Stock of the Company either (i) solely in
exchange for shares of Qualified Capital Stock or (ii) through the
application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock;
(3) the making of payments by the Company to Renco (A) no earlier than
ten days prior to the date on which Renco is required to make its payments
to the Internal Revenue Service or the applicable state taxing authority, as
the case may be, pursuant to a tax sharing agreement between the Company and
Renco (which tax sharing agreement provides that the payments thereunder
shall not exceed the amount the Company would have been required to pay for
taxes on a stand-alone basis, except that the Company will not have the
benefit of any of its tax loss carryforwards unless such tax losses were a
result of timing differences between the Company's accounting for tax and
financial reporting purposes, and which tax sharing agreement also provides
that transactions between the Company and Renco and Renco's other
Subsidiaries are accounted for on a cash basis and not on an accrual basis)
and (B) to reimburse Renco for out of pocket insurance payments made by
Renco on behalf of the Company; and
(4) the payment by the Company of a dividend to Renco on the Issue Date
in an amount not to exceed $100.0 million;
PROVIDED that in the case of clause (2) no Default or Event of Default shall
have occurred and be continuing at the time of such payment or as a result
thereof.
In determining the aggregate amount of Restricted Payments permissible under
clause (ii) of the first paragraph of this section, amounts expended, incurred
or outstanding pursuant to clauses (1) and (2) (but not pursuant to clauses (3)
and (4)), of the second paragraph of this section shall be included as
Restricted Payments; PROVIDED that any proceeds received from the issuance of
Qualified Capital Stock pursuant to clause (2) of the second paragraph of this
section shall be included in calculating the amount referred to in clause (y) of
the first paragraph of this section.
LIMITATION ON SALE OF ASSETS
(a) The Company will not consummate any Asset Sale unless (i) such Asset
Sale is for at least Fair Market Value, (ii) at least 80% of the consideration
therefrom received by the Company is in the form of cash or Cash Equivalents,
(iii) if such Asset Sale involves the sale of Capital Stock of WCI it shall be
in compliance with the provisions of clause (b) below," and (iv) the Company
shall apply the Net Cash Proceeds of such Asset Sale (the "Available Amount")
within 180 days of receipt thereof to make an offer to purchase (the "Asset Sale
Offer") from all Holders of Notes, up to a maximum principal amount (expressed
as a multiple of $1,000) of Notes equal to the Available Amount, at a purchase
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase; PROVIDED, HOWEVER, that the
Company will not be required to apply, pursuant to this paragraph (a), Net Cash
Proceeds received from any Asset Sale if, and only to the extent that, such Net
Cash Proceeds are applied in compliance with the "Limitation on Business
Activities" covenant within 180 days of such Asset Sale; PROVIDED, FURTHER, that
if at any time any non-cash consideration received by the Company in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash,
then such conversion or disposition shall be deemed to constitute an Asset Sale
under the Indenture and the Net Cash Proceeds thereof shall be applied in
accordance with this "Limitation on Sale of Assets" covenant; PROVIDED, FURTHER,
that the Company may defer the Asset Sale Offer until there is an aggregate
unutilized Available Amount equal to or in excess of $5.0 million resulting from
one or more Asset Sales (at which time, the entire unutilized Available Amount,
and not just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph).
(b) Notwithstanding anything to the contrary contained in clause (a) above
or in the Indenture, the Company may not sell any of the Capital Stock of WCI
unless such Asset Sale involves the sale of all of the Capital Stock of WCI and
the Company uses the Net Cash Proceeds of such Asset Sale within 60 days of
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receipt thereof to make an offer to purchase from all Holders of Notes, up to a
maximum principal amount (expressed as a multiple of $1,000) of Notes equal to
the Net Cash Proceeds of such Asset Sale, at a purchase price equal to the sum
of the principal amount of the Notes plus the Applicable Premium plus accrued
and unpaid interest thereon, if any, to the date of purchase. Any such offer to
purchase Notes with the Net Cash Proceeds of an Asset Sale involving the sale of
all of the Capital Stock of WCI shall comply with all the procedural and other
requirements set forth herein and in the Indenture for an Asset Sale Offer.
(c) In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Subsidiaries as an entirety to a
person in a transaction permitted under "--Merger, Consolidation, Etc." below,
the successor corporation shall be deemed to have sold the properties and assets
of the Company and its Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the Fair Market Value
of such properties and assets of the Company or its Subsidiaries deemed to be
sold shall be deemed to be Net Cash Proceeds for purposes of this covenant.
(d) Notice of an Asset Sale Offer will be mailed to the record Holders as
shown on the register of Holders not less than 30 days nor more than 60 days
before the payment date for the Asset Sale Offer, with a copy to the Trustee,
and shall comply with the procedures set forth in the Indenture. Upon receiving
notice of the Asset Sale Offer, Holders may elect to tender their Notes in whole
or in part in integral multiples of $1,000 principal amount at maturity in
exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Available Amount, Notes of tendering Holders will be repurchased
on a pro rata basis (based on amounts tendered). An Asset Sale Offer shall
remain open for a period of 20 business days or such longer period as may be
required by law.
(e) If an offer is made to repurchase the Notes pursuant to an Asset Sale
Offer, the Company will comply with all tender offer rules under state and
Federal securities laws, including, but not limited to, Section 14(e) under the
Exchange Act and Rule 14e-1 thereunder, to the extent applicable to such offer.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company shall be obligated
to make an offer to purchase (a "Change of Control Offer"), and shall, subject
to the provisions described below, purchase, on a business day (the "Change of
Control Purchase Date") not more than 60 nor less than 45 days following the
occurrence of the Change of Control, all of the then outstanding Notes at a
purchase price (the "Change of Control Purchase Price") equal to 101% of the
principal amount of the Notes plus accrued and unpaid interest thereon to the
date of purchase. The Company shall, subject to the provisions described below,
be required to purchase all Notes validly tendered into the Change of Control
Offer and not withdrawn. The Change of Control Offer is required to remain open
for at least 20 business days and until the close of business on the Change of
Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, mail to each Holder of
Notes notice of the Change of Control Offer, which notice shall govern the terms
of the Change of Control Offer and shall state, among other things, the
procedures that Holders of Notes must follow to accept the Change of Control
Offer.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by Holders of Notes
seeking to accept the Change of Control Offer. The Company shall not be required
to make a Change of Control Offer upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements applicable to a Change of Control Offer made by
the Company and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
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The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above.
LIMITATION ON LIENS
The Company will not create, incur, assume or suffer to exist any Liens (i)
upon any item of Collateral other than the Liens created by the Notes, the
Indenture and the Pledge Agreement and (ii) upon any other properties or assets
of the Company whether owned on the Issue Date or acquired after the Issue Date,
or on any income or profits therefrom, or assign or otherwise convey any right
to receive income or profits thereon other than (A) in the case of clause (ii)
only, Liens securing Indebtedness permitted to be incurred pursuant to clause
(i) of the definition of Permitted Indebtedness and (B) in the case of clauses
(i) and (ii), Permitted Liens.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
(a) The Company will not enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with or for the benefit of, an
Affiliate of the Company (an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under (b) below and (y) Affiliate Transactions (including
lease transactions) on terms that are no less favorable to the Company in the
aggregate than those that might reasonably have been obtained in a comparable
transaction by the Company on an arm's-length basis (as determined in good faith
by the Board of Directors of the Company, as evidenced by a Board Resolution)
from a person that is not an Affiliate; PROVIDED that except as otherwise
provided by (b) below, the Company shall not enter into an Affiliate Transaction
or series of related Affiliate Transactions involving or having a value of more
than $5.0 million unless the Company received an opinion from an Independent
Financial Advisor, with a copy thereof to the Trustee, to the effect that the
financial terms of such Affiliate Transaction are fair and reasonable to the
Company, and such terms are no less favorable to the Company than those that
could be obtained in a comparable transaction on an arm's-length basis with a
person that is not an Affiliate.
(b) The foregoing provisions shall not apply to (i) any Restricted Payment
that is made in compliance with the provisions under "--Limitation on Restricted
Payments" and (ii) reasonable and customary regular fees to directors of the
Company who are not employees of the Company.
(c) Notwithstanding anything to the contrary contained in clauses (a) or (b)
above or in the Indenture, the Company shall not make any Investment after the
Issue Date in any person in which Renco or any of its Affiliates (other than the
Company and its Subsidiaries) owns any Capital Stock.
OWNERSHIP OF WCI STOCK
Other than the sale of all of the Capital Stock of WCI in compliance with
clause (b) of the "Limitation on Sale of Assets" covenant above, the Company
will at all times be the legal and beneficial owner of all of the outstanding
Capital Stock of WCI.
LIMITATION ON BUSINESS ACTIVITIES
The Company will not engage in any business other than (i) the ownership of
the Capital Stock of WCI and (ii) the investing and reinvesting of the assets of
the Company other than the Capital Stock of WCI, and the application of any
proceeds therefrom, at the discretion of the Company.
IMPAIRMENT OF SECURITY INTEREST
The Company will not, and will not permit any of its Subsidiaries to, take
or omit to take any action which action or omission might or would have the
result of affecting or impairing the security interest in
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favor of the Trustee, on behalf of itself and the Holders of the Notes, with
respect to the Collateral, and the Company shall not grant to any person (other
than the Trustee on behalf of itself and the Holders of the Notes) any interest
whatsoever in the Collateral other than Liens permitted by the Indenture and the
Pledge Agreement.
AMENDMENT TO PLEDGE AGREEMENT
The Company will not, and will not permit any of its Subsidiaries to, amend,
modify or supplement or permit or consent to any amendment, modification or
supplement of, the Pledge Agreement in any way which would be adverse to the
Holders of the Notes or which would constitute a Default under the Indenture or
the Pledge Agreement.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Company will not, and will not permit any of its Subsidiaries or
controlled Affiliates to, conduct its business in a fashion that would cause the
Company to be required to register as an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act")), or otherwise become subject to regulation under the Investment
Company Act.
REPORTS
So long as any Note is outstanding, the Company will file with the
Commission and, within fifteen days after it files them with the Commission,
file with the Trustee and mail or cause the Trustee to mail to the Holders at
their addresses as set forth in the register of the Notes copies of the annual
reports on Form 10-K and of the information, documents and other reports which
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act or which the Company would be required to file with
the Commission if the Company then had a class of securities registered under
the Exchange Act. Such financial information shall include annual reports
containing consolidated financial statements and notes thereto, together with an
opinion thereon expressed by an independent public accounting firm, management's
discussion and analysis of financial condition and results of operations as well
as quarterly reports containing unaudited condensed consolidated financial
statements for the first three quarters of every fiscal year.
MERGER, CONSOLIDATION, ETC.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
any person or adopt a Plan of Liquidation unless: (i) either (1) the Company
shall be the surviving or continuing corporation or (2) the person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the person which acquires by conveyance, transfer or lease the
properties and assets of the Company substantially as an entirety or in the case
of a Plan of Liquidation, the person to which assets of the Company have been
transferred (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of, and premium, if any, and interest on all
of the Notes and the performance of every covenant of the Notes and the
Indenture on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (y) above, the Company (in the case of clause (1) of the
foregoing clause (i)) or such person (in the case of clause (2) thereof) shall
have a Consolidated Net Worth (immediately after the transaction but prior to
any purchase accounting adjustments relating to such transaction) equal to or
greater than the Consolidated Net Worth of the Company immediately prior to such
transaction; (iii) immediately before and after giving effect to such
transaction and the assumption contemplated by clause (y) above (including
giving effect to any Indebtedness and Acquired Indebtedness
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incurred or anticipated to be incurred in connection with or in respect of the
transaction), no Default and no Event of Default shall have occurred or be
continuing; (iv) the Company or such person shall have delivered to the Trustee
(A) an Officers' Certificate and an Opinion of Counsel (which counsel shall not
be in-house counsel of the Company) each stating that such consolidation,
merger, conveyance, transfer or lease or Plan of Liquidation and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, comply with this provision of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied and (B) a certificate from the Company's independent certified public
accountants stating that the Company has made the calculation required by clause
(ii) above in accordance with the terms of the Indenture; and (v) neither the
Company nor any Subsidiary of the Company nor such person, as the case may be,
would thereupon become obligated with respect to any Indebtedness (including
Acquired Indebtedness), nor any of its property or assets subject to any Lien,
unless the Company or such Subsidiary or such person, as the case may be, could
incur such Indebtedness (including Acquired Indebtedness) or create such Lien
under the Indenture (giving effect to such person being bound by all the terms
of the Indenture).
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor person formed by such consolidation
or into which the Company is merged or to which such conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise every
right and power of, the Company under the Indenture with the same effect as if
such successor had been named as the Company therein, and thereafter (except in
the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under the Indenture and the Notes.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(a) the Company defaults in the payment of interest on the Notes when
the same becomes due and payable and the Default continues for a period of
30 days;
(b) the Company defaults in the payment of the stated principal amount
of the Notes when the same becomes due and payable at maturity, upon
acceleration or redemption pursuant to an offer to purchase required under
the Indenture or otherwise;
(c) the Company fails to comply in all material respects with any of its
other agreements contained in the Notes, the Indenture (including, without
limitation, under the provisions of "-- Certain Covenants--Change of
Control," "--Certain Covenants--Limitation on Sale of Assets" and "--Merger,
Consolidation, Etc.") or the Pledge Agreement, and the Default continues for
the period and after the notice specified below;
(d) there shall be any default or defaults in the payment of principal
or interest under one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of Indebtedness under which the Company or WCI
then has outstanding Indebtedness in excess of $7.5 million, individually or
in the aggregate;
(e) there shall be any default or defaults under one or more agreements,
instruments, mortgages, bonds, debentures or other evidences of Indebtedness
under which the Company or WCI then has outstanding Indebtedness in excess
of $7.5 million, individually or in the aggregate, and such default or
defaults have resulted in the acceleration of the maturity of such
Indebtedness;
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(f) the Company or WCI fails to perform any term, covenant, condition or
provision of one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of Indebtedness under which the Company or WCI
then has outstanding Indebtedness in excess of $7.5 million, individually or
in the aggregate, and such failure to perform results in the commencement of
judicial proceedings to foreclose upon any assets of the Company or WCI
securing such Indebtedness or the holders of such Indebtedness shall have
exercised any right under applicable law or applicable security documents to
take ownership of any such assets in lieu of foreclosure;
(g) one or more judgments, orders or decrees for the payment of money
which either individually or in the aggregate at any one time exceeds $7.5
million shall be rendered against the Company or WCI by a court of competent
jurisdiction and shall remain undischarged and unbonded for a period (during
which execution shall not be effectively stayed) of 60 consecutive days
after such judgment becomes final and nonappealable;
(h) the Company or WCI (1) admits in writing its inability to pay its
debts generally as they become due, (2) commences a voluntary case or
proceeding under any Bankruptcy Law with respect to itself, (3) consents to
the entry of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Law, (4) consents to the
appointment of a Custodian of it or for substantially all of its property,
(5) consents to or acquiesces in the institution of a bankruptcy or an
insolvency proceeding against it, (6) makes a general assignment for the
benefit of its creditors, or (7) takes any corporate action to authorize or
effect any of the foregoing;
(i) a court of competent jurisdiction enters a judgment, decree or order
for relief in respect of the Company or WCI in an involuntary case or
proceeding under any Bankruptcy Law, which shall (1) approve as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or WCI, (2) appoint a Custodian of the
Company or WCI or for substantially all of its property or (3) order the
winding-up or liquidation of its affairs, and such judgment, decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or
(j) the Pledge Agreement ceases to be in full force and effect or the
Pledge Agreement ceases to give the Trustee the Liens, rights, powers and
privileges purported to be created thereby in any material respect.
A Default under clause (c) above (other than in the case of any Default
under the provisions of "--Certain Covenants--Limitation on Sale of Assets,"
"--Certain Covenants--Change of Control,"
"--Certain Covenants--Ownership of WCI Stock," "--Certain Covenants--Limitation
on Business Activities" or "--Merger, Consolidation, Etc.," which Defaults shall
be Events of Default without the notice and without the passage of time
specified in this paragraph) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 25% in principal amount of the
outstanding Notes notify the Company and the Trustee, of the Default and the
Company does not cure the Default within 30 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default." Such notice shall be given by the Trustee
if so requested by the Holders of at least 25% in principal amount of the Notes
then outstanding.
If an Event of Default (other than an Event of Default specified in clause
(h) or (i) above) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
then outstanding Notes may declare the unpaid principal of, premium, if any, and
accrued and unpaid interest on, all the Notes then outstanding to be due and
payable, by a notice in writing to the Company (and to the Trustee, if given by
Holders) and upon such declaration such principal amount, premium, if any, and
accrued and unpaid interest will become immediately due and payable,
notwithstanding anything contained in the Indenture or the Notes to the
contrary. If an Event of Default specified in clause (h) or (i) above occurs,
all unpaid principal of, and premium, if any, and accrued and unpaid interest
on, the Notes then outstanding will ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
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Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to the provisions of the Indenture relating
to the duties of the Trustee, the Trustee is under no obligation to exercise any
of its rights or powers under the Indenture at the request, order or direction
of any of the Holders, unless such Holders have offered to the Trustee
reasonable indemnity. Subject to all provisions of the Indenture and applicable
law, the Holders of a majority in aggregate principal amount of the then
outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee may withhold from
Holders notice of any continuing Default or Event of Default (except a Default
or Event of Default in the payment of principal of or premium, if any, or
interest on the Notes or that resulted from the failure to comply with the
provisions of "--Certain Covenants--Change of Control" or "--Merger,
Consolidation, Etc.") if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and premium, if any, and interest on the Notes which has become due
solely by virtue of such acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding may, on behalf of the Holders of all the Notes, waive any past
Default or Event of Default under the Indenture and its consequences, except
Default in the payment of principal of or premium, if any, or interest on the
Notes or in respect of a covenant or provision of the Indenture which cannot be
modified or amended without the consent of all Holders.
Under the Indenture, the Company is required to provide an Officers'
Certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof. In addition, for each fiscal year, the
Company's independent certified public accountants are required to certify to
the Trustee that they have reviewed the terms of the Indenture and the Notes as
they relate to accounting matters and whether, during the course of their audit
examination, any Default or Event of Default has come to their attention, and
specifying the nature and period of existence of any such Default or Event of
Default.
AMENDMENT, SUPPLEMENT AND WAIVER
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the then outstanding Notes, to enter into any supplemental
indenture for the purpose of adding, changing or eliminating any of the
provisions of the Indenture or the Pledge Agreement or of modifying in any
manner the rights of the Holders under the Indenture or the Pledge Agreement;
PROVIDED that no such supplemental indenture may without the consent of the
Holder of each outstanding Note affected thereby: (i) reduce the amount of Notes
whose holders must consent to an amendment or waiver; (ii) reduce the rate of,
or extend the time for payment of, interest, including defaulted interest, on
any Note; (iii) reduce the principal of or premium on or change the fixed
maturity of any Note or alter the redemption provisions with respect thereto;
(iv) make the principal of, or interest on, any Note payable in money other than
as provided for in the Indenture and the Notes; (v) make any change in
provisions relating to waivers of defaults, the ability of Holders to enforce
their right under the Indenture or the Pledge Agreement or in the matters
discussed in these clauses (i) through (ix); (vi) waive a default in the payment
of principal of or interest on, or redemption or repurchase payment with respect
to, any Notes, including, without limitation, a failure to make payment when
required upon a Change of Control or after an Asset Sale Offer (including an
offer to purchase with respect to an Asset Sale involving the Capital Stock of
WCI); (vii) adversely affect the ranking of the
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Notes; (viii) change the Maturity Date or alter the redemption provisions in a
manner adverse to Holders; or (ix) after the Company's obligation to purchase
the Notes arises thereunder, amend, modify or change the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or an Asset Sale Offer in the event of an Asset Sale
(including an Asset Sale involving the Capital Stock of WCI) or waive any
default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers.
In addition to the foregoing, other than in compliance with the Indenture
(including the provisions of the "Limitation on Sale of Assets" covenant), no
portion of the Collateral may be released without the consent of the Holders of
at least 75% in aggregate principal amount of the then outstanding Notes.
DEFEASANCE
The Indenture provides that the Company may terminate its obligations under
the Notes, the Indenture and the Pledge Agreement if: (i) all Notes previously
authenticated and delivered have been delivered to the Trustee for cancellation
or the Company has paid all sums payable by it thereunder, or (ii) the Company
has irrevocably deposited or caused to be deposited with the Trustee or the
Paying Agent and conveyed all right, title and interest for the benefit of the
Holders of such Notes, under the terms of an irrevocable trust agreement in form
and substance satisfactory to the Trustee, as trust funds in trust solely for
the benefit of the Holders for that purpose, money or United States government
obligations maturing as to principal and interest in such amounts and at such
times as are sufficient without consideration of any reinvestment of such
interest to pay principal of, premium, if any, and interest on such outstanding
Notes to maturity; PROVIDED that, among other things, the Company shall have
delivered to the Trustee (i) either (a) a ruling directed to the Trustee
received from the Internal Revenue Service to the effect that the Holders of
such Notes will not recognize income, gain or loss for Federal income tax
purposes as a result of the Company's exercise of its option under the
defeasance provision of the Indenture and will be subject to Federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if such option had not been exercised or (b) an Opinion of Counsel
to the same effect as the ruling described in clause (a) above accompanied by a
ruling to that effect published by the Internal Revenue Service, unless there
has been a change in the applicable Federal income tax law since the date of the
Indenture such that a ruling from the Internal Revenue Service is no longer
required, and (ii) an Opinion of Counsel to the effect that, after the passage
of 90 days following the deposit, assuming no intervening bankruptcy and that no
Holder of a Note is an insider of the Company, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally. Certain obligations of
the Company under the Indenture or the Notes, including the payment of interest
and principal, shall remain in full force and effect until such Notes have been
paid in full. Notwithstanding the foregoing, the Opinion of Counsel required
above with respect to a defeasance need not be delivered if all Notes not
theretofore delivered to the Trustee for cancellation (x) have become due and
payable or (y) will become due and payable on the maturity date within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.
GOVERNING LAW
The Indenture provides that it, the Pledge Agreement and the Notes are
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
State Street Bank and Trust Company is serving as Trustee under the
Indenture.
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The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person or any of its
Subsidiaries assumed by the Company in connection with the acquisition of assets
by the Company from such person.
"Affiliate" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative of the
foregoing. For purposes of "--Certain Covenants--Limitation on Transactions with
Affiliates," the term "Affiliate" shall include any person who, as a result of
any transaction described therein, would become an Affiliate.
"Applicable Premium" means, with respect to a Note, the excess of (A) the
present value of all remaining required interest and principal payments due on
such Note, computed using a discount rate equal to the Treasury Rate plus 100
basis points, over (B) the then outstanding principal amount of such Note;
PROVIDED, HOWEVER, that in no event will the Applicable Premium exceed the
amount of the applicable redemption price upon an optional redemption less 100%
of the then outstanding principal amount of such Note at any time on or after
February 1, 2002.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by the Company to any
person, in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of the Company; or (ii) any other properties or
assets of the Company. For the purposes of this definition, the term "Asset
Sale" shall not include any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets that is consummated in accordance with the
provisions of "--Merger, Consolidation, Etc." above.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participation or other equivalents (however designated) of such
person's capital stock, whether outstanding at the Issue Date or issued after
the Issue Date, and any and all rights, warrants or options exchangeable for or
convertible into such capital stock (but excluding any debt security that is
exchangeable for or convertible into such capital stock).
"Capitalized Lease Obligation" means, as to any person, the obligations of
such person under a Capital Lease and, for purposes of this Indenture, the
amount of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit
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<PAGE>
of the United States, in each case maturing within two years from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within two years from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P"), or Moody's Investors
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than two
years from the date of creation thereof and, at the time of acquisition, having
a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within two years from
the date of acquisition thereof issued by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $500,000,000; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company or Renco to any person or group of related persons for purposes of
Section 13(d) of the Exchange Act (a "Group") (other than a Permitted Holder or
a Group controlled by a Permitted Holder), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of the Indenture);
(ii) the approval by the holders of Capital Stock of the Company or Renco, as
the case may be, of any plan or proposal for the liquidation or dissolution of
the Company or Renco, as the case may be (whether or not otherwise in compliance
with the provisions of the Indenture); (iii) the acquisition in one or more
transactions of "beneficial ownership" (within the meaning of Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) by any person, entity or Group (other than a Permitted Holder or a
Group controlled by any Permitted Holder) of any Capital Stock of the Company or
Renco such that, as a result of such acquisition, such person, entity or Group
either (A) beneficially owns (within the meaning of Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, more than 50% of the Company's or
Renco's then outstanding voting securities entitled to vote on a regular basis
in an election for a majority of the Board of Directors of the Company or Renco
or (B) otherwise has the ability to elect, directly or indirectly, a majority of
the members of the Company's or Renco's Board of Directors; or (iv) the
shareholders of Renco as of the Issue Date and the Permitted Holders shall cease
to own at least 50% of the equity of Renco owned by such shareholders on the
Issue Date.
"Commission" means the Securities and Exchange Commission.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Subsidiaries, on a consolidated
basis for such period determined in accordance with GAAP; provided that (i) the
net income of any person in which such person or any Subsidiary of such person
has an ownership interest with a third party shall be included only to the
extent of the amount that has actually been received by such person or its
Wholly-Owned Subsidiaries in the form of dividends or other distributions during
such period (subject to, in the case of any dividend or distribution received by
a Wholly-Owned Subsidiary of such Person, the restrictions set forth in clause
(ii) below) and (ii) the net income of any Subsidiary of such person that is
subject to any restriction or limitation on the payment of dividends or the
making of other distributions shall be excluded to the extent of such
restriction or limitation; provided, further, that there shall be excluded (a)
the net income (or loss) of any person (acquired in a pooling of interests
transaction) accrued prior to the date it becomes a Subsidiary of such person or
is merged into or consolidated with such person or any Subsidiary of such
person, (b) any net
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<PAGE>
gain (or loss) resulting from an Asset Sale by such person or any of its
Subsidiaries and (c) any extraordinary, unusual or nonrecurring gains or losses
(and related tax effects) in accordance with GAAP.
"Consolidated Net Worth" means, with respect to any person at any date, the
sum of (i) the consolidated stockholders' equity of such person less the amount
of such stockholders' equity attributable to Disqualified Capital Stock of such
person and its Subsidiaries, as determined on a consolidated basis in accordance
with GAAP consistently applied and (ii) the amount of any Preferred Stock of
such person not included in the stockholders' equity of such person in
accordance with GAAP, which Preferred Stock does not constitute Disqualified
Capital Stock.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Capital Stock" means any class of Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date.
"Event of Default" has the meaning set forth under "--Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extraordinary Distribution" means any and all dividends, cash, instruments
and other property and proceeds received, receivable or otherwise distributed on
WCI Pledged Stock constituting (i) any liquidating dividend or other liquidating
distribution or other similar extraordinary dividend or distribution; (ii) any
dividend or other distribution in respect of WCI Pledged Stock in the form of
Capital Stock or any other property or assets (including cash and Cash
Equivalents) to the extent the Fair Market Value (determined at the time of the
dividend or distribution) of all dividends and other distributions in respect of
WCI Pledged Stock made on or after the Issue Date to and including the date of
such dividend or other distribution exceeds 100% of the Consolidated Net Income
of WCI accrued on a cumulative basis subsequent to January 31, 1998.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value of any asset of the
Company and its Subsidiaries shall be determined by the Board of Directors of
the Company acting in good faith and shall be evidenced by a Board Resolution
thereof delivered to the Trustee; PROVIDED that with respect to any Asset Sale
which involves in excess of $5.0 million, the Fair Market Value of any such
asset or assets shall be determined by an Independent Financial Advisor.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Indebtedness" means with respect to any person, without duplication, (i)
all obligations of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such person, (iv) all obligations of such
person issued or assumed as the deferred purchase price of property or services,
all conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable, accrued expenses and deferred
taxes arising in the ordinary course of business), (v) all obligations of such
person for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction entered into in the ordinary course of
business, (vi) all obligations of any other person of the type referred to in
clauses (i) through (v) which are secured by any Lien on any property or asset
of such
63
<PAGE>
first person and the amount of such obligation shall be the lesser of the value
of such property or asset or the amount of the obligation so secured, (vii) all
guarantees of Indebtedness by such person, (viii) Disqualified Capital Stock
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends, (ix) all obligations under Interest
Rate Protection Obligations of such person and (x) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (i) through (ix) above. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Capital Stock, such Fair
Market Value to be determined in good faith by the Board of Directors of the
person issuing such Disqualified Capital Stock.
"Independent Financial Advisor" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is, in the reasonable and
good faith judgment of the Board of Directors of the Company, qualified to
perform the task for which such firm has been engaged and disinterested and
independent with respect to the Company and its Affiliates.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any arrangement with any other person, whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any person, any advance, loan, guarantee
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others or otherwise), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other person.
Investments shall exclude extensions of trade credit on commercially reasonable
terms in accordance with normal trade practices.
"Issue Date" means the date on which the Notes offered hereby are originally
issued under the Indenture.
"Lien" means (x) any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute and (y) any agreement to enter into any of the foregoing.
"Maturity Date" means February 1, 2005.
"Net Cash Income" means, with respect to any period, the net income (or
loss) of the Company, on an unconsolidated basis for such period determined in
accordance with GAAP excluding (i) any extraordinary, unusual or nonrecurring
gains or losses (and the related tax effects) and (ii) equity in the earnings of
Subsidiaries of the Company, but including dividends from such Subsidiaries to
the extent such amount has been received by the Company in cash or Cash
Equivalents during such period.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company) net of (i) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a
direct result of such Asset Sale and (iii) appropriate amounts to be provided by
the
64
<PAGE>
Company, as a reserve required in accordance with GAAP consistently applied
against any liabilities associated with such Asset Sale and retained by the
Company, after such Asset Sale, including, without limitation, under any
indemnification obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Trustee.
"Permitted Holders" means Ira Leon Rennert and his Affiliates, estate, heirs
and legatees, and the legal representatives of any of the foregoing, including,
without limitation, the trustee of any trust of which one or more of the
foregoing are the sole beneficiaries.
"Permitted Indebtedness" means (i) any Indebtedness of the Company in an
aggregate amount not to exceed $15 million in aggregate principal amount at any
time outstanding, (ii) any Indebtedness of the Company to Renco in an aggregate
amount not to exceed $15 million in aggregate principal amount at any time
outstanding; PROVIDED that any such Indebtedness is contractually subordinated
in right of payment to the Company's obligations under the Notes; PROVIDED,
FURTHER, that if as of any date any person other than Renco or one of its
Wholly-Owned Subsidiaries owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness pursuant to this clause
(ii), (iii) the Notes and (iv) any renewals, extensions, substitutions,
refundings, refinancings or replacements of the Notes, so long as such renewal,
extension, substitution, refunding, refinancing or replacement does not result
in an increase in the aggregate principal amount of the outstanding Indebtedness
represented thereby.
"Permitted Liens" means (i) pledges or deposits by such person under
worker's compensation laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such person is a party, or
deposits to secure public statutory obligations of such person or deposits to
secure surety or appeal bonds to which such person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, (ii)
Liens imposed by law, such as landlords', carriers', warehousemen's and
mechanics' Liens or bankers' Liens incurred in the ordinary course of business
for sums which are not yet due or are being contested in good faith and for
which adequate provision has been made, (iii) Liens for taxes not yet subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings, if adequate reserve, as may be required by GAAP, shall
have been made therefor, (iv) Liens in favor of issuers of surety bonds or
appeal bonds issued pursuant to the request of and for the account of such
person in the ordinary course of its business, (v) Liens to support trade
letters of credit issued in the ordinary course of business, (vi) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions on the use of real property,
(vii) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default and (viii) Liens permitted by the Pledge
Agreement.
"person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such person to holders of
Capital Stock of such person.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participation or other equivalents (however designated) of such
person's preferred or preference stock, whether outstanding on the date hereof
or issued after the date of the Indenture, and including, without limitation,
all classes and series of preferred or preference stock of such person.
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"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock or convertible into
or exchangeable or exercisable for Disqualified Capital Stock.
"Renco" means The Renco Group, Inc., a New York corporation, which is the
parent of the Company, or any successor thereto.
"Subsidiary" of any person means (i) any corporation of which the
outstanding capital stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such person or (ii) any other person of
which at least a majority of the voting interest under ordinary circumstances is
at the time owned, directly or indirectly, by such person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the date
fixed for repurchase of the Notes following an Asset Sale consisting of the
Capital Stock of WCI (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining life of the Notes until the Maturity Date; PROVIDED, HOWEVER,
that if the remaining life of the Notes is not equal to the constant maturity of
a United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the Maturity
Date is within one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Wholly-Owned Subsidiary" means, with respect to any person, any Subsidiary
of such person all the outstanding shares of Capital Stock (other than
directors' qualifying shares, if applicable) of which are owned directly by such
person or another Wholly-Owned Subsidiary of such person.
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<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary is based on the tax laws of the United States in
effect on the date of this Prospectus, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on or before such
date. The foregoing laws and interpretations thereof are subject to change,
which could apply retroactively.
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not be a taxable event for federal income tax purposes. A holder's holding
period for Exchange Notes will include the holding period for Old Notes. HOLDERS
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR EXCHANGE NOTES.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Old Notes that were acquired for the
account of such broker-dealer as a result of market-making or other trading
activities (other than Old Notes acquired directly from the Company or any
affiliate of the Company) may exchange such Old Notes for Exchange Notes
pursuant to the Exchange Offer; provided, that each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that for a period of 180 days
after consummation of the Exchange Offer, it will make this Prospectus, as it
may be amended or supplemented from time to time, available to any broker-dealer
for use in connection with any such resale. In addition, until , 1998,
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other holder of Exchange Notes. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after consummation of the Exchange Offer, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer and to the Company's performance of, or
compliance with, the Registration Rights Agreement (other than commissions or
concessions of any brokers or dealers) and will indemnify the holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters related to the Notes being offered hereby are being
passed upon for the Company by Cadwalader, Wickersham & Taft, New York, New
York.
EXPERTS
The audited balance sheet of Renco Steel Holdings, Inc. as of January 21,
1998 and the audited consolidated financial statements and schedule of WCI
Steel, Inc. and subsidiaries as of October 31, 1996 and 1997, and for each of
the years in the three year period ended October 31, 1997, have been included in
the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
68
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
RENCO STEEL HOLDINGS, INC.
Independent Auditors' Report............................................................................... F-2
Balance Sheet as of January 21, 1998....................................................................... F-3
Notes to Balance Sheet..................................................................................... F-4
WCI STEEL, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................................................... F-5
Consolidated Balance Sheets as of October 31, 1996 and 1997 and unaudited as of January 31, 1998........... F-6
Consolidated Statements of Operations for the years ended October 31, 1995, 1996 and 1997 and unaudited for
the three months ended January 31, 1997 and 1998......................................................... F-7
Consolidated Statements of Shareholder's Equity (Deficit) for the years ended October 31, 1995, 1996 and
1997 and unaudited for the three months ended January 31, 1998........................................... F-8
Consolidated Statements of Cash Flows for the years ended October 31, 1995, 1996 and 1997 and unaudited for
the three months ended January 31, 1997 and 1998......................................................... F-9
Notes to Consolidated Financial Statements................................................................. F-10
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholder and Board of Directors
Renco Steel Holdings, Inc.:
We have audited the accompanying balance sheet of Renco Steel Holdings, Inc.
(a wholly-owned subsidiary of The Renco Group, Inc.) as of January 21, 1998.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Renco Steel Holdings, Inc. as of
January 21, 1998, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Cleveland, Ohio
January 21, 1998
F-2
<PAGE>
RENCO STEEL HOLDINGS, INC.
BALANCE SHEET
JANUARY 21, 1998
ASSETS
<TABLE>
<S> <C>
Cash................................................................................ $ 1,000
---------
Total assets.................................................................... $ 1,000
---------
---------
</TABLE>
SHAREHOLDER'S EQUITY
<TABLE>
<S> <C>
Common stock, no par value, $.01 stated value, 850 shares authorized,
100 shares issued and outstanding................................................. $ 1
Additional paid-in capital.......................................................... 999
---------
Total shareholder's equity...................................................... $ 1,000
---------
---------
</TABLE>
See accompanying notes to the balance sheet
F-3
<PAGE>
RENCO STEEL HOLDINGS, INC.
NOTES TO BALANCE SHEET
JANUARY 21, 1998
(1) ORGANIZATION
Renco Steel Holdings, Inc. (the Company) is a holding company incorporated
in the State of Ohio on January 20, 1998 and is a wholly-owned subsidiary of The
Renco Group, Inc. (Renco).
(2) PROPOSED ISSUANCE OF SENIOR SECURED NOTES
The Company proposes to sell $120 million of senior secured notes due 2005
(the Notes). Immediately preceding such sale, Renco is expected to contribute to
the Company all the common stock of its subsidiary, WCI Steel, Inc. (WCI). To
secure the Notes, the Company will grant a first priority security interest in
the common stock of WCI. As of October 31, 1997, WCI had a shareholder's deficit
of $90.9 million. The net proceeds of the sale of the Notes will be used to pay
a $100.0 million dividend to Renco, provide approximately $15.6 million of cash
to the Company and pay fees and expenses related to the offering of the Notes.
(3)EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF THE INDEPENDENT
AUDITOR
In February 1998 the Company issued the $120 million principal amount
10.875% senior secured notes due 2005 (Notes) with a discount of $434,400. The
Company used the net proceeds of the Notes to pay a $100 million dividend to
Renco, provide cash to the Company and pay related fees and expenses.
Immediately following the issuance of the Notes and the use of proceeds thereon,
including payment of estimated transaction expenses, the Company estimates the
net proceeds to be retained by the Company to be $15.6 million. Interest on the
Notes is payable semiannually in arrears on February 1 and August 1 of each year
commencing August 1, 1998. Immediately preceding the issuance of the Notes,
Renco contributed to the Company all the common stock of its subsidiary, WCI
Steel, Inc. (WCI). To secure the Notes, the Company granted a first priority
security interest in the common stock of WCI. The indenture relating to the
Notes contains numerous covenants and prohibititions that limit the financial
activities of the Company, including among others, limitations on the incurrence
of additional indebtedness and additional liens, limitations on the payment of
dividends and requirements with respect to the sale of assets.
F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholder and Board of Directors
WCI Steel Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of WCI Steel,
Inc. and subsidiaries (a wholly-owned subsidiary of The Renco Group, Inc.) as of
October 31, 1997 and 1996, and the related consolidated statements of income,
shareholder's equity (deficit), and cash flows for each of the years in the
three-year period ended October 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of WCI Steel,
Inc. and subsidiaries as of October 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended October 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Cleveland, Ohio
December 4, 1997
F-5
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
---------------------- -----------
<S> <C> <C> <C>
1996 1997 1998
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................................. $ 90,395 $ 18,989 $ 11,666
Short-term investments.................................................... 49,146 -- --
Accounts receivable, less allowances for doubtful accounts of $1,600,
$1,627 and $1,527, respectively......................................... 65,869 65,202 70,337
Inventories............................................................... 96,675 106,293 103,747
Recoverable income taxes.................................................. -- 4,273 791
Deferred income taxes..................................................... 10,637 8,188 8,470
Prepaid expenses.......................................................... 1,244 1,640 2,066
---------- ---------- -----------
Total current assets.................................................... 313,966 204,585 197,077
Property, plant and equipment, net.......................................... 205,121 224,620 223,057
Intangible pension asset.................................................... 27,505 20,982 19,984
Other assets, net........................................................... 20,861 20,564 18,156
---------- ---------- -----------
Total assets............................................................ $ 567,453 $ 470,751 $ 458,274
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities
Current portion of long-term debt......................................... $ 2,448 $ 1,319 $ 382
Accounts payable.......................................................... 79,138 64,123 61,726
Accrued liabilities....................................................... 40,697 51,504 44,228
Income taxes.............................................................. 10,049 1,737 1,876
---------- ---------- -----------
Total current liabilities............................................... 132,332 118,683 108,212
Long-term debt, excluding current portion................................... 209,058 301,618 301,590
Deferred income taxes....................................................... 4,365 7,497 7,982
Postretirement health care benefits......................................... 81,795 85,755 87,269
Pension benefits, excluding current portion................................. 34,011 31,489 30,152
Other liabilities........................................................... 26,012 16,575 15,034
---------- ---------- -----------
Total liabilities....................................................... 487,573 561,617 550,239
---------- ---------- -----------
Shareholder's equity (deficit)
Preferred stock, par value $1,000 per share, 5,000 shares authorized, none
issued.................................................................... -- -- --
Common stock, no par value, stated value $.01 per share, 40,000,000 shares
authorized, 36,623,700, 100 and 100 shares issued at October 31, 1996 and
1997 and January 31, 1998, respectively................................... 366 -- --
Additional paid-in capital.................................................. 570 -- --
Retained earnings (deficit)................................................. 80,144 (90,866) (91,965)
Treasury stock at cost, 222,300 shares at October 31,1996................... (1,200) -- --
---------- ---------- -----------
Total shareholder's equity (deficit).................................... 79,880 (90,866) (91,965)
Commitments and contingencies............................................... -- -- --
---------- ---------- -----------
Total liabilities and shareholder's equity (deficit).................... $ 567,453 $ 470,751 $ 458,274
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
---------------------------------- ----------------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales............................................ $ 630,990 $ 660,801 $ 668,470 $ 160,907 $ 166,592
Operating costs and expenses
Cost of products sold.............................. 544,789 550,609 547,545 131,609 141,848
Depreciation and amortization...................... 21,178 22,547 23,174 5,544 6,413
Selling, general and administrative expenses....... 19,675 22,074 29,355 14,016 4,052
---------- ---------- ---------- ---------- ----------
585,642 595,230 600,074 151,169 152,313
---------- ---------- ---------- ---------- ----------
Operating income................................. 45,348 65,571 68,396 9,738 14,279
---------- ---------- ---------- ---------- ----------
Other income (expense)
Interest expense................................... (25,787) (24,968) (31,690) (7,525) (8,014)
Interest and other income, net..................... 6,212 6,545 1,239 651 299
---------- ---------- ---------- ---------- ----------
(19,575) (18,423) (30,451) (6,874) (7,715)
---------- ---------- ---------- ---------- ----------
Income before income taxes and extraordinary
loss........................................... 25,773 47,148 37,945 2,864 6,564
Income tax expense................................... 10,313 19,108 14,482 1,151 2,363
---------- ---------- ---------- ---------- ----------
Income before extraordinary loss................. 15,460 28,040 23,463 1,713 4,201
Extraordinary loss on early retirement of debt, net
of income taxes.................................... -- -- 19,606 19,606 --
---------- ---------- ---------- ---------- ----------
Net income (loss)................................ $ 15,460 $ 28,040 $ 3,857 $ (17,893) $ 4,201
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
YEARS ENDED OCTOBER 31, 1995, 1996, AND 1997
AND THREE MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL RETAINED SHAREHOLDER'S
PREFERRED COMMON PAID-IN EARNINGS TREASURY EQUITY
STOCK STOCK CAPITAL (DEFICIT) STOCK (DEFICIT)
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1994.......................... -- $ 366 $ 300 $ 43,211 -- $ 43,877
Net income........................................... -- -- -- 15,460 -- 15,460
Other................................................ -- -- 158 -- -- 158
----- ----- ----- ----------- --------- ------------
Balance at October 31, 1995.......................... -- 366 458 58,671 -- 59,495
Net income........................................... -- -- -- 28,040 -- 28,040
Dividends paid on Common Stock....................... -- -- -- (6,567) -- (6,567)
Treasury stock purchases............................. -- -- -- -- $ (1,200) (1,200)
Other................................................ -- -- 112 -- -- 112
----- ----- ----- ----------- --------- ------------
Balance at October 31, 1996.......................... -- 366 570 80,144 (1,200) 79,880
Net income........................................... -- -- -- 3,857 -- 3,857
Dividends paid on Common Stock....................... -- -- -- (118,000) -- (118,000)
Repurchase of Common Stock........................... -- (366) (901) (56,867) 1,200 (56,934)
Other................................................ -- -- 331 -- -- 331
----- ----- ----- ----------- --------- ------------
Balance at October 31, 1997.......................... -- -- -- (90,866) -- (90,866)
Net income........................................... -- -- -- 4,201 -- 4,201
Dividends paid on Common Stock....................... -- -- -- (5,300) -- (5,300)
----- ----- ----- ----------- --------- ------------
Balance at January 31, 1998.......................... -- -- -- $ (91,965) -- $ (91,965)
----- ----- ----- ----------- --------- ------------
----- ----- ----- ----------- --------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
-------------------------------- --------------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)....................................... $ 15,460 $ 28,040 $ 3,857 $ (17,893) $ 4,201
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization....................... 19,713 19,617 20,243 4,811 5,680
Amortization of deferred maintenance costs.......... 1,465 2,930 2,931 733 733
Amortization of financing costs..................... 2,180 2,180 1,435 404 337
Postretirement health care benefits................. 10,066 5,508 3,960 761 1,514
Pension benefits.................................... -- 6,507 5,101 1,500 1,361
Provision for losses on accounts receivable......... 117 (658) 27 -- (100)
Deferred income taxes............................... 3,118 (5,537) 5,581 (572) 203
Extraordinary loss.................................. -- -- 32,786 32,786 --
Other............................................... (836) (6) 356 359 (35)
Cash provided (used) by changes in certain assets
and liabilities
Accounts receivable............................... 39,696 (31,595) 640 5,125 (5,035)
Inventories....................................... 7,334 4,414 (9,618) (9,211) 2,546
Prepaid expenses and other assets................. (1,031) (132) (389) 481 911
Accounts payable.................................. (25,209) 31,398 (15,015) (7,785) (2,397)
Accrued liabilities............................... (4,823) 1,113 9,707 3,332 (8,976)
Income taxes payable and recoverable, net......... (11,275) 14,398 (12,585) (15,881) 3,621
Other liabilities................................. 4,756 (182) (9,437) (4,224) (1,540)
---------- --------- --------- --------- ---------
Net cash provided (used) by operating
activities.................................... 60,731 77,995 39,580 (5,274) 3,024
---------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment.............. (14,575) (35,384) (39,902) (12,548) (4,192)
Deferred blast furnace maintenance costs................ (11,598) -- -- -- --
Gross proceeds from the sale of assets.................. 2,818 497 135 -- 110
Short-term investments, net............................. (12,282) (36,864) 49,146 49,146 --
---------- --------- --------- --------- ---------
Net cash provided (used) by investing
activities.................................... (35,637) (71,751) 9,379 36,598 (4,082)
---------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Senior Secured Notes...... -- -- 290,103 290,387 --
Repurchase of Senior Notes.............................. -- -- (233,085) (233,085) --
Repurchase of Common Stock.............................. -- -- (56,934) (56,926) --
Dividends paid.......................................... -- (6,567) (118,000) (108,000) (5,300)
Principal payments on other long-term debt.............. (2,254) (2,348) (2,449) (915) (965)
Purchases of treasury stock............................. -- (1,200) -- -- --
---------- --------- --------- --------- ---------
Net cash used by financing activities........... (2,254) (10,115) (120,365) (108,539) (6,265)
---------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents.... 22,840 (3,871) (71,406) (77,215) (7,323)
Cash and cash equivalents at beginning of period........ 71,426 94,266 90,395 90,395 18,989
---------- --------- --------- --------- ---------
Cash and cash equivalents at end of period.............. $ 94,266 $ 90,395 $ 18,989 $ 13,180 $ 11,666
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Supplemental disclosure of cash flow information
Cash paid for interest................................ $ 23,718 $ 22,888 $ 21,412 $ 5,436 $ 15,194
Cash paid for income taxes............................ 18,471 10,247 8,306 4,425 40
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
WCI Steel, Inc. (WCI) is a wholly-owned subsidiary of The Renco Group, Inc.
(Renco or Parent). See note 14.
(A) NATURE OF OPERATIONS
WCI is a niche oriented integrated producer of value-added, custom steel
products. WCI produces a wide range of custom flat rolled products at its
primary facility in Warren, Ohio, including high carbon, alloy and high
strength, silicon electrical and galvanized steel. WCI's primary customers are
steel converters, steel service centers, construction product companies,
electrical equipment manufacturers and to a lesser extent, automobile and
automotive parts manufacturers located principally in the U.S.
During 1997 and 1996, no single customer accounted for 10% or more of net
sales. During 1995, sales to WCI's largest customer accounted for 10.0% of net
sales. Concentration of credit risk related to trade receivables is limited due
to the large number of customers in a variety of industries and geographic
locations.
Since its inception, WCI has had labor agreements with the United
Steelworkers of America (USWA) and other organized labor organizations. The USWA
represents approximately 75% of WCI's employees. WCI has a four-year agreement
with the USWA that expires September 1, 1999.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of WCI and its
wholly-owned subsidiaries. All significant intercompany profits, transactions,
and balances have been eliminated in consolidation.
(C) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and short-term investments
with maturities of three months or less from the date of acquisition.
(D) SHORT-TERM INVESTMENTS
Short-term investments consist of United States government or agency issues
which have maturities of less than one year but greater than three months when
purchased. These investments are stated at cost plus accrued interest which
approximates market value.
(E) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method.
(F) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives of the
assets (buildings 20 to 30 years and machinery and equipment 4 to 25 years with
a weighted average of 18 years). Expenditures for normal repairs and maintenance
are charged to expense as incurred.
F-10
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) OTHER ASSETS
Other assets include deferred financing costs which are amortized using the
effective yield method over the term of the related financing and deferred blast
furnace maintenance costs which are amortized using the straight-line method
over a six-year period.
(H) INCOME TAXES
WCI is included in the consolidated income tax return of Renco. Under the
terms of the tax sharing agreement with Renco, income taxes are allocated to WCI
on a separate return basis, except that transactions between WCI, its
subsidiaries, Renco and Renco's other subsidiaries are accounted for on a cash
basis and WCI does not receive the benefit of net operating tax loss
carryforwards, unless such tax losses were a result of timing differences
between WCI's accounting for tax and financial reporting purposes.
(I) ENVIRONMENTAL COMPLIANCE COSTS
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial expenditures are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals coincides with the
earlier of completion of a feasibility study or WCI's development of, or
commitment to, a plan of action based on the then known facts.
(J) USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
---------------------- -----------
<S> <C> <C> <C>
1996 1997 1998
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Raw materials........................................... $ 40,828 $ 33,725 $ 33,889
Finished and semi-finished product...................... 62,340 82,216 79,152
Supplies................................................ 393 561 540
---------- ---------- -----------
103,561 116,502 113,581
Less LIFO reserve....................................... 6,886 10,209 9,834
---------- ---------- -----------
$ 96,675 $ 106,293 $ 103,747
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
F-11
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1997
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land and improvements................................................. $ 493 $ 463
Buildings............................................................. 25,641 27,433
Machinery and equipment............................................... 254,118 313,628
Construction in progress.............................................. 32,558 6,265
---------- ----------
312,810 347,789
Less accumulated depreciation......................................... 107,689 123,169
---------- ----------
$ 205,121 $ 224,620
---------- ----------
---------- ----------
</TABLE>
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
---------------------- -----------
<S> <C> <C> <C>
1996 1997 1998
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Senior Secured Notes with interest at 10% payable
semi-annually, due 2004............................... -- $ 300,000 $ 300,000
Senior Notes with interest at 10.5% payable semi-
annually, due 2002.................................... $ 206,400 280 280
Revolving Credit Facility(Revolver) with interest at
prime plus 0.5% (9.00% at October 31, 1997) payable
monthly............................................... -- -- --
Other................................................... 5,106 2,657 1,692
---------- ---------- -----------
211,506 302,937 301,972
Less current portion of long-term debt.................. 2,448 1,319 382
---------- ---------- -----------
$ 209,058 $ 301,618 $ 301,590
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
WCI has a $100,000,000 Revolver secured by and subject to eligible
inventories and receivables as defined, reduced by any outstanding letters of
credit. The Revolver is subject to an annual commitment fee of .5% of the unused
balance up to $75,000,000 payable monthly. There were no borrowings outstanding
under the Revolver as of or during the year ended October 31, 1997. The
Revolver, which expires December 29, 1999, also provides for up to an aggregate
amount of $20,000,000 in letters of credit. WCI had approximately $5,536,000 in
letters of credit outstanding at October 31, 1997. The Revolver is subject to a
penalty of $500,000 if terminated, without being refinanced with the same
lender, prior to December 29, 1998 and $250,000 thereafter if terminated before
expiration.
On November 27, 1996 WCI Steel Holdings, Inc., a wholly-owned subsidiary of
The Renco Group, Inc., completed a tender offer in which it purchased
substantially all the outstanding shares of Common Stock of WCI not held by
Renco (Equity Tender Offer). Following the completion of the Equity Tender
Offer, WCI Steel Holdings, Inc. was merged with and into WCI with WCI surviving
as a wholly-owned subsidiary of Renco. The total consideration paid for the
common stock tendered and the common stock
F-12
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) LONG-TERM DEBT (CONTINUED)
reacquired as a result of the merger of WCI Steel Holdings, Inc. with and into
WCI was approximately $56,934,000, including related expenses.
On the same date, WCI completed the sale of $300,000,000 10% senior secured
notes (Senior Secured Notes) due 2004. The proceeds from the Senior Secured
Notes, with existing cash balances of WCI, were used to complete the Equity
Tender Offer, a tender offer in which WCI acquired $206,120,000 of the
$206,400,000 aggregate principal amount of the then outstanding Senior Notes at
a rate of $1,125 per $1,000 principal amount outstanding plus accrued interest,
pay a $108,000,000 dividend to Renco, make contractual compensation payments to
certain executives of WCI and pay related transaction costs (Transactions). As a
result of these Transactions, WCI recognized an extraordinary loss of
$19,606,000, net of income tax benefits of $13,180,000, and compensation
expenses of approximately $8,577,000 in the first quarter of fiscal 1997.
The Senior Secured Notes are secured by a second priority lien on
substantially all of the existing property, plant and equipment of WCI which
will become a first priority lien if all of the Senior Notes are extinguished.
The second priority lien is shared with a lien held by the VEBA Trust discussed
in Note 8.
WCI's Revolver and Senior Secured Notes contain certain financial and other
covenants, including maintenance of specified levels of net worth as defined,
working capital, and debt service and limitations on capital expenditures.
Additional covenants limit the incurrence of additional indebtedness, payments
affecting subsidiaries, transactions with affiliates, sale/leaseback
transactions, impairment of security interest, consolidations, mergers and
transfer of WCI's assets. WCI is permitted to declare and pay dividends, and
make other transactions with affiliates provided no condition of default exists
or will exist, and the accumulated amount of such transactions is no greater
than fifty percent (50%) of the consolidated net income as defined (less 100% of
any consolidated net loss) earned for periods subsequent to October 31, 1996
when taken as a single accounting period less management fees paid to Renco in
excess of $1,200,000 annually for the same period. Under these agreements
$4,296,000 was available for dividends and other transactions with affiliates at
October 31, 1997. See note 14.
Aggregate principal payments on long-term debt for the five years subsequent
to October 31, 1997 are as follows: $1,319,000 in 1998, $116,000 in 1999,
$122,000 in 2000, $128,000 in 2001, and $415,000 in 2002.
As of October 31, 1997, the fair value of the Senior Secured Notes was
$313,500,000 based on the quoted market price.
(5) ACCRUED LIABILITIES
Accrued liabilities included employment related costs of $28,442,000 and
$26,026,000 and interest of $12,555,000 and $3,712,000 at October 31, 1997 and
1996, respectively.
(6) EMPLOYEE COMPENSATION PLANS
WCI has variable compensation plans for the benefit of substantially all
employees. The amount of compensation due under these plans is based on WCI's
income as defined under each plan. Total expense under the plans was
$24,588,000, $14,000,000, and $11,093,000 for the years ended October 31, 1997,
1996, and 1995, respectively. Certain amounts under these plans represent
deferred compensation.
F-13
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) PENSION PLANS
WCI has defined contribution retirement plans that cover substantially all
employees. WCI funds these retirement plan contributions as accrued. WCI's
contributions to the plans are based on employee age, length of service and
compensation. WCI contributions, paid or accrued, aggregated approximately
$5,929,000, $5,376,000 and $4,988,000 for the years ended October 31, 1997,
1996, and 1995, respectively.
WCI sponsors a defined benefit pension plan which covers substantially all
bargained-for employees, provides minimum pension benefits based on age, years
of service and benefits provided under WCI's defined contribution plan and a
predecessor company's defined benefit plan. WCI intends to make future
contributions to the plan in amounts that meet or exceed the minimum funding
requirements of ERISA.
The following table sets forth the actuarial present value of benefit
obligations and funded status of the plan:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1997
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of
$31,912 and $32,833, respectively................................ $ 47,947 $ 48,519
---------- ----------
---------- ----------
Projected benefit obligation....................................... $ 48,498 $ 49,077
Plan assets at fair value.......................................... 13,936 15,930
---------- ----------
Projected benefit obligation in excess of plan assets.............. 34,562 33,147
Unrecognized net gain from past experience different from that
assumed and effects of changes in assumptions.................... 10,937 13,697
Unrecognized prior service cost.................................... (38,993) (35,237)
Additional minimum liability....................................... 27,505 20,982
---------- ----------
Accrued pension cost............................................... 34,011 32,589
Less pension liability due within one year......................... -- 1,100
---------- ----------
Long-term pension liability........................................ $ 34,011 $ 31,489
---------- ----------
---------- ----------
</TABLE>
Plan assets consist primarily of listed domestic and foreign common stocks
and corporate and government bonds. An assumed discount rate of 7.25% and 7.5%
in 1997 and 1996, respectively, and an expected return on plan assets of 8.5%
were used for purposes of valuing the benefits under the defined benefit pension
plan.
F-14
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) PENSION PLANS (CONTINUED)
The following table sets forth the components of pension expense:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
<S> <C> <C>
1996 1997
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Service cost........................................................... $ (213) $ (332)
Interest cost.......................................................... 3,477 3,404
Actual return on plan assets........................................... (828) (3,188)
Amortization of unrecognized:
Prior service cost................................................... 3,831 3,756
Net gain and deferral................................................ 290 1,486
--------- ---------
$ 6,557 $ 5,126
--------- ---------
--------- ---------
</TABLE>
No pension expense related to this plan was recognized during 1995 as a
result of the plan being adopted on October 27, 1995.
(8) POSTRETIREMENT HEALTH CARE BENEFITS
WCI provides postretirement health care and life insurance benefits to
substantially all employees who retire from WCI upon meeting certain age and
length of service eligibility requirements.
The following table sets forth the plan's accumulated postretirement benefit
obligation (APBO):
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
<S> <C> <C>
1996 1997
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees.......................................................... $ 15,374 $ 23,923
Fully eligible active plan participants........................... 33,877 32,641
Other active participants......................................... 40,294 52,434
---------- ---------
89,545 108,998
Plan assets at fair value........................................... 3,332 8,485
---------- ---------
APBO in excess of plan assets....................................... 86,213 100,513
Unrecognized prior service cost resulting from
plan amendments................................................... (4,356) (6,859)
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions........................... (62) (7,899)
---------- ---------
Accrued postretirement benefit cost................................. $ 81,795 $ 85,755
---------- ---------
---------- ---------
</TABLE>
Plan assets consist primarily of listed common stocks and corporate and
government bonds. The APBO was determined using a discount rate of 7.25% and
7.5% in 1997 and 1996, respectively, an expected return on plan assets of 8.5%,
and an assumed health care cost trend rate of 8% in 1998, gradually declining to
5% after 2003. Assuming a 1% increase in the health care cost trend rate, the
APBO at October 31, 1997 would increase by $19,099,000 along with an increase in
the 1997 service and interest cost components of $1,710,000.
F-15
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) POSTRETIREMENT HEALTH CARE BENEFITS (CONTINUED)
Net periodic postretirement benefit costs included the following components:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................. 2,562 $ 2,272 $ 2,232
Interest cost................................................ 7,007 6,541 7,260
Actual return on plan assets................................. -- (188) (1,254)
Net amortization and deferral................................ 1,025 1,698 2,004
--------- --------- ---------
Net periodic postretirement benefit cost..................... $ 10,594 $ 10,323 $ 10,242
--------- --------- ---------
--------- --------- ---------
</TABLE>
Total claims paid by WCI during the years ended October 31, 1997, 1996 and
1995 were $2,383,000, $1,671,000 and $528,000, respectively.
In addition, WCI is required to contribute a minimum of $.50 per hour worked
by certain hourly employees to a Voluntary Employees Beneficiaries Trust (VEBA
Trust) established to fund future postretirement health care and life insurance
benefits. Contributions to the trust amounted to $3,899,000 and $3,144,000
during 1997 and 1996, respectively. In accordance with WCI's labor contract, WCI
will continue to pay current claims as incurred until the trust assets exceed
50% of the APBO for the hourly employees who are beneficiaries of the trust.
(9) INCOME TAXES
The provision for income tax expense (benefit) is comprised of the
following:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes
Current.................................................... $ 5,770 $ 18,861 $ 8,301
Deferred................................................... 2,662 (3,714) 4,461
State income taxes
Current.................................................... 1,427 5,784 600
Deferred................................................... 454 (1,823) 1,120
--------- --------- ---------
Provision for income taxes................................... $ 10,313 $ 19,108 $ 14,482
--------- --------- ---------
--------- --------- ---------
</TABLE>
In addition to the above income taxes, WCI recognized $13,180,000 of current
income tax benefits in 1997 related to the extraordinary loss on the early
retirement of debt (see note 4).
F-16
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) INCOME TAXES (CONTINUED)
A reconciliation between income tax expense reported and income tax expense
computed by applying the federal statutory rate to income before income taxes
and extraordinary loss follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income taxes at federal statutory rate....................... $ 9,020 $ 16,502 $ 13,282
State income taxes, net of federal income tax benefit........ 1,223 2,574 1,118
Other........................................................ 70 32 82
--------- --------- ---------
$ 10,313 $ 19,108 $ 14,482
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes result from temporary differences in the financial
basis and tax basis of assets and liabilities. Total deferred tax assets
amounted to approximately $51,492,000 and $54,719,000 as of October 31, 1997 and
1996; the most significant items comprising the deferred tax assets were
postretirement benefits of $30,084,000 and $27,516,000, respectively, and
compensation accruals of $7,137,000 and $10,968,000, respectively. Total
deferred tax liabilities amounted to approximately $50,801,000 and $48,447,000
as of October 31, 1997 and 1996, respectively, consisting primarily of deferred
taxes on inventory of $3,526,000 and $2,939,000, respectively, and fixed assets
of $46,810,000 and $45,276,000, respectively. WCI had no valuation allowance for
realization of deferred tax assets as of October 31, 1997 or 1996.
As a result of the tax sharing agreement discussed in Note 1 (h), WCI's
recoverable income taxes of $4,273,000 at October 31, 1997 is due from Renco.
(10) LEASES
WCI leases a portion of its operating and data processing equipment. Minimum
future lease payments under noncancellable operating leases are $1,555,000,
$1,257,000, $934,000, $513,000, and $7,000 for the years ending October 31,
1998, 1999, 2000, 2001 and 2002, respectively. Rent expense for noncancellable
operating leases amounted to approximately $1,386,000, $1,094,000, and
$1,033,000, for the years ended October 31, 1997, 1996, and 1995, respectively.
(11) AGREEMENT WITH THE RENCO GROUP, INC.
WCI has a management services agreement with Renco under which Renco
provides certain management services to WCI. Under terms of this agreement, WCI
is charged a monthly fee of $100,000. The term of this agreement extends to
October 31, 1998. Total expense for management services fees amounted to
$1,200,000 for each of the years ended October 31, 1997, 1996, and 1995. At
October 31, 1996, $480,000 was owed to Renco for management services fees.
To obtain the advantages of volume, Renco purchases certain insurance
coverage for its subsidiaries, including WCI, and the actual cost of such
insurance, without markup, is reimbursed by the covered subsidiaries. The major
areas of WCI's insurance coverage obtained under the Renco programs are
property, business interruption, general, product and auto liability and
workers' compensation (other than Ohio for which WCI is self insured). In fiscal
1997, 1996 and 1995, WCI incurred costs of approximately $1.7 million, $2.0
million and $1.7 million, respectively, under the Renco insurance program. WCI
believes
F-17
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) AGREEMENT WITH THE RENCO GROUP, INC. (CONTINUED)
that its insurance costs under this program were less than it would have
incurred if it had obtained its insurance directly.
(12) COMMITMENTS AND CONTINGENCIES
At October 31, 1997, WCI had commitments to purchase data processing
services of approximately $24,811,000 in the aggregate over the remaining 4.5
years of its management information systems agreement and purchased services of
approximately $5,463,000, $5,322,000 and $5,573,000 in 1997, 1996 and 1995,
respectively, under the agreement. At October 31, 1997, at pricing then in
effect, WCI had firm commitments for the purchase of raw materials and gases of
approximately $33,758,000 in 1998 and $35,591,000 thereafter. In addition, at
October 31, 1997 WCI had commitments for capital expenditures of approximately
$8,052,000.
In common with much of the steel industry, WCI's facilities are located on
sites that have been used for heavy industrial purposes for decades. WCI is and
will continue to be subject to numerous federal, state and local environmental
laws and regulations governing, among other things, air emissions, waste water
discharge and solid and hazardous waste disposal. WCI believes that it has made
and intends to continue to make the necessary expenditures for environmental
remediation and compliance with environmental laws and regulations.
Environmental laws and regulations have changed rapidly in recent years, and WCI
may be subject to more stringent environmental laws and regulations in the
future. During 1997 the EPA proposed new standards regulating particulate matter
and ozone emissions. Data relating to these standards is to be collected and
analyzed with implementation as early as 2004. These standards have been the
subject of significant discussion throughout federal and state governments, and
changes to the standards or the implementation date may be made prior to final
approval. Like much of the steel, utilities and other industries, WCI's current
operations are not expected to comply with these proposed standards. WCI cannot
currently assess the impact of these proposed standards on its results of
operations or financial condition. Compliance with more stringent environmental
laws and regulations could have a material adverse effect on WCI's financial
condition and results of operations.
On June 29, 1995, the Department of Justice, on behalf of the Environmental
Protection Agency (EPA), instituted a civil action against WCI under the Clean
Water Act in the United States District Court for the Northern District of Ohio.
The action alleges numerous violations of WCI's National Pollution Discharge
Elimination System permit alleged to have occurred during the years 1989 through
1996, inclusive. On March 29, 1996, the Department of Justice on behalf of the
EPA, instituted another civil action against WCI in the same court under the
Clean Air Act alleging violations by WCI of the work practice, inspection and
notice requirements for demolition and renovation of the National Emission
Standard for Hazardous Air Pollutants for Asbestos and also violations of the
particulate standard and the opacity limits applicable to WCI's facilities in
Warren, Ohio. Each action seeks a civil penalty not to exceed the statutory
maximum of $25,000 per day per violation and also seeks an injunction against
continuing violations. WCI believes that imposition of the statutory maximum
penalty for the alleged violations is unlikely based upon past judicial
penalties imposed under the Clean Water Act and the Clean Air Act, and that it
has defenses to liability. By letter dated November 1, 1996, EPA's Region V
Water Division Director requested information pursuant to the Clean Water Act
from WCI relating to the Warren facility, including, information as to the
effect of a prohibition against federal procurement of WCI's products on WCI's
business. WCI responded to the EPA's request on December 2, 1996. WCI has not
been notified that the EPA will seek a federal procurement prohibition based on
alleged permit violations. However,
F-18
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) COMMITMENTS AND CONTINGENCIES (CONTINUED)
there can be no assurance that a federal procurement prohibition will not be
imposed. WCI is negotiating with the EPA toward a settlement of these matters.
If WCI is unable to reach a negotiated settlement, and if a substantial penalty
similar to the statutory maximum penalty or federal procurement prohibition were
imposed, it could have a material adverse effect on the operating results or
financial condition of WCI, the extent of which WCI is unable to estimate at
this time. These actions are in discovery. The Clean Air Act civil action has a
trial date scheduled for May 1998. No trial date has been established for the
Clean Water Act civil action. See note 14.
WCI has obtained a Resource Conservation and Recovery Act (RCRA) storage
permit for waste pickle liquor at its Warren facility acid regeneration plant.
As a provision of the permit, WCI will be required to undertake a corrective
action program with respect to historical material handling practices at the
Warren facility. In April 1997 WCI received notice from the EPA that it had
approved a workplan for the first investigation step of the corrective action
program, the RCRA Facility Investigation (RFI). The workplan identifies thirteen
historical solid waste management units which are the subject of the RFI. The
final scope of the corrective action required to remediate or reclaim any
contamination that may be present at or emanating from the Warren facility is
dependent upon the findings of the RFI and the development and approval of a
corrective action program. Accordingly, WCI is unable at this time to estimate
the final cost of the corrective action program or the period over which such
costs may be incurred and there can be no assurance that it will not have a
material adverse effect on the financial condition of WCI.
On January 23, 1996, two retired employees instituted an action against WCI
and the USWA in the United States District Court for the Northern District of
Ohio alleging in substance that certain distributions made by WCI to employees
and benefit plans violated certain agreements, the Employee Retirement Income
Security Act, the National Labor Relations Act and common law. On July 31, 1997,
the court granted WCI's motion to dismiss this action and entered judgment in
favor of WCI and the USWA. The plaintiffs have filed an appeal regarding the
court's decision to dismiss.
On April 5, 1996, an employee instituted an action for damages against WCI
in the Court of Common Pleas, Trumbull County, Ohio alleging that, under Ohio
common law, her privacy rights were violated and that she has been subjected to
sexual harassment. On April 28, 1997 the plaintiff filed for summary judgment.
WCI denies plaintiff's allegations of liability and has opposed the plaintiff's
motion for summary judgment on which the court has yet to rule. The court has
set a trial date in February 1998. See note 14.
In addition to the above matters, WCI is contingently liable with respect to
lawsuits and other claims incidental to the ordinary course of its operations. A
liability has been established for an amount, which WCI believes is adequate,
based on information currently available, to cover the costs to resolve the
above described matters, including remediation, if any, except for any costs of
corrective action that may result from the RFI for which no estimate can
currently be made. The outcome of the above described matters could have a
material adverse effect on the future operating results of WCI in a particular
quarterly or annual period, however, WCI believes that the effect of such
matters will not have a material adverse effect on WCI's consolidated financial
position.
F-19
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) SELECTED QUARTERLY DATA (UNAUDITED)
The following is a summary of unaudited quarterly results for the years
ended October 31, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1997 JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales................................... $ 160,907 $ 172,634 $ 165,917 $ 169,012
Gross margin................................ 29,298 31,343 31,559 28,725
Income before extraordinary loss............ 1,713 7,777 8,150 5,823
Net income (loss)........................... (17,893) 7,777 8,150 5,823
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1996 JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales................................... $ 148,493 $ 166,959 $ 174,695 $ 170,654
Gross margin................................ 22,989 26,261 29,430 31,512
Net income.................................. 4,788 6,194 8,130 8,928
</TABLE>
During the three months ended January 31, 1997, WCI recognized $8,577,000 of
compensation expenses and an extraordinary loss, net of income taxes, of
$19,606,000 related to the Transactions. During the three months ended October
31, 1997 and 1996, WCI recorded a charge of $2,123,000 and a benefit of
$1,042,000, respectively, under the LIFO inventory valuation method.
(14) EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF THE INDEPENDENT
AUDITOR
RENCO STEEL HOLDINGS, INC.
Renco Steel Holdings, Inc. (Renco Steel) is a holding company formed by
Renco in January 1998 which owns all the outstanding shares of capital stock of
WCI. As a result, WCI is a wholly-owned subsidiary of Renco Steel and an
indirect wholly-owned subsidiary of Renco.
In February 1998, Renco Steel issued $120 million principal amount 10.875%
senior secured notes due 2005. These notes are secured by a pledge of all the
outstanding capital stock of WCI. Renco Steel intends to meet its debt service
obligations from its cash and investment balances (estimated to be $15.6 million
immediately following the issuance of the notes and use of proceeds thereon,
including payment of estimated transaction expenses) and earnings thereon and
through distributions from WCI, including payments pursuant to the tax sharing
agreement and dividends as permitted under WCI's outstanding indebtedness as
described in note 4.
COMMITMENTS AND CONTINGENCIES
Discovery has been completed in both the Clean Water Act and Clean Air Act
civil actions described in note 12, and a trial date has been scheduled for the
Clean Water Act civil action for April 1998.
On December 17, 1997, WCI received a compliance order from the EPA alleging
certain violations of WCI's NPDES permit, including exceedances of permit limits
for pH and oil and grease and failure to identify and sample for residual
chlorine. WCI currently is investigating the alleged exceedances. WCI is unable
at this time to estimate the cost which may be incurred related to the
compliance order, if any.
With respect to the action instituted against WCI on April 5, 1996 discussed
in note 12, the court has rescheduled the trial date for August 1998.
F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information............................ 2
Forward-Looking Statements....................... 2
Prospectus Summary............................... 3
Risk Factors..................................... 13
Use of Proceeds.................................. 20
Capitalization................................... 21
Selected Consolidated Financial Data............. 22
The Exchange Offer............................... 24
Management's Discussion and Analysis
of Results of Operations and Financial
Condition...................................... 30
Business......................................... 36
Management....................................... 46
Stock Ownership and Certain Relationships and
Transactions................................... 47
Description of the Notes......................... 49
Certain U.S. Federal Income Tax Considerations... 67
Plan of Distribution............................. 67
Legal Matters.................................... 68
Experts.......................................... 68
Index to Consolidated Financial
Statements..................................... F-1
</TABLE>
UNTIL , 1998 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
RENCO STEEL
HOLDINGS, INC.
OFFER TO EXCHANGE ITS
10 7/8% SENIOR SECURED NOTES
DUE 2005, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
10 7/8% SENIOR SECURED NOTES
DUE 2005, SERIES A
--------------
PROSPECTUS
--------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1701.13(E)(1) of the Ohio General Corporation Law (the "OGCL")
provides that a corporation may indemnify a person made or threatened to be made
a party to any proceeding, other than a proceeding by or in the right of the
corporation, by reason of such person's official capacity as an officer,
director, employee or agent of the corporation, or if such person is or was
serving at the request of the corporation as a director, trustee, officer,
employee, or agent of another corporation, domestic or foreign, nonprofit or for
profit, partnership, joint venture, trust or other enterprise, against
judgments, fines, expenses, including attorney's fees, and disbursements paid in
settlement incurred by such person in connection with the proceeding, if such
person (a) acted in good faith and in a manner such person reasonably believed
to be in, or not opposed to, the best interests of the corporation; and (b) in
the case of a criminal proceeding, had no reason to believe such person's
conduct was unlawful.
Section 1701.13(E)(2) of the OGCL further provides that a corporation may
indemnify a person made or threatened to be made a party to any proceeding by or
in the right of the corporation to procure a judgment in its favor, by reason of
such person's official capacity as an officer, director, employee or agent of
the corporation or if such person is or was serving at the request of the
corporation as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust or other enterprise, against expenses, including attorney's fees,
and disbursements paid in settlement incurred by such person in connection with
the proceeding, if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that the corporation may not indemnify such person for (a)
any proceeding as to which such person is adjudged to be liable for negligence
or misconduct in the performance of such person's duty to the corporation,
unless the court in which such proceeding is brought determines that, despite
the adjudication of liability, such person is entitled to indemnity for such
expenses as the court shall deem proper; and (b) any proceeding in which the
only liability asserted against a director is pursuant to Section 1701.95 of the
Revised Code of Ohio.
Section 1701.13(E)(3) of the OGCL further provides that to the extent a
director, trustee, officer, employee, or agent of a corporation is successful on
the merits or in defense of any proceeding brought under Sections 1701.13(E)(1)
and 1701.13(E)(2) of the OGCL, a corporation shall indemnify such person against
expenses, including attorney's fees, incurred by such person in connection with
the proceeding.
In addition, Section 1701.13(E)(a) of the OGCL provides that, unless
otherwise provided by a corporation's articles of incorporation or code of
regulations at the time of a director's act or omission, and unless the only
liability asserted against a director in a proceeding is pursuant to Section
1701.95 of the Revised Code of Ohio, if a director is made or threatened to be
made a party to a proceeding brought under Sections 1701.13(E)(1) and
1701.13(E)(2) of the OGCL, such person is entitled to payment or reimbursement
by a corporation of expenses, including attorney's fees, incurred by such person
in advance of the final disposition of the proceeding, upon receipt of an
undertaking by or on behalf of such person agreeing to (a) repay all amounts
paid or reimbursed by the corporation if it is ultimately determined that such
person's act or omission was undertaken with deliberate intent to cause injury
to the corporation or undertaken with reckless disregard for the best interests
of the corporation; and (b) cooperate with the corporation concerning the
proceeding. Expenses, including attorney's fees, incurred by a corporation's
director, trustee, officer, employee, or agent in a proceeding brought under
Sections 1701.13(E)(1) and 1701.13(E)(2) of the OGCL may be paid by the
corporation as they are incurred in advance of the final disposition of the
proceeding upon the receipt of an undertaking from such person to repay all
amounts paid or reimbursed by the corporation if it is ultimately determined
that such person is not entitled to be indemnified by the corporation.
II-1
<PAGE>
Finally, Section 1701.13(E)(6) of the OGCL provides that a corporation's
articles of incorporation or code of regulations may extend further
indemnification rights in addition to those provided by Section 1701.13 of the
OGCL.
The indemnification provisions of Section 32 of the Registrant's Code of
Regulations are set forth below in full:
SECTION 32. INDEMNIFICATION
(a) The Corporation shall indemnify any director or officer or any
former director or officer of the Corporation or any person who is or
has served at the request of the Corporation as a director, officer, or
trustee of another corporation, joint venture, trust or other enterprise
against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the corporation, to which he
was, is, or is threatened to be made a party by reason of the fact that
he is or was such director, officer, or trustee, provided it is
determined in the manner set forth in paragraph (c) of this section that
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and that, with
respect to any criminal action or proceeding, he had no reasonable cause
to believe his conduct was unlawful.
(b) In the case of any threatened, pending or completed action or
suit by or in the right of the Corporation, the Corporation shall
indemnify each person indicated in paragraph (a) of this section against
expenses, including attorney's fees, actually and reasonably incurred in
connection with the defense or settlement thereof, provided it is
determined in the manner set forth in paragraph (c) of this section that
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation except that no
indemnification shall be made in respect of any claim, issue, or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court of common pleas
or the court in which such action or suit was brought shall determined
upon application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the court of
common pleas or such other court shall deem proper.
(c) The determinations referred to in paragraphs (a) and (b) of this
section shall be made (1) by a majority vote of a quorum consisting of
directors of the Corporation who were not and are not parties to or
threatened with any such action, suit or proceeding, or (2) if such a
quorum is not obtainable or if a majority vote of a quorum of
disinterested directors so directs, in a written opinion by independent
legal counsel other than an attorney, or a firm having associated with
it an attorney, who has been retained by or who has performed services
for the Corporation, or any person to be indemnified, within the past
five years, or (3) by the shareholders, or (4) by the court of common
pleas or the court in which such action, suit or proceeding was brought.
(d) Expenses, including attorneys' fees, incurred in defending any
action, suit, or proceeding referred to in paragraphs (a) and (b) of
this section, may be paid by the Corporation in advance of the final
disposition of such action, suit, or proceeding as authorized by the
directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, or trustee to repay such amount, unless
it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this section.
II-2
<PAGE>
(e) The indemnification provided by this section shall not be deemed
exclusive (1) of any other rights to which those seeking indemnification
may be entitled under the articles, the regulations, any agreement, any
insurance purchase by the Corporation, vote of shareholders of
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office,
or of (2) the power of the Corporation to indemnify any person who is or
was an employee or agent of the Corporation or of another corporation,
joint venture, trust or other enterprise which he is serving or has
served at the request of the Corporation, to the same extent and in the
same situation and subject to the same determinations as are hereinabove
set forth with respect to a director, officer, or trustee. As used in
this paragraph (e) references to the "Corporation" include all
constituent corporations in a consolidation or merger in which the
Corporation or a predecessor to the Corporation by consolidation or
merger was involved. The indemnification provided by this section shall
continue as to a person who has ceased to be a director, officer, or
trustee and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Articles of Incorporation of the Registrant, filed January 20, 1998.
3.2 -- Code of Regulations of the Registrant.
4.1 -- Indenture, dated as of February 3, 1998, by and between the Registrant, as issuer, and State Street
Bank and Trust Company, as trustee, relating to the 10 7/8% Senior Secured Notes due 2005, Series A
and the 10 7/8% Senior Secured Notes due 2005, Series B of the Registrant (containing, as exhibits,
specimens of the Series A Senior Secured Notes and Series B Senior Secured Notes).
4.2 -- Purchase Agreement, dated February 3, 1998, between Donaldson, Lufkin and Jenrette Securities
Corporation and the Registrant, relating to the 10 7/8% Senior Secured Notes due 2005.
4.3 -- Registration Rights Agreement, dated as of February 3, 1998, by and between Donaldson, Lufkin &
Jenrette Securities Corporation and the Registrant, relating to the 10 7/8% Senior Secured Notes due
2005.
4.4 -- Form Letter of Transmittal.
5.1 -- Opinion of Cadwalader, Wickersham & Taft.
8.1 -- Opinion of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
10.1 -- Amended and Restated Loan and Security Agreement, dated December 29, 1992, between WCI and Congress
Financial Corporation and Security Pacific Business Credit Inc. (the "WCI Revolving Credit
Agreement").(1)
10.1.1 -- Amendment No. 1 to the WCI Revolving Credit Agreement, dated December 14, 1993.(2)
10.1.2 -- Amendment No. 2 to the WCI Revolving Credit Agreement, dated July 13, 1994.(3)
10.1.3 -- Amendment No. 3 to the WCI Revolving Credit Agreement, dated March 28, 1995.(4)
10.1.4 -- Amendment No. 4 to the WCI Revolving Credit Agreement, dated February 23, 1996.(5)
10.1.5 -- Amendment No. 5 to the WCI Revolving Credit Agreement, dated March 8, 1996.(5)
10.1.6 -- Amendment No. 6 to the WCI Revolving Credit Agreement, dated June 17, 1996.(6)
10.1.7 -- Amendment No. 7 to the WCI Revolving Credit Agreement, dated November 27, 1996.(7)
10.1.8 -- Amendment No. 8 to the WCI Revolving Credit Agreement, dated October 31, 1997.(8)
10.2 -- Intercreditor Agreement, dated December 14, 1993, among the Shawmut Bank Connecticut, National
Association, Congress Financial Corporation and Security Pacific Business Credit Inc.(2)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
10.3 -- Intercreditor Agreement, dated November 27, 1996, between Fleet National Bank and Congress Financial
Corporation.(7)
10.4 -- Intercreditor Agreement, dated November 27, 1996, among Fleet National Bank, Bank One Trust Company,
N.A. and WCI.(7)
10.5 -- Indemnification Agreement, dated as of November 27, 1996, between WCI and Bank One Trust Company,
N.A.(7)
10.6 -- Promissory Note, dated August 31, 1988, in the original principal amount of $5,552,000 made by WCI
to LTV Steel Company, Inc.(1)
10.7 -- Loan Agreement, dated as of May 1, 1990, between the Director of Development of the State of Ohio
and Youngstown Sinter Company (Ohio Enterprise Bond Fund Program).(1)
10.8 -- Agreement, dated June 11, 1990, between the City of Youngstown, Ohio and Youngstown Sinter Company
(with UDAG Grant Agreement).(1)
10.9 -- Pledge Agreement, dated as of February 3, 1998, by the Registrant, as pledgor, in favor of State
Street Bank and Trust Company, as trustee.
12 -- Statement regarding computation of ratios.
21 -- List of Subsidiaries of Registrant.
23.1 -- Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
23.2 -- Consent of KPMG Peat Marwick LLP--Registrant.
23.3 -- Consent of KPMG Peat Marwick LLP--WCI.
24 -- Power of Attorney (included on the signature page).
25 -- Statement of Eligibility and Qualification on Form T-1 of State Street Bank and Trust Company.
</TABLE>
- ------------------------
(1) Incorporated by reference to WCI's Registration Statement on Form S-4, as
amended (File No. 33-58648), originally filed with the Commission on
February 23, 1993.
(2) Incorporated by reference to WCI's Registration Statement on Form S-4 (File
No. 33-74108), originally filed with the Commission on January 14, 1994.
(3) Incorporated by reference to WCI's Pre-Effective Amendment No. 3 to
Registration Statement on Form S-1 (File No. 33-75722), filed with the
Commission on May 4, 1994.
(4) Incorporated by reference to WCI's Form 10-Q for the quarterly period ended
April 30, 1995.
(5) Incorporated by reference to WCI's Form 10-Q for the quarterly period ended
April 30, 1996.
(6) Incorporated by reference to WCI's Form 10-Q for the quarterly period ended
July 31, 1996.
(7) Incorporated by reference to WCI's Registration Statement on Form S-4, as
amended (File No. 333-18019), originally filed with the Commission on
December 17, 1996.
(8) Incorporated by reference to WCI's Form 10-K for the fiscal year ended
October 31, 1997.
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
II-4
<PAGE>
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 of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective 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.
(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 being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply be means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on March 19, 1998.
RENCO STEEL HOLDINGS, INC.
By: /s/ IRA LEON RENNERT
------------------------------------------
IRA LEON RENNERT
Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James N. Chapman and Roger L. Fay and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform such and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 19, 1998
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/ IRA LEON RENNERT Chairman of the Board and Director
-------------------------------------------
IRA LEON RENNERT
/s/ JAMES N. CHAPMAN President (Principal Executive Officer)
-------------------------------------------
JAMES N. CHAPMAN
/s/ ROGER L. FAY Vice President and Chief Financial Officer
------------------------------------------- (Principal Financial and Accounting Officer)
ROGER L. FAY
</TABLE>
II-6
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Shareholder and Board of Directors
WCI Steel, Inc. and Subsidiaries:
Under date of December 4, 1997, we reported on the consolidated balance
sheets of WCI Steel, Inc. and subsidiaries as of October 31, 1997 and 1996, and
the related consolidated statements of income, shareholder's equity (deficit),
and cash flows for each of the years in the three-year period ended October 31,
1997, which are contained as part of this report herein. In connection with our
audits of the aforementioned consolidated financial statements, we also audited
the related financial statement schedule (Schedule II--Valuation and Qualifying
Accounts) also contained as part of this report herein. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement schedule based on our
audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
KPMG PEAT MARWICK LLP
Cleveland, Ohio
December 4, 1997
S-1
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE OF DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ------------------------ BALANCE AT
BEGINNING CHARGED TO CHARGES TO END
CLASSIFICATION OF YEAR EXPENSE(B) OTHER DEDUCTIONS(C) OF YEAR
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS(a):
Year ended October 31, 1997....................... $ 1,600 $ 64 -- $ 37 $ 1,627
Year ended October 31, 1996....................... 2,258 (646) -- 12 1,600
Year ended October 31, 1995....................... 2,400 117 -- 259 2,258
</TABLE>
- ------------------------
(a) Allowance for doubtful accounts is shown as a reduction of accounts
receivable in the WCI Consolidated Financial Statements.
(b) Charges to expense for the provision for doubtful accounts.
(c) Trade receivables written-off.
S-2
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 -- Articles of Incorporation of the Registrant, filed January 20, 1998.
3.2 -- Code of Regulations of the Registrant.
4.1 -- Indenture, dated as of February 3, 1998, by and between the Registrant, as issuer, and State Street
Bank and Trust Company, as trustee, relating to the 10 7/8% Senior Secured Notes due 2005, Series A
and the 10 7/8% Senior Secured Notes due 2005, Series B of the Registrant (containing, as exhibits,
specimens of the Series A Senior Secured Notes and Series B Senior Secured Notes).
4.2 -- Purchase Agreement, dated February 3, 1998, between Donaldson, Lufkin and Jenrette Securities
Corporation and the Registrant, relating to the 10 7/8% Senior Secured Notes due 2005.
4.3 -- Registration Rights Agreement, dated as of February 3, 1998, by and between Donaldson, Lufkin &
Jenrette Securities Corporation and the Registrant, relating to the 10 7/8% Senior Secured Notes due
2005.
4.4 -- Form Letter of Transmittal.
5.1 -- Opinion of Cadwalader, Wickersham & Taft.
8.1 -- Opinion of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
10.1 -- Amended and Restated Loan and Security Agreement, dated December 29, 1992, between WCI and Congress
Financial Corporation and Security Pacific Business Credit Inc. (the "WCI Revolving Credit
Agreement").(1)
10.1.1 -- Amendment No. 1 to the WCI Revolving Credit Agreement, dated December 14, 1993.(2)
10.1.2 -- Amendment No. 2 to the WCI Revolving Credit Agreement, dated July 13, 1994.(3)
10.1.3 -- Amendment No. 3 to the WCI Revolving Credit Agreement, dated March 28, 1995.(4)
10.1.4 -- Amendment No. 4 to the WCI Revolving Credit Agreement, dated February 23, 1996.(5)
10.1.5 -- Amendment No. 5 to the WCI Revolving Credit Agreement, dated March 8, 1996.(5)
10.1.6 -- Amendment No. 6 to the WCI Revolving Credit Agreement, dated June 17, 1996.(6)
10.1.7 -- Amendment No. 7 to the WCI Revolving Credit Agreement, dated November 27, 1996.(7)
10.1.8 -- Amendment No. 8 to the WCI Revolving Credit Agreement, dated October 31, 1997.(8)
10.2 -- Intercreditor Agreement, dated December 14, 1993, among the Shawmut Bank Connecticut, National
Association, Congress Financial Corporation and Security Pacific Business Credit Inc.(2)
10.3 -- Intercreditor Agreement, dated November 27, 1996, between Fleet National Bank and Congress Financial
Corporation.(7)
10.4 -- Intercreditor Agreement, dated November 27, 1996, among Fleet National Bank, Bank One Trust Company,
N.A. and WCI.(7)
10.5 -- Indemnification Agreement, dated as of November 27, 1996, between WCI and Bank One Trust Company,
N.A.(7)
10.6 -- Promissory Note, dated August 31, 1988, in the original principal amount of $5,552,000 made by WCI
to LTV Steel Company, Inc.(1)
10.7 -- Loan Agreement, dated as of May 1, 1990, between the Director of Development of the State of Ohio
and Youngstown Sinter Company (Ohio Enterprise Bond Fund Program).(1)
10.8 -- Agreement, dated June 11, 1990, between the City of Youngstown, Ohio and Youngstown Sinter Company
(with UDAG Grant Agreement).(1)
10.9 -- Pledge Agreement, dated as of February 3, 1998, by the Registrant, as pledgor, in favor of State
Street Bank and Trust Company, as trustee.
12 -- Statement regarding computation of ratios.
21 -- List of Subsidiaries of Registrant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
23.1 -- Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
23.2 -- Consent of KPMG Peat Marwick LLP--Registrant.
23.3 -- Consent of KPMG Peat Marwick LLP--WCI.
24 -- Power of Attorney (included on the signature page).
25 -- Statement of Eligibility and Qualification on Form T-1 of State Street Bank and Trust Company.
</TABLE>
- ------------------------
(1) Incorporated by reference to WCI's Registration Statement on Form S-4, as
amended (File No. 33-58648), originally filed with the Commission on
February 23, 1993.
(2) Incorporated by reference to WCI's Registration Statement on Form S-4 (File
No. 33-74108), originally filed with the Commission on January 14, 1994.
(3) Incorporated by reference to WCI's Pre-Effective Amendment No. 3 to
Registration Statement on Form S-1 (File No. 33-75722), filed with the
Commission on May 4, 1994.
(4) Incorporated by reference to WCI's Form 10-Q for the quarterly period ended
April 30, 1995.
(5) Incorporated by reference to WCI's Form 10-Q for the quarterly period ended
April 30, 1996.
(6) Incorporated by reference to WCI's Form 10-Q for the quarterly period ended
July 31, 1996.
(7) Incorporated by reference to WCI's Registration Statement on Form S-4, as
amended (File No. 333-18019), originally filed with the Commission on
December 17, 1996.
(8) Incorporated by reference to WCI's Form 10-K for the fiscal year ended
October 31, 1997.
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
RENCO STEEL HOLDINGS, INC.
The undersigned, desiring to form a corporation for profit under Chapter
1701 of the Ohio Revised Code, does hereby certify:
FIRST: The name of the Corporation shall be Renco Steel Holdings, Inc.
SECOND: The place in the State of Ohio where the principal office of the
Corporation will be located is Cleveland, in Cuyahoga County, Ohio.
THIRD: The purpose for which the Corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under Chapter
1701 of the Ohio Revised Code, as now in effect or hereinafter amended.
FOURTH: The authorized number of shares of the Corporation is 850, all of
which shall be common stock without par value.
FIFTH: Without derogation from any other power to purchase shares of the
Corporation, the Corporation by action of its directors may purchase outstanding
shares of any class of the Corporation to the extent not prohibited by law.
SIXTH: No holder of shares of any class of the Corporation shall, as
such holder, have any preemptive or preferential right to purchase or subscribe
to any shares of any class of the Corporation, whether now or hereafter
authorized, whether unissued or in the treasury, or to purchase any obligations
convertible into shares of any class of the Corporation, which at any time may
be proposed to be issued by the Corporation or subjected to rights or options to
purchase granted by the Corporation.
<PAGE>
SEVENTH: Except as otherwise provided in these Articles of Incorporation
or the Regulations of the Corporation as they may be amended from time to time,
the holders of a majority of the Corporation's outstanding voting shares are
authorized to take any action which, but for this Article SEVENTH, would require
the vote or other action of the holders of more than a majority of such shares,
of a particular class of such shares, or of each class of shares.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 20th day of
January, 1998.
/s/ David A. Zagore
----------------------------------------
David A. Zagore, Sole Incorporator
<PAGE>
RENCO STEEL HOLDINGS, INC.
ORIGINAL APPOINTMENT OF AGENT
The undersigned, being the sole incorporator of Renco Steel Holdings, Inc.
hereby appoints Andrew Service Corporation, a corporation having a business
address in the State of Ohio, as its agent upon which any process, notice or
demand required or permitted by statute to be served upon the corporation may be
served. The complete address of Andrew Service Corporation is 4900 Key Tower,
127 Public Square, Cleveland, Ohio 44114-1304.
RENCO STEEL HOLDINGS, INC.
By: /s/ David A. Zagore
-------------------------------------
David A. Zagore, Sole Incorporator
ACCEPTANCE OF APPOINTMENT
The undersigned, Andrew Service Corporation, named herein as the statutory
agent for Renco Steel Holdings, Inc., hereby acknowledges and accepts the
appointment of statutory agent for the Corporation.
ANDREW SERVICE CORPORATION
By: /s/ David A. Zagore
-------------------------------------
Vice President
<PAGE>
Exhibit 3.2
REGULATIONS
OF
RENCO STEEL HOLDINGS, INC.
MEETING OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING.
The annual meeting of shareholders of the Corporation shall be
held at such time and on such business day as the directors may determine each
year. The annual meeting shall be held at the principal office of the
Corporation or at such other place within or without the State of Ohio as the
directors may determine. The directors shall be elected thereat and such other
business transacted as may be specified in the notice of the meeting.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the shareholders may be called at any time by
the President, a Vice President or by a majority of the directors acting with or
without a meeting, or by shareholders holding 25% or more of the outstanding
shares entitled to vote thereat. Such meetings may be held within or without
the State of Ohio at such time and place as may be specified in the notice
thereof.
SECTION 3. NOTICE OF MEETINGS.
Written notice of every annual or special meeting of the
shareholders stating the time, place and purposes thereof shall be given to each
shareholder entitled to vote thereat and to each shareholder entitled to notice
as provided by law, in person or by mailing the same to his last address
appearing on the records of the Corporation at least seven days before the
meeting. Any shareholder may waive notice of any meeting, and, by attendance at
any meeting without protesting the lack of proper notice, shall be deemed to
have waived notice thereof.
SECTION 4. PERSONS BECOMING ENTITLED BY OPERATION OF LAW OR TRANSFER.
Every person who, by operation of law, transfer or any other
means whatsoever, shall become entitled to any shares, shall be bound by every
notice in respect of such share or shares which previously to the entering of
his name and address on the records of the Corporation shall have been duly
given to the person from whom he derives his title to such shares.
<PAGE>
SECTION 5. QUORUM AND ADJOURNMENTS.
Except as may be otherwise required by law or by the Articles of
Incorporation, the holders of shares entitling them to exercise a majority of
the voting power of the Corporation shall constitute a quorum; provided that any
meeting duly called, whether a quorum is present or otherwise may, by vote of
the holders of a majority of the voting shares represented thereat, adjourn from
time to time, in which case no further notice of the adjourned meeting need be
given.
DIRECTORS
SECTION 6. NUMBER.
The number of directors shall not be less than three unless the
number of shareholders shall be less than three, in which case the number of
directors shall be not less than the number of shareholders. The number of
directors may be determined by the vote of the holders of a majority of the
shares entitled to vote thereon at any annual meeting or special meeting called
for the purpose of electing directors, and when so fixed, such number shall
continue to be the authorized number of directors until changed by the
shareholders by vote as aforesaid.
SECTION 7. ELECTION OF DIRECTORS.
At each meeting of the shareholders for the election of
directors, the persons receiving the greatest number of votes shall be the
directors. Such elections shall be by ballot whenever requested by any person
entitled to vote at such meeting; but unless so requested, such election may be
conducted in any way approved at such meeting.
SECTION 8. TERM OF OFFICE.
Directors shall hold office until the annual meeting of the
shareholders next following their election and until their respective successors
are elected, or until their earlier resignation, death or removal from office.
SECTION 9. VACANCIES.
Whenever any vacancy shall occur among the directors, the
remaining directors shall constitute the directors of the Corporation until such
vacancy is filled or until the number
-2-
<PAGE>
of directors is changed as in Section 6 hereof. Except in cases where a
director is removed as provided by law and his successor is elected by the
shareholders, the remaining directors may, by a vote of a majority of their
number, fill any vacancy for the unexpired term.
SECTION 10. QUORUM AND ADJOURNMENTS.
A majority of the directors in office at the time shall
constitute a quorum, provided that any meeting duly called, whether a quorum is
present or otherwise, may, by vote of a majority of the directors present,
adjourn from time to time and place to place within or without the State of
Ohio, in which case no further notice of the adjourned meeting need be given.
At any meeting at which a quorum is present, all questions and business shall be
determined by the affirmative vote of not less than a majority of the directors
present, except as is otherwise authorized by Section 1701.60(A) of the Ohio
Revised Code.
SECTION 11. ORGANIZATION MEETING.
Immediately after each annual meeting of the shareholders at
which directors are elected, or each special meeting held in lieu thereof, the
newly elected directors, if a quorum thereof is present, shall hold an
organization meeting at the same place or at such other time and place as may be
fixed by the shareholders at such meeting, for the purpose of electing officers
and transacting any other business. Notice of such meeting need not be given.
If for any reason such organization meeting is not held at such time, a special
meting for such purpose shall be held as soon thereafter as practicable.
SECTION 12. REGULAR MEETINGS.
Regular meetings of the directors may be held at such times and
places within or without the State of Ohio as may be provided for in by-laws or
resolutions adopted by the directors and upon such notice, if any, as shall be
so provided for.
SECTION 13. SPECIAL MEETINGS.
Special meetings of the directors may be held at any time within
or without the State of Ohio upon call by the President, or the Chief Executive
Officer, or by any two directors. Notice of each such meeting shall be given to
each director by letter or telegram or in person not less than forty-eight (48)
hours prior to such meeting. Any director may waive notice of any meeting, and,
by attendance at any meeting without protesting the lack of proper notice, shall
be deemed to have waived notice thereof. Unless otherwise limited in the notice
thereof, any business may be transacted at any organization, regular or special
meeting.
-3-
<PAGE>
SECTION 14. COMPENSATION.
The directors are authorized to fix a reasonable salary for
directors or a reasonable fee for attendance at any meeting of the directors,
the Executive Committee, or other committees elected under Section 18 hereof, or
any combination of salary and attendance fee. In addition to such compensation
provided for directors, they shall be reimbursed for any expenses incurred by
them in traveling to and from such meetings.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 15. MEMBERSHIP AND ORGANIZATION.
(a) The directors, at any time, may elect from their number an
Executive Committee which shall consist of not less than three members, each of
whom shall hold office during the pleasure of the directors and may be removed
at any time, with or without cause, by vote thereof.
(b) Vacancies occurring in the Committee may be filled by the
directors.
(c) The Committee shall appoint one of its own number as
Chairman who shall preside at all meetings and may also appoint a Secretary (who
need not be a member of the Committee) who shall keep its records and who shall
hold office during the pleasure of the Committee.
SECTION 16. MEETINGS.
(a) Regular meetings of the Committee may be held without notice
of the time, place or objects and shall be held at such times and places within
or without the State of Ohio as the Committee may from time to time determine.
(b) Special meetings may be held upon notice of the time, place
and objects thereof at any place within or without the State of Ohio and until
otherwise ordered by the Committee shall be held at any time and place at the
call of the Chairman or any two members of the Committee.
(c) A majority of the members of the Committee shall be
necessary for the transaction of any business and at any regular or special
meeting the Committee may exercise any or all of its powers and any business
which shall come before any regular or special meeting may be transacted
thereat, provided a majority of the Committee is present, but in every case
-4-
<PAGE>
the affirmative vote of a majority of all of the members of the Committee shall
be necessary to any action by it taken.
(d) Any authorized action by the Committee may be taken without
a meeting in a writing signed by all the members of the Committee.
SECTION 17. POWERS.
Except as its powers, duties and functions may be limited or
prescribed by the directors, during the intervals between the meetings of the
directors, the Committee shall possess and may exercise all the powers of the
directors provided that the Committee shall not be empowered to declare
dividends, elect or remove officers, or to fill vacancies among the directors or
Executive Committee. All actions of the Committee shall be reported to the
directors at their meeting next succeeding such action and shall be subject to
revision or alteration by the directors, provided that no rights of any third
person shall be affected thereby.
SECTION 18. OTHER COMMITTEES.
The directors may elect other committees from among the directors
in addition to or in lieu of an Executive Committee and give to them any of the
powers which under the foregoing provisions could be vested in an Executive
Committee. Sections 15 and 16 shall be applicable to such other committees.
OFFICERS
SECTION 19. OFFICERS DESIGNATED.
The directors, at their organization meeting or at a special
meeting held in lieu thereof, shall elect a President, a Secretary, a Treasurer
and, in their discretion, a Chairman of the Board, one or more Vice Presidents,
a General Manager, an Assistant Secretary or Secretaries, an Assistant Treasurer
or Treasurers, and such other offices as the directors may see fit. The
Chairman of the Board shall be, and the other officers may, but need not be,
chosen from among the directors. Any two or more of such offices other than
that of President and Vice President, or Secretary and Assistant Secretary of
Treasurer and Assistant Treasurer, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity.
SECTION 20. TENURE OF OFFICE.
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The officers of the Corporation shall hold office until the next
organization meeting of the directors and until their successors are chosen and
qualified, except in case of resignation, death or removal. The directors may
remove any officer at any time with or without cause by a majority vote of the
directors in office at the time. A vacancy, however created, in any office may
be filled by election by the directors.
SECTION 21. CHAIRMAN OF THE BOARD.
The Chairman of the Board, if any, shall preside at meetings of
the directors and shall have such other powers and duties as may be prescribed
by the directors.
SECTION 22. PRESIDENT.
The President shall preside at all meetings of the shareholders,
and in the absence of the Chairman of the Board shall also preside at meetings
of the directors. The President shall be the Chief Executive Officer of the
Corporation unless otherwise determined by the directors, and shall have general
supervision over its property, business and affairs, and perform all the duties
usually incident to such office, subject to the directions of the directors.
Unless otherwise determined by the directors, he shall have authority to
represent the Corporation at meetings of the shareholders of other corporations
in which the corporation holds shares, and to execute on behalf of the
Corporation discretionary or restricted proxies. He may execute all authorized
deeds, mortgages, bonds, contracts and other obligations, in the name of the
Corporation, and shall have such other powers and duties as may be prescribed by
the directors.
SECTION 23. VICE PRESIDENT.
The Vice Presidents shall have such powers and duties as may be
prescribed by the directors or as may be delegated by the President or the Chief
Executive Officer. In case of the absence or disability of the President or
when circumstances prevent the President from acting, the Vice Presidents, in
the order designated by the directors, shall perform the duties of the
President, and in such case, the power of the Vice Presidents to execute all
authorized deeds, mortgages, bonds, contracts and other obligations, in the name
of the Corporation, shall be coordinate with like powers of the President. In
case the President and such Vice Presidents are absent or unable to perform
their duties, the directors may appoint a President pro tempore.
SECTION 24. GENERAL MANAGER.
The General Manager, if any, shall have such powers and duties as
may be prescribed by the directors.
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<PAGE>
SECTION 25. SECRETARY.
The Secretary shall attend and keep the minutes of all meetings
of the shareholders and of the directors. He shall keep such books as may be
required by the directors, shall have charge of the seal of the Corporation and
shall give all notices of meetings of shareholders and directors, provided
however, that any persons calling such meetings may, at their options,
themselves give such notice. He shall have such other powers and duties as may
be prescribed by the directors.
SECTION 26. TREASURER.
The Treasurer shall receive and have in charge all money, bills,
notes, bonds, stocks in other corporations an similar property belonging to the
Corporation and shall do with the same as shall be ordered by the directors. He
shall keep accurate financial accounts, and hold the same open for inspection
and examination of the directors. On the expiration of his term of office, he
shall turn over to his successor, or the directors, all property, books, papers
and money of the Corporation in his hands. He shall have such other powers and
duties as may be prescribed by the directors.
SECTION 27. OTHER OFFICERS.
The Assistant Secretaries, Assistant Treasurers, if any, and the
other officers, if any, shall have such powers an duties as the directors may
prescribe.
SECTION 28. DELEGATION OF DUTIES.
The directors are authorized to delegate the duties of any
officers to any other officer and generally to control the action of the
officers and to require the performance of duties in addition to those mentioned
herein.
SECTION 29. COMPENSATION.
The directors are authorized to determine or to provide the
method of determining the compensation of all officers.
SECTION 30. BOND.
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Any officer or employee, if required by the directors, shall give
bond in such sum and with such security as the directors may require for the
faithful performance of his duties.
SECTION 31. SIGNING CHECKS AND OTHER INSTRUMENTS.
The directors are authorized to determine or provide the method
of determining how checks, notes, bills or exchange and similar instruments
shall be signed, countersigned or endorsed.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 32. INDEMNIFICATION.
(a) The Corporation shall indemnify any director or officer or
any former director of officer of the Corporation or any person who is or has
served at the request of the Corporation as a director, officer, or trustee of
another corporation, joint venture, trust or other enterprise against expenses,
including attorneys' fees, judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in the right of the
corporation, to which he was, is, or is threatened to be made a party by reason
of the fact that he is or was such director, officer, or trustee, provided it is
determined in the manner set forth in paragraph (c) of this section that he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and that, with respect to any
criminal action or proceeding, he had no reasonable cause to believe his conduct
was unlawful.
(b) In the case of any threatened, pending or completed action
or suit by or in the right of the Corporation, the Corporation shall indemnify
each person indicated in paragraph (a) of this section against expenses,
including attorneys' fees, actually and reasonably incurred in connection with
the defense or settlement thereof, provided it is determined in the manner set
forth in paragraph (c) of this section that he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court of common pleas or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person
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<PAGE>
is fairly and reasonably entitled to indemnity for such expenses as the court of
common pleas or such other court shall deem proper.
(c) The determinations referred to in paragraphs (a) and (b) of
this section shall be made (1) by a majority vote of a quorum consisting of
directors of the Corporation who were not and are not parties to or threatened
with any such action, suit or proceeding, or (2) if such a quorum is not
obtainable or if a majority vote of a quorum of disinterested directors so
directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been retained
by or who has performed services for the Corporation, or any person to be
indemnified, within the past five years, or (3) by the shareholders, or (4) by
the court of common pleas or the court in which such action, suit or proceeding
was brought.
(d) Expenses, including attorneys' fees, incurred in defending
any action, suit, or proceeding referred to in paragraphs (a) and (b) of this
section, may be paid by the Corporation in advance of the final disposition of
such action, suit, or proceeding as authorized by the directors in the specific
case upon receipt of an undertaking by or on behalf of the director, officer, or
trustee to repay such amount, unless it shall ultimately be determined that he
is entitled to be indemnified by the Corporation as authorized in this section.
(e) The indemnification provided by this section shall not be
deemed exclusive (1) of any other rights to which those seeking indemnification
may be entitled under the articles, the regulations, any agreement, any
insurance purchase by the Corporation, vote of shareholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, or of (2) the power of the
Corporation to indemnify any person who is or was an employee or agent of the
Corporation or of another corporation, joint venture, trust or other enterprise
which he is serving or has served at the request of the Corporation, to the same
extent and in the same situation and subject to the same determinations as are
hereinabove set forth with respect to a director, officer, or trustee. As used
in this paragraph (e) references to the "Corporation" include all constituent
corporations in a consolidation or merger in which the Corporation or a
predecessor to the Corporation by consolidation or merger was involved. The
indemnification provided by this section shall continue as to a person who has
ceased to be a director, officer, or trustee and shall inure to the benefit of
the heirs, executors, and administrators of such a person.
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<PAGE>
CORPORATE SEAL
SECTION 33.
The corporate seal of the Corporation, if any, shall be circular
in form and shall contain the name of the Corporation.
PROVISIONS IN ARTICLES OF INCORPORATION
SECTION 34.
These Regulations are at all times subject to the provisions of
the Articles of Incorporation of the Corporation (including in such term
whenever used in these Regulations, amendments thereto).
RESTRICTIONS ON TRANSFER OF SHARES
SECTION 35.
(a) The Corporation reserves the right to refuse to transfer any
shares on its records unless and until it receives a satisfactory opinion letter
from an attorney for the transferee of such shares that such transfer will not
violate the Securities Act of 1933, as amended, or the Regulations thereunder,
the Ohio Securities Act or the Regulations thereunder, or any other applicable
law or regulations.
(b) It is the policy of the Corporation that so far as
practicable the holders of is shares shall be persons actively interested in the
business of the Corporation. In furtherance of such policy, transfers of all
shares of the Corporation are subject to the following restrictions, under which
the Corporation, in the events and on the terms herein specified, shall have an
irrevocable option to purchase such shares (which right of purchase includes in
each case, without specification thereof, the right to nominate a purchaser or
purchasers of any or all of such shares), all of which restrictions shall be
binding on the shares and the holders thereof from time to time.
(1) No holder of shares shall sell, assign, give, transfer,
exchange or otherwise dispose of any shares unless he shall first send by
registered mail, addressed to the Secretary of the Corporation at its principal
office, written notice of his intention so to do and stating the number of
shares to be disposed of and the name and address of the proposed transferee.
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<PAGE>
Thereupon, during the 120-day period from the date of receiving such notice, the
Corporation shall have an irrevocable option to purchase, at the price and on
the terms hereinafter set forth, any or all of the shares which are the subject
of said notice.
(2) In the event of appointment of a guardian pursuant to legal
adjudication of mental incompetency or appointment of a trustee in bankruptcy,
of any holder of shares, or the sale of any shares upon execution, or in
judicial proceedings, or pursuant to foreclosure of a pledge thereof, or any
transfer of shares by operation of law, then during the 120-day period from the
date of such event, or, in the event of death of a holder of shares, then during
the 120-day period from the date of appointment of his executor or
administrator, the Corporation shall have an irrevocable option to purchase, at
the price and on the terms hereinafter set forth, any or all of such shares.
(3) With respect to any particular option to purchase shares,
the Board of Directors shall have the power to determine, at any time during the
applicable option period, that the Corporation will not exercise said option
with respect to any or all of the shares involved, in which case it shall give
notice to that effect in writing to the holder of such shares (such notice to
address as it appears in the records of the Corporation). Upon giving of such
notice, or upon the expiration of the applicable option period, whichever shall
first occur, said shares shall be released from that particular option, and any
or all of said shares may be sold or otherwise transferred free from that
particular option, but only within a period of one year from and after the
giving of such notice or the expiration of such applicable option period, as the
case may be; except that in the case of an option arising under (1) above, such
sale or transfer may be made only to the particular transferee named in the
notice provided for in the said subparagraph. Upon such sale or transfer in
accordance herewith (or at the end of such one-year period as to any shares not
sold or transferred), such shares shall again become subject to the option
provisions set forth in this section. Notwithstanding the foregoing provisions,
the occurrence, during any option period or during any such one-year period, of
any other event specified in this section as an event giving rise to an option,
shall give rise to a new option in accordance herewith.
(4) Upon the exercise of any option hereinabove provided for,
the purchase price of the shares involved shall be paid by the purchaser upon
such reasonable terms and at such times as the parties shall determine;
provided, that, if the parties do not otherwise agree, such purchase shall be
made for cash at the principal office of the Corporation at such time and on
such date prior to the expiration of the option period as shall be fixed in a
written notice from the purchaser to the holder of the shares stating that the
option is being exercised and the number of shares to be purchased. Such notice
shall be accompanied by a certified copy of the resolution of the Board of
Directors of the Corporation authorizing the exercise of said option on behalf
of the Corporation or nominating a purchase or purchasers of such shares. At
the
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<PAGE>
time and place specified in such notice, the holder of the shares involved shall
surrender the certificate therefor to the purchasers, duly endorsed. From and
after the date so specified, unless the purchaser shall be in default in respect
of payment of the purchase price upon surrender of such certificate, all rights
of the holder of such shares by reason of the ownership thereof shall cease and
such holder shall have no interest in or claim against the Corporation with
respect to said shares except only the right to receive from the purchaser the
purchase price thereof upon surrender of the certificate therefor.
(5) For the purpose of the option rights hereinabove provided
for, the option price to be paid for the shares involved shall be the book value
thereof, determined as of the end of the month preceding the month in which the
120-day option period in question begins. Book value shall be determined in
accordance with, and shall have the meaning given to it under generally accepted
accounting practice but shall, in any event, be determined in a manner
consistent with the method employed by the Corporation in keeping its books and
accounts, excluding from assets any value for goodwill or other like
Intangibles. In the event of dispute, the book values determined by the
Corporation's independent auditors and certified in writing to the Corporation
and to the holder of the shares involved shall be final and binding upon all
persons concerned.
(6) The Corporation shall decline to make any transfer of shares
on its records and until there shall have been compliance with the foregoing
applicable requirements.
AMENDMENTS
SECTION 36.
These Regulations may be altered, changed or amended in any
respect or superseded by new Regulations in whole or in part, by the affirmative
vote of the holders of record of shares entitling them to exercise a majority of
the voting power of the Corporation at an annual or special meeting called for
such purpose or without a meeting by the written consent of the holders of
record of share entitling them to exercise two-thirds of the voting power with
respect thereto. In case of adoption of any Regulation or amendment by such
written consent, the Secretary shall enter the same in the corporate records and
mail a copy thereof to each shareholder who would have been entitled to vote
thereon and did not participate in the adoption thereof.
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<PAGE>
Exhibit 4.1
================================================================================
RENCO STEEL HOLDINGS, INC.,
as Issuer
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
----------------------
INDENTURE
Dated as of February 3, 1998
----------------------
$120,000,000
10 7/8% Senior Secured Notes
due 2005, Series A
and
10 7/8% Senior Secured Notes
due 2005, Series B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Sextion Section
------- -------
310(a)(1). . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 11.02
(c) . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1). . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(D) . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . 4.07; 4.09; 11.02
(b) . . . . . . . . . . . . . . . . . . . . 10.02
(c)(1). . . . . . . . . . . . . . . . . . . . 11.04
(c)(2). . . . . . . . . . . . . . . . . . . . 11.04
(c)(3). . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . 10.03, 10.04
(e) . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . N.A
315(a) . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(LAST SENTENCE). . . . . . . . . . . . . . 2.09
(a)(1)(a) . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(b) . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . 6.07, 9.04
317(a)(1). . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . . . . . 11.01
- ---------------------------
N.A. Means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
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ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . .1
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.02. Incorporation by Reference of TIA. . . . . . . . . . . . . . . 14
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE TWO THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.02. Execution and Authentication.. . . . . . . . . . . . . . . . . 18
SECTION 2.03. Registrar and Paying Agent.. . . . . . . . . . . . . . . . . . 19
SECTION 2.04. Paying Agent To Hold Assets in Trust.. . . . . . . . . . . . . 20
SECTION 2.05. Securityholder Lists.. . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.07. Replacement Securities.. . . . . . . . . . . . . . . . . . . . 29
SECTION 2.08. Outstanding Securities.. . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. Treasury Securities. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.10. Temporary Securities.. . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.11. Cancellation.. . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. Defaulted Interest.. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.13. CUSIP Number.. . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.14. Designation. . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE THREE REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.01. Optional Redemption. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.02. Notices to Trustee.. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.03. Selection of Securities To Be Redeemed.. . . . . . . . . . . . 32
SECTION 3.04. Notice of Redemption.. . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.05. Effect of Notice of Redemption.. . . . . . . . . . . . . . . . 34
SECTION 3.06. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . 34
SECTION 3.07. Securities Redeemed in Part. . . . . . . . . . . . . . . . . . 35
ARTICLE FOUR COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.01. Payment of Securities. . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . . 35
SECTION 4.03. Limitation on Restricted Payments. . . . . . . . . . . . . . . 36
SECTION 4.04. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.05. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . 38
SECTION 4.06. Maintenance of Properties and Insurance. . . . . . . . . . . . 38
SECTION 4.07. Compliance Certificate; Notice of Default. . . . . . . . . . . 39
SECTION 4.08. Compliance with Laws.. . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.09. SEC Reports and Other Information. . . . . . . . . . . . . . . 40
SECTION 4.10. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . 41
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SECTION 4.11. Limitation on Transactions with Affiliates.. . . . . . . . . . 42
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. . . . . . 42
SECTION 4.13. Ownership of WCI Stock.. . . . . . . . . . . . . . . . . . . . 43
SECTION 4.14. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.15. Change of Control. . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.16. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . . 45
SECTION 4.17. Limitation on Business Activiti`es.. . . . . . . . . . . . . . 48
SECTION 4.18. Limitation on Status as Investment Company.. . . . . . . . . . 48
SECTION 4.19. Impairment of Security Interest. . . . . . . . . . . . . . . . 49
SECTION 4.20. Amendment to Pledge Agreement. . . . . . . . . . . . . . . . . 49
ARTICLE FIVE SUCCESSOR CORPORATION. . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.01. When Company May Merge, Etc. . . . . . . . . . . . . . . . . . 50
SECTION 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . . 51
ARTICLE SIX DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.02. Acceleration.. . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.03. Other Remedies.. . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . 55
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.07. Rights of Holders To Receive Payment.. . . . . . . . . . . . . 56
SECTION 6.08. Collection Suit by Trustee.. . . . . . . . . . . . . . . . . . 56
SECTION 6.09. Trustee May File Proofs of Claim.. . . . . . . . . . . . . . . 57
SECTION 6.10. Priorities.. . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . 58
ARTICLE SEVEN TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.03. Individual Rights of Trustee.. . . . . . . . . . . . . . . . . 61
SECTION 7.04. Trustee's Disclaimer.. . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.05. Notice of Default. . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . . . . 61
SECTION 7.07. Compensation and Indemnity.. . . . . . . . . . . . . . . . . . 62
SECTION 7.08. Replacement of Trustee.. . . . . . . . . . . . . . . . . . . . 63
SECTION 7.09. Successor Trustee by Merger, Etc.. . . . . . . . . . . . . . . 64
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . . 64
SECTION 7.11. Preferential Collection of Claims Against Company. . . . . . . 65
ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE. . . . . . . . . . . . . . 65
SECTION 8.01. Termination of Company's Obligations.. . . . . . . . . . . . . 65
SECTION 8.02. Legal Defeasance and Covenant Defeasance.. . . . . . . . . . . 66
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SECTION 8.03. Application of Trust Money.. . . . . . . . . . . . . . . . . . 70
SECTION 8.04. Repayment to Company.. . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.05. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS. . . . . . . . . . . . . . 72
SECTION 9.01. Without Consent of Holders.. . . . . . . . . . . . . . . . . . 72
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . . . 72
SECTION 9.03. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . . . 74
SECTION 9.05. Notation on or Exchange of Securities. . . . . . . . . . . . . 75
SECTION 9.06. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . . 75
ARTICLE TEN COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.01. Pledge of Collateral. . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.02. Recording; Priority; Opinions, Etc. . . . . . . . . . . . . . 76
SECTION 10.03. Release of Collateral.. . . . . . . . . . . . . . . . . . . . 77
SECTION 10.04. Trust Indenture Act Requirements. . . . . . . . . . . . . . . 79
SECTION 10.05. Suits To Protect Collateral.. . . . . . . . . . . . . . . . . 79
SECTION 10.06. Purchaser Protected.. . . . . . . . . . . . . . . . . . . . . 80
SECTION 10.07. Powers Exercisable by Receiver or Trustee.. . . . . . . . . . 80
SECTION 10.08. Determinations Relating to Collateral.. . . . . . . . . . . . 80
SECTION 10.09. Form and Sufficiency of Release.. . . . . . . . . . . . . . . 80
SECTION 10.10. Release upon Termination of the Company's Obligations.. . . . 81
ARTICLE ELEVEN MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.01. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.02. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.03. Communications by Holders with Other Holders. . . . . . . . . 83
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. . . . . . 83
SECTION 11.05. Statements Required in Certificate or Opinion.. . . . . . . . 83
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.. . . . . . . . . . 84
SECTION 11.07. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.08. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.09. No Adverse Interpretation of Other Agreements.. . . . . . . . 84
SECTION 11.10. No Recourse Against Others. . . . . . . . . . . . . . . . . . 85
SECTION 11.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 11.12. Duplicate Originals.. . . . . . . . . . . . . . . . . . . . . 85
SECTION 11.13. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 85
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Exhibit A -. . . . . . . . . . . . . . . . . . . . . . . .Form of Series A Note
-iii-
<PAGE>
Exhibit B - Form of Series B Note
Exhibit C - Form of Legend for Book-Entry Securities
Exhibit D - Form of Transferee Letter of Representation
Exhibit E - Form of certification to be given by the holders of beneficial
interest in a temporary Regulation S global security to Euroclear
or Cedel
Exhibit F - Form of certification to be given by Euroclear operator or Cedel
Bank, Societe Anonyme
Exhibit G - Form of certification to be given by transferee of beneficial
interest in a temporary Regulation S global security
Exhibit H - Form of certification for transfer or exchange of restricted
global security to temporary Regulation S global security
Exhibit I - Form of certification for transfer or exchange of restricted
global security to permanent Regulation S global security
Exhibit J - Form of certification for transfer or exchange of temporary
Regulation S global security or permanent Regulation S global
security to restricted global security
Exhibit K-1 - Form of certification for transfer or exchange of non-global
restricted security to restricted global security
Exhibit K-2 - Form of certification for transfer or exchange of non-global
restricted security to permanent Regulation S global security or
temporary Regulation S global security
Exhibit L-1 - Form of certification for transfer or exchange of non-global
permanent Regulation S security to restricted global security
Exhibit L-2 - Form of certification for transfer or exchange of non-global
permanent Regulation S security to permanent Regulation S global
security
Note: This Table of Contents shall not, for any purpose, be deemed to
be part of the Indenture.
-v-
<PAGE>
INDENTURE, dated as of February 3, 1998, by and between RENCO STEEL
HOLDINGS, INC., an Ohio corporation (the "Company"), as issuer, and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts bank and trust company, as trustee (the
"Trustee").
Each party hereto agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 10 7/8%
Senior Secured Notes due 2005, Series A, and 10 7/8% Senior Secured Notes due
2005, Series B, without distinction as to Series:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Indebtedness" means Indebtedness of a person or any of its
Subsidiaries assumed by the Company in connection with the acquisition of assets
by the Company from such person.
"Affiliate" of any specified person means any other person, directly, or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
when used with respect to any person means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative of the
foregoing. For purposes of Section 4.11, the term "Affiliate" shall include any
person who, as a result of any transaction described therein, would become an
Affiliate.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar or Paying Agent.
"Agent Member" means any member of, or participant in, the Depository.
"Applicable Premium" means, with respect to a Security, the excess of (A)
the present value of all remaining re-
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quired interest and principal payments due on such Security, computed using a
discount rate equal to the Treasury Rate plus 100 basis points, over (B) the
then outstanding principal amount of such Security; PROVIDED, HOWEVER, that in
no event will the Applicable Premium exceed the amount of the applicable
redemption price upon an optional redemption less 100% of the then outstanding
principal amount of such Security at any time on or after February 1, 2002.
"Applicable Procedures" has the meaning provided in Section 2.06(g).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by the Company to any
person, in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of the Company; or (ii) any other properties or
assets of the Company. For the purposes of this definition, the term "Asset
Sale" shall not include any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets that is consummated in accordance with the
provisions of Section 5.01 hereof.
"Asset Sale Offer" has the meaning provided in Section 4.16.
"Asset Sale Offer Payment Date" means, with respect to any Available Amount
from an Asset Sale, the earlier of (x) the 180th day following receipt of such
Available Amount or (y) such earlier date on which an Asset Sale Offer shall
expire.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such person.
"Board Resolution" means with respect to any person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such person to have been
duly adopted by the Board of Directors of such person and to be in full force
and effect on the date of such certification, and delivered to the Trustee.
<PAGE>
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"Book-Entry Security" means a Security represented by a Global Security and
registered in the name of the nominee of the Depository.
"Business Day" means any day that is not a Legal Holiday.
"Capital Lease," as applied to any person, means any lease of (or any
agreement conveying the right to use) any property (whether real, personal or
mixed) by such person as lessee which, in conformity with GAAP, is required to
be accounted for as a capital lease on the balance sheet of such person.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's capital stock, whether outstanding at the Issue Date or issued after
the Issue Date, and any and all rights, warrants or options exchangeable for or
convertible into such capital stock (but excluding any debt security that is
exchangeable for or convertible into such capital stock).
"Capitalized Lease Obligation" means, as to any person, the obligations of
such person under a Capital Lease and, for purposes of this Indenture, the
amount of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within two years from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within two years from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"), or Moody's Investors Service, Inc.
("Moody's"); (iii) commercial paper maturing no more than two years from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within two years from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any
<PAGE>
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state thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $500,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"CEDEL" means Cedel Bank, Societe Anonyme (or any successor securities
clearing agency).
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company or Renco to any person or group of related persons for purposes of
Section 13(d) of the Exchange Act (a "Group") (other than a Permitted Holder or
a Group controlled by a Permitted Holder), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of this Indenture);
(ii) the approval by the holders of Capital Stock of the Company or Renco, as
the case may be, of any plan or proposal for the liquidation or dissolution of
the Company or Renco, as the case may be (whether or not otherwise in compliance
with the provisions of this Indenture); (iii) the acquisition in one or more
transactions of "beneficial ownership" (within the meaning of Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) by any person, entity or Group (other than a Permitted Holder or a
Group controlled by any Permitted Holder) of any Capital Stock of the Company or
Renco such that, as a result of such acquisition, such person, entity or Group
either (A) beneficially owns (within the meaning of Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, more than 50% of the Company's or
Renco's then outstanding voting securities entitled to vote on a regular basis
in an election for a majority of the Board of Directors of the Company or Renco
or (B) otherwise has the ability to elect, directly or indirectly, a majority of
the members of the Company's or Renco's Board of Directors; or (iv) the
shareholders of Renco as of the Issue Date and the Permitted Holders shall cease
to own at least 50% of the equity of Renco owned by such shareholders on the
Issue Date.
<PAGE>
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"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section 4.15.
"Collateral" means, collectively, all of the property and assets that are
from time to time subject to the Pledge Agreement and all other property and
assets that are from time to time made subject, or required to be made subject,
to Liens for the benefit of the Trustee and to the Holders pursuant to the
Pledge Agreement or this Indenture.
"Company" means the party named as such in this Indenture until a successor
replaces it pursuant to this Indenture and thereafter means such successor.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Subsidiaries, on a consolidated
basis for such period determined in accordance with GAAP; PROVIDED that (i) the
net income of any person in which such person or any Subsidiary of such person
has an ownership interest with a third party shall be included only to the
extent of the amount that has actually been received by such person or its
Wholly-Owned Subsidiaries in the form of dividends or other distributions during
such period (subject to, in the case of any dividend or distribution received by
a Wholly-Owned Subsidiary of such Person, the restrictions set forth in clause
(ii) below) and (ii) the net income of any Subsidiary of such person that is
subject to any restriction or limitation on the payment of dividends or the
making of other distributions shall be excluded to the extent of such
restriction or limitation; PROVIDED, FURTHER, that there shall be excluded (a)
the net income (or loss) of any person (acquired in a pooling of interests
transaction) accrued prior to the date it becomes a Subsidiary of such person or
is merged into or consolidated with such person or any Subsidiary of such
person, (b) any net gain (or loss) resulting from an Asset Sale by such person
or any of its Subsidiaries and (c) any extraordinary, unusual or nonrecurring
gains or losses (and related tax effects) in accordance with GAAP.
"Consolidated Net Worth" means, with respect to any person at any date, the
sum of (i) the consolidated stockholders' equity of such person less the amount
of such stockhold-
<PAGE>
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ers' equity attributable to Disqualified Capital Stock of such person and its
Subsidiaries, as determined on a consolidated basis in accordance with GAAP
consistently applied and (ii) the amount of any Preferred Stock of such person
not included in the stockholders' equity of such person in accordance with GAAP,
which Preferred Stock does not constitute Disqualified Capital Stock.
"covenant defeasance" has the meaning provided in Section 8.01.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Book-Entry Securities, The Depository Trust Company or another
person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Depository Securities Certification" has the meaning provided in Section
2.01.
"Disqualified Capital Stock" means any class of Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date.
"Equity Offering" means an offering of Qualified Capital Stock of the
Company (other than to any Subsidiary of the Company).
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE>
-7-
"Exchange Offer" means the registration by the Company under the Securities
Act of all the Series B Notes pursuant to a registration statement under which
the Company offers each Holder of Series A Notes the opportunity to exchange all
Series A Notes held by such Holder for Series B Notes in an aggregate principal
amount equal to the aggregate principal amount of Series A Notes held by such
Holder, all in accordance with the terms and conditions of the Registration
Rights Agreement.
"Extraordinary Distribution" means any and all dividends, cash, instruments
and other property and proceeds received, receivable or otherwise distributed on
WCI Pledged Stock constituting (i) any liquidating dividend or other liquidating
distribution or other similar extraordinary dividend or distribution; (ii) any
dividend or other distribution in respect of WCI Pledged Stock in the form of
Capital Stock or any other property or assets (including cash and Cash
Equivalents) to the extent the Fair Market Value (determined at the time of the
dividend or distribution) of all dividends and other distributions in respect of
WCI Pledged Stock made on or after the Issue Date to and including the date of
such dividend or other distribution exceeds 100% of the Consolidated Net Income
of WCI accrued on a cumulative basis subsequent to January 31, 1998.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value of any asset of the
Company and its Subsidiaries shall be determined by the Board of Directors of
the Company acting in good faith and shall be evidenced by a Board Resolution
thereof delivered to the Trustee; PROVIDED that with respect to any Asset Sale
which involves in excess of $5.0 million, the Fair Market Value of any such
asset or assets shall be determined by an Independent Financial Advisor.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
<PAGE>
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"Global Security" means a Security evidencing all or a part of the
Securities to be issued as Book-Entry Securities, issued to the Depository in
accordance with Section 2.02 and bearing the legend or legends prescribed in
Exhibit C to this Indenture.
"Holder" or "Securityholder" means the person in whose name a Security is
registered on the Registrar's books.
"Indebtedness" means with respect to any person, without duplication, (i)
all obligations of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such person, (iv) all obligations of such
person issued or assumed as the deferred purchase price of property or services,
all conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable, accrued expenses and deferred
taxes arising in the ordinary course of business), (v) all obligations of such
person for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction entered into in the ordinary course of
business, (vi) all obligations of any other person of the type referred to in
clauses (i) through (v) which are secured by any Lien on any property or asset
of such first person and the amount of such obligation shall be the lesser of
the value of such property or asset or the amount of the obligation so secured,
(vii) all guarantees of Indebtedness by such person, (viii) Disqualified Capital
Stock valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends, (ix) all obligations under
Interest Rate Protection Obligations of such person and (x) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (i) through (ix) above. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value to be determined in good faith by the
Board of Directors of the person issuing such Disqualified Capital Stock.
<PAGE>
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"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable and good faith judgment of the Board of Directors of the Company,
qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any arrangement with any other person, whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any person, any advance, loan,
guarantee or other extension of credit or capital contribution to (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others or otherwise), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other person.
Investments shall exclude extensions of trade credit on commercially reasonable
terms in accordance with normal trade practices.
"Issue Date" means the date of the first issuance of the Securities under
this Indenture.
"legal defeasance" has the meaning provided in Section 8.02.
"Legal Holiday" has the meaning provided in Section 11.07.
<PAGE>
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"Lien" means (x) any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute and (y) any agreement to enter into any of the foregoing.
"Maturity Date" means February 1, 2005.
"Net Cash Income" means, with respect to any period, the net income (or
loss) of the Company, on an unconsolidated basis, for such period determined in
accordance with GAAP; excluding (i) any extraordinary, unusual or nonrecurring
gains or losses (and the related tax effects) and (ii) equity in the earnings of
Subsidiaries of the Company, but including dividends from such Subsidiaries to
the extent such amount has been received by the Company in cash or Cash
Equivalents during such period.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company) net of (i) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a
direct result of such Asset Sale and (iii) appropriate amounts to be provided by
the Company, as a reserve required in accordance with GAAP consistently applied
against any liabilities associated with such Asset Sale and retained by the
Company, after such Asset Sale, including, without limitation, under any
indemnification obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Trustee.
"Obligations" means any principal, interest, penalties, fees and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any person, the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Controller, the Treasurer, or the Secretary of such person.
<PAGE>
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"Officers' Certificate" means, with respect to any person, a certificate
signed by two Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of such person and otherwise complying with the requirements
of Sections 11.04 and 11.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee complying with the requirements of Sections 11.04 and
11.05. Unless otherwise required by the TIA, the legal counsel may be an
employee of or counsel to the Company.
"Owner Securities Certification" has the meaning provided in Section 2.01.
"Paying Agent" has the meaning provided in Section 2.03.
"Permanent Regulation S Global Security" has the meaning provided in
Section 2.01.
"Permitted Holders" means Ira Leon Rennert and his Affiliates, estate,
heirs and legatees, and the legal representatives of any of the foregoing,
including, without limitation, the trustee of any trust of which one or more of
the foregoing are the sole beneficiaries.
"Permitted Indebtedness" means (i) any Indebtedness of the Company in an
aggregate amount not to exceed $15 million in aggregate principal amount at any
time outstanding, (ii) any Indebtedness of the Company to Renco in an aggregate
amount not to exceed $15 million in aggregate principal amount at any time
outstanding; PROVIDED that any such Indebtedness is contractually subordinated
in right of payment to the Company's obligations under the Securities; PROVIDED,
FURTHER, that if as of any date any person other than Renco or one of its
Wholly-Owned Subsidiaries owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness pursuant to this clause
(ii), (iii) the Securities and (iv) any renewals, extensions, substitutions,
refundings, refinancings or replacements of the Securities, so long as such
renewal, extension, substitution, refunding, refinancing or replacement does not
result in an increase in the aggregate principal amount of the outstanding
Indebtedness represented thereby.
<PAGE>
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"Permitted Liens" means (i) pledges or deposits by such person under
worker's compensation laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such person is a party, or
deposits to secure public statutory obligations of such person or deposits to
secure surety or appeal bonds to which such person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, (ii)
Liens imposed by law, such as landlords', carriers', warehousemen's and
mechanics' Liens or bankers' Liens incurred in the ordinary course of business
for sums which are not yet due or are being contested in good faith and for
which adequate provision has been made, (iii) Liens for taxes not yet subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings, if adequate reserve, as may be required by GAAP, shall
have been made therefor, (iv) Liens in favor of issuers of surety bonds or
appeal bonds issued pursuant to the request of and for the account of such
person in the ordinary course of its business, (v) Liens to support trade
letters of credit issued in the ordinary course of business, (vi) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions on the use of real property,
(vii) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default and (viii) Liens permitted by the Pledge
Agreement.
"person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such person to holders of
Capital Stock of such person.
"Pledge Agreement" means the Pledge Agreement dated as of the Issue Date by
the Company in favor of the Trustee, as the same may be amended, amended and
restated, supplemented or
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otherwise modified from time to time in accordance with its terms.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participation or other equivalents (however designated) of such
person's preferred or preference stock, whether outstanding on the date hereof
or issued after the date of this Indenture, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus the premium, if any, on such Indebtedness.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act.
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock or convertible into
or exchangeable or exercisable for Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Securities; provided
that if any such date is a Legal Holiday, the Record Date shall be the first day
immediately preceding such specified day that is not a Legal Holiday.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Securities.
"Redemption Price," when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Securities.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement by
and between the Company and the Initial Purchaser, dated as of February 3, 1998,
as the same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
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"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Release Notice" has the meaning provided in Section 10.03.
"Renco" means The Renco Group, Inc., a New York corporation, which is the
parent of the Company, or any successor thereto.
"Restricted Global Security" has the meaning provided in Section 2.01.
"Restricted Payment" has the meaning provided in Section 4.03.
"Restricted Period" has the meaning provided in Section 2.01.
"Restricted Security" has the meaning provided in Rule 144(a)(3) under the
Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Notes and the Series B Notes.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Security Interests" means the Liens on the Collateral created by the
Pledge Agreement in favor of the Trustee for the benefit of the Trustee and the
Holders of the Securities.
"Series A Notes" means the Company's 10 7/8% Senior Secured Notes due 2005,
Series A, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
"Series B Notes" means the Company's 10 7/8% Senior Secured Notes due 2005,
Series B, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
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"Subsidiary" of any person means (i) any corporation of which the
outstanding capital stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such person or (ii) any other person of
which at least a majority of the voting interest under ordinary circumstances is
at the time owned, directly or indirectly, by such person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"Successor Security" of any particular Security means every Security issued
after, and evidencing all or a portion of the same debt as that evidenced by,
such particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Temporary Regulation S Global Security" has the meaning provided in
Section 2.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA.
"Transferee Certificate" means the Transferee Letter of Representation
attached as Exhibit D to this Indenture.
"Transferee Securities Certification" has the meaning provided in Section
2.06(g).
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the date
fixed for repurchase of the Securities following an Asset Sale consisting of the
Capital Stock of WCI (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining life of the Securities until the Maturity Date; PROVIDED,
HOWEVER, that if the remaining life of the Securities is not equal to the
constant maturity of a United States Treas-
<PAGE>
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ury security for which a weekly average yield is given, the Treasury Rate shall
be obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the Maturity Date is within one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trust Officer" means any officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Trustee" means the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture and thereafter
means such successor.
"U.S. Government Obligations" has the meaning provided in Section 8.01.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Valuation Date" has the meaning provided in Section 10.03.
"WCI" means WCI Steel, Inc., an Ohio corporation and a Wholly-Owned
Subsidiary of the Company.
"WCI Pledged Stock" means all of the Capital Stock of WCI now owned or from
time to time acquired by the Company and pledged pursuant to the Pledge
Agreement.
"Wholly-Owned Subsidiary" means, with respect to any person, any Subsidiary
of such person all of the shares of Capital Stock (other than directors'
qualifying shares, if applicable) of which are owned directly by such person or
another Wholly-Owned Subsidiary of such person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in, and made a part of, this Indenture. The following
TIA terms used in this Indenture have the following meanings:
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"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this indenture as a whole and not to any particular article, Section or
other subdivision.
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Securities and the Trustee's certificate of authentication with respect
thereto shall be substantially in the form of Exhibit A or Exhibit B hereto, as
the case may be. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. The Company and the Trustee
shall approve the form of the Securities and any notation, legend or endorsement
on them. Each Security shall be dated the date of its authentication, shall
bear interest from the applicable date and shall be payable on the Interest
Payment Dates and the Maturity Date.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Securities offered and sold in their initial distribution in reliance on
Regulation S may be initially issued in the form of temporary Global Securities
in fully registered form without interest coupons, substantially in the form of
Exhibit A, with such applicable legends as are provided for in Exhibit A or
Exhibit C. Such temporary Global Securities may be registered in the name of
the Depository or its nominee and deposited with the Trustee, as custodian for
the Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided, for credit by the Depository to the respective accounts of
the beneficial owners of the Securities represented thereby (or such other
accounts as they may direct), provided that upon such deposit all such
Securities shall be credited to or through accounts maintained at the Depository
by or on behalf of Euroclear or CEDEL. Until such time as the Restricted Period
(as defined below) shall have expired, such temporary Global Securities,
together with their Successor Securities which are Global Securities other than
the Restricted Global Security, shall be referred to herein as a "Temporary
Regulation S Global Security." After such time as the Restricted Period shall
have expired and the certifications referred to below in the next succeeding
paragraph shall have been provided, interests in such Temporary Regulation S
Global
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Securities shall be exchanged for interests in like Global Securities, referred
to herein collectively as the "Permanent Regulation S Global Security,"
substantially in the form of Security set forth in Exhibit A, with such
applicable legends as are provided for in Exhibit A or Exhibit C. Such
Permanent Regulation S Global Securities shall be registered in the name of the
Depository or its nominee and deposited with the Trustee, as custodian for the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided, for credit to the respective accounts of the beneficial
owners of the Securities represented thereby (or such other accounts as they may
direct). The aggregate principal amount of the Temporary Regulation S Global
Security or the Permanent Regulation S Global Security may be increased or
decreased from time to time by adjustments made on the records of the Trustee,
as custodian for the Depository, as hereinafter provided. As used herein, the
term "Restricted Period" means the period of 40 days commencing on the day after
the latest of (a) the day on which the Securities are first offered to persons
other than distributors (as defined in Regulation S) in reliance on Regulation S
and (b) the date of this Indenture.
Interests in a Temporary Regulation S Global Security may be exchanged for
interests in a Permanent Regulation S Global Security only after (a) the
expiration of the Restricted Period, (b) delivery by a beneficial owner of an
interest therein to Euroclear or CEDEL of a written certification (an "Owner
Securities Certification") substantially in the form of Annex E hereto, and (c)
upon delivery by Euroclear or CEDEL to the Trustee of a written certification (a
"Depository Securities Certification") substantially in the form attached hereto
as Annex F. Upon satisfaction of such conditions, the Trustee will exchange the
portion of the Temporary Regulation S Global Security covered by such
certification for interests in a Permanent Regulation S Global Security. The
delivery by such Holder of a beneficial interest in such Temporary Regulation S
Global Security of such certification shall constitute an irrevocable
instruction by such holder to Euroclear or CEDEL, as the case may be, to
exchange such Holder's beneficial interest in the Temporary Regulation S Global
Security for a beneficial interest in the Permanent Regulation S Global Security
upon the expiration of the Restricted Period in accordance with the next
succeeding paragraph.
Upon:
(i) the expiration of the Restricted Period;
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(ii) receipt by Euroclear or CEDEL, as the case may be, of Owner
Securities Certifications described in the preceding paragraph;
(iii) Receipt by the Depository of:
(1) written instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Depository to credit or cause to
be credited to a specified Agent Member's account a beneficial interest in a
Permanent Regulation S Global Security in a principal amount equal to that of
the beneficial interest in a corresponding Temporary Regulation S Global
Security for which the necessary certifications have been delivered; and
(2) a written order given in accordance with the Applicable Procedures
containing information regarding the account of the Agent Member, and the
Euroclear or CEDEL account for which such Agent Member's account is held, to be
credited with, and the account of the Agent Member to be debited for, such
beneficial interest; and
(iv) receipt by the Trustee of notification from the Depository of the
transactions described in (iii) above and from Euroclear or CEDEL, as the
case may be, of Depository Securities Certifications,
the Trustee, as Registrar, shall instruct the Depository to reduce the principal
amount of such Temporary Regulation S Global Security and to increase the
principal amount of such Permanent Regulation S Global Security, by the
principal amount of the beneficial interest in such Temporary Regulation S
Global Security to be so transferred, and to credit or cause to be credited to
the account of the person specified in such instructions a beneficial interest
in such Permanent Regulation S Global Security having a principal amount equal
to the amount by which the principal amount of such Temporary Regulation S
Global Security was reduced upon such transfer.
Securities offered and sold in their initial distribution in reliance on
Rule 144A under the Security Act and other than in reliance on Rule 144A under
the Securities Act or Regulation S shall be issued in the form of one or more
Global Securities (collectively, and, together with their Successor Securities,
the "Restricted Global Security") in fully registered form without interest
coupons, substantially in the form of Security set forth in Exhibit A, with such
applicable legends as are provided for in Exhibit A or Exhibit C, except as
<PAGE>
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otherwise permitted herein. Such Restricted Global Security shall be registered
in the name of the Depository or its nominee and deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided, for credit by the Depository to the
respective accounts of beneficial owners of the Securities represented thereby
(or such other accounts as they may direct). The aggregate principal amount of
the Restricted Global Security may be increased or decreased from time to time
by adjustments made on the records of the Trustee, as custodian for the
Depository, in connection with a corresponding decrease or increase in the
aggregate principal amount of the Temporary Regulation S Global Security or the
Permanent Regulation S Global Security, as hereinafter provided.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $120,000,000 upon receipt of a written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $120,000,000, except
as provided in Section 2.07. Upon the written order of the Company in the form
of an Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of the
Company.
<PAGE>
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Series B Notes may be issued only in exchange for a like principal amount
of Series A Notes pursuant to an Exchange Offer.
The principal and interest on Book-Entry Securities shall be payable to the
Depository or its nominee, as the case may be, as the sole registered owner and
the sole holder of the Book-Entry Securities represented thereby. The principal
and interest on Securities in certificated form shall be payable at the office
of the Paying Agent.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
If the Securities are to be issued in the form of one or more Global
Securities, then the Company shall execute and the Trustee shall authenticate
and deliver one or more Global Securities that shall represent and shall be in
minimum denominations of $1,000.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of Manhattan,
The City of New York, where (a) Securities may be presented or surrendered for
registration of transfer or for exchange ("Registrar"), (b) Securities may be
presented or surrendered for payment ("Paying Agent") and (c) notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. Neither
the Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the
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Securities and of their transfer and exchange. The Company, upon notice to the
Trustee, may have one or more co-Registrars and one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying Agent" includes
any additional paying agent. The Company initially appoints the Trustee as
Registrar and Paying Agent until such time as the Trustee has resigned or a
successor has been appointed.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee,
in advance, of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that each Paying Agent shall hold in trust for the benefit of the
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities (whether such assets have been
distributed to it by the Company or any other obligor on the Securities), and
shall notify the Trustee of any Default by the Company (or any other obligor on
the Securities) in making any such payment. The Company at any time may require
a Paying Agent to distribute all assets held by it to the Trustee and account
for any assets disbursed and the Trustee may at any time during the continuance
of any payment Default, upon written request to a Paying Agent, require such
Paying Agent to distribute all assets held by it to the Trustee and to account
for any assets distributed. Upon distribution to the Trustee of all assets that
shall have been delivered by the Company to the Paying Agent, the Paying Agent
shall have no further liability for such assets.
SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
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SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Beneficial interests in a Global Security may, subject to the
restrictions on the transferability of the Securities and upon delivery of a
certificate in the form of Exhibit D, be exchanged for certificated Securities
upon request but only upon at least 20 days' prior written notice given to the
Trustee by or on behalf of the Depository (in accordance with the Depository's
customary procedures) and will bear the applicable legends set forth in Exhibit
A.
(b) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depository or
its nominee to the Trustee, as Registrar, for exchange or cancellation as
provided in this Article II. If any Global Security is to be exchanged for
other Securities or cancelled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, such
Global Security shall be so surrendered for exchange or cancellation as provided
in this Article II or, if the Trustee is acting as custodian for the Depository
or its nominee (or is party to a similar arrangement) with respect to such
Global Security, the principal amount thereof shall be reduced or increased by
an amount equal to the portion thereof to be so exchanged or cancelled, or the
principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, in each case by means of an appropriate
adjustment made on the records of the Trustee, whereupon the Trustee, in
accordance with the Applicable Procedures, shall instruct the Depository or its
authorized representatives to make a corresponding adjustment to its records
(including by crediting or debiting any Agent Member's account as necessary to
reflect any transfer or exchange of a beneficial interest). Upon any such
surrender or adjustment of a Global Security, the Trustee shall, subject to this
Article II, authenticate and deliver any Securities issuable in exchange for
such Global Security (or any portion thereof) to or upon the order of, and
registered in such names as may be directed by, the Depository or its authorized
representative. Upon the request of the Trustee in connection with the
occurrence of any of the events specified in the preceding paragraph or in
paragraph (r) below, the Company shall promptly make available to the Trustee a
reasonable supply of Securities that are not in the form of Global Securities.
The Trustee shall be entitled to rely upon any order, direction or request of
the Depository or its authorized representative which is given or made pursuant
to this Article II if such order, direc-
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tion or request is given or made in accordance with the Applicable Procedures.
(c) Subject to the provisions in the legends required by this
Indenture, the registered Holder may grant proxies and otherwise authorize any
Person, including Agent Members and Persons who may hold interests in Agent
Members, to take any action that such Holder is entitled to take under this
Indenture.
(d) Neither Agent Members nor any other Person on whose behalf Agent
Members may act shall have any rights under this Indenture with respect to any
Global Security held on their behalf by the Depository or under the Global
Security, and the Depository may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security. With respect to any Global
Security deposited with the Trustee as custodian for the Depository for credit
to their respective accounts (or to such other accounts as they may direct) at
Euroclear or CEDEL, the provisions of the "Operating Procedures of the Euroclear
System" and the "Terms and Conditions Governing Use of Euroclear", and the
"Management Regulations" and "Instructions to Participants" of CEDEL,
respectively, shall be applicable to such Global Security.
(e) Upon presentation for transfer or exchange of any Security at the
office of the Trustee, as Registrar, located in The City of New York,
accompanied by a written instrument of transfer or exchange in the form approved
by the Company (it being understood that, until notice to the contrary is given
to holders of Securities, the Company shall be deemed to have approved the form
of instrument of transfer or exchange, if any, printed on any Security),
executed by the registered Holder, in person or by such Holder's attorney
thereunto duly authorized in writing, and upon compliance with this Section
2.06, such Security shall be transferred upon the Register, and a new Security
shall be authenticated and issued in the name of the transferee.
Notwithstanding any provision to the contrary herein or in the Securities,
transfers of a Global Security, in whole or in part, and transfers of interests
therein of the kind described in this Section 2.06, shall only be made in ac-
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cordance with this Section 2.06. Transfers and exchanges subject to this
Section 2.06 shall also be subject to the other provisions of this Indenture
that are not inconsistent with this Section 2.06.
(f) GENERAL. A Global Security may not be transferred, in whole or
in part, to any Person other than the Depository or a nominee thereof, and no
such transfer to any such other Person may be registered; PROVIDED, HOWEVER,
that this clause (f) shall not prohibit any transfer of a Security that is
issued in exchange for a Global Security but is not itself a Global Security.
No transfer of a Security to any Person shall be effective under this Indenture
or the Securities unless and until such Security has been registered in the name
of such Person. Nothing in this clause (f) shall prohibit or render ineffective
any transfer of a beneficial interest in a Global Security effected in
accordance with the other provisions of this Section 2.06.
(g) TEMPORARY REGULATION S GLOBAL SECURITY. If the holder of a
beneficial interest in a Temporary Regulation S Global Security wishes at any
time to transfer such interest to a Person who wishes to take delivery thereof
in the form of a beneficial interest in such Temporary Regulation S Global
Security, such transfer may be effected, subject to the rules and procedures of
the Depository, Euroclear and CEDEL, in each case to the extent applicable and
as in effect from time to time (the "Applicable Procedures"), only in accordance
with this clause (g). Upon delivery (i) by a beneficial owner of an interest in
a Temporary Regulation S Global Security to Euroclear or CEDEL, as the case may
be, of an Owner Securities Certification, (ii) by the transferee of such
beneficial interest in the Temporary Regulation S Global Security to Euroclear
or CEDEL, as the case may be, of a written certification (a "Transferee
Securities Certification") substantially in the form of Exhibit G hereto and
(iii) by Euroclear or CEDEL, as the case may be, to the Trustee, as Registrar,
of a Depository Securities Certification, the Trustee may direct either
Euroclear or CEDEL, as the case may be, to reflect on its records the transfer
of a beneficial interest in the Temporary Regulation S Global Security from the
beneficial owner providing the Owner Securities Certification to the Person
providing the Transferee Securities Certification.
(h) RESTRICTED GLOBAL SECURITY TO TEMPORARY REGULATION S GLOBAL
SECURITY. If the holder of a beneficial interest in the Restricted Global
Security wishes at any time to transfer such interest to a Person who wishes to
take delivery
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thereof in the form of a beneficial interest in the Temporary Regulation S
Global Security, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with the provisions of this clause (h) and clause
(n) below. Upon receipt by the Trustee, as Registrar, of (A) written
instructions given by or on behalf of the Depository in accordance with the
Applicable Procedures directing the Trustee to credit or cause to be credited to
a specified Agent Member's account a beneficial interest in the Temporary
Regulation S Global Security in a specified principal amount and to cause to be
debited from another specified Agent Member's account a beneficial interest in
the Restricted Global Security in an equal principal amount and (B) a
certificate in substantially the form set forth in Exhibit H signed by or on
behalf of the holder of such beneficial interest in the Restricted Global
Security, the Trustee, as Security Registrar, shall, subject to clause (n)
below, reduce the principal amount of the Restricted Global Security, and
increase the principal amount of the Temporary Regulation S Global Security by
such specified principal amount.
(i) RESTRICTED GLOBAL SECURITY TO PERMANENT REGULATION S GLOBAL
SECURITY. If the holder of a beneficial interest in the Restricted Global
Security wishes at any time to transfer such interest to a Person who wishes to
take delivery thereof in the form of a beneficial interest in the Permanent
Regulation S Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this clause (i). Upon receipt by
the Trustee, as Security Registrar, of (A) written instructions given by or on
behalf of the Depository in accordance with the Applicable Procedures directing
the Trustee to credit or cause to be credited to a specified Agent Member's
account a beneficial interest in the Permanent Regulation S Global Security in a
specified principal amount and to cause to be debited from another specified
Agent Member's account a beneficial interest in the Restricted Global Security
in an equal principal amount and (B) a certificate in substantially the form set
forth in Exhibit I signed by or on behalf of the holder of such beneficial
interest in the Restricted Global Security, the Trustee, as Registrar, shall
reduce the principal amount of a Restricted Global Security, and increase the
principal amount of the Permanent Regulation S Global Security by such specified
principal amount.
(j) TEMPORARY REGULATION S GLOBAL SECURITY OR PERMANENT REGULATION S
GLOBAL SECURITY TO RESTRICTED GLOBAL SECURITY. If the holder of a beneficial
interest in the Temporary Regulation S Global Security or the Permanent
Regulation S
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Global Security at any time, wishes to transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest in the
Restricted Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this clause (j) and clause (n)
below; PROVIDED that with respect to any transfer of a beneficial interest in a
Temporary Regulation S Global Security, the transferor and Euroclear or CEDEL,
as the case may be, must have previously delivered an Owner Securities
Certification and a Depository Securities Certification respectively, with
respect to such beneficial interest. Upon receipt by the Trustee, as Registrar,
of (A) written instructions given by or on behalf of the Depository in
accordance with the Applicable Procedures directing the Trustee to credit or
cause to be credited to a specified Agent Member's account a beneficial interest
in the Restricted Global Security in a specified principal amount and to cause
to be debited from another specified Agent Member's account a beneficial
interest in the Temporary Regulation S Global Security or the Permanent
Regulation S Global Security, as the case may be, in an equal principal amount
and (S) a certificate in substantially the form set forth in Exhibit J signed by
or on behalf of the holder of such beneficial interest in the Temporary
Regulation S Global Security or the Permanent Regulation S Global Security, as
the case may be, the Trustee, as Security Registrar, shall, subject to clause
(n) below, reduce the principal amount of such Temporary Regulation S Global
Security or Permanent Regulation S Global Security, as the case may be, and
increase the principal amount of the Restricted Global Security by such
specified principal amount.
(k) Non-Global Restricted Security to Global Security. If the holder
of a Restricted Security (other than a Global Security) wishes at any time to
transfer all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in the Restricted Global
Security, the Temporary Regulation S Global Security or the Permanent Regulation
S Global Security, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with this clause (k) and clause (n) below. Upon
receipt by the Trustee, as Registrar, of (A) such Security and written
instructions given by or on behalf of such Holder as provided in this Section
2.06 directing the Trustee to credit or cause to be credited to a specified
Agent Member's account a beneficial interest in the Restricted Global Security,
the Temporary Regulation S Global Security or the Permanent Regulation S Global
Security, as the case may be, in a specified principal amount equal to the
principal amount of the Restricted Security (or portion thereof) to be so
transferred, and (B) an appropri-
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ately completed certificate substantially in the form set forth in Exhibit
K-1 hereto, if the specified account is to be credited with a beneficial
interest in the Restricted Global Security, or Exhibit K-2 hereto, if the
specified account is to be credited with a beneficial interest in the
Temporary Regulation S Global Security or the Permanent Regulation S Global
Security, signed by or on behalf of such Holder, then the Trustee, as
Registrar, shall, subject to clause (n) below, cancel such Restricted
Security (and issue a new Security in respect of any untransferred portion
thereof) as provided in this Section 2.06 and increase the principal amount
of the Restricted Global Security, Temporary Regulation S Global Security or
Permanent Regulation S Global Security, as the case may be, by the specified
principal amount.
(l) NON-GLOBAL PERMANENT REGULATION S SECURITY TO RESTRICTED GLOBAL
SECURITY OR PERMANENT REGULATION S GLOBAL SECURITY. If the Holder of a
Permanent Regulation S Security (other than a Global Security) wishes at any
time to transfer all or any portion of such Security to a Person who wishes to
take delivery thereof in the form of a beneficial interest in the Restricted
Global Security or the Permanent Regulation S Global Security, as the case may
be, such transfer may be effected only in accordance with this clause (l) and
subject to the Applicable Procedures. Upon receipt by the Trustee, as
Registrar, of (A) such Security and instructions given by or on behalf of such
Holder as provided in this Section 2.06 directing the Trustee to credit or cause
to be credited to a specified Agent Member's account a beneficial interest in
the Restricted Global Security or the Permanent Regulation S Global Security, as
the case may be, in a principal amount equal to the principal amount of the
Security (or portion thereof) to be so transferred, and (B)(i) with respect to a
transfer which is to be delivered in the form of a beneficial interest in the
Restricted Global Security, a certificate in substantially the form set forth in
Exhibit L-1, signed by or on behalf of such Holder, and (ii) with respect to a
transfer which is to be delivered in the form of a beneficial interest in the
Permanent Regulation S Global Security, a certificate in substantially the form
set forth in Exhibit L-2, signed by or on behalf of such Holder, then the
Trustee, as Registrar, shall, subject to Clause (9) below, cancel such Security
(and issue a new Security in respect of any untransferred portion thereof) as
provided in this Section 2.06 and increase the principal amount of the
Restricted Global Security, or the Permanent Regulation S Global Security, as
the case may be, by the specified principal.
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(m) OTHER EXCHANGES. Securities that are not Global Securities may
be exchanged (on transfer or otherwise) for Securities that are not Global
Securities or for beneficial interests in a Global Security (if any is then
outstanding) only in accordance with such procedures, which shall be
substantially consistent with the provisions of clauses (f) through (l) above
(including the certification requirements intended to insure that transfers of
beneficial interests in a Global Security comply with Rule 144A under the
Securities Act, Rule 144 under the Securities Act or Regulation S, as the case
may be) and any Applicable Procedures, as may be from time to time adopted by
the Company and the Trustee.
(n) INTERESTS IN TEMPORARY REGULATION S GLOBAL SECURITY TO BE HELD
THROUGH EUROCLEAR OR CEDEL. Until the later of the expiration of the Restricted
Period and the provision of the Owner Securities Certification and the
Depository Securities Certification, beneficial interests in any Temporary
Regulation S Global Security may be held only in or through accounts maintained
at the Depository by Euroclear or CEDEL (or by Agent Members acting for the
account thereof).
(o) When Securities in certificated form are presented to the
Registrar or a co-Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal principal amount of
Securities of other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transaction are met; PROVIDED, HOWEVER, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's or co-Registrar's request. No
service charge shall be made for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.02, 2.10, 3.07, 4.15, 4.16 or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in
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whole or in part pursuant to Article Three, except the unredeemed portion of any
Security being redeemed in part.
(p) If a Series A Note is a Restricted Security in certificated form,
then as provided in this Indenture and subject to the limitations herein set
forth, the Holder, provided it is a Qualified Institutional Buyer, may exchange
such Security for a Book-Entry Security by instructing the Trustee (by
completing the Transferee Certificate in the form of Exhibit D hereto) to
arrange for such Series A Note to be represented by a beneficial interest in a
Global Security in accordance with the customary procedures of the Depository.
(q) Upon any exchange provided for in Section 2.06(a), the Company
shall execute and the Trustee shall authenticate and deliver to the person
specified by the Depository a new Series A Note or Notes registered in such
names and in such authorized denominations as the Depository, pursuant to the
instructions of the beneficial owner of the Securities requesting the exchange,
shall instruct the Trustee. Thereupon, the beneficial ownership of such Global
Security shown on the records maintained by the Depository or its nominee shall
be reduced by the amounts so exchanged and an appropriate endorsement shall be
made by or on behalf of the Trustee on the Global Security. Any such exchange
shall be effected through the Depository in accordance with the procedures of
the Depository therefor.
(r) Notwithstanding the foregoing, no Global Security shall be
registered for transfer or exchange, or authenticated and delivered, whether
pursuant to this Section, Section 2.07, 2.10 or 3.07 or otherwise, in the name
of a person other than the Depository for such Global Security or its nominee
until (i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time the Depository
ceases to be a clearing agency registered under the Exchange Act, and a
successor depository is not appointed by the Company within 30 days, (ii) the
Company executes and delivers to the Trustee a Company order that all such
Global Securities shall be exchangeable or (iii) there shall have occurred and
be continuing an Event of Default. Upon the occurrence in respect of any Global
Security representing the Series A Notes of any one or more of the conditions
specified in clause (i), (ii) or (iii) of the preceding sentence, such Global
Security may be registered for transfer or exchange for Series A Notes
registered in the names of, authenticated and delivered to, such persons as the
Trustee or the Depository, as the case may be, shall direct.
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(s) Except as provided above, any Security authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
any Global Security, whether pursuant to this Section, Section 2.07, 2.10 or
3.07 or otherwise, shall also be a Global Security and bear the legend specified
in Exhibit C.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
the Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced. The Company may charge such Holder for its reasonable,
out-of-pocket expenses in replacing a Security, including reasonable fees and
expenses of counsel. Every replacement Security shall constitute an additional
obligation of the Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
A Security does not cease to be outstanding because the Company or any of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Securities payable on that date, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue; PROVIDED, HOWEVER, that to the extent the Trustee is enjoined
from making payments to the Holders,
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interest will continue to accrue until such time as the Trustee is not so
enjoined.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or an Affiliate of the Company shall be disregarded, except that,
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities that the
Trustee knows are so owned shall be disregarded.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Securities
to replace Securities that it has paid or delivered to the Trustee for
cancellation. If the Company shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
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SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, it
shall, unless the Trustee fixes another record date pursuant to Section 6.10,
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest to the persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date fixed
by the Company for the payment of defaulted interest or the next succeeding
Business Day if such date is not a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder, with a
copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities may use a CUSIP number or
numbers, and if so, the Trustee shall use the CUSIP number or numbers in notices
of redemption or exchange as a convenience to Holders; PROVIDED that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number or numbers printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities.
SECTION 2.14. DESIGNATION.
The Indebtedness evidenced by the Securities is hereby irrevocably
designated as "senior indebtedness" or such other term denoting seniority (i)
for all purposes of the provisions defining subordination contained in
agreements that provide that the Indebtedness of the Company issued pursuant to
such agreements is subordinate to Indebtedness designated as senior indebtedness
and (ii) for the purposes of any future Indebtedness of the Company which the
Company expressly makes subordinate to any senior indebtedness or such other
term denoting seniority. In connection with the issuance of any such future
subordinated Indebtedness, the Company shall take all necessary steps to
effectuate the foregoing.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. OPTIONAL REDEMPTION.
(a) The Securities will be subject to redemption, in whole or in
part, at the option of the Company, at any time on or after February 1, 2002, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued interest to the redemption date, if redeemed during the 12
month period beginning on February 1 of the years indicated below:
Year Percentage
2002....................................... 105.438%
2003....................................... 102.719%
2004 and thereafter........................ 100.000%
(b) In addition, at any time prior to February 1, 2001, the Company
may redeem up to 33 1/3% of the aggregate principal amount of the Securities
originally issued with the proceeds of one or more Equity Offerings at a
redemption price (expressed as a percentage of principal amount) of 111% plus
accrued interest to the redemption date; PROVIDED that at least $80 million
aggregate principal amount of Securities remains outstanding immediately after
any such redemption. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Equity Offering.
SECTION 3.02. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to this Indenture
and the Securities, it shall notify the Trustee and the Paying Agent in writing
of the Redemption Date and the principal amount of the Securities to be redeemed
and whether it wants the Trustee to give notice of redemption to the Holders (at
the Company's expense) at least 35 days (unless a shorter notice shall be
satisfactory to the Trustee) but not more than 60 days before the Redemption
Date. Any such notice may be cancelled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.
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SECTION 3.03. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed at any time, the
Trustee shall select the Securities to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which the
Securities being redeemed are listed or, if the Securities are not listed on a
national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee shall deem fair and appropriate.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 or less may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. If a redemption is to be made with the
proceeds of an Equity Offering pursuant to Section 3.01, selection of the
Securities for redemption shall be made by the Trustee only on a pro rata basis
unless such method is otherwise prohibited. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption.
SECTION 3.04. NOTICE OF REDEMPTION.
Except as otherwise provided in Section 3.01, at least 30 days but not
more than 60 days before a Redemption Date the Company shall mail a notice of
redemption by first class mail to each Holder whose Securities are to be
redeemed, with a copy to the Trustee. At the Company's request, the Trustee
shall give the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Securities to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
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(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in the aggregate principal amount equal to the unredeemed
portion thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption; and
(8) the CUSIP number, if any, relating to such Securities.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.04,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price. Upon surrender to the Trustee or Paying Agent,
such Securities called for redemption shall be paid at the Redemption Price plus
accrued interest to the Redemption Date, but interest installments whose
maturity is on or prior to such Redemption Date will be payable on the relevant
Interest Payment Dates to the Holders of record at the close of business on the
relevant Record Dates referred to in the Securities.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of all
Securities to be redeemed on that date (other than Securities or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation). The Paying Agent shall promptly
return to the Company any U.S. Legal Tender so deposited which is not required
for that purpose upon the written
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request of the Company, except with respect to monies owed as obligations to the
Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Securities are presented for payment.
SECTION 3.07. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender
designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest at a rate equal to 12 7/8%
per annum.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of
New York, the office or agency required under Section 2.03. The Company shall
give prior notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 11.02.
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The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby initially designates the office of State Street
Bank and Trust Company, N.A., 61 Broadway, 15th Floor, New York, New York 10006,
as such office of the Company in accordance with this Section 4.02.
SECTION 4.03. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not after the Issue Date (a) declare or pay any
dividend or make any distribution on the Company's Capital Stock or make any
payment to holders of such Capital Stock (other than dividends or distributions
payable in Qualified Capital Stock of the Company, repayment of Indebtedness
permitted to be incurred under this Indenture or the reimbursement of expenses
paid on behalf of the Company) or (b) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock (each
of the foregoing actions set forth in clauses (a) and (b) being referred to as a
"Restricted Payment"), if at the time of such Restricted Payment or immediately
after giving effect thereto, (i) a Default or an Event of Default shall have
occurred and be continuing or (ii) Restricted Payments made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, shall
be the Fair Market Value of such property proposed to be transferred by the
Company pursuant to such Restricted Payment) shall exceed the sum of:
(x) 50% of the cumulative Net Cash Income (or if cumulative Net Cash
Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to January 31, 1998 and prior to the date the Restricted Payment
occurs (treating such period as a single accounting period); and
(y) 100% of the aggregate net proceeds, including the Fair Market
Value of property other than cash, received by the Company from any person
(other than a Subsidiary of the Company) from the issuance and sale
subsequent to the
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Issue Date of Qualified Capital Stock of the Company (excluding (A)
Qualified Capital Stock paid as a dividend on any Capital Stock or as
interest on any Indebtedness, (B) any net proceeds from issuances and sales
financed directly or indirectly using funds borrowed from the Company or
any Subsidiary of the Company, until and to the extent such borrowing is
repaid and (C) any net proceeds from any Equity Offering which are used to
redeem Securities pursuant to, and in accordance with, the provisions
described under Section 3.01(b));
The foregoing provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of its
declaration if the dividend would have been permitted on the date of
declaration;
(2) the acquisition of Capital Stock of the Company either (i) solely
in exchange for shares of Qualified Capital Stock or (ii) through the
application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock;
(3) the making of payments by the Company to Renco (A) no earlier
than ten days prior to the date on which Renco is required to make its
payments to the Internal Revenue Service or the applicable state taxing
authority, as the case may be, pursuant to a tax sharing agreement between
the Company and Renco (which tax sharing agreement provides that the
payments thereunder shall not exceed the amount the Company would have been
required to pay for taxes on a stand-alone basis, except that the Company
will not have the benefit of any of its tax loss carryforwards unless such
tax losses were a result of timing differences between the Company's
accounting for tax and financial reporting purposes, and which tax sharing
agreement also provides that transactions between the Company and Renco and
Renco's other Subsidiaries are accounted for on a cash basis and not on an
accrual basis) and (B) to reimburse Renco for out of pocket insurance
payments made by Renco on behalf of the Company; and
(4) the payment by the Company of a dividend to Renco on the Issue
Date in an amount not to exceed $100.0 million;
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PROVIDED that in the case of clause (2) no Default or Event of Default shall
have occurred and be continuing at the time of such payment or as a result
thereof.
In determining the aggregate amount of Restricted Payments permissible
under clause (ii) of the first paragraph of this section, amounts expended,
incurred or outstanding pursuant to clauses (1) and (2) (but not pursuant to
clauses (3) and (4)), of the second paragraph of this section shall be included
as Restricted Payments; provided that any proceeds received from the issuance of
Qualified Capital Stock pursuant to clause (2) of the second paragraph of this
section shall be included in calculating the amount referred to in clause (y) of
the first paragraph of this section.
SECTION 4.04. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate or other existence of each of
its Subsidiaries in accordance with the respective organizational documents of
each such Subsidiary and the rights (charter and statutory) and franchises of
the Company and each such Subsidiary; PROVIDED, HOWEVER, that the Company shall
not be required to preserve, with respect to itself, any right or franchise, and
with respect to any of its Subsidiaries any such existence, right or franchise,
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
will not be adverse in any material respect to the Holders.
SECTION 4.05. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien upon
the property of it or any of its Subsidiaries; PROVIDED, HOWEVER, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim if either (a) the amount,
applicability or validity thereof is being contested in good faith by
appropriate proceedings and an adequate reserve has been established therefor to
the extent required by GAAP or
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(b) the failure to make such payment or effect such discharge (together with all
other such failures) would not have a material adverse effect on the financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole.
SECTION 4.06. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall cause all properties used or useful in the
conduct of its business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in its
judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times unless the
failure to so maintain such properties (together with all other such failures)
would not have a material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a whole; PROVIDED,
HOWEVER, that nothing in this Section 4.06 shall prevent the Company or any
Subsidiary of the Company from discontinuing the operation or maintenance of any
of such properties, or disposing of any of them, if such discontinuance or
disposal is either (i) in the ordinary course of business, (ii) in the good
faith judgment of the Board of Directors of the Company or the Subsidiary
concerned, or of the senior officers of the Company or such Subsidiary, as the
case may be, desirable in the conduct of the business of the Company or such
Subsidiary, as the case may be, or (iii) is otherwise permitted by this
Indenture.
(b) The Company shall provide or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company are adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with reputable insurers
or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the reasonable, good faith opinion of the
Company, for companies similarly situated in the industry, unless the failure to
provide such insurance (together with all other such failures) would not have a
material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
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SECTION 4.07. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 60 days after
the end of the Company's fiscal quarters and within 90 days after the end of the
Company's fiscal year, an Officers' Certificate stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
period has been made under the supervision of the signing Officers with a view
to determining whether it has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge, the Company during
such preceding fiscal period has kept, observed, performed and fulfilled each
and every such covenant and no Default or Event of Default occurred during such
period and at the date of such certificate there is no Default or Event of
Default that has occurred and is continuing or, if such signers do know of such
Default or Event of Default, the certificate shall describe the Default or Event
of Default and its status with particularity. The Officers' Certificate shall
also include all calculations necessary to show covenant compliance. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the Company shall
deliver to the Trustee within 90 days after the end of each fiscal year a
written statement by the Company's independent certified public accountants
stating (A) that their audit examination has included a review of the terms of
this Indenture and the Securities as they relate to accounting matters, and (B)
whether, in connection with their audit examination, any Default or Event of
Default has come to their attention and if such a Default or Event of Default
has come to their attention, specifying the nature and period of existence
thereof.
(c) The Company will deliver to the Trustee as soon as possible, and
in any event within 10 days after the Company becomes aware or should reasonably
have become aware of the occurrence of any Default or Event of Default, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.
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SECTION 4.08. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except such as are being contested in good faith and by appropriate
proceedings and except for such noncompliances as would not in the aggregate
have a material adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries taken as a whole.
SECTION 4.09. SEC REPORTS AND OTHER INFORMATION.
(a) At all times when the Company is required or permitted
voluntarily to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act or this Indenture is qualified under the TIA, the Company (at its own
expense) shall file with the SEC and shall file with the Trustee and mail or
cause the Trustee to mail to the Holders at their addresses set forth in the
register of Securities within 15 days after it files them with the SEC copies of
the annual reports, quarterly reports and the information, documents, and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) to be filed pursuant to Section 13 or 15(d) of
the Exchange Act. If the Company is not subject to the requirements of such
Section 13 or 15(d) of the Exchange Act and not permitted to voluntarily file
and this Indenture has not been qualified under the TIA, the Company (at its own
expense) shall file with the Trustee and mail or cause the Trustee to mail to
the Holders at their addresses set forth in the register of Securities, within
15 days after it would have been required to file such information with the SEC,
all information and financial statements, including any notes thereto and with
respect to annual reports, quarterly reports, an auditors' report by an
accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations," both
comparable to the disclosure that the Company would have been required to
include in such annual reports, quarterly reports, information, documents or
other reports, as if the Company was subject to the requirements of such Section
13 or 15(d) of the Exchange Act, in each case in the form that would have been
required by the SEC. Upon qualification of this Indenture under the TIA,
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the Company shall also comply with the provisions of TIA Section 314(a).
(b) At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, upon the request of a Holder of a Series A Note, the
Company will promptly furnish or cause to be furnished such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) to such Holder or to a prospective purchaser of such Series A
Note designated by such Holder, as the case may be, in order to permit
compliance by such Holder with Rule 144A under the Securities Act.
SECTION 4.10. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with or for the
benefit of, an Affiliate of the Company (an "Affiliate Transaction"), other than
(x) Affiliate Transactions permitted under (b) below and (y) Affiliate
Transactions (including lease transactions) on terms that are no less favorable
to the Company in the aggregate than those that might reasonably have been
obtained in a comparable transaction by the Company on an arm's-length basis (as
determined in good faith by the Board of Directors of the Company, as evidenced
by a Board Resolution) from a person that is not an Affiliate; PROVIDED that
except as otherwise provided by (b) below, the Company shall not enter into an
Affiliate Transaction or series of related Affiliate Transactions involving or
having a value
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of more than $5.0 million unless the Company received an opinion from an
Independent Financial Advisor, with a copy thereof to the Trustee, to the effect
that the financial terms of such Affiliate Transaction are fair and reasonable
to the Company, and such terms are no less favorable to the Company than those
that could be obtained in a comparable transaction on an arm's-length basis with
a person that is not an Affiliate.
(b) The foregoing provisions shall not apply to (i) any Restricted
Payment that is made in compliance with the provisions of Section 4.03 and (ii)
reasonable and customary regular fees to directors of the Company who are not
employees of the Company.
(c) Notwithstanding anything to the contrary contained in clauses (a)
or (b) above or in this Indenture, the Company shall not make any Investment
after the Issue Date in any person in which Renco or any of its Affiliates
(other than the Company and its Subsidiaries) owns any Capital Stock.
SECTION 4.12. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND
DISQUALIFIED CAPITAL STOCK.
(a) The Company will not (i) create, incur, assume, guarantee, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for the payment of (collectively "incur") any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness or (ii)
issue any Disqualified Capital Stock.
(b) The Company shall not in any event incur any Indebtedness which
by its terms (or by the terms of any agreement governing such Indebtedness) is
subordinated to any other Indebtedness of the Company unless such Indebtedness
is also by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinated to the Securities to the same extent
and in the same manner as such Indebtedness is subordinated to such other
Indebtedness of the Company.
SECTION 4.13. OWNERSHIP OF WCI STOCK.
Other than the sale of all of the Capital Stock of WCI in compliance
with clause (b) of Section 4.16, the Company will at all times be the legal and
beneficial owner of all of the outstanding Capital Stock of WCI.
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SECTION 4.14. LIMITATION ON LIENS.
The Company will not create, incur, assume or suffer to exist any
Liens (i) upon any item of Collateral other than the Liens created by the
Securities, this Indenture and the Pledge Agreement and (ii) upon any other
properties or assets of the Company whether owned on the Issue Date or acquired
after the Issue Date, or on any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits thereon other than (A)
in the case of clause (ii) only, Liens securing Indebtedness permitted to be
incurred pursuant to clause (i) of the definition of Permitted Indebtedness and
(B) in the case of clauses (i) and (ii), Permitted Liens.
SECTION 4.15. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase all outstanding Securities pursuant to
the offer described in paragraph (b), below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, to the date of purchase. Within 10 days after the date upon
which the Change of Control occurred (the "Change of Control Date") requiring
the Company to make a Change of Control Offer pursuant to this Section 4.15, the
Company shall so notify the Trustee.
(b) The notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Change of Control Offer. Within 30 days following any Change of Control Date,
the Company shall send, by first class mail, a notice to each Holder, with
copies to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Securities tendered will be accepted for payment;
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 45 days nor later than 60
days following the Change of Control Date, other than as may be required by
law) (the "Change of Control Payment Date");
(3) that any Security not tendered will continue to accrue interest;
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(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to a
Change of Control Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the last page of
the Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than two Business Days prior to the Change
of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price of all Securities so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders new Securities equal in principal
amount to any unpurchased portion of the Securities surrendered. Any Securities
not so accepted shall be promptly mailed by the Company to the Holder thereof.
The Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date. The Company
shall comply, to the extent
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applicable, with the requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the repurchase of
securities pursuant to a Change of Control Offer. The Change of Control Offer
shall remain open for at least 20 Business Days and until the close of business
on the Change of Control Payment Date. For purposes of this Section 4.15, the
Trustee shall act as the Paying Agent.
SECTION 4.16. LIMITATION ON ASSET SALES.
(a) The Company will not consummate any Asset Sale unless (i) such
Asset Sale is for at least Fair Market Value, (ii) at least 80% of the
consideration therefrom received by the Company is in the form of cash or Cash
Equivalents, (iii) if such Asset Sale involves the sale of Capital Stock of WCI
it shall be in compliance with the provisions of clause (b) below," and (iv) the
Company shall apply the Net Cash Proceeds of such Asset Sale (the "Available
Amount") within 180 days of receipt thereof to make an offer to purchase (the
"Asset Sale Offer") from all Holders of Securities, up to a maximum principal
amount (expressed as a multiple of $1,000) of Securities equal to the Available
Amount, at a purchase price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of purchase; PROVIDED,
HOWEVER, that the Company will not be required to apply, pursuant to this
paragraph (a), Net Cash Proceeds received from any Asset Sale if, and only to
the extent that, such Net Cash Proceeds are applied in compliance with Section
4.17 within 180 days of such Asset Sale; PROVIDED, FURTHER, that if at any time
any non-cash consideration received by the Company in connection with any Asset
Sale is converted into or sold or otherwise disposed of for cash, then such
conversion or disposition shall be deemed to constitute an Asset Sale under this
Indenture and the Net Cash Proceeds thereof shall be applied in accordance with
this Section 4.16; PROVIDED, FURTHER, that the Company may defer the Asset Sale
Offer until there is an aggregate unutilized Available Amount equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire unutilized Available Amount, and not just the amount in excess of
$5.0 million, shall be applied as required pursuant to this paragraph).
(b) Notwithstanding anything to the contrary contained in clause (a)
above or in this Indenture, the Company may not sell any of the Capital Stock of
WCI unless such Asset Sale involves the sale of all of the Capital Stock of WCI
and the Company uses the Net Cash Proceeds of such Asset Sale within 60 days of
receipt thereof to make an offer to purchase
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from all Holders of Securities, up to a maximum principal amount (expressed as a
multiple of $1,000) of Securities equal to the Net Cash Proceeds of such Asset
Sale, at a purchase price equal to the sum of the principal amount of the
Securities plus the Applicable Premium plus accrued and unpaid interest thereon,
if any, to the date of purchase. Any such offer to purchase Securities with the
Net Cash Proceeds of an Asset Sale involving the sale of all of the Capital
Stock of WCI shall comply with all the procedural and other requirements set
forth herein for an Asset Sale Offer. Upon the completion of such offer to
purchase, the WCI Pledged Stock shall be released from the Lien hereunder and
under the Pledge Agreement in compliance with Section 10.03. References in this
Indenture to an Asset Sale Offer shall include an offer to purchase pursuant to
this Section 4.16(b).
(c) The Company shall provide the Trustee with prompt notice of the
occurrence of an Asset Sale Offer. Such notice shall be accompanied by an
Officers' Certificate setting forth (i) a statement to the effect that the
Company or a Subsidiary of the Company has made an Asset Sale and (ii) the
aggregate principal amount of Securities offered to be purchased and the basis
of calculation in determining such aggregate principal amount.
(d) The notice of an Asset Sale Offer shall be sent, by first class
mail, by the Company (or caused to be mailed by the Company) with a copy to the
Trustee to all Holders of Securities not less than 30 days nor more than 60 days
before the Asset Sale Payment Date at their last registered addresses. The
Asset Sale Offer shall remain open from the time of mailing until three days
before the Asset Sale Offer Payment Date. The notice to the Holders shall
contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Asset Sale Offer. Such notice shall state:
(1) that the Asset Sale Offer is being made pursuant to Section 4.16;
(2) the purchase price (including an amount of accrued interest) and
the Asset Sale Offer Payment Date;
(3) that any Security not tendered will continue to accrue interest;
(4) that unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant
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to the Asset Sale Offer shall cease to accrue interest after the Asset Sale
Offer Payment Date;
(5) that Holders electing to have a Security purchased pursuant to an
Asset Sale Offer will be required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the last page of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day prior to the
Asset Sale Offer Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, no later than two Business Days prior to the Asset
Sale Offer Payment Date, a telegram, telex, facsimile transmission or
letter stating fully the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased;
(7) that if Securities in a principal amount in excess of the
principal amount of the Securities to be acquired pursuant to the Asset
Sale Offer are tendered and not withdrawn pursuant to the Asset Sale Offer,
the Company shall purchase Securities on a pro rata basis (with such
adjustment as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or integral multiples of $1,000 shall
be so acquired); and
(8) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered.
On or before an Asset Sale Offer Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the Asset
Sale Offer (on a pro rata basis if required pursuant to paragraph (7) above),
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate identifying the Securities or portions thereof accepted for payment
by the Company. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail or deliver to such Holders new
Securities equal in principal amount to any unpurchased portion of the
Securities surren-
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dered. Any Securities not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company will publicly announce the
results of the Asset Sale Offer as promptly as practicable following the Asset
Sale Offer Payment Date. The Company shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Securities
pursuant to an Asset Sale Offer.
(e) In the event of the transfer of substantially all (but not all)
of the property and assets of the Company and its Subsidiaries as an entirety to
a person in a transaction permitted under Article Five hereof, the successor
corporation shall be deemed to have sold the properties and assets of the
Company and its Subsidiaries not so transferred for purposes of this Section
4.16, and shall comply with the provisions of this Section 4.16 with respect to
such deemed sale as if it were an Asset Sale. In addition, the Fair Market
Value of such properties and assets of the Company or its Subsidiaries deemed to
be sold shall be deemed to be Net Cash Proceeds for purposes of this Section
4.16.
SECTION 4.17. LIMITATION ON BUSINESS ACTIVITIES.
The Company will not engage in any business other than (i) the
ownership of the Capital Stock of WCI and (ii) the investing and reinvesting of
the assets of the Company other than the Capital Stock of WCI, and the
application of any proceeds therefrom, at the discretion of the Company.
SECTION 4.18. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company will not, and will not permit any of its Subsidiaries or
controlled Affiliates to, conduct its business in a fashion that would cause the
Company to be required to register as an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act")), or otherwise become subject to regulation under the Investment
Company Act.
SECTION 4.19. IMPAIRMENT OF SECURITY INTEREST.
The Company will not, and will not permit any of its Subsidiaries to,
take or omit to take any action which action or omission might or would have the
result of affecting or impairing the security interest in favor of the Trustee,
on behalf of itself and the Holders of the Securities, with respect to the
Collateral, and the Company shall not grant to any per-
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son (other than the Trustee on behalf of itself and the Holders of the
Securities) any interest whatsoever in the Collateral other than Liens permitted
by this Indenture and the Pledge Agreement.
SECTION 4.20. Amendment to Pledge Agreement.
The Company will not, and will not permit any of its Subsidiaries to,
amend, modify or supplement of, permit or consent to any amendment, modification
or supplement of, the Pledge Agreement in any way which would be adverse to the
Holders of the Securities or which would constitute a Default under this
Indenture or the Pledge Agreement.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.
(a) The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, any person or adopt a Plan of Liquidation, unless:
(1) either (i) the Company shall be the surviving or continuing
corporation or (ii) the person (if other than the Company) formed by such
consolidation or into which the Company is merged or the person which
acquires by conveyance, transfer or lease the properties and assets of the
Company substantially as an entirety or in the case of a Plan of
Liquidation, the person to which assets of the Company have been
transferred (x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Securities and the performance of every
covenant of the Securities and this Indenture on the part of the Company to
be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (y) above,
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the Company (in the case of clause (i) of the foregoing clause (1) or such
person in the case of clause (ii) thereof) shall have a Consolidated Net
Worth (immediately after the transaction but prior to any purchase
accounting adjustments relating to such transaction) equal to or greater
than the Consolidated Net Worth of the Company immediately prior to such
transaction;
(3) immediately before and after giving effect to such transaction
and the assumption contemplated by clause (y) above (including giving
effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of the
transaction), no Default and no Event of Default shall have occurred or be
continuing;
(4) the Company or such person shall have delivered to the Trustee
(i) an Officers' Certificate and an Opinion of Counsel (which counsel shall
not be in-house counsel of the Company), each stating that such
consolidation, merger, conveyance, transfer or lease or Plan of Liquidation
and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with this Article Five and
that all conditions precedent herein provided relating to such transaction
have been satisfied and (ii) a certificate from the Company's independent
certified public accountants stating that the Company has made the
calculation required by clause (2) above in accordance with the terms of
this Indenture; and
(5) neither the Company nor any Subsidiary of the Company nor such
person, as the case may be, would thereupon become obligated with respect
to any Indebtedness (including Acquired Indebtedness), nor any of its
property or assets subject to any Lien, unless the Company or such
Subsidiary or such person, as the case may be, could incur such
Indebtedness (including Acquired Indebtedness) or create such Lien under
this Indenture (giving effect to such person being bound by all the terms
of this Indenture).
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company shall be deemed to
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be the transfer of all or substantially all of the properties and assets of the
Company.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, merger, conveyance, lease or any transfer in
accordance with Section 5.01, the successor person formed by such consolidation
or into which the Company is merged or to which such conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor person had been named as the Company herein, and thereafter
(except in the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture and the Securities.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on the Securities
when the same becomes due and payable and the Default continues for a
period of 30 days;
(2) the Company defaults in the payment of the stated principal
amount of the Securities when the same becomes due and payable at maturity,
upon acceleration or redemption pursuant to an offer to purchase required
hereunder or otherwise;
(3) the Company fails to comply in all material respects with any of
its other agreements contained in the Securities, this Indenture
(including, without limitation, under Sections 4.15, 4.16 and 5.01) or the
Pledge Agreement, and the Default continues for the period and after the
notice specified below;
(4) there shall be any default or defaults in the payment of
principal or interest under one or more agreements, instruments, mortgages,
bonds, debentures or other
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evidences of Indebtedness under which the Company or WCI then has
outstanding Indebtedness in excess of $7.5 million, individually or in the
aggregate;
(5) there shall be any default or defaults under one or more
agreements, instruments, mortgages, bonds, debentures or other evidences of
Indebtedness under which the Company or WCI then has outstanding
Indebtedness in excess of $7.5 million, individually or in the aggregate,
and such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness;
(6) the Company or WCI fails to perform any term, covenant, condition
or provision of one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of Indebtedness under which the Company or
WCI then has outstanding Indebtedness in excess of $7.5 million,
individually or in the aggregate, and such failure to perform results in
the commencement of judicial proceedings to foreclose upon any assets of
the Company or WCI securing such Indebtedness or the holders of such
Indebtedness shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu
of foreclosure;
(7) one or more judgments, orders or decrees for the payment of money
which either individually or in the aggregate at any one time exceeds $7.5
million shall be rendered against the Company or WCI by a court of
competent jurisdiction and shall remain undischarged and unbonded for a
period (during which execution shall not be effectively stayed) of 60
consecutive days after such judgment becomes final and nonappealable;
(8) the Company or WCI (A) admits in writing its inability to pay its
debts generally as they become due, (B) commences a voluntary case or
proceeding under any Bankruptcy Law with respect to itself, (C) consents to
the entry of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Law, (D) consents to
the appointment of a Custodian of it or for substantially all of its
property, (E) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it, (F) makes a general assignment for
the benefit of its creditors, or (G) takes any corporate action to
authorize or effect any of the foregoing;
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(9) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or WCI in an involuntary case or
proceeding under any Bankruptcy Law, which shall (A) approve as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or WCI, (B) appoint a Custodian of
the Company or WCI or for substantially all of its property or (C) order
the winding-up or liquidation of its affairs; and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(10) the Pledge Agreement ceases to be in full force and effect or the
Pledge Agreement ceases to give the Trustee the Liens, rights, powers and
privileges purported to be created thereby in any material respect.
A Default under clause (3) above (other than in the case of any
Default under Sections 4.13, 4.15, 4.16, 4.17 and 5.01, which Defaults shall be
Events of Default without the notice and without the passage of time specified
in this paragraph) is not an Event of Default until the Trustee notifies the
Company, or the Holders of at least 25% in principal amount of the outstanding
Securities notify the Company and the Trustee, of the Default and the Company
does not cure the Default within 30 days after receipt of the notice. The
notice must specify the Default, demand that it be remedied and state that the
notice is a "Notice of Default." Such notice shall be given by the Trustee if
so requested by the Holders of at least 25% in principal amount of the
Securities then outstanding.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
Section 6.01(8) or (9)) occurs and is continuing, the Trustee may, by notice to
the Company, or the Holders of at least 25% in principal amount of the
Securities then outstanding may, by written notice to the Company and the
Trustee, and the Trustee shall, upon the request of such Holders, declare the
aggregate principal amount of the Securities outstanding, together with accrued
but unpaid interest thereon to the date of payment, to be due and payable and,
upon any such declaration, the same shall become and be due and payable;
PROVIDED, HOWEVER, that the Trustee shall be under no obligation to follow any
request of any of the Holders unless such Holders shall have offered to the
Trustee, after request by the Trustee, reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred by it in compli-
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ance with such request, order or direction. If an Event of Default specified in
Section 6.01(8) or (9) as to the Company occurs, all unpaid principal, premium,
if any, and accrued interest on the Securities then outstanding shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Securityholder. Upon payment of such
principal amount and interest, all of the Company's obligations under the
Securities and this Indenture, other than obligations under Section 7.07, shall
terminate. The Holders of a majority in principal amount of the Securities then
outstanding by notice to the Trustee may rescind an acceleration and its
consequences if (i) all existing Events of Default, other than the non-payment
of the principal and interest on the Securities which have become due solely by
such declaration of acceleration, have been cured or waived, (ii) to the extent
the payment of such interest is lawful, interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, and (iii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. No
such rescission shall affect any subsequent default or impair any right
consequent thereto. In the event that a declaration of acceleration under
either Section 6.01(4) or 6.01(5) above has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or paid or the
holders of such Indebtedness shall have rescinded their declaration of
acceleration in respect of such Indebtedness within 60 days thereafter and no
other Event of Default has occurred during such 60-day period which has not been
cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture and may take
any action under the Pledge Agreement as may be required or permitted
thereunder.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of De-
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fault. No remedy is exclusive of any other remedy. All available remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default in the payment of principal of or interest on any Security as specified
in clauses (1) and (2) of Section 6.01 or in respect of any provision hereof
which cannot be modified or amended without the consent of the Holder so
affected pursuant to Section 9.02. When a Default or Event of Default is so
waived, it shall be deemed cured and cease to exist.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it including, without limitation, any remedies provided for in
Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to
follow any direction that conflicts with any law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee reasonable indemnity against
any loss, liability or expense to be incurred in compliance with such
request;
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(4) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer of satisfactory indemnity; and
(5) during such 30-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder except to the extent
that the institution or prosecution of such suit or the entry of judgment
therein would, under applicable law, result in the surrender, impairment, waiver
or loss of the Lien of this Indenture and the Pledge Agreement upon the
Collateral.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of principal
and accrued interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the
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reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agents and counsel) and the Securityholders allowed in any judicial
proceedings relating to the Company or any other obligor upon the Securities,
any of their respective creditors or any of their respective property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agent and counsel, and any other amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article Six, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 and then for
amounts due under the Pledge Agreement;
Second: to Holders for interest accrued on the Securities, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for interest;
Third: to Holders for principal amounts owing under the Securities
and other amounts owing to the Holders with respect to the Securities,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and other amounts
owing to the Holders with respect to the Securities; and
Fourth: to the Company or any other obligor on the Securities, as
their interests may appear, or as a court of competent jurisdiction may
direct.
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The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
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(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree with the Company. Assets
held in trust by the Trustee need not be segregated from other assets except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
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(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 11.04 and 11.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to
the Company, to examine the books, records, and premises of the Company,
personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred by it in compliance with such request, order or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Subsidiary of the Company or their
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respective Affiliates with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. However, the Trustee must comply
with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder, as their
names and addresses appear on the Securityholder list described in Section 2.05,
notice of the uncured Default or Event of Default within 90 days after the
Trustee obtains actual knowledge that such Default or Event of Default has
occurred. Except in the case of a Default or an Event of Default in payment of
principal of, or interest on, any Security, and a Default that resulted from the
failure to comply with Sections 4.15, 4.16 or 5.01, the Trustee may withhold the
notice if and so long as its board of directors, the executive committee of its
board of directors or a committee of its directors and/or Trust Officers in good
faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA, and, until such qualification,
this Indenture shall be construed as if this Section 7.06 were not contained
herein.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, to the extent that
any of the events described in TIA Section 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Securityholder a
brief report dated as of such May 15 that complies with TIA Section 313(a).
The Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with
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the SEC and each stock exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any securities exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services as the Company and the Trustee may agree. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all tax obligations imposed on the Trustee related to this Indenture
and all reasonable out-of-pocket expenses incurred or made by it. Such expenses
shall include the reasonable fees and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee and its agents for, and hold
them harmless against, any loss, liability or expense incurred by them except
for such actions to the extent caused by any negligence or bad faith on their
part, arising out of or in connection with the administration of this trust
including the reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of any of
their rights, powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity, but the Trustee's failure to so notify the Company shall not affect
the Company's obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel;
PROVIDED that the Company will not be required to pay such fees and expenses if
it assumes the Trustee's defense and there is no conflict of interest between
the Company and the Trustee in connection with such defense as reasonably
determined by the Trustee. The Company need not pay for any settlement made
without its written consent. The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Securities.
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When the Trustee incurs expenses or renders services after an Event of Default
specified in Section 6.01(8) or (9) occurs, such expenses and the compensation
for such services are intended to constitute expenses of administration under
any Bankruptcy Law.
The Company's obligations under this Section 7.07 and any Lien arising
hereunder or under the Pledge Agreement shall survive the resignation or removal
of any trustee, the discharge of the Company's obligations pursuant to Article
Eight and/or the termination of this Indenture.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Securities may remove the
Trustee by so notifying the Company and the Trustee and may appoint a successor
trustee with the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Any resignation or removal of the Trustee pursuant to this Indenture
shall be deemed to be a resignation or removal of the Trustee in its capacity as
collateral agent under the Pledge Agreement and any appointment of a successor
Trustee pursuant to this Indenture shall be deemed to be appointment of a
successor collateral agent under the Pledge Agreement and such successor shall
assume all of the obligations of the Trustee in its capacity as collateral agent
under the Pledge Agreement.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee (or in the
case of a corporation included in a bank holding company system, the related
bank holding company) shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding company,
shall meet the capital requirements
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of TIA Section 310(a)(2). The Trustee shall comply with TIA Section 310(b);
PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under the Securities and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities which have been
replaced or paid and Securities for whose payment money has heretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by it
hereunder, or if:
(a) pursuant to Article Three, the Company shall have given notice to
the Trustee and mailed a notice of redemption to each Holder of the
redemption of all of the Securities under arrangements satisfactory to the
Trustee for the giving of such notice;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, money or direct
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non-callable obligations of, or non-callable obligations guaranteed by, the
United States of America for the payment of which guarantee or obligation
the full faith and credit of the United States is pledged ("U.S. Government
Obligations") maturing as to principal and interest in such amounts and at
such times as are sufficient without consideration of any reinvestment of
such interest, to pay principal of and interest on the outstanding
Securities to redemption as certified to the Trustee by a nationally
recognized firm of independent public accountants designated by the
Company; PROVIDED THAT the Trustee shall have been irrevocably instructed
to apply such money or the proceeds of such U.S. Government Obligations to
the payment of said principal and interest with respect to the Securities;
and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligation under
the Securities and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 7.08, 8.04 and 8.05 shall
survive until the Securities are no longer outstanding. After the Securities
are no longer outstanding, the Company's obligations in Sections 7.07 (except in
respect of Liens on the Collateral), 8.04 and 8.05 shall survive.
After such delivery or irrevocable deposit the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either paragraph (b) or paragraph
(c) below be applied to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter,
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"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Securities, which shall thereafter be deemed to
be "outstanding" only for the purposes of paragraph (e) below and the other
Sections of and matters under this Indenture referred to in (i) and (ii) below,
and to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (i) the rights of Holders of outstanding Securities to
receive solely from the trust fund described in paragraph (d) below and as more
fully set forth in such paragraph, payments in respect of the principal of and
interest on such Securities when such payments are due, (ii) the Company's
obligations with respect to such Securities under Sections 2.05, 2.06, 2.07,
2.08, 4.02, 7.07 (except in respect of Liens on the Collateral), 7.08, 8.04 and
8.05, (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (iv) this Section 8.02. Subject to compliance with this Section
8.02, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article Five and in
Sections 4.03, 4.07, 4.09 and 4.11 through 4.20 with respect to the outstanding
Securities on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and the Securities shall thereafter be
deemed to be not "outstanding" for the purpose of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the outstanding Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01, but, except as specified
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above, the remainder of this Indenture and such Securities shall be unaffected
thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal of and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge principal of,
premium, if any, and interest on the outstanding Securities on the Maturity
Date of such principal or installment of principal or interest in
accordance with the terms of this Indenture and of such Securities;
PROVIDED, HOWEVER, that the Trustee (or other qualifying trustee) shall
have received an irrevocable written order from the Company instructing the
Trustee (or other qualifying trustee) to apply such money or the proceeds
of such U.S. Government Obligations to said payments with respect to the
Securities;
(ii) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Securities shall have occurred and be continuing on the date
of such deposit or, insofar as Sections 6.01(8) and (9) are concerned, at
any time during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(iii) such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a Default or Event of Default
under, this Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound;
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(iv) in the case of an election under paragraph (b) above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (x)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (y) since the date of this Indenture, there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such legal defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such legal
defeasance had not occurred;
(v) in the case of an election under paragraph (c) above, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Securities will not recognize income,
gain or loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred;
(vi) in the case of an election under either paragraph (b) or (c)
above, an Opinion of Counsel to the effect that, (x) the trust funds will
not be subject to any rights of any other holders of Indebtedness of the
Company, and (y) after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable Bankruptcy Law;
PROVIDED, HOWEVER, that if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Company,
no opinion needs to be given as to the effect of such laws on the trust
funds except the following: (A) assuming such trust funds remained in the
Trustee's possession prior to such court ruling to the extent not paid to
Holders of Securities, the Trustee will hold, for the benefit of the
Holders of Securities, a valid and enforceable security interest in such
trust funds that is not avoidable in bankruptcy or otherwise, subject only
to principles of equitable subordination, (B) the Holders of Securities
will be entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used, and (C) no property, rights in
property or other interests granted to the Trustee or the Holders of
Securities in exchange for or with respect to any of such funds
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will be subject to any prior rights of any other Person, subject only to
prior Liens granted under Section 364 of Title 11 of the U.S. Bankruptcy
Code (or any section of any other Bankruptcy Law having the same effect),
but still subject to the foregoing clause (B); and
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (A) all conditions
precedent provided for relating to either the legal defeasance under
paragraph (b) above or the covenant defeasance under paragraph (c) above,
as the case may be, have been complied with and (B) if any other
Indebtedness of the Company shall then be outstanding, such legal
defeasance or covenant defeasance will not violate the provisions of the
agreements or instruments evidencing such Indebtedness.
(e) Notwithstanding the foregoing, the Opinion of Counsel required by
clause (d)(iv) above of this Section 8.02 need not be delivered if all
Securities not theretofore delivered to the Trustee for cancellation (i) have
become due and payable, (ii) will become due and payable on the Maturity Date
within one year or (iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company.
(f) All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this paragraph (f), the "Trustee") pursuant to paragraph (d)
above in respect of the outstanding Securities shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(other than the Company or any of its Affiliates) as the Trustee may determine,
to the Holders of such Securities of all sums due and to become due thereon in
respect of principal and interest, but such money need not be segregated from
other funds except to the extent required by law.
(g) Upon satisfaction by the Company of the conditions to its legal
defeasance or covenant defeasance, the Lien of this Indenture on all the
Collateral will terminate and all the Collateral will be released without any
further action by the Trustee hereunder or any other person.
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the outstanding Securities.
Anything in this Section 8.02 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
legal defeasance or covenant defeasance.
SECTION 8.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Securities.
SECTION 8.04. REPAYMENT TO COMPANY.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee shall promptly
pay to the Company, upon receipt by the Trustee of an Officers' Certificate, any
excess money, determined in accordance with Sections 8.02(d)(i) and (e), held by
it at any time. The Trustee and the Paying Agent shall pay to the Company upon
receipt by the Trustee or the Paying Agent, as the case may be, of an Officers'
Certificate, any money held by it for the payment of principal or interest that
remains unclaimed for two years; PROVIDED, HOWEVER, that the Trustee and the
Paying Agent before being required to make any payment may, but need not, at the
expense of the Company, cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein, which shall be at least 30 days from the date of such publication or
mailing, any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company, Securityholders entitled to money
must look solely
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to the Company for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.05. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had been made pursuant to
this Indenture until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with this Indenture;
PROVIDED, HOWEVER, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency; PROVIDED THAT
such amendment or supplement does not adversely affect the rights of any
Holder;
(2) to comply with Article Five;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
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(4) to make any other change that does not materially adversely
affect the rights of any Securityholders hereunder or under the Pledge
Agreement; or
(5) to comply with any requirements of the SEC in connection with the
qualification of this Indenture under the TIA;
PROVIDED that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Securities, may amend or supplement this Indenture or the Securities, without
notice to any other Securityholders. Subject to Section 6.07, the Holder or
Holders of a majority in aggregate principal amount of the outstanding
Securities may waive compliance by the Company with any provision of this
Indenture or the Securities without notice to any other Securityholder.
However, without the consent of each Securityholder affected, no amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, may:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities or the Pledge Agreement;
(2) reduce the rate of, or extend the time for payment of, interest,
including defaulted interest, on any Security;
(3) reduce the principal amount of any Security or any premium
thereon;
(4) change the Maturity Date of any Security, or alter the redemption
provisions or the repurchase provisions in this Indenture, the Securities
or the Pledge Agreement in a manner adverse to any Holder;
(5) waive a default in the payment of the principal of, interest on,
or redemption payment or repurchase pay-
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ment required hereunder with respect to, any Security, including without
limitation, a failure to make payment when required upon a Change of
Control or after an Asset Sale (including an offer to purchase with respect
to an Asset Sale involving the Capital Stock of WCI);
(6) make any changes in any provisions relating to waivers of
defaults, the ability of the Holders to enforce their rights under this
Indenture, the Securities, the Pledge Agreement or this Section 9.02;
(7) make the principal of, or the interest on any Security payable in
money other than as provided for in this Indenture and the Securities as in
effect on the date hereof;
(8) affect the ranking of the Securities in a manner adverse to the
Holders or release any Collateral, except in compliance with the terms
hereof and the Pledge Agreement or make any change in provisions relating
to the Collateral that adversely affects the Holders; or
(9) after the Company's obligation to purchase the Securities arises
thereunder, amend, modify or change the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of
Control or an Asset Sale Offer in the event of an Asset Sale (including an
offer to purchase with respect to an Asset Sale involving the Capital Stock
of WCI) or waive any default in the performance thereof or modify any of
the provisions or definitions with respect to any such offers.
In addition to the foregoing, except as expressly permitted by this
Indenture (including, without limitation, in Section 10.03 and in clause (b) of
Section 4.16), no portion of the Collateral may be released without the consent
of the Holders of at least 75% in aggregate principal amount of the then
outstanding Securities.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail
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such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver. Notwithstanding the above, nothing in
this paragraph shall impair the right of any Securityholder under Section 316(b)
of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to revoke any consent previously given, whether or not such
persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (9) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture.
ARTICLE TEN
COLLATERAL
SECTION 10.01. PLEDGE OF COLLATERAL.
(a) In order to secure the due and punctual payment of principal of
and interest on the Securities when and as the same shall be due and payable,
whether on an Interest Payment Date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of and interest
(to the extent permitted by law), if any, on the Securities and performance of
all other obligations of the Company to the Holders or the Trustee under this
Indenture and the Securities, the Company and the Trustee have simultaneously
with the execution of this Indenture entered into the Pledge Agreement, pursuant
to which the Company has granted to the Trustee for the benefit of the Trustee
and the Holders a first priority Lien on and security interest in the
Collateral.
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(b) Each Holder, by accepting a Security, consents and agrees to all
of the terms and provisions of the Pledge Agreement, as the same may be in
effect from time to time or may be amended from time to time in accordance with
the provisions of the Pledge Agreement and this Indenture, and authorizes and
directs the Trustee to act as secured party with respect thereto.
(c) As set forth in and governed by the Pledge Agreement, as among
the Holders of Securities, the Collateral as now or hereafter constituted shall
be held for the equal and ratable benefit of the Holders of the Securities
without preference, priority or distinction of any thereof over any other by
reason of difference in time of issuance, sale or otherwise, as security for the
Securities.
SECTION 10.02. RECORDING; PRIORITY; OPINIONS, ETC.
(a) The Company shall at its sole cost and expense perform any and
all acts and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable federal, state or local jurisdiction, which are
necessary or advisable and shall do such other acts and execute such other
documents as may be required under the Pledge Agreement, from time to time, in
order to grant, perfect and maintain in favor of the Trustee for the benefit of
the Trustee and the Holders a valid and perfected first priority Lien on the
Collateral and to fully preserve and protect the rights of the Trustee and the
Holders under this Indenture.
The Company shall from time to time promptly pay and satisfy all
financing and continuation statement recording and/or filing fees, charges and
taxes relating to this Indenture and the Pledge Agreement, any amendments
thereto and any other instruments of further assurance. Without limiting the
generality of the foregoing covenant, in the event at any time the Trustee shall
determine that additional transfer or similar taxes are required to be paid to
perfect or continue any Lien on any Collateral, the Company shall pay such taxes
promptly upon demand by the Trustee.
(b) The Company shall, with respect to (i) below, promptly after the
initial issuance of the Securities, and with
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respect to (ii) below, upon qualification of this Indenture under the TIA,
furnish to the Trustee:
(i) Opinion(s) of Counsel either (a) to the effect that, in the
opinion of such counsel, this Indenture and the grant of a security
interest in the Collateral intended to be made by the Pledge Agreement and
all other instruments of further assurance, including, without limitation,
financing statements, have been properly recorded and filed to the extent
necessary to perfect the Lien on the Collateral created by the Pledge
Agreement and reciting the details of such action, and stating that as to
the Liens created pursuant to the Pledge Agreement, such recordings and
filings are the only recordings and filings necessary to give notice
thereof and that no re-recordings or refilings are necessary to maintain
such notice (other than as stated in such opinion), or (b) to the effect
that, in the opinion of such counsel, no such action is necessary to
perfect such Lien;
(ii) on January 1 in each year beginning with January 1, 1999, an
Opinion of Counsel, dated as of such date, either (a) to the effect that,
in the opinion of such counsel, such action has been taken with respect to
the recordings, registerings, filings, re-recordings, re-registerings and
refilings of all financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of
the Pledge Agreement and reciting with respect to such Liens the details of
such action or referencing prior Opinions of Counsel in which such details
are given, and stating that all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the rights of the Holders and the Trustee hereunder
and under the Pledge Agreement with respect to the Liens, or (b) to the
effect that, in the opinion of such counsel, no such action is necessary to
maintain such Liens.
SECTION 10.03. RELEASE OF COLLATERAL.
The Trustee shall not release Collateral from the Lien of the Pledge
Agreement unless such release is in accordance with the provisions of this
Section 10.03 and of the Pledge Agreement. To the extent applicable, the
Company shall cause TIA Section 314(d) relating to the release of property or
Liens to be complied with.
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(a) SATISFACTION AND DISCHARGE; DEFEASANCE. The Company shall be
entitled to obtain a full release of all of the Collateral from the Lien of this
Indenture and the Pledge Agreement upon compliance with all of the conditions
precedent for satisfaction and discharge of this Indenture set forth in Section
8.01 or for defeasance pursuant to Section 8.02. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel, each to
the effect that all of the conditions precedent have been complied with (which
may be the same Officers' Certificate and Opinion of Counsel required by Article
Eight), the Trustee shall take all necessary action, at the request and expense
of the Company, to release and reconvey to the Company all of the Collateral,
and shall deliver such Collateral in its possession to the Company including,
without limitation, the execution and delivery of releases or waivers whenever
necessary.
(b) SALES OF COLLATERAL PERMITTED BY SECTION 4.16. The Company shall
be entitled to obtain a release of all of the WCI Pledged Stock subject to an
Asset Sale upon compliance with the condition precedent that the Company shall
have delivered to the Trustee the following:
(i) RELEASE NOTICE. A notice (a "Release Notice"), which shall (A)
refer to this Section 10.03, (B) attach all the documents referred to
below, (C) specify the value of the WCI Pledged Stock on a date within 60
days of the Release Notice (the "Valuation Date"), (D) certify that the
purchase price received is equal to the Fair Market Value of the WCI
Pledged Stock as of the date of such release, (E) confirm the sale of, or
an agreement to sell, the WCI Pledged Stock in a bona fide sale to a Person
that is not an Affiliate of the Company, and (F) be accompanied by a
counterpart of the instruments proposed to give effect to the release fully
executed and acknowledged (if applicable) by all parties thereto other than
the Trustee;
(ii) OFFICERS' CERTIFICATE AND OPINION OF COUNSEL. An Officers'
Certificate and an Opinion of Counsel, each stating that (A) such Asset
Sale covers all the WCI Pledged Stock and complies with the terms and
conditions of an Asset Sale pursuant to Section 4.16, (B) all Net Cash
Proceeds from the sale of all the WCI Pledged Stock will be applied
pursuant to Section 4.16(b), (C) there is no Default or Event of
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Default in effect or continuing on the date thereof, (D) the release of all
of the WCI Pledged Stock will not result in a Default or Event of Default
and (E) all conditions precedent to such release have been complied with;
(iii) PROCEEDS OF ASSET SALE. The Net Cash Proceeds and other
non-cash consideration received from the Asset Sale required to be
delivered to the Trustee pursuant to Section 4.16 to be applied to
repurchase Securities from Holders accepting the offer to purchase pursuant
to Section 4.16(b); and
(iv) OTHER DOCUMENTS. Upon qualification of this Indenture under the
TIA, all documentation required by TIA Section 314(d).
Upon compliance with the conditions set forth in (b) above, and the
delivery by the Company of such other documents that the Trustee may reasonably
require, the Trustee shall execute, acknowledge (if applicable) and deliver to
the Company such counterpart within 10 Business Days after receipt by the
Trustee of a Release Notice, as applicable, and the satisfaction of the
applicable requirements of this Section 10.03.
At any time when a Default or an Event of Default shall have occurred
and be continuing, no release of Collateral pursuant to the provisions of this
Indenture or the Pledge Agreement shall be effective as against the Holders of
the Securities.
SECTION 10.04. TRUST INDENTURE ACT REQUIREMENTS.
The release of any Collateral from the Pledge Agreement or the release
of, in whole or in part, the Liens created by the Pledge Agreement, will not be
deemed to impair the Lien of the Pledge Agreement in contravention of the
provisions hereof if and to the extent the Collateral or Liens are released
pursuant to the Pledge Agreement and pursuant to the terms hereof. The Trustee
and each of the Holders acknowledge that a release of Collateral or Liens
strictly in accordance with the terms of the Pledge Agreement and the terms
hereof will not be deemed for any purpose to be an impairment of the Liens
created pursuant to the Pledge Agreement in contravention of the terms of this
Indenture. Without limitation, the Company and each other obligor on the
Securities shall cause TIA Section 314(d) relating to the release of property or
securities from the Liens of each hereof and of the Pledge Agreement to be com-
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plied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an officer of the Company, except in cases which TIA Section 314(d)
requires that such certificate or opinion be made by an independent person.
SECTION 10.05. SUITS TO PROTECT COLLATERAL.
Subject to the provisions of the Pledge Agreement, the Trustee shall
have power to institute and to maintain such suits and proceedings as it may
deem expedient to prevent any impairment of the Collateral by any acts which may
be unlawful or in violation of any of the Pledge Agreement or this Indenture,
and such suits and proceedings as the Trustee may deem expedient to preserve or
protect its interests and the interests of the Holders in the Collateral
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the Collateral or be prejudicial to the interests of the Holders or the
Trustee).
SECTION 10.06. PURCHASER PROTECTED.
In no event shall any purchaser in good faith of any property
purported to be released hereunder be bound to ascertain the authority of the
Trustee to execute the release or to inquire as to the satisfaction of any
conditions required by the provisions hereof for the exercise of such authority
or to see to the application of any consideration given by such purchaser or
other transferee; nor shall any purchaser or other transferee of any property or
rights permitted by this Article Ten to be sold be under obligation to ascertain
or inquire into the authority of the Company to make any such sale or other
transfer.
SECTION 10.07. POWERS EXERCISABLE BY RECEIVER OR TRUSTEE.
In case the Collateral shall be in the possession of a receiver or
trustee, lawfully appointed, the powers conferred in this Article Ten upon the
Company with respect to the release, sale or other disposition of such property
may be exercised by such receiver or trustee, and an instrument signed by such
receiver or trustee shall be deemed the equivalent of any similar instrument of
the Company or of any officer or officers thereof required by the provisions of
this Article Ten.
<PAGE>
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SECTION 10.08. DETERMINATIONS RELATING TO COLLATERAL.
In the event (i) the Trustee shall receive any written request from
the Company under the Pledge Agreement for consent or approval with respect to
any matter or thing relating to any Collateral or the Company's obligations with
respect thereto (including, without limitation, the determination as to whether
any portion of the Collateral constitutes released Collateral) or (ii) there
shall be due to or from the Trustee under the provisions of the Pledge Agreement
any performance or the delivery of any instrument or (iii) the Trustee shall
become aware of any nonperformance by the Company of any covenant or any breach
of any representation or warranty of the Company set forth in the Pledge
Agreement, then, in each such event, the Trustee shall be entitled to hire
experts, consultants, agents and attorneys to advise the Trustee on the manner
in which the Trustee should respond to such request or render any requested
performance or response to such nonperformance or breach. The Trustee shall be
fully protected in the taking of any action recommended or approved by any such
expert, consultant, agent or attorney or agreed to by a majority of Holders
pursuant to Section 6.05.
SECTION 10.09. FORM AND SUFFICIENCY OF RELEASE.
In the event that the Company has sold, exchanged, or otherwise
disposed of or proposes to sell, exchange or otherwise dispose of any portion of
the Collateral which under the provisions of Section 10.03 may be sold,
exchanged or otherwise disposed of by the Company, and the Company requests the
Trustee to furnish a written disclaimer, release or quitclaim of any interest in
such property under the Pledge Agreement, the Trustee shall promptly execute
such an instrument promptly after satisfaction of the conditions set forth
herein for delivery of such release. Notwithstanding the preceding sentence,
all purchasers and grantees of any property or rights purporting to be released
herefrom shall be entitled to rely upon any release executed by the Trustee
hereunder as sufficient for the purposes of this Indenture and as constituting a
good and valid release of the property therein described from the Lien of this
Indenture and the Pledge Agreement.
SECTION 10.10. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS.
In the event that the Company delivers an Officers' Certificate
certifying that the provisions of Sections 8.01 or 8.02 have been complied with,
the Trustee shall (i) execute and
<PAGE>
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deliver such releases, termination statements and other instruments as the
Company may reasonably request evidencing the termination of the Liens created
by the Pledge Agreement and (ii) not be deemed to hold the Liens for the benefit
of the Holders.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 11.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, or overnight courier addressed as follows:
<PAGE>
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if to the Company:
Renco Steel Holdings, Inc.
c/o The Renco Group, Inc.
30 Rockefeller Center, 42nd Floor
New York, New York, 10112
Attention: President
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Michael C. Ryan, Esq., c/o Managing
Attorneys' Office
if to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
The Company and the Trustee, by written notice to each other, may
designate additional or different addresses for notices to such person. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if faxed; and five (5)
calendar days after mailing, if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder, including any
notice delivered in connection with TIA Section 310(b), TIA Section 313(c), TIA
Section 314(a) and TIA Section 315(b), shall be mailed to him by first class
mail or other equivalent means at his address as it appears on the registration
books of the Registrar and shall be sufficiently given to him if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency
<PAGE>
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with respect to other Securityholders. If a notice or communication is mailed
in the manner provided above, it is duly given, whether or not the addressee
receives it.
SECTION 11.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to
<PAGE>
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whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Securityholders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 11.08. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or Affiliate, as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect of
or by reason
<PAGE>
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of such obligations or their creation. Each Securityholder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
SECTION 11.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 11.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 11.13. SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, in any respect for any reason, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
<PAGE>
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
RENCO STEEL HOLDINGS, INC.,
as Issuer
By: /s/ Roger L. Fay
-------------------------------
Name: Roger L. Fay
Title: Vice President and Chief
Financial Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert L. Reynolds
-------------------------------
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
EXHIBIT A
[FORM OF SERIES A NOTE]
[If a restricted security, then insert -- THIS SECURITY (OR ITS PREDECESSOR) HAS
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (A)
REPRESENTS THAT (1) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) (A "QIB") OR (2) IT HAS ACQUIRED THIS SECURITY IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT; (B) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (1) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (2) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (4) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (6) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (7) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (C)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING.
[If a Temporary Regulation S Global Security, then insert -- THIS SECURITY IS A
TEMPORARY REGULATION S GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
REFERRED TO HEREINAFTER.
A-1
<PAGE>
EXCEPT IN THE CIRCUMSTANCES DESCRIBED IN SECTION 2.06 OF THE INDENTURE,
INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY MAY NOT BE OFFERED OR
SOLD TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO
THE EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE), AND NO
TRANSFER OR EXCHANGE OF AN INTEREST IN THIS TEMPORARY REGULATION S GLOBAL
SECURITY MAY BE MADE FOR AN INTEREST IN A RESTRICTED GLOBAL SECURITY OR IN A
PERMANENT REGULATION S GLOBAL SECURITY UNTIL AFTER THE LATER OF THE DATE OF
EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE OWNER SECURITIES
CERTIFICATION AND THE DEPOSITORY SECURITIES CERTIFICATION RELATING TO SUCH
INTEREST HAVE BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO
THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S.
PERSONS.]
[If a Permanent Regulation S Security, then insert -- THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
A-2
<PAGE>
RENCO STEEL HOLDINGS, INC.
10 7/8% Senior Secured Note
due 2005, Series A
No. $
RENCO STEEL HOLDINGS, INC., an Ohio corporation (the "Company," which
term includes any successor entity), for value received promises to pay
to or registered assigns, the principal sum of Dollars,
on February 1, 2005.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
To the extent set forth in the Pledge Agreement, payment hereof is
secured, on an equal and ratable basis with all other Securities, by a valid,
perfected first priority security interest in the Collateral (as defined in the
Indenture), the terms of which security interest are more fully set forth in the
Pledge Agreement.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated: February 3, 1998 RENCO STEEL HOLDINGS, INC.
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATIONThis is one of the Securities
described in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By
---------------------------------
Authorized Signatory
A-5
<PAGE>
RENCO STEEL HOLDINGS, INC.
10 7/8% Senior Secured Note
due 2005, Series A
1. INTEREST.
RENCO STEEL HOLDINGS, INC., an Ohio corporation (the "Company"),
promises to pay cash interest on the principal amount of this Security at the
rate per annum shown above. The Company will pay interest semi-annually in
arrears on February 1 and August 1 of each year (the "Interest Payment Date"),
commencing August 1, 1998. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at a rate equal to 12
7/8% per annum.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address. Notwithstanding the foregoing, the Company shall pay or cause to be
paid all amounts payable with respect to Restricted Securities or non-DTC
eligible Securities by wire transfer of Federal funds to the account of the
Holders of such Securities. If this Security is a Global Security, all payments
in respect of this Security will be made to the Depository or its nominee in
immediately available funds in accordance with customary procedures established
from time to time by the Depository.
3. PAYING AGENT AND REGISTRAR.
Initially, State Street Bank and Trust Company (the "Trustee"), will
act as Paying Agent and Registrar. The Com-
A-6
<PAGE>
pany may change any Paying Agent or Registrar without notice to the Holders.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of
February 3, 1998 (the "Indenture"), by and between the Company and the Trustee.
This Security is one of a duly authorized issue of Securities of the Company
designated as its 10 7/8% Senior Secured Notes due 2005, Series A (the "Series A
Securities"), limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $120,000,000. Capitalized terms herein are used
as defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
SectionSection 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are general
secured obligations of the Company limited in aggregate principal amount to
$120,000,000.
5. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement by and between the
Company and the initial purchaser of the Series A Securities, the Company will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Security shall have the right to exchange this Security for 10 7/8% Senior
Secured Notes due 2005, Series B, of the Company (the "Series B Securities"),
which have been registered under the Securities Act, in like principal amount
and having identical terms as the Series A Securities. The Holders of Series A
Securities shall be entitled to receive certain additional interest payments in
the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement. The Series A Securities and the Series B Securities are
together referred to herein as the "Securities."
6. OPTIONAL REDEMPTION.
The Securities will be subject to redemption, in whole or in part, at
the option of the Company, at any time on or after February 1, 2002 at the
redemption prices (expressed as percentages of principal amount) set forth below
plus ac-
A-7
<PAGE>
crued interest to the redemption date, if redeemed during the 12-month period
beginning on February 1 of the years indicated below:
Year Percentage
2002............................................ 105.438%
2003............................................ 102.719%
2004 and thereafter............................. 100.000%
In addition, at any time prior to February 1, 2001, the Company may
redeem up to 33-1/3% of the aggregate principal amount of the Securities
originally issued with the proceeds of one or more Equity Offerings at a
redemption price (expressed as a percentage of principal amount) of 111% plus
accrued interest to the redemption date; provided that at least $80 million
aggregate principal amount of Securities remains outstanding immediately after
any such redemption. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent for redemption on such Redemption
Date, then, unless the Company defaults in the payment of such Redemption Price,
the Securities called for redemption will cease to bear interest and the only
right of the Holders of such Securities will be to receive payment of the
Redemption Price.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, upon the satisfaction of
the conditions set forth in the Indenture, the Company shall be required to
offer to purchase all of the then outstanding Securities pursuant to a Change of
Control Offer at a purchase price equal to 101% of the principal amount thereof
plus accrued interest, if any, to the date of purchase. Holders of Securities
which are the subject of such an offer to repurchase shall receive an offer to
repurchase and may elect to have such Securities repurchased in accordance with
the provi
A-8
<PAGE>
sions of the Indenture pursuant to and in accordance with the terms of the
Indenture.
9. LIMITATION ON DISPOSITION OF ASSETS.
Under certain circumstances, the Company is required to apply the net
proceeds from Asset Sales to repurchase Securities.
10. COLLATERAL.
In order to secure the due and punctual payment of the principal of
and interest on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same will be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Company has granted a first
priority security interest in the WCI Pledged Stock.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Pledge Agreement, as the same may be amended from time to time
pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Pledge Agreement and the terms and provisions of the Indenture will not be
deemed for any purpose to be an impairment of the security under the Indenture.
11. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any registration of transfer or exchange or redemption
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
A-9
<PAGE>
12. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
With respect to Global Securities, the Depository may grant proxies
and otherwise authorize Holders of Book-Entry Securities to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action which a Holder of a Security is entitled to give or take under the
Indenture.
13. UNCLAIMED MONEY.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent will pay the money back to the
Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
14. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
The Company's obligations pursuant to the Indenture will be
discharged, except for obligations pursuant to certain sections thereof, subject
to the terms of the Indenture, upon the payment of all the Securities or upon
the irrevocable deposit with the Trustee of money or U.S. Government Obligations
sufficient to pay when due principal of, and premium, if any, and interest on
the Securities to maturity or redemption, as the case may be.
15. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities, comply with Article Five of the Indenture or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not adversely affect the
rights of any Holder of a Security.
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<PAGE>
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company to, among other things, incur additional Indebtedness or Liens, make
payments in respect of its Capital Stock and merge or consolidate with any other
person and sell, lease, transfer or otherwise dispose of substantially all of
certain of its properties or assets. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
17. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
18. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable in the manner,
at the time and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
19. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
20. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason
A-11
<PAGE>
of, such obligations or their creation. Each Holder of a Security by accepting
a Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
21. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
22. GOVERNING LAW.
The Laws of the State of New York shall govern this Security and the
Indenture.
23. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
24. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
25. INDENTURE.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
RENCO STEEL HOLDINGS, INC., c/o The Renco Group, Inc., 30 Rockefeller Center,
42nd Floor, New York, New York 10112, Attn.: President.
A-13
<PAGE>
26. CERTAIN INFORMATION OBLIGATIONS.
At any time when the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, upon the request of a Holder of a Series A
Security, the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto) to such Holder or to a prospective
purchaser of such Series A Security designated by such Holder, as the case may
be, in order to permit compliance by such Holder with Rule 144A under the
Securities Act.
[The form of reverse of a Temporary Regulation S Global Security shall be as set
forth below --
Until this Temporary Regulation S Global Security is exchanged for a
Permanent Regulation S Global Security, the Holder hereof shall not be entitled
to receive payments of interest hereon; until so exchanged in full, this
Temporary Regulation S Global Security shall in all other respects be entitled
to the same benefits as other Securities under the Indenture.
This Temporary Regulation S Global Security is exchangeable in whole
or in part for one or more Permanent Regulation S Global Securities or
Restricted Global Securities only (i) on or after the expiration of the
Restricted Period and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article Two of the Indenture.
Upon exchange of this Temporary Regulation S Global Security for one or more
Permanent Regulation S Global Securities or Restricted Global Securities, the
Trustee shall cancel this Temporary Regulation S Global Security.
This Temporary Regulation S Global Security shall not become valid or
obligatory until the certificate of authentication hereon shall have been duly
manually signed by the Trustee in accordance with the Indenture. This Temporary
Regulation S Global Security shall be governed by and construed in accordance
with the laws of the State of New York.
A-13
<PAGE>
SCHEDULE OF EXCHANGES FOR GLOBAL SECURITIES
The following exchanges of a part of this Temporary Regulation S
Global Security for other Global Securities have been made:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Security Signature of
Principal Amount of Principal Amount of following such decrease authorized officer
Date of Exchange this Global Security this Global Security (or increase) of Trustee
- ---------------- -------------------- -------------------- ------------------------ ------------------
<S><C>
</TABLE>
A-14
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Dated:____________________ Signed:______________________________________________
________________________________________________________________________________
(Sign exactly as your name appears onthe front of this Security)
Signature Guarantee:__________________________________________
A-15
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$
Date: __________ Signature:____________________________
(Sign exactly as your name appears on the
front of this Security)
Signature Guarantee:______________________________________
A-16
<PAGE>
EXHIBIT B
[FORM OF SERIES B NOTE]
RENCO STEEL HOLDINGS, INC.
10 7/8% Senior Secured Note
due 2005, Series B
No. $
RENCO STEEL HOLDINGS, INC., an Ohio corporation (the "Company," which
term includes any successor entity), for value received promises to pay
to or registered assigns, the principal sum of Dollars,
on February 1, 2005.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
To the extent set forth in the Pledge Agreement, payment hereof is
secured, on an equal and ratable basis with all other Securities, by a valid,
perfected first priority security interest in the Collateral, the terms of which
security interest are more fully set forth in the Pledge Agreement.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
B-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated: RENCO STEEL HOLDINGS, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
B-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
-----------------------------------
Authorized Signatory
B-3
<PAGE>
RENCO STEEL HOLDINGS, INC.
10 7/8% Senior Secured Note
due 2005, Series B
1. Interest.
RENCO STEEL HOLDINGS, INC., an Ohio corporation (the "Company"),
promises to pay cash interest on the principal amount of this Security at the
rate per annum shown above. The Company will pay interest semi-annually in
arrears on February 1 and August 1 of each year (the "Interest Payment Date"),
commencing August 1, 1998. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.The Company shall pay interest on overdue principal
and interest on overdue installments of interest, to the extent lawful, at a
rate equal to 12 7/8% per annum.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee"), will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
February 3, 1998 (the "Indenture"), by and between the Company and the Trustee.
This Security is one of a duly
B-4
<PAGE>
authorized issue of Securities of the Company designated as its 10 7/8% Senior
Secured Notes due 2005, Series B (the "Series B Securities"), limited (except as
otherwise provided in the Indenture) in aggregate principal amount to
$120,000,000. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general secured obligations of the Company limited in aggregate
principal amount to $120,000,000.
5. Exchange Offer.
The Series B Securities were issued pursuant to an exchange offer
pursuant to which 10 7/8% Senior Secured Notes due 2005, Series A, of the
Company (the "Series A Securities"), in like principal amount and having
substantially identical terms as the Series B Securities, were exchanged for the
Series B Securities. The Series A Securities and the Series B Securities are
together referred to herein as the "Securities."
6. Optional Redemption.
The Securities will be subject to redemption, in whole or in part, at
the option of the Company, at any time on or after February 1, 2002, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued interest to the redemption date, if redeemed during the --month
period beginning on February 1 of the years indicated below:
Year Percentage
2002............................................ 105.438%
2003............................................ 102.719%
2004 and thereafter............................. 100.000%
In addition, at any time prior to February 1, 2001, the Company may
redeem up to 33-1/3% of the aggregate principal amount of the Securities
originally issued with the proceeds of one or more Equity Offerings at a
redemption price (expressed as a percentage of principal amount) of 111% plus
accrued interest to the redemption date; provided that at least $80 mil-
B-5
<PAGE>
lion aggregate principal amount of Securities remains outstanding immediately
after any such redemption. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Equity Offering.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent for redemption on such Redemption
Date, then, unless the Company defaults in the payment of such Redemption Price,
the Securities called for redemption will cease to bear interest and the only
right of the Holders of such Securities will be to receive payment of the
Redemption Price.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, upon the satisfaction of
the conditions set forth in the Indenture, the Company shall be required to
offer to purchase all of the then outstanding Securities pursuant to a Change of
Control Offer at a purchase price equal to 101% of the principal amount thereof
plus accrued interest, if any, to the date of purchase. Holders of Securities
which are the subject of such an offer to repurchase shall receive an offer to
repurchase and may elect to have such Securities repurchased in accordance with
the provisions of the Indenture pursuant to and in accordance with the terms of
the Indenture.
9. Limitation on Disposition of Assets.
Under certain circumstances, the Company is required to apply the net
proceeds from Asset Sales to repurchase Securities.
10. Collateral.
In order to secure the due and punctual payment of the principal of
and interest on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same will be due and
payable, whether at maturity, by acceleration or otherwise, according to the
B-6
<PAGE>
terms of the Securities and the Indenture, the Company has granted a first
priority security interest in the WCI Pledged Stock.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Pledge Agreement, as the same may be amended from time to time
pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Pledge Agreement and the terms and provisions of the Indenture will not be
deemed for any purpose to be an impairment of the security under the Indenture.
11. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any registration of transfer or exchange or redemption
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
12. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.With respect to Global Securities, the Depository may grant
proxies and otherwise authorize Holders of Book-Entry Securities to give or take
any request, demand, authorization, direction, notice, consent, waiver or other
action which a Holder of a Security is entitled to give or take under the
Indenture.
13. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent will pay the money back to the
Company at its request. After
B-7
<PAGE>
that, all liability of the Trustee and such Paying Agent with respect to such
money shall cease.
14. Discharge Prior to Redemption or Maturity.
The Company's obligations pursuant to the Indenture will be
discharged, except for obligations pursuant to certain sections thereof, subject
to the terms of the Indenture, upon the payment of all the Securities or upon
the irrevocable deposit with the Trustee of money or U.S. Government Obligations
sufficient to pay when due principal of, and premium, if any, and interest on
the Securities to maturity or redemption, as the case may be.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities, comply with Article Five of the Indenture or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not adversely affect the
rights of any Holder of a Security.
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company to, among other things, incur additional Indebtedness or Liens, make
payments in respect of its Capital Stock and merge or consolidate with any
other person and sell, lease, transfer or otherwise dispose of substantially all
of certain of its properties or assets. The limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
17. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
B-8
<PAGE>
18. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable in the manner,
at the time and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
19. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
20. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
21. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
22. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
B-9
<PAGE>
23. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
24. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
25. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
RENCO STEEL HOLDINGS, INC., c/o The Renco Group, Inc., 30 Rockefeller Center,
42nd Floor, New York, New York 10112, Attn.: President.
B-10
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Dated:____________________ Signed: ____________________________________________
________________________________________________________________________________
(Sign exactly as your name appears onthe front of this Security)
Signature Guarantee:__________________________________________
B-11
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$
Date: __________ Signature:____________________________
(Sign exactly as your name appears on the
front of this Security)
Signature Guarantee:______________________________________
B-12
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
C-1
<PAGE>
EXHIBIT D
TRANSFEREE LETTER OF REPRESENTATION
Renco Steel Holdings, Inc.
c/o State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Dear Sirs:
In connection with our proposed purchase of $ aggregate
principal amount of the 10 7/8% Senior Secured Notes due 2005 (the "Notes") of
Renco Steel Holdings, Inc., an Ohio corporation (the "Company"), we confirm
that:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Notes to offer, sell or otherwise transfer such Notes prior to the
date which is two years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the owner of
such Notes (or any predecessor thereto) (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement which
has been declared effective under the Securities Act, (c) so long as the Notes
are eligible for resale pursuant to Rule 144A under the Securities Act, to a
person we reasonably believe is a qualified institutional buyer under Rule 144A
(a "QIB") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule 144A,
(d) pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is purchasing for his own account or
for the account of such an institutional "accredited investor," in each case in
a minimum principal amount of Notes of $250,000, (f) in an offshore transaction
pursuant to Regulation S of the Securities Act or (g) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
D-1
<PAGE>
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act and that it is acquiring
such Notes for investment purposes and not for distribution in violation of the
Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Notes pursuant to clause (c), (d) or (f)
above to require the delivery of an opinion of counsel, certifications and/or
other information satisfactory to the Company and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Notes for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in violation
of the Securities Act and we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.
3. We are acquiring at least $250,000 principal amount of the Notes
and we are acquiring the Notes purchased by us for our own account or for one or
more accounts as to each of which we exercise sole investment discretion.
D-2
<PAGE>
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
-----------------------------------
(Name of Purchaser)
By:_____________________________________
Date:___________________________________
Upon transfer the Notes would be registered in the name of the new
beneficial owner as follows:
Name: _____________________________
Address: __________________________
Taxpayer ID Number: _______________
D-3
<PAGE>
EXHIBIT E
[FORM OF CERTIFICATION TO BE GIVEN BY HOLDERS OF
BENEFICIAL INTEREST IN A TEMPORARY
REGULATION S GLOBAL SECURITY
TO EUROCLEAR OR CEDEL]
OWNER SECURITIES CERTIFICATION
RENCO STEEL HOLDINGS, INC.
10 7/8% Senior Secured Notes due 2005
CUSIP No.______
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This is to certify that, as of the date hereof, $ of the
above-captioned Securities (the "Securities") are beneficially owned by non-U.S.
person(s). As used in this paragraph, the term "U.S. person" has the meaning
given to it by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Securities
held by you for our account in accordance with your operating procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.
E-1
<PAGE>
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchasers.
Dated: __________, ____
By:________________________________
As, or as agent for, the beneficial
owner(s) of the Securities to which this
certificate relates.
E-2
<PAGE>
EXHIBIT F
[FORM OF CERTIFICATION TO BE GIVEN
BY THE EUROCLEAR OPERATOR OR
CEDEL BANK, SOCIETE ANONYME]
DEPOSITORY SECURITIES CERTIFICATION
RENCO STEEL HOLDINGS, INC.
10 7/8% Senior Secured Notes due 2005
CUSIP No. ________
Reference is hereby made to the Indenture, dated as of February 3, 1998 (the
"Indenture"), by and between Renco Steel Holdings, Inc., as issuer, and State
Street Bank and Trust Company, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This is to certify that, with respect to U.S.$ principal amount
of the above-captioned Securities (the "Securities"), except as set forth below,
we have received in writing, by tested telex or by electronic transmission, from
member organizations appearing in our records as persons being entitled to a
portion of the principal amount of the Securities (our "Member Organizations"),
certifications with respect to such portion, substantially to the effect set
forth in the Indenture.(1)
We further certify (i) that we are not making available herewith for exchange
(or, if relevant, exercise of any rights or collection of any interest) any
portion of the Temporary Regulation S Global Security (as defined in the
Indenture) excepted in such certifications and (ii) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by such Member Organizations with respect to
any portion of the part submitted herewith for exchange (or, if relevant,
exercise of any
- -------------------------
(1) Unless Morgan Guaranty Trust Company of New York, London Branch is
otherwise informed by the Agent, the long form certificate set out in the
Operating Procedures will be deemed to meet the requirements of this
sentence.
F-1
<PAGE>
rights or collection of any interest) are no longer true and cannot be relied
upon as of the date hereof.
We understand that this certification is required in connection with certain
securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchaser.
Dated: ___________, ____
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as operator of theEuroclear System]
or
[CEDEL BANK, SOCIETE ANONYME]
By:____________________________
F-2
<PAGE>
EXHIBIT G
[FORM OF CERTIFICATION TO BE GIVEN BY
TRANSFEREE OF BENEFICIAL INTEREST IN A
TEMPORARY REGULATION S GLOBAL SECURITY]
TRANSFEREE SECURITIES CERTIFICATION
RENCO STEEL HOLDINGS, INC.
10 7/8% Senior Secured Notes due 2005
CUSIP No._________
Reference is hereby made to the Indenture, dated as of February 3, 1998 (the
"Indenture"), by and between Renco Steel Holdings, Inc., as issuer, and State
Street Bank and Trust Company, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
For purposes of acquiring a beneficial interest in the Temporary Regulation S
Global Security, the undersigned certifies that it is not a U.S. Person as
defined by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or prior to the date on
which you intend to submit your certification relating to the Securities held by
you in which we intend to acquire a beneficial interest in accordance with your
operating procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection with certain
securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchaser.
Dated: _____________, ____
By:
---------------------------------------
As, or as agent for, the beneficial acquiror
of the Securities to which this certificate
relates.
G-1
<PAGE>
EXHIBIT H
FORM OF CERTIFICATION FOR TRANSFER OR
EXCHANGE OF RESTRICTED GLOBAL SECURITY
TO TEMPORARY REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Renco Steel Holdings, Inc.
10 7/8% Senior Secured Notes
due 2005 (the "Securities")
----------------------------
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S. $_____________ aggregate principal amount
of Securities which are held in the form of the Restricted Global Security
(CUSIP No. ) with the Depository in the name of [insert name of
transferor] (the "Transferor"). The Transferor has requested a transfer of such
beneficial interest in the Securities to a Person who will take delivery thereof
in the form of an equal aggregate principal amount of Securities evidenced by
the Temporary Regulation S Global Security (CUSIP No. ) to be held with the
Depository in the name of [Euroclear] [Cedel Bank, societe anonyme].
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Securities and
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and accordingly the Transferor does
hereby certify that:
(1) the offer of the Securities was not made to a person in the
United States;
[(2) at the time the buy order was originated, the transferee was
outside the United States or the Transferor
H-1
<PAGE>
and any person acting on its behalf reasonably believed that the transferee
was outside the United States;](1)
[(2) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged
with a buyer in the United States;]
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903 (b) or 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depository in the
name of [Euroclear] [Cedel Bank, societe anonyme].
- ------------------------
(1) Insert one of these two provisions, which come from the definition of
"offshore transaction" in Regulation S.
H-2
<PAGE>
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchaser.
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated: __________________
cc: Renco Steel Holdings, Inc.
H-3
<PAGE>
EXHIBIT I
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
RESTRICTED GLOBAL SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Renco Steel Holdings, Inc.
10 7/8% Senior Secured Notes
due 2005 (the "Securities")
----------------------------
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S.$____________ aggregate principal amount of
Securities which are held in the form of the Restricted Global Security (CUSIP
No. ) with the Depository in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Securities to a Person who will take delivery thereof in the
form of an equal aggregate principal amount of Securities evidenced by the
Permanent Regulation S Global Security (CUSIP No. ).
In connection with such request, and in respect of such Securities,
the Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Securities and,
(1) with respect to transfers made in reliance on Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), the Transferor does
hereby certify that:
(A) the offer of the Securities was not made to a person in the
United States;
[(B at the time the buy order was originated, the transferee was
outside the United States or the Transferor
I-1
<PAGE>
and any person acting on its behalf reasonably believed that the transferee
was outside the United States;](1)
[(B) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged
with a buyer in the United States;]
(C) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
and
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(2) with respect to transfers made in reliance on Rule 144 under the Securities
Act, the Transferor does hereby certify that the Securities are being
transferred in a transaction permitted by Rule 144 under the Securities Act.
- ------------------------
(1) Insert one of these twp provisions, which come fromthe definition of
"offshore transactions" in Regulation S.
I-2
<PAGE>
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchaser.
[Insert Name of Transferor]
By:
----------------------------
Name:
Title:
Dated: ________________
CC: Renco Steel Holdings, Inc.
I-3
<PAGE>
EXHIBIT J
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
TEMPORARY REGULATION S GLOBAL SECURITY
OR PERMANENT REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Renco Steel Holdings, Inc.
10 7/8% Senior Secured Notes
due 2005 (the "Securities")
----------------------------
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S.$ principal amount of Securities
which are evidenced by an aggregate [Temporary Regulation S Global Security
(CUSIP No. )] [Permanent Regulation S Global Security (CUSIP No. )] and
held with the Depository through [Euroclear] [Cedel] (Common Code ) in the
name of [insert name of transferor] (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in Securities to a person that
will take delivery thereof in the form of an equal principal amount of
Securities evidenced by a Restricted Global Security of the same series and of
like tenor as the Securities (CUSIP No. ).
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer is being effected pursuant to
and in accordance with Rule 144A under the Securities Act and, accordingly, the
Transferor does hereby further certify that the Securities are being transferred
to a person that the Transferor reasonably believes is purchasing the Securities
for its own account, or for one or more accounts with respect to which such
person exercises sole investment discretion, and such person and each such
account is a "qualified institutional buyer" within the meaning of Rule
J-1
<PAGE>
144A, in each case in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United
States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchaser.
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated: __________________
cc: Renco Steel Holdings, Inc.
J-2
<PAGE>
EXHIBIT K-1
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
RESTRICTED GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Renco Steel Holdings, Inc.
10 7/8% Senior Secured Notes
due 2005 (the "Securities")
----------------------------
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $ principal amount of Restricted
Securities held in definitive form (CUSIP No. ) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with Rule 144A or Rule 144 under the
United States Securities Act of 1933, as amended (the "Securities Act") and
accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 144A:
(A) the Securities are being transferred to a person that the
Transferor reasonably believes is purchasing the Securities for its
own account, or for one or more accounts with respect to which such
Person exercises sole investment discretion;
K-1-1
<PAGE>
(B) such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A; and
(C) the Securities have been transferred in a transaction
meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
K-1-2
<PAGE>
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchaser.
Dated: _____________, ____
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
cc: Renco Steel Holdings, Inc.
K-1-3
<PAGE>
EXHIBIT K-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
OR TEMPORARY REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Renco Steel Holdings, Inc.
10 7/8% Senior Secured Notes
due 2005 (the "Securities")
----------------------------
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $ principal amount of Restricted
Securities held in definitive form (CUSIP No. ) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under
the Securities Act of 1933, as amended (the "Act"), or (b) Rule 144 under the
Act, and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or Rule
904:
(A) the offer of the Securities was not made to a person in the
United States;
(B) either;
K-2-1
<PAGE>
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or 904(b) of Regulation S, as
applicable;
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Act; and
(E) if such transfer is to occur during the Restricted Period,
upon completion of the transaction, the beneficial interest being
transferred as described above was held with the Depository through
[Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained
K-2-2
<PAGE>
herein are made for your benefit and the benefit of the Company and the Initial
Purchaser.
Dated: _____________, ____
[Insert Name of Transferor]
By:
-------------------------------
Name:
Title:
cc: Renco Steel Holdings, Inc.
K-2-3
<PAGE>
EXHIBIT L-1
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO RESTRICTED GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Renco Steel Holdings, Inc.
10 7/8% Senior Secured Notes
due 2005 (the "Securities")
----------------------------
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $ principal amount of Restricted
Securities held in definitive form (CUSIP No. ) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended, and accordingly the Transferor does
hereby further certify that the Securities are being transferred to a person
that the Transferor reasonably believes is purchasing the Securities for its own
account, or for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in each case in
a transaction meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States.
L-1-1
<PAGE>
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchaser.
Dated: _____________, ____
[Insert Name of Transferor]
By:
-------------------------------
Name:
Title:
cc: Renco Steel Holdings, Inc.
L-1-2
<PAGE>
EXHIBIT L-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO PERMANENT REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Goodwin Square
225 Asylum, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Renco Steel Holdings, Inc.
10 7/8% Senior Secured Notes
due 2005 (the "Securities")
----------------------------
Reference is hereby made to the Indenture, dated as of February 3,
1998 (the "Indenture"), by and between Renco Steel Holdings, Inc., as issuer,
and State Street Bank and Trust Company, as Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $______________ principal amount of Restricted
Securities held in definitive form (CUSIP No. ) by __________ [insert
name of transferor] (the "Transferor"). The Transferor has requested an
exchange or transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under
the Securities Act of 1933, as amended (the "Act"), or (b) Rule 144 under the
Act, and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or Rule
904:
(A) the offer of the Securities was not made to a person in the
United States;
(B) either;
L-2-1
<PAGE>
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or 904 (b) of Regulation S, as
applicable;
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Act; and
(E) if such transfer is to occur during the Restricted Period,
upon completion of the transaction, the beneficial interest being
transferred as described above was held with the Depository through
[Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
L-2-2
<PAGE>
We understand that this certificate is required in connection with certain
securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and the Initial Purchaser.
Dated: _____________, ____
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
cc: Renco Steel Holdings, Inc.
L-2-3
<PAGE>
Exhibit 4.2
RENCO STEEL HOLDINGS, INC.
$120,000,000
10 7/8% Senior Secured Notes due 2005
Purchase Agreement
January 29, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
PURCHASE AGREEMENT
$120,000,000
10 7/8% Series A Senior Secured Notes due 2005
RENCO STEEL HOLDINGS, INC.
January 29, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
RENCO STEEL HOLDINGS, INC., an Ohio corporation (the "COMPANY"),
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation (the "INITIAL PURCHASER") an aggregate of $120,000,000 in principal
amount of its 10 7/8% Senior Secured Notes due 2005 (the "SERIES A NOTES"),
subject to the terms and conditions set forth herein. The Series A Notes are to
be issued pursuant to the provisions of an indenture (the "INDENTURE"), to be
dated as of the Closing Date (as defined below), between the Company and State
Street Bank and Trust Company, as trustee (the "TRUSTEE"). The Series A Notes
and the Series B Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "NOTES." The Notes will be secured by a
pledge on all the outstanding shares of capital stock of WCI Steel, Inc. (the
"COLLATERAL") pursuant to the Pledge Agreement to be dated as of the Closing
Date (the "PLEDGE AGREEMENT") between the Company and the Trustee thereunder.
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and sold
to the Initial Purchaser pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Securities Act"). The Company has prepared a preliminary offering memorandum,
dated January 22, 1998 (the "PRELIMINARY OFFERING MEMORANDUM") and a final
offering memorandum, dated January 29, 1998 (the "OFFERING MEMORANDUM"),
relating to the Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
THE NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY
<PAGE>
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER: (A) REPRESENTS THAT (1) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB") OR (2) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (B) AGREES THAT IT
WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (1) TO THE COMPANY
OR ANY OF ITS SUBSIDIARIES, (2) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (4) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (6) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) OR (7) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (C) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions
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contained herein, the Company agrees to issue and sell to the Initial Purchaser,
and the Initial Purchaser agrees to purchase from the Company, an aggregate
principal amount of $120,000,000 of Series A Notes at a purchase price equal to
97.138% of the principal amount thereof.
3. TERMS OF OFFERING. The Initial Purchaser has advised the Company
that the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Series
A Notes purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to (i) persons whom the Initial Purchaser
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Securities Act ("QIBS") and (ii) to persons permitted to purchase
the Series A Notes in offshore transactions in reliance upon Regulation S under
the Securities Act (each, a "REGULATION S PURCHASER") (such persons specified in
clauses (i) and (ii) being referred to herein as the "ELIGIBLE PURCHASERS").
The Initial Purchaser will offer the Series A Notes to Eligible Purchasers
initially at a price equal to 99.638% of the principal amount thereof. Such
price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "COMMISSION")
under the circumstances set forth therein, (i) a registration statement under
the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the
Company's 10 7/8% Series B Senior Secured Notes due 2005 (the "SERIES B NOTES"),
to be offered in exchange for the Series A Notes (such offer to exchange being
referred to as the "EXCHANGE OFFER") and/or (ii) a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION
STATEMENT" and, together with the Exchange Offer Registration Statement, the
"REGISTRATION STATEMENTS") relating to the resale by certain holders of the
Series A Notes and to use its reasonable efforts to cause such Registration
Statements to be declared and remain effective and usable for the periods
specified in the Registration Rights Agreement and to consummate the Exchange
Offer. This Agreement, the Indenture, the Notes, the Pledge Agreement and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the Series A
Notes shall be made at the offices of Cahill Gordon & Reindel or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 a.m. New York City time, on February 3, 1998 or at such other time on
the same date or such other date as shall be agreed upon by the Initial
Purchaser and the Company in writing. The time and date of such delivery and
the payment for the Series A Notes are herein called the "CLOSING DATE."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of The Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Series A Notes (collectively, the "GLOBAL NOTE"), shall
be delivered by the Company to the Initial Purchaser (or as
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the Initial Purchaser directs) in each case with any transfer taxes thereon duly
paid by the Company against payment by the Initial Purchaser of the Purchase
Price thereof by wire transfer in same day funds to the order of the Company.
The Global Note shall be made available to the Initial Purchaser for inspection
not later than 9:30 a.m., New York City time, on the business day immediately
preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with the
Initial Purchaser as follows:
(a) To advise you promptly and, if requested by the Initial
Purchaser, confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any of the Series A Notes for offering or
sale in any jurisdiction, or the initiation of any proceeding for such
purpose by any state securities commission or other regulatory authority,
and (ii) of the happening of any event that makes any statement of a
material fact made in the Offering Memorandum untrue or that requires the
making of any additions to or changes in the Offering Memorandum in order
to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Company shall use its best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any of the Series A Notes under any state
securities or Blue Sky laws, and if at any time any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption of any of the Series A Notes under any state
securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time.
(b) To furnish you, without charge, as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as you may reasonably request. The Company consents
to the lawful use of the Preliminary Offering Memorandum and the Offering
Memorandum, and any amendments and supplements thereto, by you in
connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum or
the Offering Memorandum prior to the Closing Date unless you shall
previously have been advised thereof and shall not have objected thereto
after being furnished a copy thereof. The Company shall promptly prepare,
upon your request, any amendment or supplement to the Preliminary Offering
Memorandum or the Offering Memorandum that may be reasonably necessary or
advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any Exempt
Resales, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of your counsel, it becomes necessary
to amend or supplement the Offering Memorandum in order to make the
statements therein, in the light of the circumstances when the Offering
Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary to amend or supplement the
Offering Memorandum to comply with applicable law, forthwith to prepare an
appropriate amendment or supplement to the Offering Memorandum so that
statements therein as so
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amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Offering Memorandum will
comply with applicable law.
(e) To cooperate with you and your counsel in connection with the
qualification of the Series A Notes under the securities or Blue Sky laws
of such jurisdictions as you may request and to continue such qualification
in effect so long as required for the Exempt Resales; PROVIDED, HOWEVER,
that the Company shall not be required in connection therewith to register
or qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process in suits or
taxation, other than as to matters and transactions relating to the Exempt
Resales, in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to
pay all costs, expenses, fees and taxes incident to and in connection with:
(i) the preparation, printing, filing and distribution of the Preliminary
Offering Memorandum and the Offering Memorandum (including, without
limitation, financial statements and exhibits) and all amendments and
supplements thereto, (ii) the preparation (including, without limitation,
word processing and duplication costs) and delivery of this Agreement and
the other Operative Documents and all preliminary and final Blue Sky
memoranda and all other agreements, memoranda, correspondence and other
documents prepared and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance and delivery by the Company of the Notes, (iv)
the qualification of the Notes for offer and sale under the securities or
Blue Sky laws of the several states (including, without limitation, the
reasonable fees and disbursements of your counsel relating to such
registration or qualification), (v) furnishing such copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and all
amendments and supplements thereto, as may be reasonably requested for use
in connection with Exempt Resales, (vi) the preparation of certificates for
the Notes (including, without limitation, printing and engraving thereof),
(vii) the fees, disbursements and expenses of the Company's counsel and
accountants, (viii) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in the National Association
of Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
("PORTAL"), (ix) all fees and expenses (including fees and expenses of
counsel) of the Company in connection with approval of the Notes by DTC,
Euroclear or CEDEL for "book-entry" transfer and (x) the performance by the
Company of its other obligations under this Agreement and the other
Operative Documents.
(g) To use the proceeds from the sale of the Series A Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(i) To do and perform all things required to be done and performed
under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent on its part to the delivery of the Series
A Notes.
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(j) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act)
that would be integrated with the sale of the Series A Notes in a manner
that would require the registration under the Securities Act of the sale to
you or Eligible Purchasers of the Series A Notes.
(k) For so long as any of the Notes remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any QIB or beneficial owner of Series A Notes in connection
with any sale thereof and any prospective purchaser of such Series A Notes
from such QIB or beneficial owner, the information required by Rule
144A(d)(4) under the Securities Act.
(l) To cause the Exchange Offer to be made in the appropriate form to
permit registration of the Series B Notes to be offered in exchange for the
Series A Notes and to comply in all material respects with all applicable
federal and state securities laws in connection with the Exchange Offer.
(m) To comply in all material respects with all of its agreements set
forth in the Registration Rights Agreement, and all agreements set forth in
the representation letter of the Company to DTC relating to the approval of
the Notes by DTC for "book-entry" transfer and any similar such letter, if
any, with Euroclear or CEDEL.
(n) To use reasonable efforts to effect the inclusion of the Series A
Notes in PORTAL.
(o) During a period of five years following the date of this
Agreement, to deliver to you promptly upon their becoming available, copies
of all current, regular and periodic reports filed by the Company with the
Commission or any securities exchange or with any governmental authority
succeeding to any of the Commission's functions.
(p) The Company agrees to do or cause to be done such further acts
and things and deliver or cause to be delivered to the Trustee, and file or
cause to be filed, such additional instruments, documents, forms
(including, without limitation, Uniform Commercial Code ("UCC") forms) and
assurances as the Initial Purchaser or the Trustee may reasonably require
or deem advisable to give the Trustee a valid and perfected first priority
lien on the Collateral.
6. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to you that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum
have been prepared in connection with the Exempt Resales. The Preliminary
Offering Memorandum as of its date did not, and the Offering Memorandum
does not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
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representations and warranties contained in this paragraph (i) shall not
apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating
to you furnished to the Company in writing by you expressly for use
therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated
by this Agreement are subject to the registration requirements of the
Securities Act, has been issued. Each of the Preliminary Offering
Memorandum and the Offering Memorandum, as of its date, contains all the
information specified in, and meeting the requirements of, Rule 144A(d)(4)
under the Securities Act.
(b) When the Series A Notes are issued and delivered pursuant to this
Agreement, none of the Series A Notes will be of the same class (within the
meaning of Rule 144A under the Securities Act) as securities of the Company
that are listed on a national securities exchange registered under Section
6 of the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(c) The Company and each of its subsidiaries has been duly organized,
is validly existing as a corporation or limited partnership, as the case
may be, in good standing under the laws of its respective jurisdiction of
incorporation or formation, as the case may be, has all requisite power and
authority to carry on its business as it is currently being conducted and
as described in the Offering Memorandum and to own, lease and operate its
properties, and is duly qualified and in good standing as a foreign
corporation or limited partnership, as the case may be, authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification.
(d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. The Company owns,
directly or indirectly through other subsidiaries, 100% of the outstanding
capital stock or other securities evidencing equity ownership of such
subsidiaries, free and clear of any security interest, claim, lien,
limitation on voting rights or encumbrance; and all of such securities have
been duly authorized, validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights. There
are no outstanding subscriptions, rights, warrants, calls, commitments of
sale or options to acquire, or instruments convertible into or exchangeable
for, any such shares of capital stock or other equity interest of such
subsidiaries.
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Pledge Agreement, the Registration Rights Agreement and the other Operative
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, with
respect to the Company, the corporate power and authority to issue, sell
and deliver the Notes as provided herein and therein.
(f) This Agreement has been duly and validly authorized, executed and
delivered by the Company and is the legally valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.
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<PAGE>
(g) The Indenture has been duly and validly authorized by the Company
and, when duly executed and delivered by the Company, will be the legally
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The Indenture, when executed and
delivered, will conform to the description thereof in the Offering
Memorandum.
(h) The Pledge Agreement has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company (including,
without limitation, the creation and perfection of the liens in the
Collateral), will be the legally valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
Pledge Agreement, when executed and delivered, will conform to the
description thereof in the Offering Memorandum.
(i) The Series A Notes have been duly and validly authorized for
issuance and sale to you by the Company pursuant to this Agreement and,
when issued and authenticated in accordance with the terms of the Indenture
and delivered against payment therefor in accordance with the terms hereof,
will be the legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and entitled
to the benefits of the Indenture. The Series A Notes, when issued,
authenticated and delivered, will conform to the description thereof in the
Offering Memorandum.
(j) The Series B Notes have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in accordance
with the terms of the Indenture, the Registration Rights Agreement and the
Exchange Offer, will be the legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture.
(k) The grant of security interests in the Collateral pursuant to the
Pledge Agreement will create a valid, perfected first priority security
interest in the Collateral in accordance with the terms thereof and, on the
Closing Date, the Collateral will be free and clear of all liens other than
liens to which the Collateral may be subject under the terms of the Pledge
Agreement. On the Closing Date, all filings, recordings or other actions
required by the Pledge Agreement in connection with the liens (including to
perfect such liens) shall have been obtained and/or taken by the Company.
(l) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The
Registration Rights Agreement, when executed and delivered, will conform to
the description thereof in the Offering Memorandum.
(m) Neither the Company nor any of its subsidiaries is in violation
of its respective articles of incorporation or certificate of limited
partnership, as the case may be, or code of regulations or limited
partnership agreement, as the case may be, or is in default in the
performance of any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which it is a party or by which
it is bound or to which any
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of its properties is subject, or is in violation of any law, statute, rule,
regulation, judgment or court decree applicable to the Company, any of its
subsidiaries or their assets or properties. There exists no condition
that, with notice, the passage of time or otherwise, would constitute a
default under any such document or instrument.
(n) The execution, delivery and performance by the Company of this
Agreement and the other Operative Documents to which it is a party, the
issuance and sale of the Notes, and the consummation of the transactions
contemplated hereby and thereby will not violate, conflict with or
constitute a breach of any of the terms or provisions of, or a default
under (or an event that with notice or the lapse of time, or both, would
constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of the Company or any
of its subsidiaries, or an acceleration of indebtedness pursuant to, (i)
the articles of incorporation or certificate of limited partnership, as the
case may be, or code of regulations or limited partnership agreement, as
the case may be, of the Company or any of its subsidiaries, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which any of them or their property is or may be bound, (iii) any statute,
rule or regulation applicable to the Company, any of its subsidiaries or
any of their assets or properties, or (iv) any judgment, order or decree of
any court or governmental agency or authority having jurisdiction over the
Company, any of its subsidiaries or their assets or properties. No
consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or governmental
agency, body or administrative agency is required for the execution,
delivery and performance of this Agreement and the other Operative
Documents and the consummation of the transactions contemplated hereby and
thereby, except such as have been obtained and made (or, in the case of the
Registration Rights Agreement, will be obtained and made) under the
Securities Act, the Trust Indenture Act, and state securities or Blue Sky
laws and regulations or such as may be required by the NASD. No consents
or waivers from any other person are required for the execution, delivery
and performance of this Agreement and the other Operative Documents and the
consummation of the transactions contemplated hereby and thereby, other
than such consents and waivers as have been obtained (or, in the case of
the Registration Rights Agreement, will be obtained).
(o) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or threatened or contemplated to which the Company or
any of its subsidiaries is or may be a party or to which the business or
property of the Company or any of its subsidiaries is or may be subject,
(ii) no statute, rule, regulation, or order that has been enacted, adopted
or issued by any governmental agency or that has been proposed by any
governmental body, (iii) no injunction, restraining order or order of any
nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any of its subsidiaries is or may be
subject issued that, in the case of clauses (i), (ii) and (iii) above, (x)
might, singly or in the aggregate, result in a material adverse effect on
the properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Company and its subsidiaries, taken
as a whole (a "MATERIAL ADVERSE EFFECT"), (y) would interfere with or
adversely affect the issuance of the Notes or (z) in any manner draw into
question the
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validity of this Agreement, the Indenture, the Pledge Agreement, the
Registration Rights Agreement or any other Operative Document.
(p) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Notes; no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction
has been issued that prevents the issuance of the Notes or suspends the
sale of the Notes in any jurisdiction referred to in Section 5(e) hereof;
and no action, suit or proceeding is pending against or affecting or, to
the best knowledge of the Company and any of its subsidiaries, threatened
against, the Company or any of its subsidiaries before any court or
arbitrator or any governmental body, agency or official which, if adversely
determined, would prohibit, interfere with or adversely affect the issuance
or marketability of the Notes or in any manner draw into question the
validity of any Operative Document; and every request of any securities
authority or agency of any jurisdiction for additional information has been
complied with in all material respects.
(q) There is (i) no significant unfair labor practice complaint
pending against the Company or any of its subsidiaries nor, to the best
knowledge of the Company and its subsidiaries, threatened against any of
them, before the National Labor Relations Board, any state or local labor
relations board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any or
its subsidiaries or, to the best knowledge of the Company and its
subsidiaries, threatened against any of them, (ii) no significant strike,
labor dispute slowdown or stoppage pending against the Company or any of
its subsidiaries nor, to the best knowledge of the Company and its
subsidiaries, threatened against the Company or any of its subsidiaries and
(iii) to the best knowledge of the Company and its subsidiaries, no union
representation question existing with respect to the employees of the
Company and its subsidiaries and, to the best knowledge of the Company and
its subsidiaries, no union organizing activities are taking place. Neither
the Company nor any of its subsidiaries has violated any federal, state or
local law or foreign law relating to discrimination in hiring, promotion or
pay of employees, nor any applicable wage or hour laws, nor any provision
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations thereunder, which might result in a
Material Adverse Effect.
(r) In the ordinary course of its business, each of the Company and
its subsidiaries conducts periodic reviews of the effect of Environmental
Laws (as defined herein) and the handling, storage, transport, treatment
and disposal of Hazardous Materials (as defined herein) on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, all capital and operating
expenditures required for response and corrective actions, closure of
properties and compliance with Environmental Laws, all permits, licenses
and approvals, all related constraints on operating activities and all
potential liabilities to third parties). On the basis of such reviews, the
Company has reasonably concluded that such associated costs and liabilities
would not have a Material Adverse Effect other than as disclosed in the
Offering Memorandum. Neither the Company
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nor any of its subsidiaries has violated any Environmental Law applicable
to it or its business or property, or is subject to any liability under any
Environmental Law, lacks any permit, license or other approval required of
them under applicable Environmental Laws or is violating any Environmental
Law or term or condition of such permit, license or approval which might
have a Material Adverse Effect, in each case, other than as disclosed in
the Offering Memorandum. For the purposes of this Agreement,
"ENVIRONMENTAL LAWS" shall mean any federal, state and local laws, rules or
regulations, any orders, decrees, judgments or injunctions and the common
law relating to pollution or protection of human health, safety or the
environment, including, without limitation, ambient air, indoor air, soil,
surface water, ground water, wetlands, land or subsurface strata,
including, without limitation, those relating to releases or threatened
releases of Hazardous Materials into the environment, or otherwise relating
to the manufacture, processing, generation, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. For the
purposes of this Agreement, "HAZARDOUS MATERIAL" shall mean any pollutant,
contaminant, toxic, hazardous or extremely hazardous substance, constituent
or waste, or any other constituent, waste, material, compound or substance,
including, without limitation, petroleum including crude oil and any
fraction thereof, or any petroleum product, subject to regulation under any
Environmental Law.
(s) Each of the Company and its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the Offering
Memorandum or as would not have a Material Adverse Effect, (ii) peaceful
and undisturbed possession under all leases to which it is party as lessee,
(iii) all licenses, certificates, permits, authorizations, approvals,
franchises and other rights from, and has made all declarations and filings
with, all federal, state and local authorities, all self-regulatory
authorities and all courts and other tribunals (each an "AUTHORIZATION")
necessary to engage in the business currently conducted by it in the manner
described in the Offering Memorandum, except where failure to hold such
Authorizations would not have a Material Adverse Effect and (iv) no reason
to believe that any governmental body or agency is considering limiting,
suspending or revoking any such Authorization. All such Authorizations are
valid and in full force and effect and the Company and its subsidiaries are
in compliance in all material respects with the terms and conditions of all
such Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto. All leases to which
the Company or any of its subsidiaries is a party are valid and binding and
no default by the Company or any of its subsidiaries has occurred and is
continuing thereunder, and no material defaults by the landlord are
existing under any such lease.
(t) All tax returns required to be filed by the Company or any of its
subsidiaries, in all jurisdictions, have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently
payable without penalty or interest. Neither the Company nor any of its
subsidiaries knows of any material proposed additional tax assessments
against it or any of its subsidiaries.
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(u) Neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"INVESTMENT COMPANY ACT"), or analogous foreign laws and regulations, or
(ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(v) There are no holders of securities of the Company who, by reason
of the execution by the Company of this Agreement or any other Operative
Document to which it is a party or the consummation of the transactions
contemplated hereby and thereby, have the right to request or demand that
the Company register under the Securities Act or analogous foreign laws and
regulations securities held by them.
(w) The authorized, issued and outstanding capital stock of the
Company has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of or subject to any
preemptive or similar rights. The Company and its subsidiaries had at
October 31, 1997, assuming the Company was in existence on such date, an
authorized and outstanding capitalization as set forth in the Offering
Memorandum.
(x) Each certificate signed by any officer of the Company and
delivered to the Initial Purchaser or counsel for the Initial Purchaser
shall be deemed to be a representation and warranty by the Company to the
Initial Purchaser as to the matters covered thereby.
(y) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
(z) The Company and each of its subsidiaries maintains insurance
covering their properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect the Company and its
subsidiaries and their businesses. Neither the Company nor any of its
subsidiaries has received notice from any insurer or agent of such insurer
that substantial capital improvements or other expenditures will have to be
made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be outstanding
and duly in force on the Closing Date.
(aa) Neither the Company nor any of its subsidiaries has (i) taken,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price
of any security of the Company or any of its subsidiaries to facilitate the
sale or resale of the Notes or (ii) since the date of the Preliminary
Offering Memorandum (A) sold, bid for, purchased or paid any person any
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compensation for soliciting purchases of, the Notes or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase
any other securities of the Company or any of its subsidiaries.
(bb) No registration under the Securities Act of the Series A Notes is
required for the sale of the Series A Notes to the Initial Purchaser as
contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Series A Notes in the Exempt Resales are either QIBs
or Regulation S Purchasers and (ii) the accuracy of the Initial Purchaser's
representations regarding the absence of general solicitation in connection
with the sale of Series A Notes to the Initial Purchaser and the Exempt
Resales contained herein. No form of general solicitation or general
advertising was used by the Company or any of its representatives in
connection with the offer and sale of any of the Series A Notes or in
connection with Exempt Resales, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising. No securities of the same class as the Series A Notes
have been issued and sold by the Company within the six-month period
immediately prior to the date hereof.
(cc) Set forth on Exhibit B hereto is a list of each employee pension
or benefit plan with respect to which the Company or any corporation
considered an affiliate of the Company within the meaning of Section
407(d)(7) of ERISA (an "AFFILIATE") is a party in interest or disqualified
person. The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Series A Notes to be purchased by the
Eligible Purchasers will not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue
Code of 1986, as amended. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy of,
and compliance with, the representations and covenants made or deemed made
by the Eligible Purchasers as set forth in the Offering Memorandum under
the Section entitled "Notice to Investors."
(dd) Subsequent to the respective dates as of which information is
given in the Offering Memorandum and up to the Closing Date, except as set
forth in the Offering Memorandum, neither the Company nor any of its
subsidiaries has incurred any liabilities or obligations, direct or
contingent, which are material to the Company and its subsidiaries taken as
a whole, nor entered into any transaction not in the ordinary course of
business, there has not been, singly or in the aggregate, any material
adverse change, or any development which may reasonably be expected to
involve a material adverse change, in the properties, business, results of
operations, condition (financial or otherwise), affairs or prospects of the
Company and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE
CHANGE") and there have not been dividends or distributions of any kind
(except the dividend paid by WCI Steel, Inc. ("WCI") on January 28, 1998)
declared, paid or made by the Company or any of its subsidiaries on any
class of its capital stock.
(ee) Neither the Company nor any agent thereof acting on the behalf of
the Company has taken, and the Company will not take, any action that might
cause this
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Agreement or the issuance or sale of the Notes to violate Regulation G (12
C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(ff) The accountants who have certified or shall certify the financial
statements and supporting schedules included or to be included as part of
the Offering Memorandum are independent accountants. The balance sheet of
the Company fairly presents the financial condition of the Company, and the
consolidated historical statements of WCI fairly present the consolidated
financial condition and results of operations of WCI and its subsidiaries,
at the respective dates and for the respective periods indicated, in
accordance with generally accepted accounting principles consistently
applied throughout such periods, except as stated therein. The pro forma
data has been prepared on a basis consistent with such historical
statements, except for the pro forma adjustments specified therein, and
give effect to assumptions made on a reasonable basis and present fairly
the historical and proposed transactions contemplated by this Agreement and
the other Operative Documents. Other financial and statistical information
and data included in the Offering Memorandum, historical and pro forma, are
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company and its subsidiaries.
(gg) The present fair saleable value of the assets of the Company
exceeds the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of
each such person as they become absolute and matured. The assets of the
Company do not constitute unreasonably small capital to carry out its
businesses as conducted or as proposed to be conducted. The Company does
not intend to, nor does it believe that it will, incur debts beyond its
ability to pay such debts as they mature. Upon the issuance of the Series
A Notes, the present fair saleable value of the assets of the Company will
exceed the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of
the Company as they become absolute and matured. The assets of the
Company, upon the issuance of the Series A Notes, will not constitute
unreasonably small capital to carry out its businesses as now conducted,
including the capital needs of the Company, taking into account the
projected capital requirements and capital availability of the Company.
(hh) There are no contracts, agreements or understandings between the
Company or any of its subsidiaries and any person that would give rise to a
valid claim against the Company, its subsidiaries or the Initial Purchaser
for a brokerage commission, finder's fee or like payment in connection with
the issuance, purchase and sale of the Notes.
The Company acknowledges that the Initial Purchaser and, for the purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and hereby consent
to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to, and agrees with, the Company that:
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(a) It is a QIB, with such knowledge and experience in financial and
business matters as are necessary in order to evaluate the merits and risks of
an investment in the Series A Notes.
(b) It (A) is not acquiring the Series A Notes with a view to any
distribution thereof that would violate the Securities Act or the securities
laws of any state of the United States or any other applicable jurisdiction and
(B) will be reoffering and reselling the Series A Notes only to QIBs in reliance
on the exemption from the registration requirements of the Securities Act
provided by Rule 144A and in offshore transactions in compliance with Regulation
S under the Securities Act.
(c) No form of general solicitation or general advertising has been or
will be used by it or any of its representatives in connection with the offer
and sale of any of the Series A Notes, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
(d) It agrees that, in connection with the Exempt Resales, it will solicit
offers to buy the Series A Notes only from, and will offer to sell the Series A
Notes only to, QIBs and Regulation S Purchasers in offshore transactions in
compliance with Regulation S under the Securities Act. It further agrees (A)
that it will offer to sell the Series A Notes only to, and will solicit offers
to buy the Series A Notes only from, (1) QIBs who in purchasing such Series A
Notes will be deemed to have represented and agreed that they are purchasing the
Series A Notes for their own account or accounts with respect to which they
exercise sole investment discretion and that they or such accounts are QIBs and
(2) Regulation S Purchasers in offshore transactions in compliance with
Regulation S under the Securities Act and (B) that, in the case of such QIBs and
Regulation S Purchasers, acknowledges and agrees that such Series A Notes will
not have been registered under the Securities Act and may be resold, pledged or
otherwise transferred only (x)(I) to a person who the seller reasonably believes
is a QIB in a transaction meeting the requirements of Rule 144A, (II) in a
transaction meeting the requirements of Rule 144, (III) to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act or
(IV) in accordance with another exemption from the registration requirements of
the Securities Act (and based upon an opinion of counsel if the Company so
requests), (y) to the Company and (z) pursuant to an effective registration
statement under the Securities Act and, in each case, in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction and (C) that the holder will, and each subsequent holder
is required to, notify any purchaser from it of the security evidenced thereby
of the resale restrictions set forth in (B) above.
(e) It will comply with the applicable provisions of Rule 144A under the
Securities Act and Regulation S under the Securities Act.
(f) It also understands that the Company and, for purposes of the opinions
to be delivered to you pursuant to Section 9 hereof, counsel to the Company and
counsel to the
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<PAGE>
Purchaser will rely upon the accuracy and truth of the foregoing representations
and hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company agrees, to indemnify and hold harmless the Initial
Purchaser and its directors and its officers and each person, if any, who
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) the Initial Purchaser, from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action, that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Offering Memorandum
(or any amendment or supplement thereto) or the Preliminary Offering Memorandum
or any information provided by the Company to any prospective purchaser of
Series A Notes pursuant to Section 5(k) or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Initial Purchaser furnished in writing to the
Company by the Initial Purchaser; provided, however, that the foregoing
indemnity agreement with respect to any Preliminary Offering Memorandum shall
not inure to the benefit of the Initial Purchaser if it failed to deliver a
Final Offering Memorandum (as then amended or supplemented, provided by the
Company to the Initial Purchaser in the requisite quantity and on a timely basis
to permit proper delivery on or prior to the Closing Date) to the person
asserting any losses, claims, damages, liabilities and judgments caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such untrue statement or omission
or alleged untrue statement or omission was cured in the Final Offering
Memorandum.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, and its directors and officers and each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing indemnity from
the Company to the Initial Purchaser but only with reference to information
relating to the Initial Purchaser furnished in writing to the Company by the
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to
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both Sections 8(a) and 8(b), the Initial Purchaser shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchaser). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in
the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with the indemnifying
party's written consent or (ii) effected without the indemnifying party's
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchaser, on the other hand, from the
offering of the Series A Notes or (ii) if the
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<PAGE>
allocation provided by clause 8(d)(i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 8(d)(i) above but also the relative fault of
the Company, on the one hand, and the Initial Purchaser, on the other hand,
in connection with the untrue statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any
other relevant equitable considerations. The relative benefits received by
the Company, on the one hand, and the Initial Purchaser, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Series A Notes (after underwriting discounts and
commissions, but before deducting expenses) received by the Company, and
the total discounts and commissions received by the Initial Purchaser bear
to the total price to investors of the Series A Notes, in each case as set
forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company, on the one hand, and the Initial Purchaser,
on the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or the Initial
Purchaser, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.
The Company and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
incurred by such indemnified party in connection with investigating or
defending any matter, including any action that could have given rise to
such losses, claims, damages, liabilities or judgments. Notwithstanding
the provisions of this Section 8, the Initial Purchaser shall not be
required to contribute any amount in excess of the amount by which the
total discounts and commissions received by the Initial Purchaser exceeds
the amount of any damages which the Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(a) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations
of the Initial Purchaser to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof
and on the Closing Date with the same force and effect as if made on and as
of the date hereof and the Closing Date, respectively. The Company shall
have performed or complied with all of the agreements herein contained and
required to be performed or complied with by it at or prior to the Closing
Date.
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(b) The Offering Memorandum shall have been printed and copies
distributed to the Eligible Purchasers to whom the Initial Purchaser
intends to resell in Exempt Resales the Series A Notes on the Closing Date
not later than 10:00 a.m., New York City time, on the date of this
Agreement or at such later date and time as to which you may agree, and no
stop order suspending the qualification or exemption from qualification of
any of the Series A Notes in any jurisdiction referred to in Section 5(e)
shall have been issued and no proceeding for that purpose shall have been
commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance of any of
the Series A Notes; no action, suit or proceeding shall be pending against
or affecting or, to the knowledge of the Company, threatened against, the
Company or any of its subsidiaries before any court or arbitrator or any
governmental body, agency or official that, if adversely determined, would
prohibit, interfere with or adversely affect the issuance of the Series A
Notes or would have a Material Adverse Effect, or in any manner draw into
question the validity of any of the Operative Documents; and no stop order
preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements
of the Securities Act shall have been issued.
(d) Since the dates as of which information is given in the Offering
Memorandum and other than as contemplated in the Offering Memorandum, (i)
there shall not have been any material change, or any development that is
reasonably likely to result in a material change, in the capital stock or
the long-term debt, or material increase in the short-term debt, of the
Company or any of its subsidiaries from that set forth in the Offering
Memorandum, (ii) no dividend or distribution of any kind (except the
dividend paid by WCI on January 28, 1998) shall have been declared, paid or
made by the Company or any of its subsidiaries on any class of its capital
stock, and (iii) neither the Company nor any of its subsidiaries shall have
incurred any liabilities or obligations, direct or contingent, that are
material, individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole, and that are required to be disclosed on a
balance sheet in accordance with generally accepted accounting principles
and are not disclosed on the latest balance sheet included in the Offering
Memorandum. Since the date hereof and since the dates as of which
information is given in the Offering Memorandum, there shall not have been
any Material Adverse Change.
(e) You shall have received certificates, dated the Closing Date,
signed by (i) the President or Vice President and (ii) a principal
financial or accounting officer of the Company confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 9.
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(f) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of
Cadwalader, Wickersham & Taft, counsel for the Company to the effect that:
(i) each of the Company and its subsidiaries is organized and
validly existing as a corporation or limited partnership, as the case
may be, in good standing under the laws of its respective jurisdiction
of incorporation or formation, as the case may be, has all requisite
power and authority to own, lease and operate its properties and to
conduct its business as it is currently being conducted and as
described in the Offering Memorandum, and is duly qualified and in
good standing as a foreign corporation or limited partnership, as the
case may be, authorized to do business in each jurisdiction in which
the ownership, leasing and operating of its property and the conduct
of its business requires such qualification, except where the failure
to be so qualified would not have a Material Adverse Effect;
(ii) the entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. The Company owns,
directly or indirectly through other subsidiaries, 100% of the
outstanding capital stock or other securities evidencing equity
ownership of such subsidiaries, to such counsel's knowledge, free and
clear of any security interest, claim, lien, limitation on voting
rights or encumbrance; and all of such securities have been duly
authorized, validly issued, are fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights. To such
counsel's knowledge, there are no outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for, any such shares of
capital stock or other equity interest of such subsidiaries;
(iii) the Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, the Indenture, the Pledge Agreement, the Registration
Rights Agreement and the other Operative Documents to which it is a
party and to consummate the transactions contemplated hereby or
thereby, including, without limitation, with respect to the Company,
the corporate power and authority to issue, sell and deliver the Notes
as provided herein;
(iv) this Agreement has been duly and validly authorized,
executed and delivered by the Company;
(v) the Indenture has been duly and validly authorized, executed
and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Trustee) will be the legally
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except (i) as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights and remedies generally,
(ii) as to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity, (iii) to
the extent that a waiver of rights under any
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<PAGE>
usury laws may be unenforceable and (iv) as rights to indemnity and
contribution may be limited by federal or state securities laws or the
public policy underlying such laws. The Indenture, when duly executed
and delivered, will conform to the description thereof in the Offering
Memorandum;
(vi) the Pledge Agreement (including, without limitation, the
creation and perfection of the liens in the Collateral) has been duly
and validly authorized, executed and delivered by the Company, and
(assuming the due authorization, execution and delivery thereof by the
Trustee) will be the legally valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, (iii) to the extent that a waiver of
rights under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws. The Pledge
Agreement, when duly executed and delivered, will conform to the
description thereof in the Offering Memorandum;
(vii) the Series A Notes have been duly and validly authorized
for issuance and sale to you by the Company pursuant to this Agreement
and, when issued and authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with
the terms hereof, will be the legally valid and binding obligations of
the Company, enforceable against the Company in accordance with their
terms and entitled to the benefits of the Indenture, except (i) as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
and remedies generally, (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or
in equity, (iii) to the extent that a waiver of rights under any usury
laws may be unenforceable and (iv) as rights to indemnity and
contribution may be limited by federal or state securities laws or the
public policy underlying such laws. The Series A Notes, when issued,
authenticated and delivered, will conform to the description thereof
in the Offering Memorandum;
(viii) the Series B Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Indenture, the Registration Rights
Agreement and the Exchange Offer, will be the legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, (iii) to the extent that a waiver of
rights under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws;
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(ix) the Registration Rights Agreement has been duly and validly
authorized, executed and delivered by the Company and (assuming the
due authorization, execution and delivery thereof by the Initial
Purchaser) will be the legally valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally (ii) as to general principles
of equity, regardless of whether enforcement is sought in a proceeding
at law or in equity and (iii) as rights to indemnity and contribution
may be limited by federal or state securities laws or the public
policy underlying such laws. The Registration Rights Agreement, when
duly executed and delivered, will conform to the description thereof
in the Offering Memorandum;
(x) when the Series A Notes are issued and delivered pursuant to
this Agreement, none of the Series A Notes will be of the same class
(within the meaning of Rule 144A under the Securities Act) as
securities of the Company that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system;
(xi) no registration under the Securities Act of any of the
Series A Notes is required for the sale of the Series A Notes to you
as contemplated hereby or for the Exempt Resales assuming (i) that
each of the Eligible Purchasers is a QIB or a Regulation S Purchaser
and (ii) the accuracy of your representations regarding the absence of
general solicitation in connection with the sale of the Series A Notes
to you and the Exempt Resales contained herein;
(xii) neither the Company nor any of its subsidiaries is in
violation of its respective articles of incorporation or certificate
of limited partnership, as the case may be, or code of regulations or
limited partnership agreement, as the case may be, or, to such
counsel's knowledge, is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture, mortgage or deed of trust or other material agreement to
which it is a party or by which it is bound or to which any of its
properties is subject or is in violation of any law, statute, rule,
regulation, judgment or court decree applicable to the Company or its
subsidiaries and, to such counsel's knowledge, there exists no
condition that, with notice, the passage of time or otherwise, would
constitute such default under any such document or instrument, which
any such default would result in a Material Adverse Effect;
(xiii) the execution, delivery and performance by the Company of
this Agreement and the other Operative Documents to which it is a
party, the issuance and sale of the Notes, and the consummation of the
transactions contemplated hereby and thereby will not violate,
conflict with or constitute a breach of any of the terms or provisions
of, or a default under (or an event that with notice or the lapse
22
<PAGE>
of time, or both, would constitute a default), or require consent
under, or result in the imposition of a lien or encumbrance on any
properties of the Company or any of its subsidiaries, or an
acceleration of indebtedness pursuant to, (i) the articles of
incorporation or certificate of limited partnership, as the case may
be, or code of regulations or limited partnership agreement, as the
case may be, of the Company or any of its subsidiaries, (ii) to such
counsel's knowledge, any bond, debenture, note, indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which any of them or their
property is or may be bound, (iii) any statute, rule or regulation
applicable to the Company, any of its subsidiaries or their assets or
properties (except (with respect to this clause (iii)) such
violations, conflicts, breaches or defaults as could not reasonably be
expected to have a Material Adverse Effect), or (iv) to such counsel's
knowledge, any judgment, order or decree of any court or governmental
agency or authority having jurisdiction over the Company, any of its
subsidiaries or their assets or properties. To such counsel's
knowledge, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court
or governmental agency, body or administrative agency is required for
the execution, delivery and performance of this Agreement and the
other Operative Documents and the consummation of the transactions
contemplated hereby and thereby, except such as have been obtained and
made (or, in the case of the Registration Rights Agreement, will be
obtained and made) under the Securities Act, the Trust Indenture Act
and state securities or Blue Sky laws and regulations or such as may
be required by NASD. To such counsel's knowledge, no consents or
waivers from any other person are required for the execution, delivery
and performance of this Agreement and the other Operative Documents
and the consummation of the transactions contemplated hereby and
thereby, other than such consents and waivers as have been obtained
(or, in the case of the Registration Rights Agreement, will be
obtained);
(xiv) to such counsel's knowledge, no action has been taken and
no statute, rule or regulation or order has been enacted, adopted or
issued by any governmental agency that prevents the issuance of the
Notes; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued that
prevents the issuance of the Notes or suspends the sale of the Notes
in any jurisdiction referred to in Section 5(e) hereof; and no action,
suit or proceeding is pending against or affecting or, to such
counsel's knowledge, threatened against, the Company or any of its
subsidiaries before any court or arbitrator or any governmental body,
agency or official which, if adversely determined, would prohibit,
interfere with or adversely affect the issuance or marketability of
the Notes or in any manner draw into question the validity of any
Operative Document;
(xv) to such counsel's knowledge, the Company and each of its
subsidiaries has (i) good and marketable title to all of the
properties and assets described in the Offering Memorandum as owned by
it, free and clear of all liens, charges, encumbrances and
restrictions, except such as are described in the Offering Memorandum
or as would not have a Material Adverse Effect, (ii) peaceful and
23
<PAGE>
undistributed possession under all leases to which it is party as
lessee, (iii) all Authorizations necessary to engage in the business
currently conducted by it in the manner described in the Offering
Memorandum, except where failure to hold such Authorizations would not
have a Material Adverse Effect and (iv) no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization. To such counsel's knowledge, all
such Authorizations are valid and in full force and effect and the
Company and its subsidiaries are in compliance in all material
respects with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities having
jurisdiction with respect thereto. To such counsel's knowledge, all
leases to which the Company or any of its subsidiaries is a party are
valid and binding and no default by the Company or any of its
subsidiaries has occurred and is continuing thereunder, and no
material defaults by the landlord are existing under any such lease;
(xvi) to such counsel's knowledge, other than as disclosed in
the Offering Memorandum, neither the Company nor any of its
subsidiaries has violated any Environmental Laws, lacks any permits,
licenses or other approvals required of them under applicable
Environmental Laws or is violating any terms and conditions of any
such permit, license or approval, nor has the Company or any of its
subsidiaries violated any federal, state or local law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable wage or hourly laws, nor any provisions of ERISA or the
rules and regulations promulgated thereunder, which in each case would
result in a Material Adverse Effect;
(xvii) neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940 or
analogous foreign laws and regulations, or (ii) a "holding company" or
a "subsidiary company" or an "affiliate" of a holding company within
the meaning of the Public Utility Holding Company Act of 1935, as
amended;
(xviii) prior to the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, the Indenture is
not required to be qualified under the Trust Indenture Act of 1939;
(xix) the Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date (except for the
financial statements, including the notes thereto, and supporting
schedules and other financial, statistical and accounting data
included therein or omitted therefrom, as to which no opinion need be
expressed), contains all the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Securities Act;
(xx) The Pledge Agreement, together with the delivery of
certificates evidencing the Current Shares (as defined in the Pledge
Agreement), duly indorsed in the name of the Trustee or in blank (or
accompanied by an appropriate stock
24
<PAGE>
power or separate document of assignment duly executed in the name of
the Trustee or in blank), to the Trustee in the State of New York,
will create in favor of the Trustee a valid and perfected security
interest therein as security for the Secured Obligations (as defined
in the Pledge Agreement). Assuming that the Trustee took delivery of
the Current Shares without notice of any adverse claim (within the
meaning of the Uniform Commercial Code as in effect in the State of
New York as of the date hereof (the "UCC")), the Trustee will acquire
its interest in the Current Shares free of any adverse claim. Our
opinion above as to the security interest of the Trustee in the
Current Shares is subject to the following:
(1) in the case of the issuance or distribution of
additional instruments in respect of the Collateral, or the
distribution of cash proceeds in respect of such Collateral and
such additional instruments, the security interests of the
Trustee in such instruments or proceeds will be perfected only if
possession of the instruments representing them or cash proceeds,
as applicable, are obtained by the Trustee in accordance with the
Pledge Agreement;
(2) in the case of non-identifiable cash proceeds and other
proceeds not referred to in clause (1) above, continuation of
perfection of such security interest is limited to the extent set
forth in Section 9-306 of the UCC;
In rendering the foregoing opinion, we have assumed that each
signature on any indorsement, stock power or assignment is genuine and
duly authorized.
(xxi) Without restrictions arising under New York law, the
Trustee shall be able to exercise the remedies for the realization of
the Collateral in its own name, as trustee, without naming the Trustee
or the holders of the Notes.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, your
representatives and your counsel in connection with the preparation of the
Offering Memorandum and has considered the matters required to be stated
therein and the statements contained therein and, although such counsel has
not independently verified the accuracy, completeness or fairness of such
statements (except as indicated above), such counsel advises you that, on
the basis of the foregoing, no facts came to its attention that caused it
to believe that the Offering Memorandum (as amended or supplemented, if
applicable), at the time such Offering Memorandum was circulated or at the
Closing Date, contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without limiting
the foregoing, such counsel may further state that they assume no
responsibility for, and have not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and schedules
and other financial data included in the Offering Memorandum.
25
<PAGE>
In rendering such opinion, such counsel may rely (i) as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible officers
of the Company and public officials and (ii) as to matters of Ohio law and
environmental law, on an opinion or opinions of Squire, Sanders & Dempsey L.L.P.
The opinions of such counsel described in this paragraph shall be rendered
to you at the request of the Company and shall so state therein.
(g) You shall have received an opinion, dated the Closing Date, of Cahill
Gordon & Reindel, your counsel, in form and substance reasonably satisfactory to
you, covering such matters as are customarily covered in such opinions.
(h) At the time this Agreement is executed and delivered by the Company
and on the Closing Date, you shall have received letters, substantially in the
form previously approved by you, from KPMG Peat Marwick LLP, independent
certified public accountants, with respect to the financial statements and
certain financial information contained in Offering Memorandum.
(i) The Company and the Trustee shall have entered into the Indenture and
you shall have received counterparts, conformed as executed, thereof.
(j) The Company shall have entered into the Registration Rights Agreement
and you shall have received counterparts, conformed as executed, thereof.
(k) On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall have received an opinion from Houlihan, Lokey,
Howard & Zukin, in form and substance satisfactory to the Initial Purchaser and
counsel for the Initial Purchaser, with respect to the solvency of the Company
upon issuance of the Series A Notes and the consummation of the other
transactions contemplated in this Agreement, the other Operative Documents and
the Offering Memorandum.
(l) On or before the Closing Date, evidence satisfactory to the Initial
Purchaser shall be furnished of the completion or substantially contemporaneous
completion of all recordings and/or filings of such financing statements or
security documents or other actions as may be necessary or, in the opinion of
the Initial Purchaser, desirable to perfect the liens created, or intended to be
created, by the Pledge Agreement. All filing fees and taxes in connection with
such recording or filing shall have been paid and the Initial Purchaser shall
have received evidence satisfactory to it of such recordation, filings and
payments, including in the case of any financing statements, the secured party's
copy of all such financing statements bearing evidence of filing in each such
public office.
(m) On or before the Closing Date, the Initial Purchaser shall have
received the Pledge Agreement, duly executed by the Company and dated on or
before the Closing Date together with:
(i) acknowledgment copies of appropriate UCC-1 financing statements
or other documents under the provisions of the UCC or any other applicable
state
26
<PAGE>
law filed in each office where such filing is necessary or appropriate
to grant to the Trustee a first priority Lien of the character
contemplated by the Pledge Agreement; and
(ii) evidence that all other actions necessary to perfect and
protect the Liens created by the Pledge Agreement have been taken.
(n) The Company shall not have failed on or prior to the Closing Date
to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company on or prior to the
Closing Date.
(o) On or before the Closing Date, the Initial Purchaser and counsel
for the Initial Purchaser shall have received such further certificates,
documents or other information as they may have reasonably requested from
the Company.
(p) On or before the Closing Date, the Trustee shall have received
all certificates, agreements, or instruments representing or evidencing the
Collateral. All Collateral shall be in suitable form for transfer by
delivery or shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and substance reasonably satisfactory
to the Trustee.
All opinions, certificates, letters and other documents required by
this Section 9 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to you. The Company will furnish the Initial Purchaser with such conformed
copies of such opinions, certificates, letters and other documents as they shall
reasonably request.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchaser by written notice to the Company if any of
the following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchaser's judgment, is material and adverse and, in the Initial
Purchaser's judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
27
<PAGE>
either federal or New York State authorities, (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States or (vii) any securities of the Company or
any of its subsidiaries shall have been downgraded or placed on any "watch list"
for possible downgrading by any nationally recognized statistical rating
organization.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to Renco Steel
Holdings, Inc., 30 Rockefeller Plaza, 42nd Floor, New York, New York 10112,
telephone number: (212) 541-6000, Attention: James N. Chapman, with a copy to
Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York 10038,
Attention: Michael C. Ryan, Esq., c/o Managing Attorneys' Office, and (ii) if to
the Initial Purchaser, c/o Donaldson, Lufkin & Jenrette Securities Corporation,
277 Park Avenue, New York, New York 10172, Attention: Ramsey Frank, with a copy
to Cahill Gordon & Reindel, 80 Pine Street, New York, New York, 10005 Attention:
William M. Hartnett, Esq., or in any case to such other address as the person to
be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Initial Purchaser set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Series A
Notes, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Company, the officers or directors of the Company, or any person
controlling the Company, (ii) acceptance of the Series A Notes and payment for
them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf
of the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchaser for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(f) hereof.
In addition, the Company agrees to pay all the actual costs and
expenses of creating and perfecting security interests in the Collateral in
favor of the Trustee, on behalf of the Trustee, as secured parties for the
holders of the Notes, pursuant to the Pledge Agreement, including without
limitation, filing and recording fees and expenses, fees and expenses of special
and local counsel for the Company for providing such opinions as the Initial
Purchaser may reasonably request, and fees and expenses of the Trustee, the cost
and expenses of obtaining an appraisal of the Collateral as of the Closing Date,
and any appraisal of the Collateral required by the Indenture.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons referred to herein, the directors of the Company and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term
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<PAGE>
"successors and assigns" shall not include a purchaser of any of the Series A
Notes from the Initial Purchaser merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
29
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchaser.
Very truly yours,
RENCO STEEL HOLDINGS, INC.
By: /s/ Roger L. Fay
--------------------------
Name: Roger L. Fay
Title: Vice President and Chief
Financial Officer
Accepted and agreed:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:/s/William J.R. Wilson
--------------------------------
Name: William J.R. Wilson
Title: Vice President
30
<PAGE>
SCHEDULE A
SUBSIDIARIES
------------
WCI Steel, Inc.
Niles Properties, Inc.
Youngstown Sinter Company
WCI Steel Metallurgical Services Inc.
WCI Steel Production Control Services Inc.
WCI Steel Sales L.P.
S-1
<PAGE>
EXHIBIT A
---------
Form of Registration Rights Agreement
<PAGE>
EXHIBIT B
---------
Employee Pension or Benefit Plan
WCI Steel, Incorporated USWA Defined Benefit Pension Plan
WCI Steel, Incorporated USWA Pension Plan
WCI Steel, Incorporated Retirement and Capital Accumulation Plan
WCI Steel, Incorporated Voluntary Employees Beneficiary Association
Youngstown Sinter Company - USWA Pension Plan
<PAGE>
Exhibit 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of February 3, 1998
by and between
Renco Steel Holdings, Inc.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
================================================================================
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of February 3, 1998, by and between Renco Steel Holdings, Inc.,
an Ohio corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette
Securities Corporation (the "INITIAL PURCHASER"), who has agreed to purchase the
Company's 10 7/8% Senior Secured Notes due 2005, Series A (the "SERIES A SENIOR
NOTES") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated as of
January 29, 1998 (the "PURCHASE AGREEMENT"), by and between the Company and the
Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Series A Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser under the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
BROKER-DEALER TRANSFER RESTRICTED SECURITIES: Series B Notes that are
acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A Notes
that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its affiliates).
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued
<PAGE>
-2-
in the Exchange Offer, (b) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer open for a period
not less than the minimum period required pursuant to Section 3(b) hereof and
(c) the delivery by the Company to the Registrar under the Indenture of Series B
Notes in the same aggregate principal amount as the aggregate principal amount
of Series A Notes tendered by Holders thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Series A Notes, each
Interest Payment Date.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and outside the United States
in compliance with Regulation S under the Act.
HOLDERS: As defined in Section 2 hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated the Closing Date, by and between the
Company and State Street Bank and Trust Company, as trustee (the "TRUSTEE"),
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
INTEREST PAYMENT DATE: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
NOTES: The Series A Notes and the Series B Notes.
<PAGE>
-3-
PERSON: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
PROSPECTUS: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECORD HOLDER: With respect to any Damages Payment Date, each Person
who is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) which is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
RESTRICTED BROKER-DEALER: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
SERIES B NOTES: The Company's 10 7/8% Senior Secured Notes due 2005,
Series B to be issued pursuant to the Indenture (i) in the Exchange Offer or
(ii) upon the request of any Holder of Series A Notes covered by a Shelf
Registration Statement, in exchange for such Series A Notes.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such Note
has been disposed of in accordance with a Shelf Registration Statement, (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
<PAGE>
-4-
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by
applicable federal law, the Company shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 45 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use reasonable efforts to cause such Exchange Offer Registration Statement
to become effective at the earliest possible time, but in no event later than
120 days after the Closing Date, (iii) in connection with the foregoing, (A)
file all pre-effective amendments to such Exchange Offer Registration Statement
as may be necessary in order to cause such Exchange Offer Registration Statement
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Series B Notes to be offered in
exchange for the Series A Notes that are Transfer Restricted Securities and to
permit sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall use its reasonable efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Company shall cause the Exchange Offer to comply in
all material respects with all applicable federal and state securities laws. No
securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Company shall use reasonable efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 Business Days thereafter.
<PAGE>
-5-
(c) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Restricted Broker-Dealer who holds Series A Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Series B Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company shall use reasonable efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms in all material respects with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of 180 days from the date on which the
Exchange Offer is Consummated.
The Company shall promptly provide sufficient copies of the latest
version of such Prospectus to such Restricted Broker-Dealers promptly upon
request, and in no event later than one Business Day after such request, at any
time during such 180-day period in order to facilitate such sales.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not required to
file an Exchange Offer Registration Statement with respect to the Series B Notes
because the Exchange Offer is not permitted by applicable law or (ii) if any
Holder of Transfer Restricted Securities shall notify the Company within 20
Business Days following the Consummation of the Exchange Offer that (A) such
Holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B
<PAGE>
-6-
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Notes acquired directly from
the Company or one of its affiliates, then the Company shall (x) cause to be
filed on or prior to 30 days after the date on which the Company determines that
it is not required to file the Exchange Offer Registration Statement pursuant to
clause (i) above or 30 days after the date on which the Company receives the
notice specified in clause (ii) above a shelf registration statement pursuant to
Rule 415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "SHELF REGISTRATION STATEMENT")),
relating to all Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b) hereof, and shall (y)
use reasonable efforts to cause such Shelf Registration Statement to become
effective on or prior to 90 days after the date on which the Company becomes
obligated to file such Shelf Registration Statement. If, after the Company has
filed an Exchange Offer Registration Statement which satisfies the requirements
of Section 3(a) above, the Company is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above. Such an event shall have no effect on the requirements of clause (y)
above. The Company shall use reasonable efforts to keep the Shelf Registration
Statement discussed in this Section 4(a) continuously effective, supplemented
and amended as required by and subject to the provisions of Sections 6(b) and
(c) hereof to the extent necessary to ensure that it is available for sales of
Transfer Restricted Securities by the Holders thereof entitled to the benefit of
this Section 4(a), and to ensure that it conforms in all material respects with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least three years (as extended pursuant to Section 6(c)(i)) following the date
on which such Shelf Registration Statement first becomes effective under the Act
or such shorter period that will terminate when all the Transfer Restricted
Securities covered by the Shelf Registration Statement have been sold pursuant
thereto or are, in the written opinion of counsel to the Company, eligible for
sale under Rule 144(k) under the Act.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION
WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information specified in Item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein or Prospectus supplement. No Holder of
Transfer Restricted Securities shall be entitled to liquidated damages pursuant
to Section
<PAGE>
-7-
5 hereof unless and until such Holder shall have used its best efforts to
provide all such information. Each Holder as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "REGISTRATION DEFAULT"), then the Company hereby agrees to pay liquidated
damages to each Holder of Transfer Restricted Securities with respect to the
first 90-day period immediately following the occurrence of such Registration
Default, in an amount equal to $.05 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the liquidated
damages shall increase by an additional $.05 per week per $1,000 in principal
amount of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of $.50 per week per $1,000 principal amount of Transfer
Restricted Securities. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the beneficial holders
of interests in the Global Security (as defined in the Indenture) by wire
transfer of immediately available funds and to Holders of Securities (as defined
in the Indenture) in certificated
<PAGE>
-8-
form by mailing checks to their registered addresses on each Damages Payment
Date. All obligations of the Company set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with
the Exchange Offer, the Company shall comply in all material respects with all
applicable provisions of Section 6(c) below, shall use reasonable efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply in all material respects with all of the
following provisions:
(i) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any Person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary
course of business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to participate
in a distribution of the securities to be acquired in the Exchange Offer
(1) could not under Commission policy as in effect on the date of this
Agreement rely on the position of the Commission enunciated in MORGAN
STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of Series B Notes obtained by such Holder in exchange
for Series A Notes acquired by such Holder directly from the Company or an
affiliate thereof.
(ii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that
<PAGE>
-9-
the Company is registering the Exchange Offer in reliance on the position
of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), MORGAN STANLEY AND CO., INC. (available June 5,
1991) and (B) including a representation that the Company has not entered
into any arrangement or understanding with any Person to distribute the
Series B Notes to be received in the Exchange Offer and that, to the best
of the Company's information and belief, each Holder participating in the
Exchange Offer is acquiring the Series B Notes in its ordinary course of
business and has no arrangement or understanding with any Person to
participate in the distribution of the Series B Notes received in the
Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use reasonable efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) GENERAL PROVISIONS. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company shall:
(i) use reasonable efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement, (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of clauses (A) and (B), use
reasonable efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter.
<PAGE>
-10-
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Act, and to comply in all material respects with
Rules 424, 430A and 462, as applicable, under the Act in a timely manner;
and comply in all material respects with the provisions of the Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in writing,
(A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in
the Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time
the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company shall use its best efforts
to obtain the withdrawal or lifting of such order at the earliest possible
time;
<PAGE>
-11-
(iv) furnish to the Initial Purchaser, each selling Holder named
in any Registration Statement or Prospectus and each of the underwriter(s)
in connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the reasonable review and comment of such Holders and
underwriter(s) in connection with such sale, if any, for a period of at
least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably
object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply in all material respects with
the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of such underwriter(s), all
pertinent financial and other records, corporate documents and properties
of the Company and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably
<PAGE>
-12-
request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering of
the Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(viii) furnish to each selling Holder and each of the underwriter(s)
in connection with such sale, if any, without charge, at least one copy of
the Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all exhibits;
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby consents
to the use (in accordance with law) of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
(x) enter into such agreements (including an underwriting
agreement) and make such representations and warranties and take all such
other actions in connection therewith in order to expedite or facilitate
the disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Transfer Restricted Securities or underwriter in
connection with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement, and in such connection, the Company shall:
(A) furnish (or in the case of paragraphs (2) and (3), use
reasonable efforts to furnish) to each underwriter, if any, upon the
effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of effectiveness
of the Shelf Registration Statement, signed on behalf of the
Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company
confirming, as of the date thereof, the matters set forth in
paragraphs (a) through (d) of Section 9 of the
<PAGE>
-13-
Purchase Agreement and such other similar matters as the
underwriter(s) may reasonably request;
(2) an opinion, dated the date of effectiveness of
the Shelf Registration Statement, of counsel for the Company
covering matters similar to those set forth in paragraph (f)
of Section 9 of the Purchase Agreement and such other matters
as the underwriter(s) may reasonably request, and in any
event including a statement to the effect that such counsel
has participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on
the basis of the foregoing (relying as to materiality to a
large extent upon facts provided to such counsel by officers
and other representatives of the Company and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange
Offer Registration Statement, as of the date of Consummation
of the Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes
and schedules and other financial data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date
of effectiveness of the Shelf Registration Statement from the
Company's independent accountants, in the customary form and
covering matters
<PAGE>
-14-
of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 9 of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if
any, and Restricted Broker Dealers, if any, to evidence compliance,
with respect to any underwriter(s), with clause (A) above and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company pursuant to this clause (x).
The above shall be done at each closing under such underwriting or
similar agreement, if any, as and to the extent required thereunder, and if
at any time the representations and warranties of the Company contemplated
in (A)(1) above cease to be true and correct, the Company shall so advise
the underwriter(s), if any, promptly and if requested by such Persons,
shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Series B Notes having an aggregate principal amount equal to the aggregate
principal amount of Series A Notes surrendered to the Company by such
Holder in exchange therefor or
<PAGE>
-15-
being sold by such Holder; such Series B Notes to be registered in the name
of such Holder or in the name of the purchaser(s) of such Notes, as the
case may be; in return, the Series A Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities in
such denominations and such names as the Holders or the underwriter(s), if
any, may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xiv) use reasonable efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi)
above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xvi) provide a CUSIP number or numbers for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with The Depository
Trust Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use reasonable efforts to cause such Registration Statement to
become effective and approved by such gov-
<PAGE>
-16-
ernmental agencies or authorities as may be necessary to enable the Holders
selling Transfer Restricted Securities to consummate the disposition of
such Transfer Restricted Securities;
(xviii) otherwise use reasonable efforts to comply in all material
respects with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 under the Act
(which need not be audited) covering a twelve-month period beginning after
the effective date of the Registration Statement (as such term is defined
in paragraph (c) of Rule 158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use reasonable efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition
of a Transfer Restricted Security that, upon receipt of the notice referred to
in Section 6(c)(i) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement and Prospectus contained therein until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xv) hereof, or until it is advised in writing by
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (the "Advice"). If so directed by the Company, each
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of either such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(i) or Section
<PAGE>
-17-
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and reasonable expenses
(including filings made by the Initial Purchaser or any Holder with the NASD
(and, if applicable, the reasonable fees and expenses of any "qualified
independent underwriter") and its counsel that may be required by the rules and
regulations of the NASD); (ii) all reasonable fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii) all
reasonable expenses of printing (including printing certificates for the Series
B Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all reasonable fees and
disbursements of counsel for the Company and the Holders of Transfer Restricted
Securities (subject to the provisions of Section 7 (b)) ; (v) all application
and filing fees, if any, in connection with listing the Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all reasonable fees and disbursements of independent certified
public accountants of the Company (including the reasonable expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by
this Agreement (including, without limitation, the Exchange Offer Registration
Statement and/or the Shelf Registration Statement), the Company will reimburse
the Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
<PAGE>
-18-
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder and (ii) each Person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of the
Persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person") and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any Person referred to in clause (i), (ii) or (iii) may hereinafter be referred
to as an "INDEMNIFIED HOLDER"), to the fullest extent lawful, from and against
any and all losses, claims, damages, liabilities, judgments, actions and
expenses (including without limitation and as incurred, reimbursement of all
reasonable costs of investigating, preparing, pursuing or defending any claim or
action, or any investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of counsel
to any Indemnified Holder) directly or indirectly caused by, related to, based
upon, arising out of or in connection with any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Company by any of the
Holders expressly for use therein; PROVIDED, HOWEVER, that the foregoing
indemnity agreement with respect to any Registration Statement, preliminary
Prospectus or Prospectus (or any amendment or supplement thereto) shall not
inure to the benefit of any Holder from whom the Person asserting any such
losses, claims, damages, liabilities, judgments, actions or expenses purchased
Series B Notes, or any Person controlling such Holder, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Holder to such Person, at or prior to the written confirmation of the sale
of the Series B Notes to such Person, and if the Prospectus (as so amended and
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability, judgment, action or expense.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Company, such Indemnified Holder (or the Indemnified Holder controlled by
such controlling person) shall promptly notify the Company in writing (PROVIDED,
that the failure to give such notice shall not relieve the Company of its
obligations pursuant to this Agreement unless it shall have been determined by a
court of competent jurisdiction, by a final judgment not subject to ap-
<PAGE>
-19-
peal or review, that such failure shall have resulted in a material adverse
effect upon the Company). Such Indemnified Holder shall have the right to
employ its own counsel in any such action and the reasonable fees and expenses
of such counsel shall be paid, as incurred, by the Company; PROVIDED, HOWEVER,
that the Company shall be entitled to participate in such action or proceeding
and, to the extent that the Company shall wish to assume the defense thereof
(provided that any such participation or assumption shall be permitted only upon
written notice to the Indemnified Holder which notice is received within 10 days
of the Company's actual knowledge of such action or proceeding), with counsel
satisfactory to such Indemnified Holder (which counsel shall not, except with
the consent of the Indemnified Holder, be counsel to the Company), at the
Company's expense, and after notice from the Company to such Indemnified Holder
of the Company's election so to assume the defense thereof, the Company shall
not be liable to such Indemnified Holder under this Section 8(a) for any legal
expenses of other counsel or any other expenses, in such case subsequently
incurred by such Indemnified Holder, in connection with the defense thereof
other than reasonable costs of investigation; PROVIDED, FURTHER, that the
Company shall not be entitled to control the defense of, or investigation by,
such Indemnified Holder if such Indemnified Holder has been advised by its
counsel that there could reasonably be expected to be a conflict of interest
between the Company and such Indemnified Holder under applicable standards of
professional responsibility. The Company shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for such Indemnified Holders, which firm shall be designated by the
Holders. The Company shall be liable for any settlement of any such action or
proceeding effected with the Company's prior written consent, which consent
shall not be withheld unreasonably, and the Company agrees to indemnify and hold
harmless each Indemnified Holder from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected with the
written consent of the Company. The Company shall not, without the prior
written consent of each Indemnified Holder (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of judgment
in or otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or contribution may
be sought hereunder (whether or not any Indemnified Holder is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Holder from all liability arising out
of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, any
Person controlling (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) the Company, and
<PAGE>
-20-
their respective officers, directors, partners, employees, representatives and
agents (collectively, "Indemnified Company Persons"), to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Holders, but
only with respect to claims and actions based on information relating to such
Holder furnished in writing by such Holder expressly for use in any Registration
Statement. In case any action or proceeding shall be brought against any
Indemnified Company Person in respect of which indemnity may be sought against a
Holder of Transfer Restricted Securities, such Holder shall have the rights and
duties given the Company, and the Indemnified Company Person shall have the
rights and duties given to each Indemnified Holder by Section 8(a). In no event
shall any Holder be liable or responsible for any amount in excess of the amount
by which the total received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Holders, on the other hand, from their sale of
Transfer Restricted Securities or if such allocation is not permitted by
applicable law, the relative fault of the Company, on the one hand, and of the
Indemnified Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and of the Indemnified Holder, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Indemnified Holder and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
<PAGE>
-21-
The Company and each Holder of Transfer Restricted Securities agree
that it would not be just and equitable if contribution pursuant to this Section
8(c) were determined by pro rata allocation (even if the Holders were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no Holder or
its related Indemnified Holders shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Transfer Restricted Securities
pursuant to a Registration Statement exceeds the sum of (A) the amount paid by
such Holder for such Transfer Restricted Securities PLUS (B) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Series A Notes held by each of the Holders hereunder and not
joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company is not subject to Section 13 or 15(d) of the Securities Exchange
Act, to make available, upon request of any Holder of Transfer Restricted
Securities, to any Holder or beneficial owner of Transfer Restricted Securities
in connection with any sale thereof and any prospective purchaser of such
Transfer Restricted Securities designated by such Holder or beneficial owner,
the information required by Rule 144A(d)(4) under the Act in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
<PAGE>
-22-
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering. Such investment bankers and managers are referred to herein as
the "underwriters."
SECTION 12. MISCELLANEOUS
(a) REMEDIES. Each party hereto, in addition to being entitled
to exercise all rights provided herein, in the Indenture, the Purchase Agreement
or granted by law, including recovery of liquidated or other damages, to the
extent applicable to such party, will be entitled to specific performance of its
rights under this Agreement. Each party hereto agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and hereby agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company has
not previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company will not take
any action, or voluntarily permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case of
Section 5 hereof and this Section 12(d)(i), the Company has obtained the written
consent of Holders of all outstanding Transfer Restricted Securities and (ii) in
the case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being
<PAGE>
-23-
tendered pursuant to such Exchange Offer may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
subject to such Exchange Offer.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier, or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Renco Steel Holdings, Inc.
c/o The Renco Group, Inc.
30 Rockefeller Plaza, 42nd Floor
New York, New York 10112
Telecopier No.: (212) 541-6197
Attention: President
With a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Telecopier No.: (212) 504-6666
Attention: Michael C. Ryan, Esq., c/o Managing Attorneys'
office
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
<PAGE>
-24-
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
<PAGE>
-25-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
RENCO STEEL HOLDINGS, INC.
By: /s/ Roger L. Fay
-----------------------------------
Name: Roger L. Fay
Title: Vice President and Chief
Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William J. R. Wilson
------------------------------
Name: William J.R. Wilson
Title: Vice PResident
<PAGE>
EXHIBIT 4.4
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10% SENIOR SECURED NOTES DUE 2005, SERIES A
OF
RENCO STEEL HOLDINGS, INC.
PURSUANT TO
PROSPECTUS DATED , 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1998, UNLESS EXTENDED. TENDERS OF 10% SENIOR SECURED NOTES DUE 2005, SERIES A
MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS
AND HEREIN.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
FACSIMILE TRANSMISSION:
(860) 244-1881
CONFIRM BY TELEPHONE:
(860) 244-1846
<TABLE>
<CAPTION>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
<S> <C>
State Street Bank and Trust Company State Street Bank and Trust Company
Two International Place, 4th Floor 61 Broadway, 15th Floor
Boston, Massachusetts 02110 New York, New York 10006
Attention: Clarie Young--Corporate Trust Attention: Corporate Trust Department
Department
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED
NAME(S) AND ADDRESS(ES) OF HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) OLD NOTES TENDERED
APPEAR(S) ON OLD NOTES) (ATTACH ADDITIONAL SCHEDULE, IF NECESSARY)
<S> <C> <C>
<CAPTION>
(1) (2) (3)
<S> <C> <C>
<CAPTION>
TOTAL PRINCIPAL AMOUNT
CERTIFICATE NUMBER(S) OF OLD NOTES TENDERED
<S> <C> <C>
Total
</TABLE>
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED , 1998
(THE "PROSPECTUS"), OF RENCO STEEL HOLDINGS, INC., AN OHIO CORPORATION (THE
"COMPANY"), RELATING TO THE OFFER (THE "EXCHANGE OFFER") OF THE COMPANY, UPON
THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE PROSPECTUS AND HEREIN
AND THE INSTRUCTIONS HERETO, TO EXCHANGE $1,000 PRINCIPAL AMOUNT OF ITS 10%
SENIOR SECURED NOTES DUE 2005, SERIES B (THE "EXCHANGE NOTES") FOR EACH $1,000
PRINCIPAL AMOUNT OF THE OUTSTANDING 10% SENIOR SECURED NOTES DUE 2005, SERIES A
(THE "OLD NOTES"), OF WHICH $300 MILLION AGGREGATE PRINCIPAL AMOUNT IS
OUTSTANDING. THE MINIMUM PERMITTED TENDER IS $1,000 PRINCIPAL AMOUNT OF OLD
NOTES, AND ALL OTHER TENDERS MUST BE IN INTEGRAL MULTIPLES OF $1,000.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION BY
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998 (the "Expiration Date"), unless extended.
<PAGE>
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER THEIR OLD NOTES TO THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal should be used only to exchange the Old Notes,
pursuant to the Exchange Offer as set forth in the Prospectus.
This Letter of Transmittal is to be used (a) if Old Notes are to be
physically delivered to the Exchange Agent or (b) if delivery of Old Notes is to
be made by book-entry transfer to the account maintained by the Exchange Agent
at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering." Delivery of documents to the
Book-Entry Transfer Facility does not constitute deliver to the Exchange Agent.
Holders whose Old Notes are not available or who cannot deliver their Old
Notes and all other documents required hereby to the Exchange Agent on or prior
to the Expiration Date nevertheless may tender their Old Notes in accordance
with the guaranteed delivery procedures set forth in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF OLD NOTES
FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN
WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE
WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.
HOLDERS WHO WISH TO EXCHANGE THEIR OLD NOTES MUST COMPLETE THE BOX BELOW
ENTITLED "METHOD OF DELIVERY," COMPLETE COLUMNS (1) THROUGH (3) IN THE BOX ON
THE COVER ENTITLED "DESCRIPTION OF OLD NOTES TENDERED" AND SIGN IN THE
APPROPRIATE BOX(ES) BELOW.
<PAGE>
METHOD OF DELIVERY
/ / CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE ENCLOSED
HEREWITH.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY SPECIFIED ABOVE AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution: _____________________________________________
Name of Book-Entry Transfer Facility:
/ / The Depository Trust Company
Account Number: ______________ Transaction Code Number: ___________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4):
Name(s) of Registered Holder(s): ________________________________________
Window Ticket Number (if any): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: _____________________
Name of Eligible Institution which Guaranteed Delivery: _________________
IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, CHECK BOX OF BOOK-ENTRY
TRANSFER FACILITY:
/ / The Depository Trust Company
Account Number: ___________ Transaction Code Number: ___________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN
ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: _________________________________________________________________
Address: ______________________________________________________________
_______________________________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated in the box on the cover entitled "Description of Old Notes Tendered."
Subject to, and effective upon, the acceptance for exchange of the Old Notes
tendered hereby, the undersigned hereby irrevocably sells, assigns and transfers
to or upon the order of the Company all right, title and interest in and to such
Old Notes, and hereby irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that said Exchange Agent also acts as the agent of the Company and as
Trustee under the indenture governing the Old Notes and the Exchange Notes) with
respect to such Old Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver certificates representing such Old Notes, and to deliver all
accompanying evidences of transfer and authenticity to or upon the order of the
Company upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon the acceptance by the
Company of such Old Notes for exchange pursuant to the Exchange Offer, (b)
receive all benefits and otherwise to exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of the Exchange
Offer, and (c) present such Old Notes for transfer on the register for such Old
Notes.
The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Old Notes or the Exchange Notes. If a market for
the Exchange Notes should develop, the Exchange Notes could trade at a discount
from their principal amount. The undersigned is aware that the Company does not
intend to list the Exchange Notes on a national securities exchange and that
there can be no assurance that an active market for the Exchange Notes will
develop.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by any person receiving such Exchange Notes whether or
not such person is the holder thereof, (other than any such holder or other
person which is (i) a broker-dealer that receives Exchange Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making or other trading activities, or (ii)
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act")) without compliance
with the registration and prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the ordinary course of
business of such holder or other person, such holder or other person is not
engaged in or intending to engage in a distribution of the Exchange Notes, and
such holder or other person has no arrangement with any person to participate in
the distribution of such Exchange Notes. See Morgan Stanley & Co. Incorporated,
SEC No-Action Letter (available June 5, 1991) and Exxon Capital Holdings
Corporation, SEC No-Action Letter (available May 13, 1988).
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes, it represents that the Old Notes to be exchanged for Exchange Notes were
acquired as a result of market-making activities or other trading activities and
it acknowledges that it will deliver a prospectus in connection with any resale
of such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN
4
<PAGE>
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN
COMPLIANCE WITH ANY PROVISION OF ANY APPLICABLE SECURITY LAW.
The undersigned represents that (a) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
undersigned or other person receiving such Exchange Notes, (b) neither the
undersigned nor any such other person is engaged in or intends to engage in a
distribution of such Exchange Notes, (c) neither the undersigned nor any such
other person has any arrangement or understanding with any person to participate
in a distribution of the Exchange Notes and (d) neither the undersigned nor any
such other person is an "affiliate" as defined under Rule 405 of the Securities
Act, of the Company or The Renco Group, Inc., the parent corporation of the
Company, or if such holder is such an affiliate, that such holder will comply
with the registration and the prospectus delivery requirements of the Securities
Act in connection with the disposition of any Exchange Notes to the extent
applicable.
The undersigned understands and acknowledges that the Company reserves the
right in its sole discretion to purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date or, as set forth in the
Prospectus under the caption "Conditions of the Exchange Offer," to terminate
the Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers will differ from the terms of the Exchange
Offer.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Exchange Offer, has full power and authority to
tender, exchange, assign and transfer the Old Notes tendered hereby, and that
when the same are accepted for exchange by the Company, the Company will acquire
good and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim or right. The
undersigned will, upon request, execute and deliver any additional documents
deeded by the Exchange Agent or the Company to be necessary or desirable to
complete the sale, assignment and transfer of the Old Notes tendered hereby.
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The undersigned also agrees that, except as
stated in the Prospectus, the Old Notes tendered hereby cannot be withdrawn.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering" and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that by tendering Old Notes pursuant to one of
the procedures described in the Prospectus and the instructions thereto, the
tendering holder will be deemed to have waived the right to receive any payment
in respect of interest on the Old Notes accrued up to the date of issuance of
the Exchange Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Old Notes tendered. Old Notes not accepted for exchange or withdrawn will be
returned to the undersigned at the address set forth below unless otherwise
indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, Exchange Notes, and Old Notes not validly tendered or
accepted for exchange, will be issued in the name of the undersigned. Similarly,
unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, Exchange Notes, and Old Notes not validly tendered or
accepted for exchange, will be
5
<PAGE>
delivered to the undersigned at the address shown below the signature of the
undersigned. The undersigned recognizes that the Company has no obligation
pursuant to the "Special Issuance Instructions" to transfer any Old Notes from
the name of the registered holder thereof if the Company does not accept for
exchange any of the principal amount of such Old Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any irregularities or conditions of tender as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in this Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost to such holder by the Exchange Agent to the
tendering holders of Old Notes, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
6
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ON THE COVER ENTITLED "DESCRIPTION OF
OLD NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO
HAVE TENDERED THE OLD NOTES AND MADE CERTAIN REPRESENTATIONS (INCLUDING AS TO
FINANCIAL STATUS) DESCRIBED IN THE PROSPECTUS AND HEREIN.
<TABLE>
<S> <C>
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
X
(SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Must be signed by the registered holder(s) of Old Notes exactly as their name(s)
appear(s) on certificate(s) for the Old Notes or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted with this Letter of
Transmittal. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation, agent or other person acting in a
fiduciary or representative capacity, please provide the following information. See
Instruction 3.
Name(s):
(PLEASE PRINT)
Capacity (full title):
Address:
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
SIGNATURE GUARANTEE
(SEE INSTRUCTION 3)
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURE(S))
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NO., INCLUDING AREA CODE, OF FIRM)
(AUTHORIZED SIGNATURE)
(PRINTED NAME)
(TITLE)
Date: , 1998
</TABLE>
7
<PAGE>
- -------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for Old Notes in a principal amount
not exchanged and/or certificates for Exchange Notes are to be issued in the
name of someone other than the undersigned, or if Old Notes are to be
returned by credit to an account maintained by the Book-Entry Transfer
Facility.
Issue (check appropriate box)
/ / Exchange Notes to:
/ / Old Notes to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
Zip Code
____________________________________________________________________________
Taxpayer Identification Number
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
Credit unaccepted Old Notes tendered by book-entry transfer to:
/ / The Depository Trust Company
account set forth below
____________________________________________________________________________
(DTC ACCOUNT NUMBER)
- -------------------------------------------
- -------------------------------------------
SPECIAL DELIVER INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for Old Notes in a principal amount
not exchanged and/or certificates for Exchange Notes are to be sent to
someone other than the undersigned at an address other than that shown
above.
Deliver (check appropriate box)
/ / Exchange Notes to:
/ / Old Notes to:
Name: ______________________________________________________________________
(Please Print)
Address: ___________________________________________________________________
____________________________________________________________________________
Zip Code
____________________________________________________________________________
Taxpayer Identification Number
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
- ------------------------------------------
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. To be effectively tendered pursuant to the Exchange Offer,
the Old Notes, together with a properly completed Letter of Transmittal (or
facsimile thereof), duly executed by the registered holder thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the front page of this
Letter of Transmittal. If the beneficial owner of any Old Notes is not the
registered holder, then such person may validly tender his or her Old Notes only
by obtaining and submitting to the Exchange Agent a properly completed Letter of
Transmittal from the registered holder. OLD NOTES SHOULD BE DELIVERED ONLY TO
THE EXCHANGE AGENT AND NOT TO THE COMPANY OR TO ANY OTHER PERSON.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER, BUT IF SUCH DELIVERY
IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED OR
CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT OLD NOTES BE DELIVERED BY HAND OR BY COURIER.
IF CERTIFICATES FOR OLD NOTES ARE SENT BY MAIL, IT IS SUGGESTED THAT THE
MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT
DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
If a holder desires to tender Old Notes and such holder's Old Notes are not
immediately available or time will not permit such holder's Letter of
Transmittal, Old Notes or other required documents to reach the Exchange Agent
on or before the Expiration Date, such holder's tender may be effected if:
(a) such tender is made by or through an Eligible Institution (as
defined);
(b) on or prior to the Expiration Date, the Exchange Agent has received
a properly completed and duly executed Notice of Guaranteed Delivery (by
facsimile transmission, mail or hand delivery) from such Eligible
Institution setting forth the name and address of the holder of such Old
Notes, the certificate numbers of such Old Notes (if available) and the
principal amount of Old Notes tendered and stating that the tender is being
made thereby and guaranteeing that, within three business days after the
Expiration Date, a duly executed Letter of Transmittal, or facsimile
thereof, together with the Old Notes, and any other documents required by
this Letter of Transmittal and the instructions hereto, will be deposited by
such Eligible Institution with the Exchange Agent; and
(c) this Letter of Transmittal (or facsimile thereof), a Notice of
Guaranteed Delivery and Old Notes, in proper form for transfer, and all
other required documents are received by the Exchange Agent within three
business days after the date of such telegram, facsimile transmission or
letter.
2. WITHDRAWAL OF TENDERS. Tendered Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 5:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange, (b)
specify the name of the person who tendered the Old Notes, (c) contain the
description of the Old Notes to be withdrawn, the certificate numbers shown on
the particular certificates evidencing such Old Notes and the aggregate
principal amount represented by such Old Notes and (d) be signed by the holder
of such Old Notes in the same manner as the original signature appears on this
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the holder
withdrawing the
9
<PAGE>
tender. The signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution unless such Old Notes have been tendered (a) by a
registered holder of Old Notes who has not completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt)of such withdrawal notices shall be determined by the
Company, whose determination shall be final and binding on all parties. If the
Old Notes to be withdrawn have been delivered or otherwise identified to the
Exchange Agent, a signed notice of withdrawal is effective immediately upon
receipt by the Exchange Agent of a written or facsimile transmission notice of
withdrawal even if physical release is not yet effected. In addition, such
notice must specify, in the case of Old Notes tendered by delivery of
certificates for such Old Notes, the name of the registered holder (if different
from that of the tendering holder) to be credited with the withdrawn Old Notes.
Withdrawals may not be rescinded, and any Old Notes withdrawn will thereafter be
deemed not validly tendered for purposes of the Exchange Offer. However,
properly withdrawn Old Notes may be retendered by following one of the
procedures described under "The Exchange Offer--Procedures for Tendering" in the
Prospectus at any time on or prior to the applicable Expiration Date.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered hereby, the signature must
correspond exactly with the name(s) as written on the face of the certificates
without any change whatsoever.
If any Old Notes tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any Old Notes tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Exchange Notes are to be issued, or
certificates for any untendered principal amount of Old Notes are to be
reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein such certificates(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, proper evidence satisfactory to the
Company of their authority so to act must be submitted.
Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, need not be guaranteed if the Old Notes tendered pursuant
hereto are tendered (a) by a registered holder of Old Notes who has not
completed either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b)
for the account of an Eligible Institution. In the event that signatures on this
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Delivers, Inc. or by a commercial bank or trust
company having an office or correspondent in the Untied States (each as
"Eligible Institutions").
10
<PAGE>
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Exchange Notes and/or substitute certificates evidencing Old Notes for the
principal amounts not exchanged are to be issued or sent, if different from the
name and address of the person signing this Letter of Transmittal. In the case
of issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no such instructions are
given, any Old Notes not exchanged will be returned to the name and address of
the person signing this Letter of Transmittal.
5. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax law
of the United States requires that a holder of Old Notes whose Old Notes are
accepted for exchange provide the Company with his correct taxpayer
identification number, which, in the case of a holder who is an individual, is
his or her social security number, or otherwise establish an exemption from
backup withholding. If the Company is not provided with the correct taxpayer
identification number, the exchanging holder of Old Notes may be subject to a
$50 penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
interest on the Exchange Notes acquired pursuant to the Exchange Offer may be
subject to backup withholding in an amount equal to 31% of any interest payment.
If withholding occurs and results in an overpayment of taxes, a refund may be
obtained.
To prevent backup withholding, each exchange holder of Old Notes subject to
backup withholding must provide his correct taxpayer identification number by
completing the Substitute Form W-9 provided in this Letter of Transmittal,
certifying that the taxpayer identification number provided is correct (or that
the exchanging holder of Old Notes is awaiting a taxpayer identification number)
and that either (a) the exchanging holder has not yet notified by the IRS that
such holder is subject to backup withholding as a result of failure to report
all interest or dividends or (b) the IRS has notified the exchanging holder that
such holder is no longer subject to backup withholding.
Certain exchanging holders of Old Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding requirements. A foreign individual and other exempt holders (i.e.
corporations) should certify, in accordance with the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9," to such
exempt status on the Substitute Form W-9 provided in this Letter of Transmittal.
6. TRANSFER TAXES. Holders tendering pursuant to the Exchange Offer will
not be obligated to pay brokerage commissions or fees or to pay transfer taxes
with respect to their exchange under the Exchange Offer unless the box entitled
"Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Exchange Notes are to be issued to any person other
than the holder of the Old Notes tendered for exchange. The Company will pay all
other charges or expenses in connection with the Exchange Offer. If holders
tender Old Notes for exchange and the Exchange Offer is not consummated,
certificates representing the Old Notes will be returned to the holders at the
Company's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
7. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of the Old Notes being tendered and the certificate
numbers (if available) should be listed on a separate schedule attached hereto
and separately signed by all parties required to sign this Letter of
Transmittal.
8. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If tenders are to be made with respect to less than the
entire principal amount of any Old Notes, fill in the principal amount of Old
Notes which are tendered in column (3) in the box on the cover entitled
"Description of Old Notes Tendered." In the case of partial tenders, new
certificates representing the Old
11
<PAGE>
Notes in fully registered form for the remainder of the principal amount of the
Old Notes will be sent to the person(s) signing this Letter of Transmittal,
unless otherwise indicated in the appropriate place on this Letter of
Transmittal, as promptly as practicable after the expiration or termination of
the Exchange Offer.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or
additional copies of the Prospectus or this Letter of Transmittal may be
obtained from the Exchange Agent at its telephone number set forth on the cover.
12
<PAGE>
PAYER'S NAME: FLEET NATIONAL BANK
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------
SUBSTITUTE Part I--PLEASE --------------------------------
FORM W-9 PROVIDE YOUR TIN IN Social Security Number
DEPARTMENT OF THE TREASURY THE BOX AT RIGHT AND
INTERNAL REVENUE SERVICE CERTIFY BY SIGNING OR ---------------------------
AND DATING BELOW. Employer Identification Number
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
---------------------------------------------------------------------------------------
CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because: (a) I am exempt from backup
withholding; or (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
-------------------------------------------------------
PART II--AWAITING TIN PART III--EXEMPT / /
/ /
-------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
under-reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS stating that you are no longer subject to backup
withholding, do not cross out item (2). If you are exempt from backup withholding,
check the box in Part III.
Signature ------------------------------------------------------------ Date
-----------------------
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
Please fill out your name and address below:
---------------------------------------------------------------------------------------
Name
- ---------------------------------------------------------------------------------------
Address (Number and street)
- ---------------------------------------------------------------------------------------
City, State and Zip Code
---------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE SOLICITATION. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART II OF
SUBSTITUTE FORM W-9.
---------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not
been issued to me, and either (a) I have mailed or delivered an application to receive
a taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer identification
number to the payor by the time of payment, 31% of all reportable payments made to me
will be withheld until I provide a number and that, if I do not provide my taxpayer
identification number within 60 days, such retained amounts shall be remitted to the
IRS as backup withholding.
Signature ------------------------------------------------------------ Date
-----------------------
---------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Exhibit 5.1
[Letterhead of Cadwalader, Wickersham & Taft]
March 19, 1998
Renco Steel Holdings, Inc.
1040 Pine Avenue, S.E.
Warren, OH 44483-6528
Re: Registration Statement on Form S-4 related to 10O% Senior Secured Notes
due 2005, Series B
-----------------------------------------------------------------------
Gentlemen:
We have acted as special counsel for Renco Steel Holdings, Inc., an Ohio
corporation (the "Company"), in connection with the preparation of the Company's
Registration Statement on Form S-4 pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), being filed with the Securities and Exchange
Commission (the "Commission") on the date hereof and to which this opinion
letter is an exhibit. The Registration Statement relates to the Company's offer
to exchange its 10 7/8% Senior Secured Notes due 2005, Series B (the "Exchange
Notes") for any and all of its outstanding 10 7/8% Senior Secured Notes due
2005, Series A (the "Old Notes"). The Old Notes were issued, and the Exchange
Notes are to be issued, under an indenture, dated as of February 3, 1998 (the
"Indenture"), between the Company, as issuer, and State Street Bank and Trust
Company, as trustee.
In rendering the opinions expressed below, we have examined and relied upon,
among other things, (a) the Registration Statement, including the Prospectus
constituting a part thereof, (b) the Indenture filed as an exhibit to the
Registration Statement and (c) originals or copies, certified or otherwise
identified to our satisfaction, of such certificates, corporate, public or other
records, and other documents as we have deemed appropriate for the purpose of
rendering this opinion letter. In connection with such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents and
instruments of all documents and instruments submitted to us as copies or
specimens, and the authenticity of the originals of such documents and
instruments submitted to us as copies or specimens. We have also made such
investigations of law as we have deemed appropriate. In addition, we have
assumed that the Exchange Notes will be executed and delivered in substantially
the form in which they are filed as an exhibit to the Registration Statement.
We are members of the Bar of the State of New York, and in rendering the
opinions below, we do not purport to be an expert in, or express any opinion
concerning, the laws of any jurisdiction other than the substantive laws of the
State of New York
<PAGE>
Renco Steel Holdings, Inc.
March 19,1998
Page 2
and, where expressly referred to below, the substantive federal laws of the
United States of America (in each case without regard to conflicts of law
principles).
Based upon the foregoing and subject to the qualifications set forth herein, we
are of the opinion that:
1. The Exchange Notes will be legally and validly issued and binding
obligations of the Company (except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of
equity, regardless of whether enforceability is considered in a proceeding
in equity or at law), when (a) the Registration Statement, as finally
amended, shall have become effective under the Securities Act and the
Indenture shall have been qualified under the Trust Indenture Act of 1939,
as amended, and (b) the Exchange Notes shall have been duly executed,
authenticated and delivered as contemplated in the Registration Statement.
2. The statements made in the Prospectus constituting a part of the
Registration Statement under the caption "Certain U.S. Federal Income Tax
Considerations," insofar as such statements purport to summarize certain
federal income tax laws of the United States of America, constitute a fair
summary of the principal federal income tax consequences of an investment
in the Exchange Notes.
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the reference to this Firm in the Prospectus
constituting a part of the Registration Statement under the caption "Legal
Matters," without admitting that we are "experts" within the meaning of the
Securities Act or the rules and regulations of the Commission issued thereunder
with respect to any part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
<PAGE>
Exhibit 10.9
================================================================================
PLEDGE AGREEMENT
BY
RENCO STEEL HOLDINGS, INC.,
as Pledgor,
TO
STATE STREET BANK AND TRUST COMPANY,
as Trustee for the holders of the
10 7/8% Senior Secured Notes due 2005
Dated as of February 3, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. PLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Grant of Pledge . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Delivery of Collateral. . . . . . . . . . . . . . . . . . . . . . 2
1.3. Secured Obligations . . . . . . . . . . . . . . . . . . . . . . . 3
1.4. No Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR . . . . . . 4
2.1. Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2. Shares Validly Issued . . . . . . . . . . . . . . . . . . . . . . 4
2.3. Perfection upon Delivery. . . . . . . . . . . . . . . . . . . . . 4
2.4. Government Regulations. . . . . . . . . . . . . . . . . . . . . . 4
2.5. Authorization; Enforceability . . . . . . . . . . . . . . . . . . 4
2.6. No Consents, etc. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7. No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8. Pledgor's Duties. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9. Preservation of Collateral. . . . . . . . . . . . . . . . . . . . 5
2.10. Further Assurances; Supplements. . . . . . . . . . . . . . . . . 5
2.11. Trustee May Perform; Trustee Agent Appointed Attorney-in-Fact. . 6
2.12. Accuracy of Information. . . . . . . . . . . . . . . . . . . . . 6
2.13. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3. SPECIAL PROVISIONS CONCERNING COLLATERAL . . . . . . . . . . . . 6
3.1. Voting Rights, Dividends, Etc. Prior to Event of Default. . . . . 6
3.2. Voting Rights and Dividends After Event of Default. . . . . . . . 8
3.3. Further Assurances for Voting Rights and Dividends. . . . . . . . 8
3.4. Dividends Received in Trust . . . . . . . . . . . . . . . . . . . 9
3.5. Transfers and Other Liens; Additional Shares. . . . . . . . . . . 9
SECTION 4. REMEDIES UPON DEFAULT. . . . . . . . . . . . . . . . . . . . . .10
4.1. Event of Default. . . . . . . . . . . . . . . . . . . . . . . . .10
4.2. Dispositions of Collateral. . . . . . . . . . . . . . . . . . . .10
4.3. Securities Laws Limitations . . . . . . . . . . . . . . . . . . .10
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<PAGE>
4.4. Additional Information. . . . . . . . . . . . . . . . . . . . . .11
4.5. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.6. Deficiency. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.7. Application of Proceeds . . . . . . . . . . . . . . . . . . . . .12
4.8. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.9. No Waiver; Discontinuance of Proceeding.. . . . . . . . . . . . .12
SECTION 5. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . .13
5.1. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . .13
5.2. Execution in Counterparts . . . . . . . . . . . . . . . . . . . .13
5.3. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.4. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.5. Severability of Provisions. . . . . . . . . . . . . . . . . . . .13
5.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.7. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.8. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.9. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. . . . . . . . . .14
5.10. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.11. Reasonable Care. . . . . . . . . . . . . . . . . . . . . . . . .14
5.12. Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.13. Continuing Security Interest; Assignment . . . . . . . . . . . .15
5.14. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . .15
5.15. Termination; Release . . . . . . . . . . . . . . . . . . . . . .16
5.16. Location of Pledged Shares . . . . . . . . . . . . . . . . . . .16
Signatures
Schedule A PLEDGED SHARES
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<PAGE>
PLEDGE AGREEMENT
----------------
I N T R O D U C T I O N :
PLEDGE AGREEMENT (this "Agreement"), dated as of February 3, 1998,
made by RENCO STEEL HOLDINGS, INC., a Delaware corporation ("Pledgor"), in favor
of STATE STREET BANK AND TRUST COMPANY (together with any successors or assigns,
the "Trustee"), in its capacity as trustee under the Indenture (as hereinafter
defined).
R E C I T A L S :
A. Pledgor and State Street Bank and Trust Company, as trustee, have
entered into an indenture, dated as of the date hereof (the "Indenture";
capitalized terms used herein but not otherwise defined herein have the meanings
assigned to such terms in the Indenture), pursuant to which the Company's 10
7/8% Senior Secured Notes due 2005 (the "Notes") will be issued concurrently
herewith.
B. Pledgor is the legal and beneficial owner of the Collateral (as
hereinafter defined).
C. In order to secure the performance of the Secured Obligations (as
hereinafter defined), the parties hereto are entering into this Agreement
regarding the terms and conditions of Pledgor's pledge of the Collateral to the
Trustee, for the benefit of itself and the holders of the Notes (the Trustee and
such holders, each a "Secured Party" and collectively, the "Secured Parties").
A G R E E M E N T
Pledgor and the Trustee agree as follows:
SECTION 1. PLEDGE
1.1. GRANT OF PLEDGE. In order to secure the payment and performance
when due of the Secured Obligations, Pledgor does hereby transfer, convey,
warrant, deliver, pledge, assign, hypothecate and grant to the Trustee, for its
benefit and the benefit of the holders of the Notes, and its successors and
assigns a first priority lien on, continuing security in-
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terest in and pledge of all of Pledgor's present and future right, title and
interest in, to and under the following properties, rights, interests and
privileges (collectively, the "Collateral"):
(a) the shares of capital stock of WCI Steel, Inc. ("WCI") set forth
on Schedule A hereto (collectively, the "Current Shares");
(b) all additional shares of capital stock of WCI set forth on
Schedule A hereto from time to time acquired by Pledgor in any manner
(collectively, the "Additional Shares"; together with the Current Shares,
the "Pledged Shares");
(c) any and all certificates representing the Pledged Shares and any
interest of Pledgor in any securities account pertaining to the Pledged
Shares (collectively, the "Certificates");
(d) subject to the provisions of Section 3 hereof, all dividends,
cash or proceeds, options, warrants, rights, instruments and other property
or proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the Pledged Shares
(collectively, the "Dividends"); and
(e) all cash, instruments, securities, funds and credits of Pledgor
from time to time on deposit with the Trustee, all investments of such
funds and all certificates, securities and instruments evidencing any such
investments of such funds, and all interest, dividends, cash, instruments
and other property received as proceeds of, or in substitution or exchange
for, and all collections and claims in respect of, any and all of the
foregoing (collectively, the "Cash Collateral").
1.2. DELIVERY OF COLLATERAL. All certificates or instruments
representing or evidencing the Collateral shall be delivered to and held by or
on behalf of the Trustee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Trustee. The Trustee shall have the right, at any time upon or after the
occurrence of an Event of Default (as hereinafter defined) and without notice to
Pledgor, to transfer to or to register in the name of the Trustee or any of its
nominees any or all of the Collateral. In addition, the Trus-
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tee shall have the right at any time to exchange certificates representing or
evidencing Collateral for certificates of smaller or larger denominations.
1.3. SECURED OBLIGATIONS. This Agreement secures, and the Collateral
is collateral security for, the payment and performance in full when due,
whether at stated maturity, by acceleration or otherwise (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the filing of a petition in bankruptcy (whether or not a
claim is allowed against Pledgor for such interest or other amounts in any such
bankruptcy proceeding) or the operation of the automatic stay under Section
362(a) of the Bankruptcy Law), of (i) all obligations of Pledgor now existing or
hereafter arising under or in respect of the Indenture (including, without
limitation, Pledgor's obligations to pay principal, interest and all other
charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
other payments related to or in respect of the obligations contained therein)
and (ii) without duplication of the amounts described in clause (i), all
obligations of Pledgor now existing or hereafter arising under or in respect of
this Agreement, including, without limitation, with respect to all charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in this Agreement
(the obligations described in clauses (i) and (ii), collectively, the "Secured
Obligations").
1.4. NO RELEASE. Nothing set forth in this Agreement shall relieve
Pledgor from the performance of any term, covenant, condition or agreement on
Pledgor's part to be performed or observed under or in respect of any of the
Collateral or from any liability to any person under or in respect of any of the
Collateral or shall impose any obligation on the Trustee to perform or observe
any such term, covenant, condition or agreement in respect of any of the
Collateral on Pledgor's part to be so performed or observed or shall impose any
liability on the Trustee for the operation, control, care, management or repair
of the Collateral or for any act or omission on the part of Pledgor relating to
Pledgor's obligations thereto or for any breach of any representation or
warranty on the part of Pledgor contained in this Agreement, under or in respect
of the Collateral or made in connection herewith or therewith. The provisions
set forth in this Section 1.4 shall survive the termination of this Agreement
and the discharge of the Pledgor's obligations under this Agreement.
<PAGE>
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SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR
Pledgor represents, warrants and covenants (as applicable) as follows:
2.1. OWNERSHIP. Pledgor is as of the date hereof, and, as to
Collateral acquired by it from time to time after the date hereof, Pledgor will
be, the legal, record and beneficial owner of all of the Collateral free and
clear of any Lien or other right, title or interest of any person other than the
Lien and security interest granted by Pledgor to the Trustee pursuant to this
Agreement.
2.2. SHARES VALIDLY ISSUED. All of the Pledged Shares have been duly
authorized and validly issued and are fully paid and non-assessable.
2.3. PERFECTION UPON DELIVERY. Upon delivery by Pledgor to the
Trustee of the certificates evidencing the Pledged Shares, duly indorsed to the
Trustee or in blank, the Lien on such Collateral granted to the Trustee pursuant
to this Agreement constitutes and assuming continued possession by the Trustee
thereof hereafter will constitute a first priority perfected Lien on such
Collateral, superior and prior to the rights of all other persons therein and
subject to no other Liens.
2.4. GOVERNMENT REGULATIONS. The pledge of the Collateral pursuant
to this Agreement does not violate Regulation G, T, U or X of the Federal
Reserve Board.
2.5. AUTHORIZATION; ENFORCEABILITY. Pledgor has full corporate
power, authority and legal right to pledge and grant a security interest in all
the Collateral pursuant to this Agreement. This Agreement constitutes the
legal, valid and binding obligation of Pledgor, enforceable against Pledgor in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and similar laws affecting
creditors' rights generally and to general equitable principles.
2.6. NO CONSENTS, ETC. No authorization, consent, approval, license,
qualification or formal exemption from, or any filing, declaration or
registration with, any court, governmental agency or regulatory authority, or
with any securities exchange or any other person, is required in connection with
(i) the execution, delivery or performance by Pledgor of
<PAGE>
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this Agreement, (ii) the grant of a Lien on (including the priority thereof) the
Collateral by Pledgor in the manner and for the purpose contemplated by this
Agreement or (iii) the exercise of the rights and remedies of the Trustee
created hereby, except (a) those that have been obtained or made concurrently
with the execution hereof, and (b) as may be required in connection with such
disposition by laws affecting the offering and sale of securities generally.
2.7. NO CONFLICTS. The execution, delivery and performance by
Pledgor of this Agreement do not (or with notice or lapse of time or both, will
not) violate, conflict with or constitute a default under, or result in the
termination of or accelerate the performance required by, or result in there
being declared void, voidable or without further binding effect, any provision
of any other agreement, instrument or document to which Pledgor is a party.
2.8. PLEDGOR'S DUTIES. Pledgor shall perform, abide by and be
governed by each and all of the terms, provisions, covenants and agreements set
forth in this Agreement and in each and every supplement hereto or amendment
hereof which may at any time or from time to time be executed and delivered by
the parties hereto or their successors and assigns.
2.9. PRESERVATION OF COLLATERAL. All rights, powers and privileges
of the Trustee herein set forth are coupled with an interest and are
irrevocable, subject to the terms and conditions hereof, and Pledgor shall not
take or omit to take any action with respect to the Collateral or otherwise
which is inconsistent with this Agreement, and any such action inconsistent
herewith or therewith shall be void. Pledgor shall not further pledge,
encumber, hypothecate, sell, convey or assign, or grant any option with respect
to all or any part of the Collateral or suffer any of the foregoing to occur by
operation of law or otherwise, except for the Liens and security interests
granted by Pledgor to the Trustee pursuant to this Agreement, and shall promptly
take such action as is reasonably necessary to remove any such other Lien.
Pledgor will, at its expense, warrant and defend the title to the Collateral
against all claims and demands of all third persons or persons claiming by,
through or under Pledgor at any time claiming any interest therein adverse to
the Trustee.
2.10. FURTHER ASSURANCES; SUPPLEMENTS. Pledgor agrees that at any
time and from time to time, Pledgor will, at its expense, promptly do, execute,
acknowledge and deliver all and every further act, deed, conveyance, transfer,
waiver, sub-
<PAGE>
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ordination, supplement and other instruments, documents and assurances that may
be reasonably necessary or that the Trustee deems appropriate or advisable,
including, without limitation, supplemental or additional UCC-1 financing
statements, for the continued perfection, preservation and protection of the
security interest in the Collateral granted hereby or to enable the Trustee to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
2.11. TRUSTEE MAY PERFORM; TRUSTEE APPOINTED ATTORNEY-IN-FACT. If
Pledgor fails to perform any agreement contained in this Agreement, the Trustee
may itself perform, or cause performance of, such agreement, and the expenses of
the Trustee, including, without limitation, the reasonable fees and expenses of
its counsel and the allocated cost of staff counsel, incurred in connection
therewith shall be payable by Pledgor on demand. Pledgor hereby appoints the
Trustee its attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to time in the
Trustee's discretion to take any action which the Trustee may take pursuant to
the provisions of this Section.
2.12. ACCURACY OF INFORMATION. All information set forth herein
(including the exhibits hereto) relating to the Collateral is accurate and
complete in all material respects.
2.13. INDEMNIFICATION. Pledgor hereby agrees to indemnify the
Trustee for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Trustee in any way relating to or arising out of this Agreement or the pledge
and security interest contemplated hereby or the enforcement of any of the terms
hereof or otherwise arising or relating in any manner to the Lien contemplated
hereunder; provided, however, that Pledgor shall not be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Trustee.
SECTION 3. SPECIAL PROVISIONS CONCERNING COLLATERAL
3.1. VOTING RIGHTS, DIVIDENDS, ETC. PRIOR TO EVENT OF DEFAULT. As
long as no Event of Default shall have occurred and be continuing:
(a) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the
<PAGE>
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Collateral or any part thereof for any purpose not inconsistent with the
terms of this Agreement or the Indenture; provided, however, that Pledgor
shall give the Trustee at least five days' prior written notice of the
manner in which it intends to exercise any such right. It is understood,
however, that neither (i) the voting by Pledgor of any Pledged Shares for
or Pledgor's consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders or with respect to incidental
matters at any such meeting nor (ii) Pledgor's consent to or approval of
any action otherwise permitted under this Agreement and the Indenture,
shall be deemed inconsistent with the terms of this Agreement or the
Indenture within the meaning of this Section 3.1, and no notice of any such
voting or consent need be given to the Trustee.
(b) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the Lien of this Agreement, any and all dividends and
distributions in respect of the Collateral; provided, however, that any and
all Extraordinary Distributions shall be, and shall be delivered forthwith
to the Trustee to hold as, Collateral and shall, if received by Pledgor, be
received in trust for the benefit of the Trustee, be segregated from the
other property or funds of Pledgor, and be delivered forthwith to the
Trustee as Collateral in the same form as so received (with any necessary
endorsement or other instruments required by Section 1.2 of this
Agreement).
(c) In order to permit Pledgor to exercise the voting and other
rights which it is entitled to exercise pursuant to Section 3.1(a) above
and to receive the dividends and distributions which it is authorized to
receive and retain pursuant to Section 3.1(b) above, the Trustee shall, if
necessary, upon written request of Pledgor, from time to time execute and
deliver (or cause to be executed and delivered) to Pledgor all such
proxies, dividend payment orders and other instruments as Pledgor may
reasonably request.
(d) For purposes of Section 3.1(b) above, "Extraordinary
Distribution" shall mean any and all dividends, cash, instruments and other
property and proceeds received, receivable or otherwise distributed on the
Pledged Shares constituting (i) any liquidating dividend or other
liquidating distribution or other similar extraordinary dividend or
distribution; (ii) any dividend or other distribution in respect of the
Pledged Shares in the
<PAGE>
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form of Capital Stock or any other property or assets (including cash and
Cash Equivalents) to the extent the Fair Market Value (determined at the
time of the dividend or distribution) of all dividends and other
distributions in respect of the Pledged Shares made on or after the Issue
Date to and including the date of such dividend or other distribution
exceeds 100% of the Consolidated Net Income of WCI accrued on a cumulative
basis subsequent to January 31, 1998.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between
a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value of
any asset of the Company and its Subsidiaries shall be determined by the
Board of Directors of the Company acting in good faith and shall be
evidenced by a Board Resolution thereof delivered to the Trustee; provided
that with respect to any Asset Sale which involves in excess of $5.0
million, the Fair Market Value of any such asset or assets shall be
determined by an Independent Financial Advisor.
3.2. VOTING RIGHTS AND DIVIDENDS AFTER EVENT OF DEFAULT. Upon the
occurrence and during the continuance of an Event of Default:
(a) Upon written notice from the Trustee to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 3.1 above shall
cease, and all such rights shall thereupon become vested in the Trustee,
which shall thereupon have the sole right to exercise such voting and other
consensual rights during the continuance of such Event of Default.
(b) Upon written notice from the Trustee to Pledgor, all rights of
Pledgor to receive the dividends and distributions which it would otherwise
be authorized to receive and retain pursuant to Section 3.1 above shall
cease and all such rights shall thereupon become vested in the Trustee,
which shall thereupon have the sole right to receive and hold as Collateral
such dividends and distributions during the continuance of such Event of
Default.
3.3. FURTHER ASSURANCES FOR VOTING RIGHTS AND DIVIDENDS. In order to
permit the Trustee to receive all dividends
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and other distributions to which it may be entitled under Section 3.1(b) above,
to exercise the voting and other consensual rights which it may be entitled to
exercise pursuant to Section 3.2(a) above, and to receive all dividends and
distributions which it may be entitled to receive under Section 3.2(b) above,
Pledgor shall, if necessary, upon written notice from the Trustee, from time to
time execute and deliver to the Trustee appropriate proxies, dividend payment
orders and other instruments as the Trustee may reasonably request.
3.4. DIVIDENDS RECEIVED IN TRUST. All Dividends and distributions
which are received by Pledgor contrary to the provisions of Section 3.2 above
shall be received in trust for the benefit of the Trustee, shall be segregated
from other funds of Pledgor and shall be forthwith paid over to the Trustee as
Collateral in the same form as so received (with any necessary endorsement).
3.5. Transfers and Other Liens; Additional Shares.
(a) Transfers and Other Liens. Pledgor shall not (i) pledge,
encumber, hypothecate, sell, convey, assign or otherwise dispose of, or
grant any option or warrant with respect to, any of the Collateral or
suffer any of the foregoing to occur by operation of law or otherwise
except for the Liens and security interests granted by Pledgor to the
Trustee pursuant to this Agreement or (ii) permit WCI to merge or
consolidate unless all the outstanding capital stock of the surviving or
resulting corporation is, upon such merger or consolidation, pledged
hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation;
provided, however, that in the event of an Asset Sale of all of the
Collateral, pursuant to, and in compliance with, the provisions of the
Indenture, the Trustee shall release the Collateral that is the subject of
such sale to Pledgor free and clear of the Lien and security interest under
this Agreement upon the making of proper arrangements by the Trustee for
the application of the proceeds of such Asset Sale in accordance with the
provisions of the Indenture.
(b) Additional Shares. Pledgor agrees that it will cause each issuer
of Collateral consisting of capital stock not to issue any stock or other
securities in addition to or in substitution for such Collateral issued by
such issuer, except to Pledgor.
<PAGE>
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SECTION 4. REMEDIES UPON DEFAULT
4.1. EVENT OF DEFAULT. It shall be an Event of Default hereunder if
there shall occur an Event of Default under the Indenture.
4.2. DISPOSITIONS OF COLLATERAL. If any Event of Default shall have
occurred and be continuing, the Trustee may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of New York at
that time, and may also in its sole discretion, without notice except as
specified below, subject to applicable law, at any time or from time to time,
sell, assign and deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale, at any
exchange or broker's board for cash, for immediate or future delivery without
any assumption of credit risk, and for such price or prices and on such terms as
may be reasonable; provided that at least 10 days' notice of the time and place
of any such sale shall be given to Pledgor. At any such sale, unless prohibited
by applicable law, the Trustee on behalf of the Secured Parties may bid for and
purchase all or any part of the Collateral so sold free from any right or equity
of redemption of Pledgor. Neither the Trustee nor any Secured Party shall be
liable for failure to collect or realize upon any or all of the Collateral or
for any delay in so doing nor shall any of them be under any obligation to take
any action whatsoever with regard thereto.
4.3. SECURITIES LAWS LIMITATIONS. Pledgor recognizes that, by reason
of certain prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, the Trustee may be
compelled, with respect to any sale of all or any part of the Collateral, to
limit purchasers to those who will agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable to the Trustee than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that the Trustee shall have no obligation to engage in public sales
and no obligation to delay
<PAGE>
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the sale of any Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if Pledgor
would agree to do so.
4.4. ADDITIONAL INFORMATION. If the Trustee determines to exercise
its right to sell any or all of the Collateral, upon written request, Pledgor
shall, and shall cause each issuer of any Collateral to be sold hereunder from
time to time to, furnish to the Trustee all such information as the Trustee may
request in order to determine the number of shares and other instruments
included in the Collateral which may be sold by the Trustee as exempt
transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
4.5. WAIVERS. Pledgor hereby waives, to the extent permitted by
applicable law, notice or judicial hearing in connection with the Trustee's
taking possession or the Trustee's disposition of any Collateral, including,
without limitation, any and all prior notice and hearing for any prejudgment
remedy or remedies and any such right which Pledgor would otherwise have under
law, and Pledgor hereby further waives: (a) all damages occasioned by such
taking of possession; (b) all other requirements as to the time, place and terms
of sale or other requirements with respect to the enforcement of the Trustee's
rights hereunder; and (c) all rights of redemption, appraisal, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of Pledgor therein and thereto, and shall be
a perpetual bar both at law and in equity against Pledgor and against any and
all persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under Pledgor.
4.6. DEFICIENCY. Notwithstanding any other provision of this
Agreement to the contrary, if, after giving effect to any sale, transfer or
other disposition of any or all of the Collateral pursuant hereto and after the
application of the proceeds hereunder and any Collateral sold, transferred or
otherwise disposed of, any Secured Obligations remain unpaid or unsatisfied,
Pledgor shall remain liable for the unpaid and unsatisfied amount of such
Secured Obligations.
<PAGE>
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4.7. APPLICATION OF PROCEEDS. The proceeds of any sale made under or
by virtue of the provisions of Section 4.16 of the Indenture, together with any
other sums then held by the Trustee pursuant to this Agreement, shall be applied
promptly from time to time by the Trustee as set forth in the Indenture.
4.8. EXPENSES. Pledgor will upon demand pay to the Trustee the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and the allocated fees and expenses of staff counsel and
the reasonable fees and expenses of any experts and agents, which the Trustee
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Trustee hereunder or (iv) the failure by Pledgor to
perform or observe any of the provisions hereof. All amounts payable by Pledgor
under this Section 4.8 shall be due upon demand and shall be part of the Secured
Obligations. Pledgor's obligations under this Section shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
hereunder.
4.9. NO WAIVER; DISCONTINUANCE OF PROCEEDING.
(a) No failure on the part of the Trustee to exercise, and no course
of dealing with respect to, and no delay in exercising, any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise by the Trustee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein provided are to the fullest
extent permitted by law cumulative and are not exclusive of any remedies
provided by law.
(b) In the event the Trustee shall have instituted any proceeding to
enforce any right, power or remedy under this instrument by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Trustee, then and in every such case Pledgor, the Trustee and each Secured
Party shall be restored to their respective former positions and rights
hereunder with respect to the Collateral, and all rights, remedies and
powers of the Trustee shall continue as if no such proceeding had been
instituted.
<PAGE>
-13-
SECTION 5. MISCELLANEOUS PROVISIONS
5.1. ENTIRE AGREEMENT. This Agreement and the documents and
agreements referred to herein embody the entire agreement and understanding
between the parties hereto and supersede all prior agreements and understandings
relating to the subject matter hereof.
5.2. EXECUTION IN COUNTERPARTS. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts shall constitute one and the same Agreement.
5.3. SURVIVAL. All representations, warranties, covenants and
agreements herein contained on the part of Pledgor shall survive the payment and
performance of all the Secured Obligations and the termination of this
Agreement.
5.4. HEADINGS. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
5.5. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
5.6. NOTICES. All notices or other communications required to be
given hereunder shall be given at the address and in the manner required in the
Indenture.
5.7. AMENDMENTS. No amendment, modification, supplement, termination
or waiver of or to any provision of this Agreement, or consent to any departure
by Pledgor therefrom, shall be effective unless in writing and signed by the
Trustee and Pledgor. Any amendment, modification or supplement of or to any
provision of this Agreement, any waiver of any provision of this Agreement and
any consent to any departure by Pledgor from the terms of any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given.
<PAGE>
-14-
5.8. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO NEW YORK'S PRINCIPLES OF CONFLICTS OF LAWS).
5.9. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, PLEDGOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT SUBJECT
TO RIGHT OF APPEAL. PLEDGOR HEREBY IRREVOCABLY WAIVES TRIAL BY JURY AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH JURISDICTION. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE TRUSTEE TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY
OTHER JURISDICTION.
5.10. AGENTS. The Trustee may use one or more agents to perform its
obligations hereunder.
5.11. REASONABLE CARE. The Trustee shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equivalent to that which
the Trustee, in its individual capacity, accords its own property, it being
understood that the Trustee shall not have responsibility for taking any
necessary steps to preserve rights against any person with respect to any
Collateral.
5.12. TRUSTEE. The Trustee has been appointed as trustee pursuant to
the Indenture. The actions of the Trustee hereunder are subject to the
provisions of the Indenture. The Trustee may resign and a successor Trustee may
be appointed in the manner provided in the Indenture. Upon the acceptance of
any appointment as the Trustee by a successor Trustee, that successor Trustee
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Trustee under this Agreement, and the
retiring Trustee shall thereupon be discharged from its duties and obligations
<PAGE>
-15-
under this Agreement. After any retiring Trustee's resignation, the provisions
of this Agreement shall inure to its benefit as to any actions taken or omitted
to be taken by it under this Agreement while it was the Trustee.
5.13. CONTINUING SECURITY INTEREST; ASSIGNMENT. This Agreement shall
create a continuing security interest in the Collateral and shall (i) be binding
upon Pledgor and its successors and assigns and (ii) inure, together with the
rights and remedies of the Trustee hereunder, to the benefit of the Trustee and
each Secured Party and each of their successors, transferees and assigns. No
other person (including, without limitation, any other creditor of Pledgor)
shall have any interest herein or any right or benefit with respect hereto.
Pledgor may not assign its rights under this Agreement without the prior written
consent of the Trustee.
5.14. OBLIGATIONS ABSOLUTE. All obligations of Pledgor hereunder
shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
(ii) any lack of validity or enforceability of any loan document, or
any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
or any other agreement or instrument relating thereto;
(iv) any exchange or non-perfection of the Pledged Collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise or any waiver of any right, remedy,
power or privilege under or in respect of any document relating to the
Indenture; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
<PAGE>
-16-
5.15. TERMINATION; RELEASE. When all of the Secured Obligations have
been paid in full or the Collateral has been sold pursuant to an Asset Sale
described in, and complying with, Section 4.16 of the Indenture, this Agreement
shall terminate. Upon termination of this Agreement or any release of
Collateral in accordance with the provisions of the Indenture, the Trustee
shall, upon the request and at the sole cost and the expense of Pledgor,
forthwith assign, transfer and deliver to Pledgor against receipt and without
express or implied recourse to or warranty by the Trustee, such of the
Collateral to be released as may be in possession of the Trustee and as shall
not have been sold or otherwise applied pursuant to the terms hereof, and proper
instruments acknowledging the termination of this Agreement or the release of
such Collateral, as the case may be.
5.16. LOCATION OF PLEDGED SHARES. The Trustee will take all
reasonable steps to ensure that the Pledged Shares are at all times located
within the State of New York.
<PAGE>
IN WITNESS WHEREOF, Pledgor and the Trustee have executed this
Agreement as of the day and year first above written.
RENCO STEEL HOLDINGS, INC.
By: /s/ Roger L. Fay
-----------------------------
Name: Roger L. Fay
Title: Vice President and Chief
Financial Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Robert L. Reynolds
-----------------------------
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
SCHEDULE A
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
Percentage
of All Capital
or Other Equity
Class of Certificate Number of Interests of
Issuer Stock Par Value Numbers Shares Issuer
- ------ -------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C>
WCI Steel, Inc. Common No par value WCU 0382 100 100%
Stock
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
Renco Steel
WCI Steel, Inc. Holdings, Inc.
--------------------------------------------------------------- --------------
Year Ended October 31, Three Months Ended Pro Forma
January 31, Three Months
--------------------------------------------------------------- Ended
January 31,
1993 1994 1995 1996 1997 1997 1998 1998
------ ------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before taxes........................ 23,636 52,792 25,773 47,148 37,945 2,864 6,564 3,143
Fixed charges.............................. 23,214 28,926 26,066 25,263 32,064 7,609 8,123 11,544
------ ------ ------ ------ ------ ------ ------ ------
Earnings................................. 46,850 81,718 51,839 72,411 70,009 10,473 14,687 14,687
Interest expense........................... 18,108 26,437 23,607 22,788 30,255 7,121 7,677 10,940
Amortization of financing costs............ 5,074 2,272 2,180 2,180 1,435 404 337 496
Rental/Lease interest...................... 32 217 279 295 374 84 109 109
------ ------ ------ ------ ------ ------ ------ ------
Fixed charges............................ 23,214 28,926 26,066 25,263 32,064 7,609 8,123 11,544
Ratio of earnings to fixed charges..... 2.0x 2.8x 2.0x 2.9x 2.2x 1.4x 1.8x 1.3x
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF RENCO STEEL HOLDINGS, INC.
JURISDICTION OF
SUBSIDIARY ORGANIZATION
WCI Steel, Inc. Ohio
Niles Properties, Inc. Ohio
Youngstown Sinter Company Ohio
WCI Steel Metallurgical Services Inc. Ohio
WCI Steel Production Control Services Inc. Ohio
WCI Steel Sales LP Ohio
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
The Board of Directors
Renco Steel Holdings, Inc.;
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Form S-4 Registration Statement
under the Securities Act of 1933.
KPMG Peat Marwick LLP
Cleveland, Ohio
March 19, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
The Board of Directors
WCI Steel, Inc. and Subsidiaries
The audits referred to in our report dated December 4, 1997, included the
related financial statement schedule as of October 31, 1997, and for each of
the years in the three-year period ended October 31, 1997, included in the
Form S-4 Registration Statement under the Securities Act of 1933. The
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Form S-4 Registration Statement
under the Securities Act of 1933.
KPMG Peat Marwick LLP
Cleveland, Ohio
March 19, 1998
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
-----------------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
STATE STREET BANK AND TRUST COMPANY
--------------------------------------------------------------
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
- ------------------------------------- ----------------------------------------
(State of incorporation if (I.R.S. Employer
not a national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
John R. Towers, Executive Vice President and General Counsel,
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
RENCO STEEL HOLDINGS, INC.
--------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Ohio 34-1854775
- ------------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1040 Pine Avenue, S.E., Warren, Ohio 44483
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
10 7/8% Senior Secured Notes due 2005, Series B
--------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject:
Department of Banking and Insurance of
The Commonwealth of Massachusetts
100 Cambridge Street
Boston, Massachusetts
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee or its parent, State Street
Corporation.
Item16. List of exhibits. List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. A copy of the Articles of Association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission
as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A copy of the Certificate of Authority of the trustee to
do Business.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with the
Securities
-2-
<PAGE>
and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement
of Eligibility and Qualification of Trustee (Form T-1) filed with
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A copy of the Certification of Fiduciary Powers of the Trustee.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as Exhibit
3 to Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference thereto.
4. A copy of the By-laws of the trustee as now in effect.
A copy of the By-Laws of the trustee, as now in effect, is on file with
the Securities and Exchange Commission as Exhibit 4 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
Registration Statement of Eastern Edison Company (File No. 33-37823) and
is incorporated herein by reference thereto.
5. A consent of the trustee required by Section 321(b) of the Act is annexed
hereto as Exhibit 5 and made a part hereof.
6. A copy of the latest Consolidated Reports of Condition of the trustee,
published pursuant to law or the requirements of its supervising or
examining authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 6 and made a part hereof.
-3-
<PAGE>
NOTES
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base its answer to Item 2, the answer to
said Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-1.
-4-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, State Street Bank and Trust Company, a Massachusetts trust company,
has duly caused this statement of eligibility and qualification to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the City
of Hartford, and State of Connecticut, on the 16th day of March, 1998.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Rinette N. Elovecky
---------------------------
Name: Rinette N. Elovecky
Title: Vice President
-5-
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
----------------------------------
The undersigned, as Trustee under an Indenture entered into between Renco
Steel Holdings, Inc. and State Street Bank and Trust Company, Trustee, does
hereby consent that, pursuant to Section 321(b) of the Trust Indenture Act of
1939, reports of examinations with respect to the undersigned by Federal, State,
Territorial or District authorities may be furnished by such authorities to
the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Rinette N. Elovecky
------------------------------
Name: Rinette N. Elovecky
Title: Vice President
Dated: March 16, 1998
<PAGE>
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business March 31, 1997, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner of
Banks under General Laws, Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
ASSETS Thousands of Dollars
- ------ --------------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin................................ $ 1,665,142
Interest-bearing balances......................................................... 8,193,292
Securities.......................................................................... 10,238,113
Federal funds sold and securities purchased under agreements to resell
in domestic offices of the bank and of its Edge subsidiary........................ 5,863,144
Loans and lease financing receivables:
Loans and leases, net of unearned income.............................. 4,936,454
Allowance for loan and lease losses................................... 70,307
Loans and leases, net of unearned income and allowance............................ 4,866,147
Assets held in trading accounts..................................................... 957,478
Premises and fixed assets........................................................... 380,117
Other real estate owned............................................................. 884
Investments in unconsolidated subsidiaries.......................................... 26,835
Customers' liability to this bank on acceptances outstanding........................ 45,548
Intangible assets................................................................... 158,080
Other assets........................................................................ 1,066,957
-----------
TOTAL ASSETS........................................................................ $33,450,737
-----------
-----------
LIABILITIES
Deposits:
In domestic offices............................................................... 8,270,845
Noninterest-bearing................................................ 6,318,360
Interest-bearing................................................... 1,952,485
In foreign offices and Edge subsidiary............................................ 12,760,086
Noninterest-bearing................................................ 53,052
Interest-bearing................................................... 12,707,034
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge subsidiary............. 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities.................... 926,821
Other borrowed money................................................................ 671,164
Subordinated notes and debentures................................................... 0
Bank's liability on acceptances executed and outstanding............................ 46,137
Other liabilities................................................................... 745,529
-----------
TOTAL LIABILITIES................................................................... 31,637,223
-----------
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................................... 0
Common Stock........................................................................ 29,931
Surplus............................................................................. 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses)........ 1,426,881
Cumulative foreign currency translation adjustments................................. (4,015)
TOTAL EQUITY CAPITAL................................................................ 1,813,514
-----------
TOTAL LIABILITIES AND EQUITY CAPITAL................................................ 33,450,737
-----------
-----------
</TABLE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
