As filed with the Securities and Exchange Commission on December 4, 1997
Registration Nos. 333-40425, 333-40425-01
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 1
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
THE LTV CORPORATION LTV STEEL COMPANY, INC.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
Delaware New Jersey
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
4812 4812
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
13-3784318 34-0486510
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
--------------- ---------------
200 Public Square 200 Public Square
Cleveland, Ohio 44114 Cleveland, Ohio 44114
(216) 622-5000 (216) 622-5000
(Address and telephone number (Address and telephone number
of registrant's principal executive offices) of principal executive offices)
</TABLE>
Glenn J. Moran
Senior Vice President, General
Counsel and Secretary
The LTV Corporation
200 Public Square
Cleveland, Ohio 44114
(216) 622-5000
(Name, address and
telephone number of agent for service)
Copies to:
Keith L. Kearney
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
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. [ ]
---------------
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, as amended or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
==============================================================================
FORM S-4
REGISTRATION STATEMENT
Cross-Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item Number and Caption Caption in Prospectus
----------------------- ----------------------
<S> <C>
1. Forepart of Registration Statement and Outside Front Cover Page
of Prospectus.............................................................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus.................... Available Information; Incorporation of
Certain Information by Reference;
Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information................................................................ Risk Factors; Consolidated Ratio of
Earnings to Fixed Charges
4. Terms of the Transaction................................................... The Exchange Offer
5. Pro Forma Financial Information............................................ Capitalization and Other Significant
Obligations
6. Material Contacts With the Company Being Acquired.......................... Not Applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters.......................................... Not Applicable
8. Interests of Named Experts and Counsel..................................... Not Applicable
9. Disclosure of Commission Position on Indemnification For
Securities Act Liabilities................................................. Not Applicable
10. Information With Respect to S-3 Registrants............................... Not Applicable
11. Incorporation of Certain Information by
Reference................................................................. Inside Front Cover Page
12. Information With Respect to S-2 or S-3
Registrants............................................................... Not Applicable
13. Incorporation of Certain Information by
Reference................................................................. Not Applicable
14. Information With Respect to Registrants Other Than S-3 or S-2
Registrants:
(a) Description of Business................................................ Not Applicable
(b) Description of Property................................................ Not Applicable
(c) Legal Proceedings...................................................... Not Applicable
(d) Common Equity Securities............................................... Not Applicable
(e) Financial Statements................................................... Not Applicable
(f) Selected Financial Data................................................ Not Applicable
(g) Supplementary Financial Information.................................... Not Applicable
(h) Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... Not Applicable
(i) Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................................... Not Applicable
15. Information With Respect to S-3 Companies................................. Not Applicable
16. Information With Respect to S-2 or S-3
Companies.................................................................. Not Applicable
17. Information With Respect to Companies Other Than S-2 or S-3 Companies..... Not Applicable
18. Information if Proxies, Consents or Authorizations Are to be
Solicited.................................................................. Not Applicable
19. Information if Proxies, Consents or Authorizations Are Not to be
Solicited, or in an Exchange Offer......................................... Not Applicable
</TABLE>
PROSPECTUS
Offer to Exchange
8.20% Senior Notes due 2007
(which have been registered under the Securities Act of 1933)
For Any and All Outstanding
8.20% Senior Notes due 2007
of
The LTV Corporation
Unconditionally Guaranteed by LTV Steel Company, Inc.
The Exchange Offer will expire at 5:00 P.M.
New York City time, on January 12, 1997, unless extended
The LTV Corporation ("LTV" or the "Company") hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange $300 million principal amount of 8.20% Senior
Notes due 2007 (which have been registered under the Securities Act of 1933)
(the "New Notes") of the Company for the $300 million principal amount of
issued and outstanding 8.20% Senior Notes due 2007 (the "Old Notes" and,
together with the New Notes, the "Notes") of the Company. The Old Notes were,
and the New Notes will be, fully and unconditionally guaranteed (the
"Guaranty") by LTV Steel Company, Inc. ("LTV Steel"). The terms of the New
Notes are identical in all material respects to the Old Notes, except that the
offer of the New Notes will have been registered under the Securities Act and,
therefore, the New Notes will not be subject to certain transfer restrictions,
registration rights and related liquidated damage provisions applicable to the
Old Notes.
Interest on the Notes will be payable semi-annually on March 15
and September 15 of each year, commencing March 15, 1998. See "Description of
Notes."
The New Notes are being offered hereunder in order to satisfy
certain obligations of the Company under the Registration Rights Agreement
dated September 17, 1997 among the Company and the other signatories thereto
(the "Registration Rights Agreement"). Based upon interpretations contained
in letters issued to third parties by the staff of the Securities and Exchange
Commissions (the "Commission"), the Company believes that the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by each holder thereof (other than a
broker-dealer, as set forth below, and any such holder which is 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 New Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. Eligible holders
wishing to accept the Exchange Offer must represent to the Company in the
Letter of Transmittal that such conditions have been met. Each broker-dealer
that receives New Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such New 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 New
Notes received in exchange for Old Notes where such Old Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus 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. The Company will pay all the expenses incident to the Exchange Offer.
Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. In the event the Company terminates the
Exchange Offer and does not accept for exchange any Old Notes, the Company
will promptly return all previously tendered Old Notes to the holders thereof.
See "The Exchange Offer."
Prior to this Exchange Offer, there has been no public market
for the Notes. The Company does not currently intend to list the New Notes on
any securities exchange or to seek approval for quotation through any
automated quotation system. There can be no assurance than an active public
market for the New Notes will develop.
See "Risk Factors" for a discussion of certain risk factors
that should be considered by holders prior to tendering their Old Notes in the
Exchange Offer.
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 ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December 4, 1997
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act, with respect to the Notes
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and the Notes, reference
is hereby made to such Registration Statement and the exhibits and schedules
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith is required to file reports and other information with the
Commission. The Registration Statement, as well as such reports and other
information filed by the Company with the Commission, may be inspected without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New York,
New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained by mail from
the Commission's Public Reference Section at 450 Fifth Street, N.W.,
Washington D.C. 20549 at prescribed rates. The Commission maintains a Web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission. In addition, such reports and
other information concerning the Company may also be inspected at the offices
of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the
Commission (File No. 1-4368) pursuant to the Exchange Act are incorporated
herein by reference:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(ii) the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997;
(iii) the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997; and
(iv) the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997;
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Notes offered
hereby shall be deemed incorporated by reference into this Prospectus and to
be a part hereof from the date such documents are filed.
Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in the applicable Prospectus Supplement or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or
superseded, to constitute part of this Prospectus.
The Company will provide without charge to each person to whom
a copy of this Prospectus is delivered, upon the written or oral request of
such person, a copy of each document incorporated herein by reference.
Requests for such copies should be directed to Glenn J. Moran, Senior Vice
President, General Counsel and Secretary, The LTV Corporation, 200 Public
Square, Cleveland, Ohio, 44114-2308, (216) 622-5000.
THE COMPANY
LTV is a leading integrated steel producer that manufactures
and sells coated sheet and cold rolled and hot rolled sheet and strip, as well
as tubular and tin mill products and, beginning in July 1997, metal building
systems. Based on 1996 shipments, LTV believes it is the third largest
domestic integrated steel producer, the second largest producer of flat rolled
steel and a leading supplier of quality-critical, flat rolled steel to the
automotive, appliance and electrical equipment industries in the United
States. LTV operates two integrated steel mills (Cleveland Works and Indiana
Harbor Works) and various finishing and processing facilities, as well as
tubular, tin mill operations and metal building operations.
Over the last ten years, the Company has made capital
expenditures of approximately $3 billion to achieve significant reductions in
operating costs, enhance its ability to produce value-added steel products and
improve its quality to internationally competitive levels. As a result, LTV
believes it has core steel facilities that are highly competitive in terms of
cost, technology and quality. In 1996, the Company derived over 78% of its
revenues from steel that was processed beyond the hot rolled stage. LTV's
emphasis on value-added products and quality has allowed the Company to
achieve its leadership position in the quality-critical automotive, appliance
and electrical equipment industries and to win numerous quality awards from
its customers. All the Company's flat rolled, tin mill and tubular product
facilities are ISO-9002 certified, and each of the Company's flat rolled
facilities is certified as to QS-9000. In addition, LTV is a qualified
supplier to all domestic automobile manufacturers (including all foreign-owned
transplant automobile assembly operations).
LTV's strategy is to capitalize on its current position as a
leading supplier of quality-critical steel products and to pursue
opportunities for profitable growth in leading steel technologies and metal
fabrication, while continuing to strengthen its financial position.
LTV's principal office is located at 200 Public Square,
Cleveland, Ohio, 44114-2308 and its telephone number is (216) 622-5000.
Recent Developments
Acquisition of Metal Buildings Business
On July 2, 1997, VP Buildings ("VP Buildings"), a wholly-owned
subsidiary of the Company, acquired the Varco-Pruden metal buildings
division of United Dominion Industries, Inc. for approximately $187.5
million, subject to final closing adjustments and expenses (the "VP
Acquisition"). See "Use of Proceeds." VP Buildings, the second largest
domestic participant in the growing metal buildings industry, engineers and
manufactures non-residential, low-rise steel building systems for
manufacturing, warehousing, school and commercial applications. In 1996,
Varco-Pruden had revenues of $305 million. The United Steelworkers of
America ("USWA") is currently engaged in an organizing effort to represent
non-management employees at certain plants of VP Buildings. The USWA has
secured representation rights for non-management hourly plant employees at
the Evansville, Wisconsin plant and has sought to represent such employees
at the Pine Bluff, Arkansas plant.
Closure of Pittsburgh Coke Plant
Also in July 1997, LTV announced its intention to close
permanently its Pittsburgh coke and by-product plant by the end of 1997.
Closure of the plant, which has reached the end of its useful life, resulted
in a charge for the third quarter of 1997 of $150 million for employee costs,
demolition, environmental matters and facilities write down, approximately
$100 million of which would be payable in cash over a period of several years.
The Company has engaged a consultant to study the environmental condition of
the facility, which has been in operation for over a century. The Company
believes that it will be able to negotiate the scope and stringency of any
required remediation with the state regulatory authorities under the
newly-enacted voluntary cleanup legislation. If this is not the case,
remediation expenses could increase substantially. The Company has entered
into long-term supply contracts which, when combined with the Company's own
coke production capability, will fulfill all the Company's coke requirements.
In August 1997, the USWA filed a grievance, which is subject to
binding arbitration under its labor agreement with the Company, alleging that
the Company's actions relating to the Pittsburgh coke plant violated the
Company's labor agreement. A decision on the arbitration proceeding is not
expected until some time after November 1997, and the Company cannot predict
the outcome of such arbitration. The Company is unable to predict the effect
of a finding of violation on the Company.
New Labor Contracts
In August 1997, the Company and the USWA reached a tentative
agreement on new labor contracts covering approximately 230 USWA-represented
employees at two electro-galvanizing joint ventures. The agreements, which
were ratified by the USWA-represented employees at the two facilities, will
expire on August 1, 1999 and provide for wage and benefit increases which are
comparable to increases accorded recently at other domestic integrated steel
producers.
New Tubular Facility
In August 1997, the Company announced its intention to build a
new "best in class" tubing manufacturing facility in Marion, Ohio at an
initial project cost of approximately $66 million. The facility will
manufacture high-quality tubing for the automotive mechanical tubing market,
including for the manufacture of hydroformed parts. This market is expected
to grow as automobile manufacturers increase their use of tubular products in
order to reduce the weight of vehicles and the cost of vehicle construction.
The facility will have a high-speed steel slitter, two forming and welding
mills, heat treating capabilities and precision cutting and end finishing
equipment designed to produce the quality levels needed by the automotive
industry. The facility is expected to have a processing capacity of 146,000
tons of steel annually.
RISK FACTORS
In addition to other matters described in this Prospectus,
holders of Old Notes should carefully consider the following risk factors
before accepting the Exchange Offer.
Risk Factors Relating to the Notes
Holding Company Structure; Asset Encumbrance
Although the Notes are senior unsecured obligations of the
Company and the Guaranty is a senior unsecured obligation of LTV Steel, the
Notes will be effectively subordinated to all the liabilities of the Company's
other subsidiaries (including claims of the Pension Benefit Guaranty
Corporation (the "PBGC"), trade creditors, secured creditors and creditors
holding guarantees and claims of preferred stockholders, if any). As of
September 30, 1997, the total balance sheet liabilities of such other
subsidiaries would have been approximately $371 million (excluding outstanding
letters of credit) and such subsidiaries would have had approximately $320
million of additional available borrowing capacity under senior credit
facilities.
Since all the operations of the Company are conducted through
subsidiaries, the cash flow and the consequent ability to service debt and
other obligations of the Company, including the Notes, will be dependent upon
the earnings of its subsidiaries and the distribution of those earnings to, or
upon loans or other payments of funds by those subsidiaries to, the Company
(other than, in the case of LTV Steel, to the extent the Guaranty is in
effect). The payment of dividends and the making of loans and advances to the
Company by its subsidiaries are subject to statutory and contractual
restrictions, are dependent upon the earnings of those subsidiaries and are
subject to various business considerations.
The Notes and the Guaranty also will be effectively
subordinated to any secured debt of the Company and LTV Steel, respectively,
to the extent of the value of the assets securing such debt. As of the date
of this Prospectus, the Company and LTV Steel have no secured debt or other
secured obligations outstanding (other than outstanding letters of credit and
borrowings available under senior credit facilities and the contingent
obligations under the $250 million lien (the "USWA Lien") pursuant to a labor
agreement with the USWA). Although the Indenture contains limitations on the
amount of additional Debt the Company and the Restricted Subsidiaries may
incur, the amounts of such Debt could be substantial and, in any case, a
significant portion of the Debt may be Debt or Secured Debt of non-Guarantor
subsidiaries (which will be effectively senior in right of payment to the
Notes).
Potential Limitations on Guaranty
Although the Notes are obligations of the Company, they will be
unconditionally guaranteed by LTV Steel, which in 1996 accounted for
approximately 85% of the Company's sales. The performance by LTV Steel of its
obligations with respect to the Guaranty may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
LTV Steel. Under these statutes, if a court were to find that an obligation
(such as the Guaranty) was incurred with the intent of hindering, delaying or
defrauding present or future creditors, that LTV Steel received less than a
reasonably equivalent value of fair consideration for the obligation, or that
LTV Steel contemplated insolvency with a design to prefer one or more
creditors to the exclusion, in whole or in part, of other creditors and that,
at the time of the incurrence of the obligation, the obligor either (i) was
insolvent or was rendered insolvent by reason thereof, (ii) was engaged or was
about to engage in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital, or (iii) intended
to incur or believed that it was incurring debts beyond its ability to pay
such debts as they matured or became due, such court could void LTV Steel's
obligations under the Guaranty, subordinate the Guaranty to other debt of LTV
Steel or take other action detrimental to the holders of the Notes. The
Guaranty could be subject to the claim that, since the Guaranty was incurred
for the benefit of the Company (and only indirectly for the benefit of LTV
Steel), the obligations of LTV Steel thereunder were incurred for less than
reasonably equivalent value or fair consideration. If the Guaranty was not
enforceable, the Notes would be effectively subordinated to all liabilities of
LTV Steel.
The measure of insolvency for purposes of a fraudulent
conveyance or other similar claim will vary depending upon the laws of the
jurisdiction being applied. Generally, however, a company will be considered
insolvent at a particular time if the sum of its debts at that time is greater
than the then fair value of its assets or if the fair salable value of its
assets at that time is less than the amount that would be required to pay its
probable liability on its existing debts as they become absolute and mature.
The Company believes that, after giving effect to the Offering, each of the
Company and LTV Steel will be (a) neither insolvent nor rendered insolvent by
the incurrence of debt in connection with the Offering, (b) in possession of
sufficient capital to run their businesses effectively and (c) incurring debts
within their ability to pay as the same mature or become due.
Furthermore, LTV Steel may be or become subject to contractual
restrictions on its ability to make payments on the Guaranty. Upon the sale or
other disposition of LTV Steel or the sale or disposition of all or
substantially all the assets of LTV Steel permitted by the Indenture, LTV
Steel will be released from all its obligations under the Guaranty. See
"Description of Notes."
Change of Control Provisions
Upon the occurrence of a Change of Control at any time, each
holder of the Notes will have the right to require the Company to repurchase
each holder's Notes at a price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, thereon to the date of
purchase. There can be no assurance that the Company will have the financial
resources necessary to repurchase the Notes upon a Change of Control. See
"Description of Notes --Repurchase of Notes at the Option of holders Upon a
Change of Control." In addition, a Change of Control may constitute a
liquidation event or default under the Receivables Credit Agreement dated as
of October 12, 1994 among LTV Sales Finance Company, a bankruptcy-remote
special purpose subsidiary of LTV, the Lenders party thereto and Bankers Trust
Company, as Collateral Agent and Facility Agent (the "Receivables Credit
Agreement") or the Letter of Credit Agreement dated as of October 12, 1994
among LTV and certain of its subsidiaries, the Lenders party thereto and BT
Commercial Corporation, as Agent (the "Letter of Credit Agreement"),
respectively. Future debt of LTV may contain similar provisions to those in
the Receivables Credit Agreement and the Letter of Credit Agreement.
Restrictions on Resales; Absence of Public Market for the Old Notes
The Old Notes were offered and sold by the Company in a private
offering exempt from registration requirements of the Securities Act. Holders
of Old Notes who do not exchange their Old Notes for New Notes pursuant to the
Exchange Offer will continue to be subject to the restrictions on transfer of
such Old Notes as set forth in the legend thereon. In general, the 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 does not
intend to register the Old Notes under the Securities Act. The Company
believes that, based upon interpretations contained in letters issued to third
parties by the staff of the Commission, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by each holder thereof (other than a broker-dealer, as
set forth below, and any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. If any holder has
any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company does not currently intend to take
any action to register or qualify the New Notes for resale in any such
jurisdictions.
Risk Factors Relating to LTV
Substantial Leverage; Ability to Meet Liquidity Needs
The Company has substantial unfunded retiree health care,
unfunded pension and other obligations, including debt. As of September 30,
1997, the total consolidated debt, pension and other postemployment health
care and insurance benefit liabilities of the Company and LTV Steel were
approximately $2.474 billion (excluding approximately $99.6 million of
outstanding letters of credit), and the Company and its subsidiaries had
approximately $320 million of additional available borrowing capacity under
senior credit facilities. The degree to which the Company is leveraged could
affect its ability to service its debt and fund its pension and other
postemployment benefit obligations, to make capital investments, to take
advantage of business opportunities, including making joint venture
investments, or to obtain additional financing. Declines in the demand for
steel or in steel prices (whether as a result of the steel industry's
cyclicality or otherwise), increases in labor, raw material or other costs,
adverse environmental or other regulatory developments or the inability to
borrow additional funds for operations if and when required could also impair
the Company's ability to meet its substantial liquidity needs. These factors
could force the Company to restructure or refinance its debt or seek
additional equity capital. There can be no assurance that any of these
actions could be effected on a timely basis. In addition, the terms of the
Company's existing and future debt and PBGC agreements, including the
Indenture, may prohibit the Company from taking such actions, and the
Company's ability to obtain equity financing is separately limited by certain
tax considerations.
LTV's aggregate annual expense for pensions and other
postemployment benefit obligations is currently higher on a per ton shipped
basis than that of some other domestic integrated steel producers that
publicly report such data. Cash obligations include postemployment health
care and other insurance benefits, payments under the PBGC Settlement
Agreement among the PBGC, LTV and certain affiliates of LTV (the "PBGC
Settlement Agreement") to amortize the unfunded liability in the Company's
restored defined benefit pension plans and required contributions to a
Voluntary Employees' Beneficiary Association ("VEBA") Trust to prefund
postemployment health care and other insurance benefits. The Company's actual
annual expense depends on a variety of factors, some of which are beyond the
control of the Company. The United States government could enact legislation
which could materially change the Company's postemployment benefit and
pension-related liabilities or could materially increase the Company's annual
cash flow requirements related to current pension funding requirements or
level of pension insurance premiums. Further, if the actual retirement or
other termination of active employees is significantly earlier than projected
(for plant closings or other reasons), if the plans are modified after August
1999 because of contractual changes with the USWA, if certain trends change,
if events occur differently than as assumed or if assumptions change as a
result of such events or for other reasons, these liabilities could change
substantially.
Significance of the Automotive Industry; Customer Concentration
Demand for the Company's steel products is affected by, among
other things, the relative strength or weakness of the domestic automotive
industry and events impacting the domestic automotive industry. The
automotive industry can be highly cyclical, is dependent on consumer spending
and is subject to the impact of international trade. Direct shipments of the
Company's products to the automotive market accounted for approximately 24%,
22%, 25% and 26% of the Company's steel-related shipments in the first nine
months of 1997 and in the years 1996, 1995 and 1994, respectively. The
Company also sells to the steel service center and converter markets which, in
turn, sell a portion of their product to the automotive industry. Direct
sales to General Motors Corporation ("General Motors"), the Company's largest
customer, accounted for approximately 12%, 11%, 12% and 11% of the Company's
steel-related sales in the first nine months of 1997 and in the years 1996,
1995 and 1994, respectively. The Company's current sales arrangement with
General Motors expires at year end 1998. Accordingly, there can be no
assurance that future sales to General Motors will be at historical levels.
Automotive manufacturers that sell passenger cars and
light-duty trucks in the United States are required to comply with federally
mandated corporate average fuel economy ("CAFE") standards. From time to
time, there have been federal legislative and administrative initiatives that
would increase CAFE standards from their current levels. More stringent CAFE
standards could require vehicle manufacturers to restrict their current
product offerings or otherwise reduce the average weight of such vehicles sold
in the United States in future model years. Such action would likely result
in a reduction in the average weight of steel used in vehicles sold in the
United States. Because of the significance of the United States automotive
market to the Company, a significant reduction in the average usage of steel
in such vehicles could have a material adverse effect on the Company's
business.
Substantial Capital Expenditure Requirements
The Company's integrated steel operations are capital
intensive. Over the last ten years, the Company's capital expenditures have
totaled approximately $3 billion. This level of capital expenditures was made
in order to maintain productive capacity, reduce costs, improve productivity
and upgrade selected facilities to meet competitive requirements and, to a
lesser extent, maintain compliance with environmental laws and regulations,
including the Clean Air Act of 1990. The Company anticipates that capital
expenditures will approximate $300 million in 1997. Although the Company
believes it will be able to make capital expenditures deemed necessary or
appropriate, there can be no assurance that the Company will have adequate
funds to make all such capital expenditures or that the amount of future
capital expenditures will be adequate to preserve its competitive position or
to comply with environmental regulations.
Production Shutdowns
The Company's manufacturing processes are dependent upon
certain critical pieces of steelmaking equipment, such as its blast furnaces
and continuous casters, which on occasion may be out of service due to routine
scheduled maintenance or as the result of equipment failures. Interruptions
in the Company's production capabilities could result in fluctuations in the
Company's quarterly total sales and income. The most significant scheduled
maintenance outages involve the relining of the Company's five blast furnaces.
The relining of each furnace is scheduled approximately once every five years
and typically takes ten to twelve weeks. The Company has currently scheduled
its five blast furnaces to be relined at the rate of one a year, although the
reline scheduled for 1997 has been postponed until 1998 because of
better-than-anticipated furnace conditions. LTV plans to offset lost
production from furnace relines with purchased steel in order to enable the
Company to continue to satisfy its customers' requirements. Using purchased
steel, however, may adversely affect the Company's profitability. Other
routine scheduled maintenance outages or equipment failures could limit the
Company's production for a period of several days to several weeks. The
Company maintains property insurance covering both physical damage to real and
personal property and business interruption. Although the Company has
experienced no equipment failures or scheduled maintenance outages that have
resulted in the complete shutdown of a major portion 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.
Labor Relations
The Company's primary labor agreement with the USWA covering
approximately 10,800 employees (substantially all of the hourly employees at
its steel operations) expires on August 1, 1999. The Company's participation
in a minimill joint venture, Trico Steel Company, L.L.C. ("Trico"), the
employees of which are not currently represented by the USWA or another union,
has been a significant issue between the USWA and the Company. This issue may
adversely affect the Company's negotiations for a new labor agreement, and the
Company cannot predict the outcome of such negotiations. Further, no
assurance can be given that the USWA will not seek to represent Trico employees
at some future date. The USWA's labor agreements with other domestic
integrated steel producers also expire on August 1, 1999, which may further
complicate the Company's negotiations with the USWA.
The USWA has recently alleged that the Company's actions
relating to the closure of the Pittsburgh coke plant violates the Company's
labor agreement. See "The Company -- Recent Developments."
In the course of recent negotiations, the Company has not
experienced work stoppages, but there can be no assurance that work stoppages
will not occur in the future in connection with contract negotiations or
otherwise, or as to the results of such a stoppage. A prolonged general work
stoppage would, however, have a material adverse effect on the Company.
Managing Expansion
The Company's strategy of expanding beyond its existing
integrated steel operations is subject to various risks. The Company's
management has only limited experience in many of these other operations, and
there can be no assurance it will be able to effectively evaluate or manage
such operations. Joint ventures have in the past been one of the Company's
primary means for expanding its operations, and the Company expects to
continue to make investments in joint ventures. The Company's joint venture
partners may from time to time have economic or business interests that are
inconsistent with the interests of the Company. The Company also faces the
risk that a joint venture partner may be unable to meet its economic or other
obligations and that the Company may be required or choose to fulfill those
obligations. Many of the opportunities that the Company is pursuing are
start-up operations and require significant investments before becoming
operational. The development, construction and start-up of such operations
are themselves subject to numerous risks. After start-up, further investments
may be required and significant losses could be incurred before any profits
are realized. The Company's strategy includes pursuing additional
steel-related investments beyond those it has already acquired, but there can
be no assurance that any such other investments will be consummated.
Litigation
The Company is a defendant in a number of pending lawsuits,
including certain challenges to actions taken during the Chapter 11 bankruptcy
proceedings and other proceedings involving environmental matters and patent
infringement. There can be no assurance that the Company will succeed in
defending such claims or that judgments will not be rendered against the
Company in respect of any or all of such proceedings. While, in the opinion
of the Company's management, adequate provision has been made for losses which
are likely to result from these claims, to the extent that such reserves prove
to be inadequate, the Company could incur a charge to earnings which could
have a material adverse effect on the Company's results of operations and
liquidity for the applicable period. The Company has benefitted from certain
trade cases relating to steel imports which remain subject to annual review.
Such annual reviews may adversely affect such benefits.
Potential Limitation on Utilization of Net Operating Loss Carryforwards and
Other Tax Attributes
The Company's ability to reduce its future income tax
liability, if any, through utilization of its substantial net operating loss
carryforwards of $2.6 billion and other favorable tax attributes could be
significantly limited if the Company were to undergo an "ownership change" (an
"Ownership Change") within the meaning of Section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"). Imposition of such limitations could
have a material adverse effect on the Company. Article Ninth of the Company's
Restated Certificate of Incorporation ("Article Ninth") provides a measure of
protection against an Ownership Change by prohibiting certain ownership
accumulations without the approval of the Board of Directors of the Company.
However, the Company's future ability to issue additional shares of stock or
equity-related instruments convertible into stock may be limited because of
the constraints imposed by Section 382 of the Code.
Year 2000 Compliance
As is the case with most other companies using computers in
their operations, the Company is faced with the task of addressing the Year
2000 problem during the next two years. The Company is currently engaged in a
comprehensive project to upgrade its computer software in its information
technology, manufacturing and facilities systems to programs which will be
Year 2000 compliant. In addition, over a three-year period, the Company
currently estimates that it will expense approximately $50 million related to
Year 2000 compliant work. Approximately $10 million will be expensed in 1997.
Failure by the Company and/or vendors working on this project to complete the
Year 2000 compliance work in a timely manner could have a material adverse
effect on the Company's operations.
Risk Factors Relating to the Steel Industry Generally
Steel Price Sensitivity and Cyclicality of the Steel Industry
The steel industry is highly cyclical in nature and the
Company's results of operations are substantially affected by small variations
in the realized prices of its products. Such realized prices are
significantly influenced by prevailing prices for steel and demand for
particular products. The Company's steel operations shipped 8.1 million tons
of steel products and recorded sales of $4.1 billion during 1996. A 1%
increase or decrease in the average realized price during 1996 would, on a
pro forma basis, have resulted in an increase or decrease in pre-tax income of
approximately $36 million. The Company's average realized steel selling
prices during the first six months of 1997 were only 8% above those of a
decade ago. Domestic integrated producers suffered substantial losses between
1982 and 1986, primarily as a result of recessionary conditions, high levels
of steel imports, the strength of the United States dollar against other
currencies, worldwide steel production overcapacity, increased domestic and
international competition, high labor costs and inefficient production
facilities. Domestic steel industry earnings improved between 1987 and 1989,
compared to such prior period, due in part to substantial restructuring
activities (including the reduction of steel production capacity), the
strength of the domestic economy, the decline of the United States dollar
against foreign currencies and temporary labor concessions. Domestic steel
production in 1995 was the highest since 1981. Industry demand, however,
slackened during the latter half of 1990 and continued to be weak through
1992, and the steel industry suffered losses during such period. Demand
increased in 1993 and in years subsequent thereto and domestic steel producers
have been able to implement a number of announced price increases since 1993.
While the Company and the steel industry in general realized a number of price
increases during 1993, 1994 and the first half of 1995, steel prices declined
materially in the second half of 1995. In 1996 and the first nine months of
1997, the Company was able to implement price increases that only partially
offset the decreases experienced in the second half of 1995, and average
realized steel selling prices per ton in 1996 and the first nine months of
1997 remained below average 1995 levels. The price increase announced in May
1997 by LTV has only partially taken effect.
With severe competitive pressures in the steel industry, excess
worldwide capacity, a significantly higher level of imports than in 1996 and
fluctuating automotive industry sales as described above, there can be no
assurance that prices will not decline during any future period or as to
domestic steel industry earnings in the future. See "Excess Worldwide
Industry Capacity and Depressed Prices" and "Competition."
Excess Worldwide Industry Capacity and Depressed Prices
At current worldwide demand levels, there exists substantial
excess worldwide steelmaking capacity. In addition, Wheeling-Pittsburgh
Corporation ("WHX") resumed steel production in the fourth quarter of 1997
after a ten-month strike-related cessation of operations. Domestic flat
rolled steel production capacity has been reduced through corporate
reorganizations or as a result of bankruptcy proceedings, causing domestic
capacity to fall below current domestic demand for flat rolled steel.
However, taking into account both historic and recent levels of imports and an
expected increase in domestic raw steel production capacity of more than 8%
during the next two years (primarily due to the construction of new minimill
and other production facilities), there is expected to be an excess supply in
the domestic flat rolled steel market. Steel selling prices have been under
pressure recently as a result of the recent sustained high level of imports,
the start-up or planned start-up of new minimills and other production
facilities, a strengthened United States dollar and various other factors.
The outlook for prices continues to be uncertain. See "Steel Price
Sensitivity and Cyclicality of the Steel Industry."
Competition
Domestic steel producers have faced significant competition
from foreign producers. Foreign competition is intense and has adversely
affected product prices in the United States and tonnage sold by domestic
producers. The intensity of foreign competition is substantially affected by
the relative strength of foreign economies and fluctuations in the value of
the United States dollar against foreign currencies. Steel imports have
increased as the value of the dollar has risen in relation to foreign
currencies. Further, many foreign steel producers are owned, controlled or
subsidized by their governments. Decisions by such foreign producers with
respect to production and sales may be influenced to a greater degree by
political and economic policy considerations than by prevailing market
conditions. Based on reports by the American Iron and Steel Institute
("AISI"), imports of flat rolled product increased approximately 41% in the
first eight months of 1997 from the comparable period in 1996 to approximately
9.8 million tons or 20% of domestic steel consumption. See "Steel Price
Sensitivity and Cyclicality of the Steel Industry."
LTV also competes with other domestic integrated producers,
some of which have greater resources than the Company, and with minimills
which are relatively efficient, low-cost producers that generally produce
steel from scrap in electric furnaces, have lower employment and environmental
costs and generally target regional markets. Recently developed thin slab
casting technologies have allowed some minimill producers to enter certain
sectors of the flat rolled market which have traditionally been supplied by
integrated producers, and other producers have announced their intention to do
the same. Industry experts estimate that current domestic raw steel
production capacity will be increased by more than 8% during the next two
years as new minimills, now under construction, engaged in start-up operations
or otherwise proposed, begin operation.
In the case of many steel products, there is substantial
competition from manufacturers of other products, including plastics,
aluminum, ceramics, glass, wood and concrete.
Environmental Regulation
With respect to its properties and operations, the Company and
other steel producers have become subject to increasingly stringent
environmental standards imposed by federal, state and local environmental laws
and regulations concerning air emissions, water discharges and waste
disposal. The Company has incurred and will continue to incur substantial
capital costs and operating and maintenance expenses in complying with such
stringent environmental standards. In particular, the 1990 Clean Air Act
Amendments will continue to require additional significant expenditures for
air pollution control or major changes in the production of steel. Further,
new federal environmental regulations adopted in 1997 impose significantly
more stringent ambient air environmental standards which could in the future
also add significantly to expenditure levels by the Company. Additionally,
the United States Environmental Protection Agency (the "EPA") has interpreted
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), as
granting the EPA authority to require companies to clean up plant sites where
hazardous wastes have been used (and are being or may be released into the
environment), even if such sites are not subject to the permitting
requirements of RCRA. If the EPA were to require the Company to clean up its
facilities under RCRA, the costs to the Company associated with such a cleanup
could be substantial.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the
issuance of the New Notes offered hereby. In consideration for issuing the
New Notes in exchange for the Old Notes as described in this Prospectus, the
Company will receive Old Notes in like principal amount. The Old Notes
surrendered in exchange for the New Notes will be retired and canceled.
Accordingly, the issuance of the New Notes will not result in any change in
the indebtedness of the Company.
The net proceeds to the Company from the sale of the Old Notes
was approximately $289.8 million. Such net proceeds were used by the Company
to finance the approximate $187.5 million cost, subject to final closing
adjustments, of the VP Acquisition and to redeem the $100 million principal
amount of Senior Secured Convertible Notes due 2003 issued by LTV to SMI
America, Inc.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratio of
earnings to fixed charges for the Company for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(unaudited) (1)................... 0.7x 3.3x 3.5x 5.8x 4.1x 0.1x --
</TABLE>
- ---------------
(1) The ratio of earnings to fixed charges is determined by dividing the sum
of earnings from continuing operations before extraordinary items,
discontinued operations, interest expense, taxes and a portion of rent
expense representative of interest, by the sum of interest expense and a
portion of rent expense representative of interest. The ratio for the
nine months ended September 30, 1997 includes the $150 million special
charge recorded in the third quarter of 1997. Without the special
charge, the ratio would have been 3.5x. The ratio of earnings to fixed
charges is not meaningful for periods that result in a deficit. For
1992, the deficit of earnings to fixed charges was $166 million.
THE EXCHANGE OFFER
Terms of the Exchange Offer; Period for Tendering Old Notes
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Company will accept for exchange Old Notes
which are properly tendered on or prior to the Expiration Date and not
withdrawn as permitted below. As used herein, the term "Expiration Date"
means 5:00 p.m, New York City time, on January 12, 1998; provided, however,
that if the Company, in its sole discretion, has extended the period of time
for which the Exchange Offer is open, the term "Expiration Date" means the
latest time and date to which the Exchange Offer is extended.
As of the date of this Prospectus, $300 million aggregate
principal amount of the Old Notes was outstanding. This Prospectus, together
with the Letter of Transmittal, is first being sent on or about the date set
forth on the cover page to all holders of Old Notes at the addresses set forth
in the security register with respect to Old Notes maintained by the Trustee.
The Company's obligations to accept Old Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth under "Certain
Conditions to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from
time to time, to extend the period of time during which the Exchange Offer is
open, and thereby delay acceptance of any Old Notes, by giving oral (promptly
confirmed in writing) or written notice of such extension to the Exchange
Agent and notice of such extension to the holders as described below. During
any such extension, all Old Notes previously tendered will remain subject to
the Exchange Offer and may be accepted for exchange by the Company. Any Old
Notes not accepted for exchange for any reason will be returned without
expense to the tendering holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Old Notes not
theretofore accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified below under "Certain Conditions to
the Exchange Offer." The Company will give oral (promptly confirmed in
writing) or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release
or other public announcement no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of the State of Delaware or the
Indenture in connection with the Exchange Offer. The Company intends to
conduct the Exchange Offer in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the Commission thereunder.
Procedures for Tendering Old Notes
The tender to the Company of Old Notes by a holder thereof as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal or
Agent's Message (as defined below) in lieu thereof, including all other
documents required by such Letter of Transmittal, to The Chase Manhattan Bank
(the "Exchange Agent") at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date. In addition, (i) certificates for
such Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company ("DTC" or
the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY, NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
The term "Holder" or "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 or any participant in DTC whose name appears
on a security position listing as the holder of Old Notes (which for the
purpose of the Exchange Offer, include beneficial interests in the Old Notes
held by direct or indirect participants in DTC and Old Notes held in
definitive form).
Signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed unless the Old Notes
surrendered for exchange pursuant thereto are tendered (i) by a registered
holder of the Old Notes who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). 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
guarantees must be by a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (collectively, "Eligible Institutions").
If Old Notes are registered in the name of a person other than the person
signing the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including
time of receipt) and acceptance of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Old Notes not properly tendered or to not accept
any particular Old Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right in its sole discretion to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility
of any holder who seeks to tender Old Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with the tenders of Old Notes for exchange must be cured within
such reasonable period of 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 any defect or irregularity with respect to any tender of
Old Notes for exchange, nor shall any of them incur any liability for failure
to give such notification.
If the Letter of Transmittal is signed by a person or persons
other than the registered holder or holders of Old Notes, such Old Notes must
be endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders that
appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such person should so indicate when signing and,
unless waived by the Company, proper evidence satisfactory to the Company of
its authority to so act must be submitted.
By tendering, each holder will represent to the Company that,
among other things, (i) the New Notes acquired pursuant to the Exchange Offer
are being acquired in the ordinary course of business of the person receiving
such New Notes, whether or not such person is the holder, (ii) neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes, (iii) if the
holder is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the holder
nor any such other person is engaged in or intends to participate in the
distribution of such New Notes and (iv) neither the holder nor any such
other person is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company. If the tendering holder is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading
activities, it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes.
Acceptance of Old Notes for Exchange, Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will accept, promptly after the Expiration Date,
all Old Notes properly tendered and will issue the New Notes promptly after
acceptance of the Old Notes. See "Certain Conditions to the Exchange Offer"
below. For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Old Notes for exchange when, as and if the Company
has given oral (promptly confirmed in writing) or written notice thereof to
the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Old Notes or a
timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, a properly completed and duly executed
Letter of Transmittal (or Agent's Message in lieu thereof) and all other
required documents. If any tendered Old Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if certificates
representing Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to
an account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
Interest on the New Notes
Interest on the Notes will accrue at the rate of 8.20% per
annum and will be payable in cash semi-annually on each March 15 and September
15, commencing on March 15, 1998.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account
with respect to the Old Notes at the Book-Entry Transfer Facility for purposes
of the Exchange Offer promptly after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Notes by causing the
Book-Entry Transfer Facility to transfer such Notes into the Exchange Agent's
account in accordance with the Book-Entry Transfer Facility Automated Tender
Offer Program ("ATOP") procedures for transfer. However, the exchange for the
Notes so tendered will only be made after timely confirmation of such
book-entry transfer of Notes into the Exchange Agent's account, and timely
receipt by the Exchange Agent of an Agent's Message (as defined) and any other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message, transmitted by the Book-Entry Transfer Facility and received
by the Exchange Agent and forming a part of a Book-Entry Confirmation, which
states that the Book-Entry Transfer Facility has received an express
acknowledgment from a participant tendering Notes that are the subject of such
Book-Entry Confirmation that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal, and that the Company may
enforce such agreement against such participant.
Guaranteed Delivery Procedures
If a registered holder of the Old Notes desires to tender such
Old Notes and the Old Notes are not immediately available, or time will not
permit such holder's Old Notes or other required documents to reach the
Exchange Agent before the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
(i) the tender is made 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,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within
five New York Stock Exchange ("NYSE") trading days after the date of execution
of the Notice of Guaranteed Delivery, the certificates of all physically
tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation,
as the case may be, the Letter of Transmittal (or an Agent's Message in lieu
thereof) and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, the Letter of
Transmittal (or an Agent's Message in lieu thereof) and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within five NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at one of the addresses set
forth below under "Exchange Agent." Any such notice of withdrawal must specify
the name of the person having tendered the Old Notes to be withdrawn, identify
the Old Notes to be withdrawn (including the principal amount of such Old
Notes), and (where certificates for Old Notes have been transmitted) specify
the name in which such Old Notes are registered, if different from that of the
withdrawing holder. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of
the particular certificates to be withdrawn and a signed notice of withdrawal
with signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such 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
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) 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 under "Procedures for Tendering Old Notes"
above at any time on or prior to the Expiration Date.
Certain Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, the
Company shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if
at any time before the acceptance of such Old Notes for exchange or the
exchange of the New Notes for such Old Notes such acceptance or issuance would
violate applicable law or any interpretation of the staff of the Commission.
The foregoing condition is for the sole benefit of the Company
and may be asserted by the Company regardless of the circumstances giving rise
to such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company
at any time to exercise the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old
Notes tendered, and no New Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
Exchange Agent
The Chase Manhattan Bank has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent, addressed as
follows:
Deliver To:
By Registered or Certified Mail
or Hand or Overnight Delivery:
The Chase Manhattan Bank
55 Water Street
Room 234, North Building
New York, New York 10041
Attention: Carlos Esteves
Confirm by Telephone:
(212) 638-0828
Facsimile Transmission:
(212) 638-7375 or (212) 344-9367
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
Fees and Expenses
The principal solicitation is being made by mail; however,
additional solicitation may be made by telegraph, telephone or in person by
officers and regular employees of the Company and its affiliates. No
additional compensation will be paid to any such officers and employees who
engage in soliciting tenders. The Company will not make any payment to
brokers, dealers, or others soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith.
The estimated cash expenses to be incurred in connection with
the Exchange Offer will be paid by the Company and are estimated in the
aggregate to be $75,000.
Transfer Taxes
Holders who tender their Old Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that
holders who instruct the Company to register New Notes in the name of, or
request that Old Notes not tendered or not accepted in the Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for
New Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon.
In general, the 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 does not intend to register the Old Notes under the Securities Act.
The Company believes that, based upon interpretations contained in letters
issued to third parties by the staff of the Commission, New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by each holder thereof (other than a
broker-dealer, as set forth below, and any such holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes. If any holder has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company
does not currently intend to take any action to register or qualify the New
Notes for resale in any such jurisdictions.
Tax Consequences to U.S. Holders
There will be no federal income tax consequences to holders
exchanging Old Notes for New Notes pursuant to the Exchange Offer and a holder
will have the same adjusted basis and holding period in the New Notes as it
had in the Old Notes immediately before the exchange.
DESCRIPTION OF NOTES
The Old Notes were issued and the New Notes will be issued
under an indenture dated as of September 22, 1997 (the "Indenture") among the
Company, LTV Steel and The Chase Manhattan Bank, as trustee (the "Trustee").
The Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The Indenture will be qualified under the
Trust Indenture Act upon effectiveness of the Registration Statement. The
following summary of certain provisions of the Indenture does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the Trust Indenture Act and to all the provisions of the Notes and the
Indenture, including the definitions therein of certain terms. For purposes
of this Section, references to the "Company" shall mean The LTV Corporation
excluding its subsidiaries. Capitalized terms used in this Section and not
otherwise defined below have the respective meanings assigned to them in the
Indenture.
General
The Notes will mature on September 15, 2007, and will be
limited to an aggregate principal amount of $300 million. The Notes will bear
interest at the rate set forth on the cover page of this Prospectus from
September 22, 1997, or from the most recent interest payment date to which
interest has been paid, payable semiannually on March 15 and September 15 of
each year, beginning on March 15, 1998, to the Persons who are registered
holders of the Notes at the close of business on the preceding March 1 or
September 1, as the case may be. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Principal of, and premium, if any, and interest on, the Notes
will be payable in immediately available funds, and the Notes will be
exchangeable and transferable, at an office or agency of the Company, one of
which will be maintained for such purpose in The City of New York (which
initially will be the corporate trust office of the Trustee); provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the Person entitled thereto as shown on the Security Register.
The Notes will be issued only in fully registered form without coupons, in
denominations of $1,000 or any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange of Notes, except for
any tax or other governmental charge that may be imposed in connection
therewith.
The terms of the New Notes are identical in all material
respects to the terms of the Old Notes, except for certain transfer
restrictions and registration rights relating to the Old Notes and except
that, if (a) on or prior to the 60th day following the date of original
issuance of the Old Notes, neither the Registration Statement nor a shelf
registration statement for the New Notes (the "Shelf Registration Statement")
has been filed with the Commission, (b) on or prior to the 150th day following
the date of original issuance of the Old Notes, the Registration Statement has
not been declared effective, (c) on or prior to the 180th day following the
date of original issuance of the Old Notes, neither the Exchange Offer has
been consummated nor a Shelf Registration Statement has been declared
effective or (d) after either the Registration Statement or the Shelf
Registration Statement has been declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Old Notes or New Notes in accordance with and
during the periods specified in the Registration Agreement (each such event
referred to in clauses (a) through (d), a "Registration Default"), interest
("Special Interest") will accrue on the principal amount of the Old Notes and
the New Notes (in addition to the stated interest on the Old Notes and the New
Notes) from and including the date on which any such Registration Default
shall occur to but excluding the date on which all Registration Defaults have
been cured. Special Interest will accrue at a rate of 0.25% per annum during
the 90-day period immediately following the occurrence of any Registration
Default and shall increase by 0.25% per annum at the end of each subsequent
90-day period, but in no event shall such rate exceed 1.00% per annum.
Ranking
The Notes will be senior unsecured obligations of the Company,
will rank pari passu with all existing and future senior debt of the Company,
will be senior in right of payment to all future subordinated debt of the
Company and will be guaranteed on a senior unsecured basis by LTV Steel. For
certain financial information with respect to LTV Steel, see the notes to the
Consolidated Financial Statements for the years ended December 31, 1996, 1995
and 1994 and for the nine months ended September 30, 1997 and 1996. As of
September 30, 1997, after giving effect to the VP Acquisition, the Offering
and the application of the estimated net proceeds therefrom, the total
outstanding debt of the Company and LTV Steel was approximately $354 million
(excluding approximately $99.6 million in outstanding letters of credit) and
the Company and LTV Steel had approximately $320 million of additional
available borrowing capacity under the Receivables Credit Agreement and the
Letter of Credit Agreement. As of such date, the total outstanding pension
liabilities of the Company and LTV Steel were approximately $601 million and
the total outstanding liabilities of the Company and LTV Steel for
postemployment health care and other insurance benefits were approximately
$1.5 billion. None of the debt or pension or other postemployment benefit
liabilities of the Company and LTV Steel outstanding as of September 30, 1997,
would have been subordinated to the Notes or the Guaranty. Although the
Indenture contains limitations on the amount of additional Debt which the
Company and LTV Steel may incur, the amounts of such Debt could be
substantial. In addition, the Company and LTV Steel have other liabilities,
including contingent liabilities, which may be significant.
The Notes and the Guaranty will be effectively subordinated to
creditors (including the PBGC, trade creditors and secured creditors) and
preferred stockholders, if any, of the Subsidiaries of the Company other than
LTV Steel. As of September 30, 1997, the total balance sheet liabilities of
such Subsidiaries were approximately $371 million (excluding approximately
$99.6 million of outstanding letters of credit and approximately $320 million
of additional available borrowing capacity under the Receivables Credit
Agreement and the Letter of Credit Agreement). Since all the operations of
the Company are conducted through Subsidiaries, the cash flow and the
consequent ability to service debt of the Company, including the Notes, is
dependent upon the earnings of any such Subsidiaries and the distribution of
those earnings to, or upon loans or other payments of funds by those
Subsidiaries to, the Company. The payment of dividends and the making of
loans and advances to the Company by such Subsidiaries could be limited by
statutory and contractual restrictions or other business considerations and
will be dependent upon the earnings of those Subsidiaries. Under certain
circumstances, the Guaranty could be effectively subordinated to all the
obligations of LTV Steel. See "Certain Covenants--Limitation of Debt and
Restricted Subsidiary Preferred Stock."
The Notes and the Guaranty also will be effectively
subordinated to any secured debt of the Company and LTV Steel, respectively,
to the extent of the value of the assets securing such debt. As of September
30, 1997, after giving effect to the Offering and the application of the
estimated net proceeds therefrom, the Company and LTV Steel had no secured
debt or other secured obligations outstanding (other than letters of credit
and additional available borrowing capacity under the Receivables Credit
Agreement and the Letter of Credit Agreement and the contingent obligations
under the $250 million USWA Lien.
Guaranty
The obligations of the Company under the Indenture, including
the repurchase obligation resulting from a Change of Control, will be
unconditionally guaranteed on a senior unsecured basis by LTV Steel. LTV's
trade sales accounted for 85% of the Company's trade sales in 1996 (without
giving pro forma effect to the VP Acquisition). Upon the sale or other
disposition of LTV Steel or the sale or disposition of all or substantially
all the assets of LTV Steel permitted by the Indenture, LTV Steel will be
released from all its obligations under the Guaranty. See "Certain Covenants--
Limitation on Issuance or Sale of Capital Stock of Restricted Subsidiaries"
and "Merger, Consolidation and Sale of Property." The Company will agree to
contribute to LTV Steel an amount equal to the Company's proportionate share
of any payment made by LTV Steel under the Guaranty, based on the net worth of
the Company relative to the aggregate net worth of the Company and LTV Steel).
Optional Redemption
Except as set forth in the following paragraph, the Notes will
not be redeemable at the option of the Company prior to September 15, 2002.
Thereafter, the Notes will be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
the following redemption prices (expressed as percentages of principal
amount), plus accrued and unpaid interest (if any) to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed
during the 12-month period commencing on September 15 of the years set
forth below:
Redemption
Year Price
2002...................................... 104.100%
2003...................................... 102.733%
2004...................................... 101.367%
2005 and thereafter....................... 100.000%
At any time and from time to time prior to September 15, 2000,
the Company may redeem up to a maximum of 35% of the original aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings, at a redemption price equal to 108.20% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided,
however, that after giving effect to any such redemption, at least 65% of the
original aggregate principal amount of the Notes remains outstanding. Any
such redemption shall be made within 60 days of such Public Equity Offering
upon not less than 30 nor more than 60 days' notice mailed to each holder of
Notes being redeemed and otherwise in accordance with the procedures set forth
in the Indenture.
Sinking Fund
There are no sinking fund payments for the Notes.
Repurchase at the Option of Holders Upon a Change of Control
Upon the occurrence of a Change of Control, each holder of
Notes shall have the right to require the Company to repurchase all or any
part of such holder's Notes pursuant to the offer described below (the "Change
of Control Offer") at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the purchase date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
Within 30 days following any Change of Control, the Company
shall (a) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States and (b) send, by first-class mail, with a copy to the Trustee,
to each holder of Notes, at such holder's address appearing in the Security
Register, a notice stating, among other things: (i) that a Change of Control
has occurred and a Change of Control Offer is being made pursuant to the
covenant entitled "Repurchase at the Option of holders Upon a Change of
Control" and that all Notes timely tendered will be accepted for payment; (ii)
the Change of Control Purchase Price and the purchase date, which shall be,
subject to any contrary requirements of applicable law, a business day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed; (iii) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to the Change of Control);
and (iv) the procedures that holders of Notes must follow in order to tender
their Notes (or portions thereof) for payment, and the procedures that holders
of Notes must follow in order to withdraw an election to tender Notes (or
portions thereof) for payment.
The Company will 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 Notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the covenant described
hereunder, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
covenant described hereunder by virtue of such compliance.
The Change of Control repurchase feature is a result of
negotiations between the Company and the initial purchasers of the Old Notes
(the "Initial Purchasers"). Management has no present intention to engage in
a transaction involving a Change of Control, although it is possible that the
Company would decide to do so in the future. Subject to certain covenants
described below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinances or other recapitalization,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of debt outstanding at such time or otherwise affect
the Company's capital structure or credit ratings.
The definition of Change of Control includes a phrase relating
to the sale, assignment, lease, conveyance, disposition or transfer of "all or
substantially all" the Company's assets. Although there is a developing body
of case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a holder of Notes to require the Company to repurchase such Notes
as a result of a sale, assignment, lease, conveyance, disposition or transfer
of less than all the assets of the Company may be uncertain.
The occurrence of certain of the events that constitute a
Change of Control under the Indenture would constitute a liquidation event or
a default under the Receivables Credit Agreement and the Letter of Credit
Agreement, respectively. Future Senior Debt of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such Senior Debt to be repurchased upon a Change of Control.
Moreover, the exercise by holders of Notes of their right to require the
Company to repurchase such Notes could cause a default under existing or
future Senior Debt of the Company, even if the Change of Control itself does
not, due to the financial effect of such repurchase on the Company. Finally,
the Company's ability to pay cash to holders of Notes upon a repurchase may
be limited by the Company's then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make
any required repurchases. The Company's failure to purchase the Notes in
connection with a Change in Control would result in a default under the
Indenture which would, in turn, constitute a default under the existing or
future Senior Debt of the Company. The provisions under the Indenture
relative to the Company's obligation to make an offer to repurchase the Notes
as a result of a Change of Control may be waived or modified (at any time
prior to the occurrence of such Change of Control) with the written consent of
the holders of a majority in principal amount of the Notes.
Certain Covenants
Covenant Termination. The Indenture provides that the
following restrictive covenants will be applicable to the Company and the
Restricted Subsidiaries unless the Company reaches Investment Grade Status.
After the Company has reached Investment Grade Status, and notwithstanding
that the Company may later cease to have an Investment Grade Rating from
either or both of the Rating Agencies, the Company and the Restricted
Subsidiaries will be released from their obligations to comply with the
restrictive covenants described below, except for the covenants described
under "Limitation on Liens," "Limitation on Sale and Leaseback Transactions"
and "Designation of Restricted and Unrestricted Subsidiaries" (other than
clause (x) of the second paragraph (and such clause (x) as referred to in the
first paragraph) thereunder). The Company and LTV Steel will also, upon
reaching Investment Grade Status, remain obligated to comply with the
provisions described under "Merger, Consolidation and Sale of Property" (other
than clauses (e) and (f) of the first and second paragraphs thereunder) and
under "Repurchase at the Option of Holders Upon a Change of Control."
Limitation on Debt and Restricted Subsidiary Preferred Stock.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Debt (which includes, in the case of
Restricted Subsidiaries, Preferred Stock) unless, after giving pro forma
effect to the application of the proceeds thereof, no Default or Event of
Default would occur as a consequence of such Incurrence or be continuing
following such Incurrence and either (a) after giving effect to the Incurrence
of such Debt and the application of the proceeds thereof, the Consolidated
Interest Coverage Ratio would be greater than 2.00 to 1.00 or (b) such Debt is
Permitted Debt.
The term "Permitted Debt" is defined to include the following:
(a) Debt of the Company evidenced by the Notes and of LTV Steel
evidenced by the Guaranty;
(b) Debt under the Credit Facilities, provided that the
aggregate principal amount of all such Debt under the Credit Facilities,
together with all Permitted Refinancing Debt Incurred in respect of Debt
previously Incurred pursuant to this clause (b), at any one time outstanding
shall not exceed the greater of (i) $470 million less the sum of the aggregate
amount of all prepayments and required payments of principal applied to reduce
the aggregate amount available to be borrowed under the Credit Facilities or
such Permitted Refinancing Debt, including pursuant to the covenant described
below "Limitation on Asset Sales," and (ii) the sum of the amounts equal to
(x) 60% of the book value of the inventory of the Company and the Restricted
Subsidiaries and (y) 85% of the book value of the accounts receivable of the
Company and the Restricted Subsidiaries, in each case as of the most recently
ended quarter of the Company for which financial statements of the Company
have been provided to the holders of Notes;
(c) Capital Expenditure Debt, provided that (i) the aggregate
principal amount of such Debt does not exceed the Fair Market Value (on the
date of the Incurrence thereof) of the Property acquired, constructed or
leased and (ii) the aggregate principal amount of all Debt Incurred and then
outstanding pursuant to this clause (c), together with all Permitted
Refinancing Debt Incurred and then outstanding in respect of Debt previously
Incurred pursuant to this clause (c), does not exceed $300 million;
(d) Debt of the Company owing to and held by any Wholly Owned
Subsidiary and Debt of a Restricted Subsidiary owing to and held by the
Company or any Wholly Owned Subsidiary; provided, however, that any subsequent
issue or transfer of Capital Stock or other event that results in any such
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of any such Debt (except to the Company or a Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of
such Debt by the issuer thereof;
(e) Debt of a Restricted Subsidiary Incurred and outstanding on
or prior to the date on which such Restricted Subsidiary was acquired by the
Company or otherwise became a Restricted Subsidiary (other than Debt Incurred
as consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of transactions
pursuant to which such Restricted Subsidiary became a Subsidiary of the
Company or was otherwise acquired by the Company), provided that at the time
such Restricted Subsidiary was acquired by the Company or otherwise became a
Restricted Subsidiary and after giving pro forma effect to the Incurrence of
such Debt, the Company would have been able to Incur $1.00 of additional Debt
pursuant to clause (a) of the immediately preceding paragraph;
(f) Debt under Interest Rate Agreements entered into by the
Company or a Restricted Subsidiary for the purpose of limiting interest rate
risk in the ordinary course of the financial management of the Company or such
Restricted Subsidiary and not for speculative purposes, provided that the
obligations under such agreements are directly related to payment obligations
on Debt otherwise permitted by the terms of this covenant;
(g) Debt under Commodity Price Protection Agreements entered
into by the Company or a Restricted Subsidiary in the ordinary course of the
financial management (including cost control) of the Company or such
Restricted Subsidiary and not for speculative purposes;
(h) Debt in connection with one or more standby letters of
credit or performance bonds issued by the Company or a Restricted Subsidiary
in the ordinary course of business or pursuant to self-insurance obligations
and not in connection with the borrowing of money or the obtaining of advances
or credit;
(i) Debt outstanding on the Issue Date not otherwise described
in clauses (a) through (h) above and any additional Debt Incurred after the
Issue Date representing interest paid in-kind on Debt outstanding pursuant to
this clause (i);
(j) Debt of the Company or any Restricted Subsidiary (other
than Debt permitted by the immediately preceding paragraph or the other
clauses of this paragraph) in an aggregate principal amount outstanding at any
one time not to exceed $100 million; and
(k) Permitted Refinancing Debt Incurred in respect of Debt
Incurred pursuant to clause (a) of the immediately preceding paragraph and
clauses (a), (b), (c), (e) and (i) above, subject, in the case of clauses (b)
and (c) above, to the limitations set forth in the respective provisos thereto.
Limitation on Restricted Payments. The Company shall not make,
and shall not permit any Restricted Subsidiary to make, directly or
indirectly, any Restricted Payment if at the time of, and after giving pro
forma effect to, such proposed Restricted Payment,
(a) a Default or Event of Default shall have occurred and be
continuing,
(b) the Company could not Incur at least $1.00 of additional
Debt pursuant to clause (a) of the first paragraph of the covenant described
under "Limitation on Debt and Restricted Subsidiary Preferred Stock" or
(c) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made since the Issue Date (the amount of
any Restricted Payment, if made other than in cash, to be based upon Fair
Market Value) would exceed an amount equal to the sum of:
(i) 50% of the aggregate amount of Consolidated Net Income accrued
during the period (treated as one accounting period) from and after the
first day of the fiscal quarter following the end of the most recent
fiscal quarter ended immediately prior to the Issue Date to the end of
the most recent fiscal quarter ending at least 45 days prior to the date
of such Restricted Payment (or if the aggregate amount of Consolidated
Net Income for such period shall be a deficit, minus 100% of such
deficit),
(ii) Capital Stock Sale Proceeds, and
(iii) the amount by which Debt (other than Subordinated Obligations
issued or sold prior to the Issue Date) of the Company or LTV Steel is
reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the Issue Date
of any Debt of the Company or LTV Steel convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company (less the
amount of any cash or other Property distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange).
Notwithstanding the foregoing limitation, the Company may:
(a) pay dividends on its Capital Stock within 60 days of the
declaration thereof if, on said declaration date, such dividends could have
been paid in compliance with the Indenture; provided, however, that at the
time of such payment of such dividend, no other Default or Event of Default
shall have occurred and be continuing (or would result therefrom); provided
further, however, that such dividend shall be included in the calculation of
the amount of Restricted Payments;
(b) purchase, repurchase, redeem, legally defease, acquire or
retire for value Capital Stock of the Company or Subordinated Obligations in
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of the Company or an employee
stock ownership plan or trust established by the Company or any of its
Subsidiaries for the benefit of their employees); provided, however, that (i)
such purchase, repurchase, redemption, legal defeasance, acquisition or
retirement shall be excluded in the calculation of the amount of Restricted
Payments and (ii) the Net Cash Proceeds from such exchange or sale shall be
excluded from the calculation of the amount of Capital Stock Sale Proceeds;
(c) purchase, repurchase, redeem, legally defease, acquire or
retire for value any Subordinated Obligations in exchange for, or out of the
proceeds of the substantially concurrent sale of, Permitted Refinancing Debt;
provided, however, that such purchase, repurchase, redemption, legal
defeasance, acquisition or retirement shall be excluded in the calculation of
the amount of Restricted Payments;
(d) expend up to $43 million to repurchase, prior to the
two-year anniversary of the Issue Date, common stock of the Company pursuant
to the Company's stock repurchase plan approved on January 24, 1997, by the
Board of Directors; provided, however, that at the time of, and after giving
pro forma effect to, any such expenditure, (i) no other Default or Event of
Default shall have occurred and be continuing and (ii) the Company could incur
at least $1.00 of additional Debt pursuant to clause (a) of the first
paragraph of the covenant described under "Limitation on Debt and Restricted
Subsidiary Preferred Stock;" provided further, however, that such repurchase
shall be excluded in the calculation of the amount of Restricted Payments;
(e) expend up to $5 million in any fiscal year of the Company
to repurchase common stock of the Company (i) to distribute to current or
former employees, officers and directors of the Company and its Subsidiaries,
(ii) from such current or former employees, officers or directors or (iii)
otherwise in order to distribute as employee compensation; provided, however,
that the time of, and after giving pro forma effect to, any such expenditure,
no other Default or Event of Default shall have occurred and be continuing;
provided further, however, that such repurchase shall be excluded in the
calculation of the amount of Restricted Payments; and
(f) expend up to $40 million for Restricted Payments in
addition to amounts permitted pursuant to clauses (a) through (e) above;
provided, however, that at the time of, and after giving pro forma effect to,
any such expenditure, no other Default or Event of Default shall have occurred
and be continuing; provided further, however, that such expenditures shall be
excluded in the calculation of the amount of Restricted Payments.
Limitation on Liens. The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, Incur or suffer
to exist, any Lien (other than Permitted Liens) upon any of its Property
(including Capital Stock of a Restricted Subsidiary), whether owned at the
Issue Date or thereafter acquired, or any interest therein or any income or
profits therefrom, unless it has made or will make effective provision whereby
the Notes or the Guaranty will be secured by such Lien equally and ratably
with (or prior to) all other Debt of the Company or any Restricted Subsidiary
secured by such Lien.
Limitation on Issuance or Sale of Capital Stock of Restricted
Subsidiaries. The Company shall not (a) sell, pledge, hypothecate or
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary or
(b) permit any Restricted Subsidiary to, directly or indirectly, issue or sell
or otherwise dispose of any shares of its Capital Stock other than (i)
directors' qualifying shares, (ii) to the Company or a Wholly Owned Subsidiary
or (iii) if, immediately after giving effect to such disposition, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary;
provided, however, that, in the case of this clause (iii), (x) such
disposition is effected in compliance with the covenant described under
"Limitation on Asset Sales" and (y) if such Restricted Subsidiary is LTV
Steel, then, upon consummation of such disposition and execution and delivery
of a supplemental indenture in form satisfactory to the Trustee, LTV Steel
shall be released from all its obligations under the Guaranty.
Limitation on Asset Sales. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, consummate
any Asset Sale unless (a) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale (or, in the case of a lease that
is an Asset Sale, the Company or such Restricted Subsidiary is to receive over
the term of such lease consideration) at least equal to the Fair Market Value
of the Property subject to such Asset Sale; (b) at least 75% of the
consideration paid to the Company or such Restricted Subsidiary in connection
with such Asset Sale is in the form of cash, cash equivalents, Additional
Assets or the assumption by the purchaser of liabilities of the Company or any
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes or the Guaranty) as a result of which the Company
and the Restricted Subsidiaries, are no longer obligated with respect to such
liabilities; and (c) the Company delivers an Officers' Certificate to the
Trustee certifying that such Asset Sale complies with the foregoing clauses
(a) and (b).
The Net Available Cash (or any portion thereof) from Asset
Sales may be applied by the Company or a Restricted Subsidiary, to the extent
the Company or such Restricted Subsidiary elects (or is required by the terms
of any Debt): (a) to prepay, repay, legally defease or purchase Senior Debt of
the Company or LTV Steel or Debt of any other Restricted Subsidiary
(excluding, in any such case, Debt owed to the Company or an Affiliate of the
Company); or (b) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary); provided,
however, that in connection with any prepayment, repayment, legal defeasance
or purchase of Debt pursuant to clause (a) above, the Company, LTV Steel or
such other Restricted Subsidiary shall retire such Debt and shall cause the
related loan commitment (if any) to be permanently reduced by an amount equal
to the principal amount so prepaid, repaid, legally defeased or purchased.
Any Net Available Cash from an Asset Sale not applied in
accordance with the preceding paragraph within twelve months from the date of
the receipt of such Net Available Cash shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5 million (taking into
account income earned on such Excess Proceeds, if any), the Company will be
required to make an offer to purchase (the "Prepayment Offer") the Notes which
offer shall be in the amount of the Excess Proceeds, on a pro rata basis
according to principal amount, at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the Purchase Date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. To the extent that any portion
of the amount of Net Available Cash remains after compliance with the
preceding sentence and provided that all holders of Notes have been given the
opportunity to tender their Notes for purchase as described in the following
paragraph, the Company or such Restricted Subsidiary may use such remaining
amount for any purpose permitted by the Indenture and the amount of Excess
Proceeds will be reset to zero.
Within five business days after the Company is obligated to
make a Prepayment Offer as described in the preceding paragraph, the Company
will send a written notice, by first-class mail, to the holders of Notes,
accompanied by such information regarding the Company and its Subsidiaries as
the Company in good faith believes will enable such holders to make an
informed decision with respect to such Prepayment Offer. Such notice will
state, among other things, the purchase price and the purchase date, which
shall be, subject to any contrary requirements of applicable law, a business
day no earlier than 30 days nor later than 60 days from the date such notice
is mailed.
The Company will 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 Notes pursuant to the
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with provisions of the covenant
described hereunder, the Company will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
under the covenant described hereunder by virtue thereof.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist any consensual restriction on the right of any Restricted Subsidiary to
(a) pay dividends, in cash or otherwise, or make any other distributions on or
in respect of its Capital Stock, or pay any Debt or other obligation owed, to
the Company or any other Restricted Subsidiary, (b) make any loans or advances
to the Company or any other Restricted Subsidiary or (c) transfer any of its
Property to the Company or any other Restricted Subsidiary. The foregoing
limitations will not apply (i) with respect to clauses (a), (b) and (c), to
restrictions (A) in effect on the Issue Date, (B) relating to Debt of a
Restricted Subsidiary and existing at the time it became a Restricted
Subsidiary if such restriction was not created in connection with or in
anticipation of the transaction or series of transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was acquired by
the Company, or (C) which result from the Refinancing of Debt Incurred
pursuant to an agreement referred to in the immediately preceding clause
(i)(A) or (B) above or in clause (ii)(A) or (B) below, provided that such
restriction is no less favorable to the holders of Notes than those under the
agreement evidencing the Debt so Refinanced, or (D) on Sales Finance or any
other bankruptcy-remote special-purpose Subsidiary of the Company or any
Restricted Subsidiary that purchases or sells accounts receivable or
inventory pursuant to the Credit Facilities and (ii) with respect to clause
(c) only, to restrictions (A) relating to Debt that is permitted to be
Incurred and secured pursuant to the covenants described under "Limitation
on Debt and Restricted Subsidiary Preferred Stock" and "Limitation on
Liens" that limit the right of the debtor to dispose of the Property
securing such Debt, (B) encumbering Property at the time such Property was
acquired by the Company or any Restricted Subsidiary, so long as such
restriction relates solely to the Property so acquired and was not created
in connection with or in anticipation of such acquisition, (C) resulting
from customary provisions restricting subletting or assignment of leases or
customary provisions in other agreements that restrict assignment of such
agreements or rights thereunder or (D) customary restrictions contained in
asset sale agreements limiting the transfer of such Property pending the
closing of such sale.
Limitation on Transactions with Affiliates. The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, conduct any business or enter into or suffer to exist any
transaction or series of transactions (including the purchase, sale, transfer,
assignment, lease, conveyance or exchange of any Property or the rendering of
any service) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction"), unless (a) the terms of such Affiliate Transaction
are (i) set forth in writing and (ii) no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that could be obtained
in a comparable arm's-length transaction with a Person that is not an
Affiliate of the Company, (b) if such Affiliate Transaction involves aggregate
payments or value in excess of $10 million, the Board of Directors (including
a majority of the disinterested members of the Board of Directors) approves
such Affiliate Transaction and, in its good faith judgment, believes that such
Affiliate Transaction complies with clause (a) of this paragraph as evidenced
by a Board Resolution promptly delivered to the Trustee and (c) if such
Affiliate Transaction involves aggregate payments or value in excess of $25
million, the Company obtains a written opinion from an Independent Appraiser
to the effect that such Affiliate Transaction is fair, from a financial point
of view, to the Company or such Restricted Subsidiary, as the case may be.
Notwithstanding the foregoing limitation, the Company or any
Restricted Subsidiary may enter into or suffer to exist the following:
(i) any transaction or series of transactions between the
Company and one or more Restricted Subsidiaries or between two or
more Restricted Subsidiaries, provided that no more than 5% of the
total voting power of the Voting Stock (on a fully diluted basis) of
any such Restricted Subsidiary is owned by an Affiliate of the
Company (other than a Restricted Subsidiary);
(ii) any Restricted Payment permitted to be made pursuant to the
covenant described under "Limitation on Restricted Payment;"
(iii) any issuance of securities, or other payments, awards or
grants in securities or otherwise pursuant to, or the funding of,
employment arrangements, pension plans, stock options and stock
ownership plans approved by the Board of Directors;
(iv) the payment of reasonable fees to directors of the Company
or such Restricted Subsidiary who are not employees of the Company or
any Restricted Subsidiary;
(v) loans and advances to employees made in the ordinary course of
business and consistent with the past practices of the Company or such
Restricted Subsidiary, as the case may be, provided that such loans and
advances do not exceed $5 million in the aggregate at any one time
outstanding;
(vi) any transaction or series of transactions between the Company
or any Restricted Subsidiary and any of their joint ventures,
provided that (x) such transaction or series of transactions is in
the ordinary course of business between the Company or such
Restricted Subsidiary and such joint venture and is consistent with
the past practices of the Company and the Restricted Subsidiaries
with respect to their joint ventures, (y) if such transaction or
series of transactions constitutes an Investment by the Company, such
Restricted Subsidiary or such joint venture, the other equity
investors in such joint venture (A) participate in such Investment on
the same basis as the Company or such Restricted Subsidiary, (B) have
their interests in such joint venture diluted to the extent such
investors elect not to so participate in such Investment or (C)
individually beneficially own 10% or less of the equity interests in
such joint venture and (z) such joint venture is engaged in a Related
Business; and
(vii) any transaction or series of transactions between the
Company or any Restricted Subsidiary and SMI or any of its affiliates
pursuant to the terms of the Sumitomo Securities Purchase Agreement
and any documents relating thereto, as such Agreement and documents
are in effect on the Issue Date.
Limitation on Sale and Leaseback Transactions. The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale and Leaseback Transaction with respect to any Property unless (a) the
Company or such Restricted Subsidiary would be entitled to (i) Incur Debt in
an amount equal to the Attributable Debt with respect to such Sale and
Leaseback Transaction pursuant to the covenant described under "Limitation on
Debt and Restricted Subsidiary Preferred Stock" and (ii) create a Lien on such
Property securing such Attributable Debt without securing the Notes pursuant
to the covenant described under "Limitation on Liens" and (b) such Sale and
Leaseback Transaction is effected in compliance with the covenant described
under "Limitation on Asset Sales;" provided, however, that the Company or any
Restricted Subsidiary may at any time enter into a Sale and Leaseback
Transaction if the sum of (x) the aggregate amount of Attributable Debt
outstanding at such time with respect to such Sale and Leaseback Transaction
and all other Sale and Leaseback Transactions entered into by the Company or
any Restricted Subsidiary and (y) the aggregate principal amount (in the case
of Debt sold at a discount, at Stated Maturity) of all Secured Debt
outstanding at such time (other than the USWA Secured Obligations and any
Permitted Refinancing Debt in respect thereof to the extent not exceeding $250
million in the aggregate), does not exceed 10% of Consolidated Net Tangible
Assets as determined based on the consolidated balance sheet of the Company as
of the end of the recent fiscal quarter ending at least 45 days prior thereto.
Designation of Restricted and Unrestricted Subsidiaries. The
Board of Directors may designate any Subsidiary of the Company to be an
Unrestricted Subsidiary if (a) the Subsidiary to be so designated does not own
any Capital Stock or Debt of, or own or hold any Lien on any Property of, the
Company or any other Restricted Subsidiary, (b) the Subsidiary to be so
designated is not obligated under any Debt, Lien or other obligation that, if
in default, would result (with the passage of time or notice or otherwise) in
a default on any Debt of the Company or of any Restricted Subsidiary and (c)
either (i) the Subsidiary to be so designated has total assets of $1,000 or
less or (ii) such designation is effective immediately upon such entity
becoming a Subsidiary of the Company or any Restricted Subsidiary. Unless so
designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary
of the Company or of any Wholly Owned Subsidiary will be classified as a
Restricted Subsidiary, provided that the requirements set forth in clauses (x)
and (y) of the immediately following paragraph would be satisfied after giving
pro forma effect to such classification. Any Person not permitted by the
terms of the immediately preceding sentence to be classified as a Restricted
Subsidiary shall be automatically classified as an Unrestricted Subsidiary.
Except as provided in the first sentence of this paragraph, no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if, immediately after giving pro
forma effect to such designation, (x) the Company could Incur at least $1.00
of additional Debt pursuant to clause (a) of the first paragraph of the
covenant described under "Limitation on Debt and Restricted Subsidiary
Preferred Stock" and (y) no Default or Event of Default shall have occurred
and be continuing or would result therefrom.
Any such designation or redesignation by the Board of Directors
will be evidenced to the Trustee by filing with the Trustee a Board Resolution
giving effect to such designation or redesignation and an Officers' Certificate
(a) certifying that such designation or redesignation complies with the
foregoing provisions and (b) giving the effective date of such designation or
redesignation, such filing with the Trustee to occur within 45 days after the
end of the fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal quarter of the Company's fiscal year, within 90 days
after the end of such fiscal year).
Notwithstanding anything to the contrary in the foregoing,
Presque Isle Corporation and L-S Electro-Galvanizing Company, which had $31.3
million and $32.9 million, respectively, of total assets at December 31, 1996
will initially be Unrestricted Subsidiaries.
Merger, Consolidation and Sale of Property
The Company shall not merge, consolidate or amalgamate with or
into any other Person (other than a merger of a Wholly Owned Subsidiary into
the Company) or sell, transfer, assign, lease, convey or otherwise dispose of
all or substantially all its Property in any one transaction or series of
transactions unless: (a) the Company shall be the surviving Person (the
"Surviving Person") or the Surviving Person (if other than the Company) formed
by such merger, consolidation or amalgamation or to which such sale, transfer,
assignment, lease, conveyance or disposition is made shall be a corporation
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia; (b) the Surviving Person (if other
than the Company) expressly assumes, by supplemental indenture in form
satisfactory to the Trustee, executed and delivered to the Trustee by such
Surviving Person, the due and punctual payment of the principal of, and
premium, if any, and interest on, all the Notes, according to their tenor, and
the due and punctual performance and observance of all the covenants and
conditions of the Indenture to be performed by the Company; (c) in the case of
a sale, transfer, assignment, lease, conveyance or other disposition of all
or substantially all the Company's Property, such Property shall have been
transferred as an entirety or virtually as an entirety to one Person; (d)
immediately before and after giving effect to such transaction or series of
transactions on a pro forma basis (and treating, for purposes of this clause
(d) and clauses (e) and (f) below, any Debt which becomes, or is anticipated
to become, an obligation of the Surviving Person or any Restricted Subsidiary
as a result of such transaction or series of transactions as having been
Incurred by the Surviving Person or such Restricted Subsidiary at the time of
such transaction or series of transactions), no Default or Event of Default
shall have occurred and be continuing; (e) immediately after giving effect to
such transaction or series of transactions on a pro forma basis, the Company
or the Surviving Person, as the case may be, would be able to Incur at least
$1.00 of additional Debt under clause (a) of the first paragraph of the
covenant described under "Certain Covenants--Limitation on Debt and Restricted
Subsidiary Preferred Stock;" (f) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Surviving
Person shall have a Consolidated Net Worth in an amount which is not less than
the Consolidated Net Worth of the Company immediately prior to such
transaction or series of transactions; and (g) the Company shall deliver, or
cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of
Counsel, each stating that such transaction and any supplemental indenture in
respect thereto comply with this covenant and that all conditions precedent
herein provided for relating to such transaction have been satisfied.
The Company shall not permit LTV Steel to merge, consolidate or
amalgamate with or into any other Person (other than a merger of a Wholly
Owned Subsidiary into LTV Steel) or sell, transfer, assign, lease, convey or
otherwise dispose of all or substantially all its Property in any one
transaction or series of transactions unless: (a) the Surviving Person (if
not LTV Steel) formed by such merger, consolidation or amalgamation or to
which such sale, transfer, assignment, lease, conveyance or disposition is
made shall be a corporation organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia; (b)
the Surviving Person (if other than LTV Steel) expressly assumes, by
supplemental indenture in form satisfactory to the Trustee, executed and
delivered to the Trustee by such Surviving Person, the due and punctual
performance and observances of all the obligations of LTV Steel under the
Guaranty; (c) in the case of a sale, transfer, assignment, lease, conveyance
or other disposition of all or substantially all the Property of LTV Steel,
such Property shall have been transferred as an entirety or virtually as an
entirety to one Person; (d) immediately before and after giving effect to such
transaction or series of transactions on a pro forma basis (and treating, for
purposes of this clause (d) and clauses (e) and (f) below, any Debt which
becomes, or is anticipated to become, an obligation of the Surviving Person,
the Company or any Restricted Subsidiary as a result of such transaction or
series of transactions as having been incurred by the Surviving Person, the
Company or such Restricted Subsidiary at the time of such transaction or
series of transactions), no Default or Event of Default shall have occurred
and be continuing; (e) immediately after giving effect to such transaction or
series of transactions on a pro forma basis, the Company would be able to
Incur at least $1.00 of additional Debt under clause (a) of the first
paragraph of the covenant described under "Certain Covenants--Limitation on
Debt and Restricted Subsidiary Preferred Stock;" (f) immediately after giving
effect to such transaction or series of transactions on a pro forma basis, the
Company shall have a Consolidated Net Worth in an amount which is not less
than the Consolidated Net Worth of the Company immediately prior to such
transaction or series of transactions; and (g) the Company shall deliver, or
cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of
Counsel, each stating that such transaction and such supplemental indenture,
if any, in respect thereto comply with this covenant and that all conditions
precedent herein provided for relating to such transaction have been
satisfied. The foregoing provisions (other than clause (d)) shall not apply
to any transactions which constitute an Asset Sale if the Company has complied
with the covenant described under "Certain Covenants--Limitation on Asset
Sales."
The Surviving Person will succeed to, and be substituted for,
and may exercise every right and power of the Company under the Indenture (or
of LTV Steel under the Guaranty, as the case may be), but the predecessor
Company in the case of a sale, transfer, assignment, lease, conveyance or
other disposition, shall not be released from the obligation to pay the
principal of, and premium, if any, and interest on, the Notes.
SEC Reports
Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with, or furnish to, the Commission such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and reports to be so
filed at the times specified for the filing of such information, documents and
reports under such Sections (the "Required Filing Times"); provided, however,
that the Company shall not be so obligated to file such information, documents
and reports with the Commission if the Commission does not permit such
filings. The Company shall also in any event (a) within 15 days of each
Required Filing Date, provide the Trustee and the holders of Notes with copies
of such information, documents and reports and (b) if the Commission does not
permit the filing of such information, documents and reports, promptly upon
written request supply copies of such information, documents and reports to any
prospective holder of Notes.
Events of Default
Events of Default in respect of the Notes include: (a) failure
to make the payment of any interest on the Notes when the same becomes due and
payable, and such failure continues for a period of 30 days; (b) failure to
make the payment of any principal of, or premium, if any, on, any of the Notes
when the same becomes due and payable at its Stated Maturity, upon
acceleration, redemption, optional redemption, required repurchase or
otherwise; (c) failure to comply with the covenant described above under
"Merger, Consolidation and Sale of Property;" (d) failure to comply with any
other covenant or agreement in the Notes or in the Indenture (other than a
failure which is the subject of the foregoing clause (a), (b) or (c)) and such
failure continues for 30 days after written notice is given to the Company as
provided below; (e) a default under any Debt by the Company or any Restricted
Subsidiary which results in acceleration of the maturity of such Debt, or
failure to pay any such Debt at maturity, in an aggregate amount greater than
$20 million (the "cross acceleration provisions"); (f) any judgment or
judgments for the payment of money in an aggregate amount in excess of $20
million shall be rendered against the Company or any Restricted Subsidiary and
shall not be waived, satisfied or discharged for any period of 30 consecutive
days during which a stay of enforcement shall not be in effect (the "judgment
default provisions"); (g) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary (the "bankruptcy
provisions"); and (h) the Guaranty ceases to be in full force and effect
(other than in accordance with the terms of the Indenture or the Guaranty) or
LTV Steel denies or disaffirms its obligations under the Guaranty (the
"guaranty provisions"). The Indenture provides that the Trustee may withhold
notice to the holders of the Notes of any Default (except in payment of
principal, premium, if any, or interest) if the Trustee considers it to be in
the best interest of the holders of the Notes to do so.
A Default under clause (d) is not an Event of Default until the
Trustee or the holders of not less than 25% in principal amount of the Notes
then outstanding notify the Company of the Default and the Company does not
cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state
that such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any event which with the giving of notice and the lapse of time would
become an Event of Default, its status and what action the Company is taking
or proposes to take with respect thereto.
The Indenture provides that if an Event of Default with respect
to the Notes (other than an Event of Default resulting from certain events
involving bankruptcy, insolvency or reorganization with respect to the Company
or any Significant Subsidiary) shall have occurred and be continuing, the
Trustee or the registered holders of not less than 25% in aggregate principal
amount of the Notes then outstanding may declare to be immediately due and
payable the principal amount of all the Notes then outstanding, plus accrued
but unpaid interest to the date of acceleration. In case an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Significant Subsidiary shall occur, such amount
with respect to all the Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of the
Notes. The holders of a majority in aggregate principal amount of the
outstanding Notes may, by notice to the Trustee and the Company, rescind any
declaration of acceleration if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
Subject to the provisions of the Indenture relating to the
duties of the Trustee, in case an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders of the Notes, unless such holders shall have offered to the Trustee
reasonable indemnity. Subject to such provisions for the indemnification of
the Trustee, the holders of a majority in aggregate principal amount of the
Notes then outstanding will 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 with respect to the
Notes.
No holder of Notes will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or trustee, or for any remedy thereunder, unless (a) such holder has
previously given to the Trustee written notice of a continuing Event of
Default, (b) the registered holders of at least 25% in aggregate principal
amount of the Notes then outstanding have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as trustee
and (c) the Trustee shall not have received from the registered holders of a
majority in aggregate principal amount of the Notes then outstanding a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a
suit instituted by a holder of any Note for enforcement of payment of the
principal of, and premium, if any, or interest on, such Note on or after the
respective due dates expressed in such Note.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended
with the consent of the registered holders of a majority in aggregate
principal amount of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Notes) and any past
default or compliance with any provisions may also be waived (except a default
in the payment of principal, premium or interest and certain covenants and
provisions of the Indenture which cannot be amended without the consent of
each holder of an outstanding Note) with the consent of the registered holders
of at least a majority in aggregate principal amount of the Notes then
outstanding. However, without the consent of each holder of an outstanding
Note, no amendment may, among other things, (a) reduce the amount of Notes
whose holders must consent to an amendment or waiver, (b) reduce the rate of
or extend the time for payment of interest on any Note, (c) reduce the
principal of or extend the Stated Maturity of any Note, (d) make any Note
payable in money other than that stated in the Note, (e) impair the right of
any holder of the Notes to receive payment of principal of and interest on
such holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such holder's Notes
or the Guaranty, (f) subordinate the Notes to any other obligation of the
Company, (g) release any security interest that may have been granted in favor
of the holders of the Notes, (h) reduce the premium payable upon the
redemption or repurchase of any Note as described under "Optional Redemption"
or "Repurchase at the Option of Holders Upon a Change of Control," (i) at any
time after a Change of Control has occurred, change the time at which the
Change of Control Offer relating thereto must be made or at which the Notes
must be repurchased pursuant to such Change of Control Offer or Prepayment
Offer or (j) make any change in the Guaranty that could adversely affect the
holders of the Notes.
Without the consent of any holder of the Notes, the Company and
the Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to add additional Guarantees
with respect to the Notes or to release LTV Steel from the Guaranty as
provided by the terms of the Indenture, to secure the Notes, to add to the
covenants of the Company for the benefit of the holders of the Notes or to
surrender any right or power conferred upon the Company, to make any change
that does not adversely affect the rights of any holder of the Notes or to
comply with any requirement of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act.
The consent of the holders of the Notes is not necessary under
the Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the
Company is required to mail to each registered holder of the Notes at such
holder's address appearing in the Security Register a notice briefly
describing such amendment. However, the failure to give such notice to all
holders of the Notes, or any defect therein, will not impair or affect the
validity of the amendment.
Defeasance
The Company at any time may terminate all its obligations under
the Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations
to register the transfer or exchange of the Notes, to replace mutilated,
destroyed, lost or stolen Notes and to maintain a registrar and paying agent
in respect of the Notes. The Company at any time may terminate its
obligations under the covenants described under "Repurchase at the Option of
Holders Upon a Change of Control" and "Certain Covenants," the operation of the
cross acceleration provisions, the judgment default provisions, the bankruptcy
provisions with respect to Significant Subsidiaries and the guaranty
provisions described under "Events of Default" above and the limitations
contained in clauses (e) and (f) under the first paragraph, or contained in
the second paragraph, of "Merger, Consolidation and Sale of Property" above
("covenant defeasance"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Notes may not be accelerated because of an Event of Default with
respect thereto. If the Company exercises its covenant defeasance option,
payment of the Notes may not be accelerated because of an Event of Default
specified in clause (d) (with respect to the covenants described under
"Certain Covenants"), (e), (f), (g) (with respect only to Significant
Subsidiaries) or (h) under "Events of Default" above or because of the failure
of the Company to comply with clauses (e) and (f) under the first paragraph,
or with the second paragraph, of "Merger, Consolidation and Sale of Property"
above. If the Company exercises its legal or covenant defeasance option, LTV
Steel will be released from all its obligations under the Guaranty.
In order to exercise either defeasance option, the Company
must, among other things, irrevocably deposit in trust (the "defeasance
trust") with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Notes to maturity or redemption, as the case
may be, and must comply with certain other conditions, including delivery to
the Trustee of an Opinion of Counsel to the effect that holders of the Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred (and, in
the case of legal defeasance only, such Opinion of Counsel must be based on a
ruling of the Internal Revenue Service or other change in applicable Federal
income tax law).
Book-Entry System
The Old Notes were, and the New Notes will initially be, issued
in the form of one or more Global Securities registered in the name of DTC or
its nominee.
Upon the issuance of a Global Security, DTC or its nominee will
credit the accounts of Persons holding through it with the respective
principal amounts of the New Notes represented by such Global Security
purchased by such Persons in the Offering. Ownership of beneficial interests
in a Global Security will be limited to Persons that have accounts with DTC
("participants") or Persons that may hold interests through participants. Any
Person acquiring an interest in a Global Security through an offshore
transaction in reliance on Regulation S under the Securities Act may hold such
interest through Cedel or Euroclear. Ownership of beneficial interests in a
Global Security will be shown on, and the transfer of that ownership interest
will be effected only through, records maintained by DTC (with respect to
participants' interests) and such participants (with respect to the owners of
beneficial interests in such Global Security other than participants). The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.
Payment of principal of and interest on Notes represented by a
Global Security will be made in immediately available funds to DTC or its
nominee, as the case may be, as the sole registered owner and the sole holder
of the Notes represented thereby for all purposes under the Indenture. The
Company has been advised by DTC that upon receipt of any payment of principal
of or interest on any Global Security, DTC will immediately credit, on its
book-entry registration and transfer system, the accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal or face amount of such Global Security as shown on the records
of DTC. Payments by participants to owners of beneficial interests in a
Global Security held through such participants will be governed by standing
instructions and customary practices as is now the case with securities held
for customer accounts registered in "street name" and will be the sole
responsibility of such participants.
A Global Security may not be transferred except as a whole by
DTC or a nominee of DTC to a nominee of DTC or to DTC. A Global Security is
exchangeable for certificated Notes only if (a) DTC notifies the Company that
it is unwilling or unable to continue as a depositary for such Global Security
or if at any time DTC ceases to be a clearing agency registered under the
Exchange Act, (b) the Company in its discretion at any time determines not to
have all the Notes represented by such Global Security or (c) there shall have
occurred and be continuing a Default or an Event of Default with respect to
the Notes represented by such Global Security. Any Global Security that is
exchangeable for certificated Notes pursuant to the preceding sentence will be
exchanged for certificated Notes in authorized denominations and registered in
such names as DTC or any successor depositary holding such Global Security may
direct. Subject to the foregoing, a Global Security is not exchangeable,
except for a Global Security of like denomination to be registered in the name
of DTC or any successor depositary or its nominee. In the event that a Global
Security becomes exchangeable for certificated Notes, (a) certificated Notes
will be issued only in fully registered form in denominations of $1,000 or
integral multiples thereof, (b) payment of principal of, and premium, if any,
and interest on, the certificated Notes will be payable, and the transfer of
the certificated Notes will be registerable, at the office or agency of the
Company maintained for such purposes and (c) no service charge will be made
for any registration of transfer or exchange of the certificated Notes,
although the Company may require payment of a sum sufficient to cover any tax
or governmental charge imposed in connection therewith.
So long as DTC or any successor depositary for a Global
Security, or any nominee, is the registered owner of such Global Security, DTC
or such successor depositary or nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Security for all purposes under the Indenture and the Notes. Except as set
forth above, owners of beneficial interests in a Global Security will not be
entitled to have the Notes represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
certificated Notes in definitive form and will not be considered to be the
owners or holders of any Notes under such Global Security. Accordingly, each
Person owning a beneficial interest in a Global Security must rely on the
procedures of DTC or any successor depositary, and, if such Person is not a
participant, on the procedures of the participant through which such Person
owns its interest, to exercise any rights of a holder under the Indenture. The
Company understands that under existing industry practices, in the event that
the Company requests any action of holders or that an owner of a beneficial
interest in a Global Security desires to give or take any action which a holder
is entitled to give or take under the Indenture, DTC or any successor
depositary would authorize the participants holding the relevant beneficial
interest to give or take such action and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning
through them.
DTC has advised the Company that DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and
to facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations some of whom
(or their representatives) own DTC. Access to DTC's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in Global Securities among participants of
DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Company, the Trustee or the Initial Purchasers will have any responsibility
for the performance by DTC or its participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
Governing Law
The Indenture and the Notes are governed by the internal laws
of the State of New York without reference to principles of conflicts of law.
The Trustee
The Chase Manhattan Bank will be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Notes.
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 of the rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise
as a prudent Person would exercise under the circumstances in the conduct of
such Person's own affairs. The Chase Manhattan Bank is a lender and agent
under the credit facility with Trico, the Company's minimill joint venture,
and engages in other general financing and banking services for the Company
and its affiliates.
Certain Definitions
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for the full
definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Additional Assets" means (a) any Property (other than cash,
cash equivalents or securities) to be owned by the Company or any Restricted
Subsidiary; or (b) Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary from any Person other than the Company or an
Affiliate of the Company.
"Affiliate" of any specified Person means (a) any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person who
is a director or officer of (i) such specified Person, (ii) any Subsidiary of
such specified Person or (iii) any Person described in clause (a) above. 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 "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the covenants
described under "Certain Covenants--Limitation on Transactions with
Affiliates", "Limitation on Asset Sales" and the definition of the term
"Additional Assets" only, "Affiliate" shall also mean any beneficial owner of
shares representing 5% or more of the total voting power of the Voting Stock
(on a fully diluted basis) of the Company or of rights or warrants to purchase
such Voting Stock (whether or not currently exercisable) and any Person who
would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Asset Sale" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction or by
means of a disposition of Capital Stock permitted by clause (iii) of the
covenant described under "Certain Covenants--Limitation on Issuance and Sale
of Capital Stock of Restricted Subsidiaries" (each referred to for the
purposes of this definition as a "disposition"), of (a) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares),
(b) all or substantially all the assets of any division or line of business of
the Company or any Restricted Subsidiary or (c) any other assets of the Company
or any Restricted Subsidiary outside of the ordinary course of business of the
Company or such Restricted Subsidiary (other than (i) in the case of clauses
(a), (b) and (c) above, any disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (ii) in the case of clauses (b) and (c) above, (x) any disposition
of accounts receivable or inventory by or to the Company or any Restricted
Subsidiary to or from Sales Finance or any other bankruptcy-remote,
special-purpose Subsidiary of the Company in connection with the Incurrence of
Debt by such Subsidiary under the Credit Facilities or (y) any disposition of
Property having, together with other Property disposed of pursuant to such
clauses during the same fiscal year, an aggregate Fair Market Value of less
than $25 million and (iii) in the case of clause (c) above, any disposition
effected in compliance with the first paragraph of the covenant described
under "Merger, Consolidation and Sale of Property").
"Attributable Debt" in respect of a Sale and Leaseback
Transaction means, at any date of determination, (a) if such Sale and
Leaseback Transaction is a Capital Lease Obligation, the amount of Debt
represented thereby according to the definition of the term "Capital Lease
Obligation" and (b) in all other instances, the present value (discounted at
the actual rate of interest implicit in such transaction, compounded annually)
of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale and Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of any date of determination, with
respect to any Debt or Preferred Stock, the quotient obtained by dividing (a)
the sum of the product of the numbers of years (rounded to the nearest
one-twelfth of one year) from the date of determination to the dates of each
successive scheduled principal payment of such Debt or redemption or similar
payment with respect to such Preferred Stock multiplied by the amount of such
payment by (b) the sum of all such payments.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such
Board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification.
"Capital Expenditure Debt" means Debt Incurred by any Person to
finance a capital expenditure so long as (a) such capital expenditure is or
should be included as an addition to "Property, Plant and Equipment" in
accordance with GAAP and (b) such Debt is Incurred within 180 days of the date
such capital expenditure is made.
"Capital Lease Obligations" means any obligation under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP; and the amount of Debt represented by such obligation
shall be the capitalized amount of such obligations determined in accordance
with GAAP; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of
a penalty. For purposes of "Certain Covenants--Limitation on Liens," a
Capital Lease Obligation shall be deemed secured by a Lien on the Property
being leased.
"Capital Stock" means, with respect to any Person, any shares
or other equivalents (however designated) of corporate stock, partnership
interests or any other participations, rights, warrants, options or other
interests in the nature of an equity interest in such Person, including
Preferred Stock, but excluding any debt security convertible or exchangeable
into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate Net Cash
Proceeds received by the Company from the issuance or sale (other than to a
Subsidiary of the Company or an employee stock ownership plan or trust
established by the Company or any of its Subsidiaries for the benefit of their
employees) by the Company of any class of its Capital Stock (other than
Disqualified Stock) after the Issue Date.
"Change of Control" means the occurrence of any of the
following events:
(a) if any "Person" or "group" (as such terms are used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provisions
to either of the foregoing), including any group acting for the purpose of
acquiring, holding, voting or disposing of securities within the meaning of
Rule 13d-5(b)(1) under the Exchange Act, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, except that a Person will be
deemed to have "beneficial ownership" of all shares that any such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of 50% or more of the
total voting power of all classes of the Voting Stock of the Company (for
purposes of this clause (a), such other Person or group shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the "parent corporation") so long
as such other Person or group beneficially owns, directly or indirectly, in
the aggregate a majority of the voting power of all classes of the Voting
Stock of such parent corporation); or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the assets of
the Company and the Restricted Subsidiaries, considered as a whole (other than
a disposition of such assets as an entirety or virtually as an entirety to a
Wholly Owned Subsidiary) shall have occurred, or the Company merges,
consolidates or amalgamates with or into any other Person or any other Person
merges, consolidates or amalgamates with or into the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is reclassified into or exchanged for cash, securities or other
Property, other than any such transaction where (i) the outstanding Voting
Stock of the Company is reclassified into or exchanged for Voting Stock of the
surviving corporation and (ii) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the Voting Stock of the surviving corporation immediately
after such transaction and in substantially the same proportion as before the
transaction; or
(c) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (together
with any new directors whose election or appointment by such Board or whose
nomination for election by the shareholders of the Company was approved by a
vote of 66-2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(d) the shareholders of the Company shall have approved any
plan of liquidation or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Trust Agreement" means the Collateral Trust
Agreement dated as of May 15, 1993, as amended through the Issue Date, among
the Company, LTV Steel Company, Inc., the USWA and Bank One Ohio Trust
Company, N.A., as collateral trustee.
"Commodity Price Protection Agreement" means, in respect of a
Person, any forward contract, commodity swap agreement, commodity option
agreement or other similar agreement or arrangement designed to protect such
Person against fluctuations in commodity prices.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of liabilities of the Company and its
consolidated Restricted Subsidiaries which may properly be classified as
current liabilities (including taxes accrued as estimated), after eliminating
(a) all intercompany items between the Company and any Restricted Subsidiary
or between Restricted Subsidiaries and (b) all current maturities of long-term
Debt.
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) the aggregate amount of EBITDA for the period
of the most recent four consecutive fiscal quarters ending at least 45 days
prior to such determination date to (b) Consolidated Interest Expense for such
four fiscal quarters; provided, however, that (i) if the Company or any
Restricted Subsidiary has Incurred any Debt since the beginning of such period
that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio is an Incurrence of Debt,
or both, Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Debt as if such Debt had been
Incurred on the first day of such period and the discharge of any other Debt
repaid, repurchased, defeased or otherwise discharged with the proceeds of
such new Debt as if such discharge had occurred on the first day of such
period, (ii) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Sale or if the transaction
giving rise to the need to calculate the Consolidated Interest Coverage Ratio
is an Asset Sale, or both, EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive) directly attributable to the assets which
are the subject of such Asset Sale for such period, or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such
period, in either case as if such Asset Sale had occurred on the first day of
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable
to any Debt of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with such Asset Sale for such
period, as if such Asset Sale had occurred on the first day of such period
(or, if the Capital Stock of any Restricted Subsidiary is sold, by an amount
equal to the Consolidated Interest Expense for such period directly
attributable to the Debt of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for
such Debt after such sale), (iii) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made
an Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of Property, including any
acquisition of Property occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all
of an operating unit of a business, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Debt) as if such Investment or acquisition
occurred on the first day of such period and (iv) if since the beginning of
such period any Person (that subsequently became a Restricted Subsidiary or
was merged with or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any Asset Sale, Investment or
acquisition of Property that would have required an adjustment pursuant to
clause (ii) or (iii) above if made by the Company or a Restricted Subsidiary
during such period, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if such Asset
Sale, Investment or acquisition occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of Property, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Debt incurred
in connection therewith, the pro forma calculations shall be determined in
good faith by a responsible financial or accounting Officer and as further
contemplated by the definition of the term "pro forma." If any Debt bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Debt shall be calculated as if the rate in effect on the date
of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Debt if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent incurred by the Company or its Restricted Subsidiaries, (a)
interest expense attributable to capital leases, (b) amortization of debt
discount and debt issuance cost, (c) capitalized interest, (d) non-cash
interest expenses, (e) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (f) net
costs associated with Hedging Obligations (including amortization of fees),
(g) Redeemable Dividends, (h) Preferred Stock dividends in respect of all
Preferred Stock of Restricted Subsidiaries held by Persons other than the
Company or a Wholly Owned Subsidiary, (i) interest incurred in connection with
Investments in discontinued operations, (j) interest accruing on any Debt of
any other Person to the extent such Debt is Guaranteed by the Company or any
Restricted Subsidiary and (k) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its consolidated Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income (a) any net
income (loss) of any Person (other than the Company) if such Person is not a
Restricted Subsidiary, except that (i) subject to the exclusion contained in
clause (d) below, the Company's equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (c) below) and (ii) the
Company's equity in a net loss of any such Person (other than an Unrestricted
Subsidiary) for such period shall be included in determining such Consolidated
Net Income, (b) any net income (loss) of any Person acquired by the Company or
any of its consolidated Subsidiaries in a pooling of interests transaction for
any period prior to the date of such acquisition, (c) any net income (loss) of
any Restricted Subsidiary to the extent that such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends
or the making of distributions, directly or indirectly, to the Company, except
that (i) subject to the exclusion contained in clause (d) below, the Company's
equity in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate amount
of cash distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to another
Restricted Subsidiary, to the limitation contained in this clause) and (ii)
the Company's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income, (d) any
gain (but not loss) realized upon the sale or other disposition of any
Property of the Company or any of its consolidated Subsidiaries (including
pursuant to any Sale and Leaseback Transaction) which is not sold or otherwise
disposed of in the ordinary course of business, (e) any extraordinary gain or
loss, (f) any unusual or nonrecurring non-cash charge or credit separately
identified on the Company's consolidated income statement for such period,
provided that (i) to the extent any such charge (other than the charge
referred to in clause (i) below) represents an accrual of or reserve for
cash expenditures in any future period, such cash expenditure shall be
included in Consolidated Net Income for such future period or (ii) for
purposes of the covenant described under "Certain Covenants Limitation on
Restricted Payments" only, to the extent any such credit will result in the
receipt of cash payments in any future period, such cash payment shall be
included in Consolidated Net Income for such future period, (g) the
cumulative effect of a change in accounting principles, (h) any non-cash
compensation expense realized for grants of performance shares, stock
options or other stock awards to officers, directors and employees of the
Company or any Restricted Subsidiary and (i) for purposes of the covenant
described under "Certain Covenants Limitation on Restricted Payments" only,
the special charge (in an amount not to exceed $150 million) to be taken
with respect to the proposed shutdown of the Pittsburgh coke facility
announced by the Company in July 1997; provided further, however, that
there shall be added to such Consolidated Net Income any provision for
taxes not payable in cash.
"Consolidated Net Tangible Assets" means, as of any date of
determination, the sum of the amounts that would appear on a consolidated
balance sheet of the Company and its consolidated Restricted Subsidiaries as
the total assets (less accumulated depreciation, depletion and amortization,
allowances for doubtful receivables, adjustments for pension liabilities,
other applicable reserves and other properly deductible items) of the Company
and its Restricted Subsidiaries, after giving effect to purchase accounting
and after deducting therefrom Consolidated Current Liabilities and, to the
extent otherwise included, the amounts of (without duplication): (a) the
excess of cost over fair market value of assets or businesses acquired; (b)
any revaluation or other write-up in book value of assets subsequent to the
last day of the fiscal quarter of the Company immediately preceding the Issue
Date as a result of a change in the method of valuation in accordance with
GAAP; (c) unamortized debt discount and expenses and other unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, licenses, organization or developmental expenses and other
intangible items; (d) minority interests in consolidated Subsidiaries held by
Persons other than the Company or any Restricted Subsidiary; (e) treasury
stock; (f) cash or securities set aside and held in a sinking or other
analogous fund established for the purpose of redemption or other retirement
of Capital Stock to the extent such obligation is not reflected in
Consolidated Current Liabilities; and (g) Investments in and assets of
Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown
on the consolidated balance sheet of the Company and its Restricted
Subsidiaries as of the end of the most recent fiscal quarter of the Company
ending at least 45 days prior to the taking of any action for the purpose of
which the determination is being made, as (a) the par or stated value of all
outstanding Capital Stock of the Company plus (b) paid-in capital or capital
surplus relating to such Capital Stock plus (c) any retained earnings or
earned surplus less (i) any accumulated deficit, (ii) any amounts attributable
to Disqualified Stock and (iii) any adjustments for pension liabilities.
"Credit Facilities" means the Receivables Credit Agreement and
the Letter of Credit Agreement, in each case together with any extensions,
revisions, refinances or replacements thereof by a lender or syndicate of
lenders (including through the sale of accounts receivable or inventory to
such lender or lenders or to Sales Finance or any other bankruptcy-remote
special-purpose Subsidiary of the Company that purchases such accounts
receivable or inventory).
"Currency Exchange Protection Agreement" means, in respect of a
Person, any foreign exchange contract, currency swap agreement, currency
option or other similar agreement or arrangement designed to protect such
Person against fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date of
determination (without duplication), (a) the principal of and premium (if any)
in respect of (i) debt of such Person for money borrowed and (ii) debt
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable; (b) all Capital Lease
Obligations of such Person and all Attributable Debt in respect of Sale and
Leaseback Transactions entered into by such Person; (c) all obligations of
such Person issued or assumed as the deferred purchase price of Property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (d) all obligations of such
Person for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect
to letters of credit securing obligations (other than obligations described in
(a) through (c) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to
the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit); (e) the amount of all obligations
of such Person with respect to the redemption, repayment or other repurchase
of any Disqualified Stock or, with respect to any Subsidiary of such Person,
any Preferred Stock (but excluding, in each case, any accrued dividends); (f)
all obligations of the type referred to in clauses (a) through (e) of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any Guarantee; (g) all
obligations of the type referred to in clauses (a) through (f) of other
Persons secured by any Lien on any Property or asset of such Person (whether
or not such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such Property or
assets or the amount of the obligation so secured; (h) to the extent not
otherwise included in this definition, Hedging Obligations of such Person; and
(i) to the extent not otherwise included in this definition, any financing of
accounts receivable or inventory of such Person (whether or not treated as a
sale or debt for accounting purposes); provided that such accounts receivable
or inventory shall be deemed to be on the consolidated balance sheet of the
Company for purposes of clause (b)(ii) of the definition of "Permitted Debt".
The amount of Debt of any Person at any date shall be the outstanding balance
at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person,
Redeemable Stock of such Person as to which the maturity, mandatory
redemption, redemption at the option of the holder thereof, conversion or
exchange occurs, or may occur, on or prior to the first anniversary of the
Stated Maturity of the Notes; provided, however, that Redeemable Stock of such
Person that would not otherwise be characterized as Disqualified Stock under
this definition shall not constitute Disqualified Stock if such Redeemable
Stock is convertible or exchangeable into Debt solely at the option of the
issuer thereof.
"EBITDA" means, for any period, an amount equal to, for the
Company and its consolidated Restricted Subsidiaries, (a) the sum of
Consolidated Net Income for such period, plus the following to the extent
reducing Consolidated Net Income for such period: (i) the provision for taxes
for such period based on income or profits or utilized in computing net loss,
(ii) Consolidated Interest Expense, (iii) depreciation and amortization of
fixed and intangible assets and (iv) any other non-cash items (other than any
such non-cash item to the extent that it represents an accrual of or reserve
for cash expenditures in any future period), minus (b) all non-cash items
increasing Consolidated Net Income for such period (other than any such
non-cash item to the extent that it will result in the receipt of cash
payments in any future period). Notwithstanding the foregoing, the provision
for taxes based on the income or profits of, and the depreciation and
amortization of, a Restricted Subsidiary shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its stockholders.
"Event of Default" has the meaning set forth under "Events of
Default."
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, with respect to any Property, the
price (or, in the case of a lease, the rent) which could be negotiated in an
arm's-length free market transaction, for cash, between a willing seller (or
lessor) and a willing buyer (or lessee), neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (a) if such Property has a Fair
Market Value equal to or less than $25 million, by any Officer of the Company
or (b) if such Property has a Fair Market Value in excess of $25 million, by a
majority of the Board of Directors and evidenced by a Board Resolution, dated
within 30 days of the relevant transaction, delivered to the Trustee.
"GAAP" means United States generally accepted accounting
principles as in effect on the Issue Date, including those set forth (a) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (b) in the statements and
pronouncements of the Financial Accounting Standards Board, (c) in such other
statements by such other entity as approved by a significant segment of the
accounting profession and (d) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Debt of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such
Person (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt of such other Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
The term "Guarantor" shall mean any Person Guaranteeing any obligation.
"Guaranty" means the Guaranty on the terms set forth in the
Indenture by LTV Steel of the Company's obligations with respect to the Notes.
"Hedging Obligation" of any Person means any obligation of such
Person pursuant to any Interest Rate Agreement, Currency Exchange Protection
Agreement, Commodity Price Protection Agreement or any other similar agreement
or arrangement.
"Incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by merger, conversion, exchange or
otherwise), extend, assume, Guarantee or become liable in respect of such Debt
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Debt or obligation on the balance sheet of such Person
(and "Incurrence" and "Incurred" shall have meanings correlative to the
foregoing); provided, however, that a change in GAAP that results in an
obligation of such Person that exists at such time, and is not theretofore
classified as Debt, becoming Debt shall not be deemed an Incurrence of such
Debt; provided further, however, that solely for purposes of determining
compliance with "Certain Covenants--Limitation on Debt and Restricted
Subsidiary Preferred Stock," amortization of debt discount shall not be deemed
to be the Incurrence of Debt, provided that in the case of Debt sold at a
discount, the amount of such Debt Incurred shall at all times be the aggregate
principal amount at Stated Maturity.
"Independent Appraiser" means, an investment banking firm of
national standing or any third party appraiser of national standing, provided
that such firm or appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect against fluctuations
in interest rates.
"Investment" by any Person means any direct or indirect loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person), advance
or other extension of credit or capital contribution (by means of transfers of
cash or other Property to others or payments for Property or services for the
account or use of others, or otherwise) to, or Incurrence of a Guarantee of
any obligation of, or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Debt issued by, any other
Person. In determining the amount of any Investment made by transfer of any
Property other than cash, such Property shall be valued at its Fair Market
Value at the time of such Investment.
"Investment Grade Rating" means a rating equal to or higher
than Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.
"Investment Grade Status" shall be deemed to have been reached
on the date that the Notes have an Investment Grade Rating from both Rating
Agencies.
"Issue Date" means the date on which the Notes are initially
issued.
"Lien" means, with respect to any Property of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any
easement not materially impairing usefulness or marketability), encumbrance,
preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such Property
(including any Capital Lease Obligation, conditional sale or other title
retention agreement having substantially the same economic effect as any of
the foregoing or any Sale and Leaseback Transaction, but excluding any
operating lease (except Sale and Leaseback Transactions) entered into in the
ordinary course of such Person's business).
"Moody's" means, Moody's Investors Service, Inc. or any
successor to the rating agency business thereof.
"Net Available Cash" from any Asset Sale means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Debt or other obligations relating to the Property that is the subject of such
Asset Sale or received in any other noncash form), in each case net of (a) all
legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local taxes
required to be accrued as a liability under GAAP, as a consequence of such
Asset Sale, (b) all payments made on any Debt which is secured by any Property
subject to such Asset Sale, in accordance with the terms of any Lien upon or
other security agreement of any kind with respect to such Property, or which
must by its terms, or in order to obtain a necessary consent to such Asset
Sale, or by applicable law, be repaid out of the proceeds from such Asset
Sale, (c) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Sale and (d) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with the GAAP, against any liabilities associated with
the Property disposed in such Asset Sale and retained by the Company or any
Restricted Subsidiary after such Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or sale
of Capital Stock, the cash proceeds of such issuance or sale, net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the President and Chief Executive Officer, the
Chief Financial Officer or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two
Officers of the Company, at least one of whom shall be the principal executive
officer or principal financial officer of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion from legal counsel
who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Liens" means:
(a) Liens to secure Debt permitted to be Incurred under clause
(b) of the second paragraph of the covenant described under "Certain
Covenants--Limitation on Debt and Restricted Subsidiary Preferred Stock,"
provided that any such Lien is limited to the accounts receivable and
inventory (and insurance proceeds and other Property similarly incidental
thereto) of the Company and the Restricted Subsidiaries and any securities
issued by Sales Finance or any other bankruptcy-remote, special purpose
Subsidiary of the Company that purchases such accounts receivable or inventory
in connection with the Incurrence of such Debt;
(b) Liens to secure Debt permitted to be Incurred under clause
(c) of the second paragraph of the covenant described under "Certain
Covenants--Limitation on Debt and Restricted Subsidiary Preferred Stock,"
provided that any such Lien may not extend to any Property of the Company or
any Restricted Subsidiary other than (i) the Property acquired, constructed or
leased with the proceeds of such Debt, (ii) all improvements and accessions to
such Property and (iii) in the case of personal Property, any real Property
underlying such personal Property;
(c) Liens for taxes, assessments or governmental charges or
levies on the Property of the Company or any Restricted Subsidiary if the same
shall not at the time be delinquent or thereafter can be paid without penalty,
or are being contested in good faith and by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision that shall be required in conformity with GAAP shall
have been made therefor;
(d) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens on the Property of the Company or any Restricted Subsidiary
arising in the ordinary course of business and securing payment of obligations
which are not more than 60 days past due or are being contested in good faith
and by appropriate proceedings;
(e) Liens on the Property of the Company or any Restricted
Subsidiary Incurred in the ordinary course of business to secure performance
of obligations with respect to statutory or regulatory requirements,
performance or return-of-money bonds, surety bonds or other obligations of a
like nature and Incurred in a manner consistent with industry practice, in
each case which are not incurred in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the deferred purchase
price of Property and which do not in the aggregate impair in any material
respect the use of Property in the operation of the business of the Company
and the Restricted Subsidiaries taken as a whole;
(f) Liens on Property at the time the Company or any Restricted
Subsidiary acquired such Property, including any acquisition by means of a
merger or consolidation with or into the Company or any Restricted Subsidiary;
provided, however, that any such Lien may not extend to any other Property of
the Company or any Restricted Subsidiary; provided further, however, that such
Liens shall not have been Incurred in anticipation or in connection with the
transaction or series of transactions pursuant to which such Property was
acquired by the Company or any Restricted Subsidiary;
(g) Liens on the Property of a Person at the time such Person
becomes a Restricted Subsidiary; provided, however, that any such Lien may not
extend to any other Property of the Company or any other Restricted Subsidiary
which is not a direct Subsidiary of such Person; provided further, however,
that any such Lien was not Incurred in anticipation of or in connection with
the transaction or series of transactions pursuant to which such Person became
a Restricted Subsidiary;
(h) pledges or deposits by the Company or any Restricted
Subsidiary under workmen'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 Debt) or leases to which the Company
or any Restricted Subsidiary is party, or deposits to secure public or
statutory obligations of the Company, or deposits for the payment of rent, in
each case Incurred in the ordinary course of business;
(i) utility easements, building restrictions and such other
encumbrances or charges against real Property as are of a nature generally
existing with respect to properties of a similar character;
(j) Liens existing on the Issue Date not otherwise described in
clauses (a) through (i) above, including the Lien securing the USWA Secured
Obligations, provided that such Lien may be extended from time to time to
Property of the Company or any Restricted Subsidiary not subject thereto on
the Issue Date to the extent any such extension is required by the terms of
the Collateral Trust Agreement as in effect on the Issue Date;
(k) Liens on the Property of the Company or any Restricted
Subsidiary to secure any Refinancing, in whole or in part, of any Debt secured
by Liens referred to in clause (a), (b), (f), (g) or (j) above; provided,
however, that any such Lien shall be limited to all or part of the same
Property that secured the original Lien (together with improvements and
accessions to such Property) and the aggregate principal amount of Debt that
is secured by such Lien shall not be increased to an amount greater than the
sum of (i) the outstanding principal amount, or, if greater, the committed
amount, of the Debt secured by Liens described under clause (a), (b), (f), (g)
or (j) above, as the case may be, at the time the original Lien became a
Permitted Lien under the Indenture and (ii) an amount necessary to pay any
premiums, fees and other expenses incurred by the Company or such Restricted
Subsidiary in connection with such Refinancing; or
(l) Liens securing Debt not otherwise described in clauses (a)
through (k) above, provided that at the time any such Lien is Incurred the sum
of (i) the aggregate principal amount (in the case of Debt sold at a discount,
at Stated Maturity) of all Secured Debt outstanding at such time (other than
the USWA Secured Obligations and any Permitted Refinancing Debt in respect
thereof to the extent not exceeding $250 million in the aggregate) and (ii)
the aggregate amount of Attributable Debt outstanding at such time with
respect to Sale and Leaseback Transactions entered into by the Company or any
Restricted Subsidiary, does not exceed 10% of Consolidated Net Tangible
Assets, as determined based on the consolidated balance sheet of the Company
as of the end of the most recent fiscal quarter ending at least 45 days prior
thereto.
"Permitted Refinancing Debt" means any Debt that Refinances any
other Debt, including any successive Refinances, so long as (a) such Debt is
in an aggregate principal amount (or if Incurred with original issue discount,
an aggregate issue price) not in excess of the sum of (i) the aggregate
principal amount (or if Incurred with original issue discount, the aggregate
accreted value) then outstanding of the Debt being Refinanced and (ii) an
amount necessary to pay any fees and expenses, including premiums and
defeasance costs, related to such Refinancing, (b) the Average Life of such
Debt is equal to or greater than the Average Life of the Debt being
Refinanced, (c) the Stated Maturity of such Debt is no earlier than the
earlier of (i) the Stated Maturity of the Debt being Refinanced and (ii) the
date that is at least one year and one day after the Stated Maturity of the
Notes and (d) the new Debt shall not be senior in right of payment to the Debt
that is being Refinanced; provided, however, that Permitted Refinancing Debt
shall not include (a) Debt of a Subsidiary that Refinances Debt of the Company
or (b) Debt of the Company or a Restricted Subsidiary that Refinances Debt of
an Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including
any limited liability or joint-stock company), partnership, joint venture,
association, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
shares of any other class of Capital Stock issued by such Person.
"Property" means, with respect to any Person, any interest of
such Person in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, including Capital Stock in, and other securities
of, any other Person. For purposes of any calculation required pursuant to
the Indenture, the value of any Property shall be its Fair Market Value.
"Public Equity Offering" means an underwritten public offering
of common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Rating Agencies" mean Moody's and S&P.
"Redeemable Dividend" means, for any dividend with respect to
Redeemable Stock, the quotient of the dividend divided by the difference
between one and the maximum statutory federal income tax rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such
Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any
Capital Stock that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or otherwise (a) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b)
is or may become redeemable or repurchaseable at the option of the holder
thereof, in whole or in part, or (c) is convertible or exchangeable for Debt
or Disqualified Stock.
"Refinance" means, in respect of any Debt, to refinance,
extend, renew, refund, reply, prepay, redeem, defease or retire, or to issue
other Debt, in exchange or replacement for, such Debt. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Restricted Payment" means (a) any dividend or distribution
(whether made in cash, securities or other Property) declared or paid on or
with respect to any shares of Capital Stock of the Company or any Restricted
Subsidiary (including any payment in connection with any merger or
consolidation with or into the Company or any Restricted Subsidiary), except
for any dividend or distribution which is made solely to the Company or a
Restricted Subsidiary (and, if such Restricted Subsidiary is not a Wholly
Owned Subsidiary, to the other shareholders of such Restricted Subsidiary on a
pro rata basis) or any dividend or distribution payable solely in shares of
Capital Stock (other than Redeemable Stock) of the Company; (b) any payment
made by the Company or any Restricted Subsidiary to purchase, redeem,
repurchase, acquire or retire for value any Capital Stock of the Company or
any Affiliate of the Company (other than a Restricted Subsidiary) or (c) any
payment made by the Company or any Restricted Subsidiary to purchase, redeem,
repurchase, defease or otherwise acquire or retire for value, prior to any
scheduled maturity, scheduled sinking fund or mandatory redemption payment,
any Subordinated Obligation (other than the purchase, repurchase, or other
acquisition of any Subordinated Obligation purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition).
"Restricted Subsidiary" means (a) any Subsidiary of the Company
after the Issue Date unless such Subsidiary shall have been designated an
Unrestricted Subsidiary as permitted or required pursuant to "Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries" and (b) an
Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary as
permitted pursuant to "Certain Covenants--Designation of Restricted and
Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Ratings Service or any successor
to the rating agency business thereof.
"Sale and Leaseback Transaction" means any arrangement relating
to Property now owned or hereafter acquired whereby the Company or a
Restricted Subsidiary transfers such Property to another Person and the
Company or a Restricted Subsidiary leases it from such Person, other than any
such arrangement with respect to Property acquired or placed into service by
the Company or any Restricted Subsidiary after the Issue Date to the extent
entered into within 365 days after the date of such acquisition or placement
into service and not constituting a Capital Lease Obligation.
"Secured Debt" means any Debt of the Company or any Restricted
Subsidiary secured by a Lien.
"Senior Debt" of the Company means (a) all obligations
consisting of the principal, premium, if any, and accrued and unpaid interest
in respect of (i) Debt of the Company for borrowed money and (ii) Debt of the
Company evidenced by notes, debentures, bonds or other similar instruments
permitted under the Indenture for the payment of which the Company is
responsible or liable; (b) all Capital Expenditure Debt of the Company; (c)
all obligations of the Company (i) for the reimbursement of any obligor on any
letter of credit, bankers' acceptance or similar credit transaction or (ii)
under Hedging Obligations; and (d) all obligations of other Persons of the
type referred to in clauses (a) and (b) for the payment of which the Company
is responsible or liable as Guarantor; provided, however, that Senior Debt of
the Company shall not include (A) Debt of the Company that is by its terms
subordinate in right of payment to the Notes; (B) any Debt Incurred in
violation of the provisions of the Indenture; (C) accounts payable or any
other obligations of the Company to trade creditors created or assumed by the
Company in the ordinary course of business in connection with the obtaining of
materials or services (including Guarantees thereof or instruments evidencing
such liabilities); (D) any liability for Federal, state, local or other taxes
owed or owing by the Company; (E) any obligation of the Company to any
Subsidiary; or (F) any obligations with respect to any Capital Stock. "Senior
Debt" of LTV Steel has a correlative meaning, provided that clause (E) above
shall be deemed to refer to any obligations of LTV Steel to the Company or any
subsidiary of the Company.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Debt of the Company or LTV
Steel (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes or the Guaranty
pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any specified Person, any
corporation, company, partnership, joint venture, association or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
"Unrestricted Subsidiary" means (a) any Subsidiary of the
Company in existence on the Issue Date that is not a Restricted Subsidiary;
(b) any Subsidiary of an Unrestricted Subsidiary; (c) any Subsidiary of the
Company that is designated after the Issue Date as an Unrestricted Subsidiary
as permitted pursuant to the covenant described under "Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries" and not
thereafter redesignated as a Restricted Subsidiary as permitted pursuant
thereto; and (d) Presque Isle Corporation and L-S Electro-Galvanizing Company.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"USWA Secured Obligations" means the retiree health benefit,
plan contribution and other obligations of the Company and its Subsidiaries
secured by a Lien granted to the USWA pursuant to the Collateral Trust
Agreement.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted
Subsidiary all the Voting Stock of which (except directors' qualifying shares)
is at such time owned, directly or indirectly, by the Company and its other
Wholly Owned Subsidiaries.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with sales of New 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 90 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any such broker-dealer for use in
connection with any such resale. In addition, until March 11, 1998 (90 days
after the date of this Prospectus), all dealers effecting transactions in the
New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New
Notes by broker-dealers. New 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 New 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 New Notes. Any
broker-dealer that resells New 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 New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on
any such resale of New 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 90 days after the Expiration Date 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 in the Registration Agreement to
indemnify each broker-dealer reselling New Notes pursuant to this Prospectus,
and their officers, directors and controlling persons, against certain
liabilities in connection with the offer and sale of the New Notes, including
liabilities under the Securities Act, or to contribute to payments that such
broker-dealers may be required to make in respect thereof.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed
upon for the Company by Davis Polk & Wardwell.
EXPERTS
The consolidated financial statements of The LTV Corporation as
of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 included and incorporated by reference in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included and
incorporated herein by reference. Such consolidated financial statements are
included and incorporated by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
THE LTV CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Interim Financial Information (unaudited) ----
Consolidated Statement of Operations for the nine months ended
September 30, 1997 and 1996......................................... F-2
Consolidated Balance Sheet at September 30, 1997...................... F-3
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1997 and 1996......................................... F-4
Notes to Consolidated Financial Statements............................ F-5
Year-End Financial Information (audited)
Report of Ernst & Young LLP, Independent Auditors..................... F-10
Consolidated Statement of Income for the years ended December 31,
1996, 1995 and 1994................................................ F-11
Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1995 and 1994................................................ F-12
Consolidated Balance Sheet at December 31, 1996 and 1995............. F-13
Consolidated Statement of Shareholders', Equity for the years ended
December 31, 1996, 1995 and 1995................................... F-15
Notes to Consolidated Financial Statements........................... F-16
THE LTV CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1997 1996
-------- --------
<S> <C> <C>
Sales.................................................................................. $3,299.1 $3,117.1
Costs and expenses:
Cost of products sold............................................................ 2,827.7 2,720.9
Depreciation and amortization.................................................... 198.1 201.2
Selling, general and administrative.............................................. 119.6 106.4
Results of affiliates operations................................................. 26.3 --
Net interest and other income.................................................... (26.4) (27.9)
Special charge........................................................................ 150.0 --
-------- --------
Total............................................................................ 3,295.3 3,000.6
-------- --------
Income before income taxes............................................................. 3.8 116.5
Income tax provision
Taxes payable.................................................................... 0.6 0.2
Taxes not payable in cash........................................................ 0.9 41.6
-------- --------
Total............................................................................ 1.5 41.8
-------- --------
Income before extraordinary loss....................................................... 2.3 74.7
Extraordinary loss on early extinguishment of debt (net of income taxes of $2.6)....... (3.8) --
Net income (loss)...................................................................... $ (1.5) $ 74.7
======== ========
Earnings (loss) per share:
Primary.......................................................................... $ 0.01 $ 0.69
Extraordinary loss.................................................................... (0.04) --
-------- --------
Total............................................................................... $ (0.03) $ 0.69
Fully diluted.................................................................... 0.01 0.69
Extraordinary loss.................................................................... (0.04) --
-------- --------
Total............................................................................... $ (0.03) $ 0.69
Cash dividends paid per common share................................................... 0.09 0.06
======== ========
</TABLE>
See notes to consolidated financial statements.
THE LTV CORPORATION
CONSOLIDATED BALANCE SHEET
(in millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30,
1997
-------------
ASSETS
<S> <C>
Current assets
Cash and cash equivalents................................ $ 256.9
Marketable securities.................................... 401.0
--------
Total cash and marketable securities................. 657.9
Receivables, less allowance for doubtful accounts........ 497.1
Inventories:
Products............................................... 613.1
Materials, purchased parts and supplies................ 248.4
--------
Total inventories.................................... 861.5
Prepaid expenses, deposits and other..................... 21.0
--------
Total current assets................................. 2,037.5
--------
Investments in affiliates................................. 310.0
Other noncurrent assets................................... 257.2
Property, plant and equipment............................. 4,107.4
Allowance for depreciation............................... (940.2)
--------
Total property, plant and equipment.................. 3,167.2
--------
$5,771.9
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable......................................... $ 346.7
Accrued employee compensation and benefits............... 376.8
Other accrued liabilities................................ 327.8
--------
Total current liabilities............................ 1,051.3
--------
Noncurrent liabilities
Long-term debt........................................... 354.2
Postemployment health care and other insurance benefits.. 1,564.0
Pension benefits......................................... 608.4
Other.................................................... 531.6
--------
Total noncurrent liabilities......................... 3,058.2
--------
Shareholders' equity
Convertible preferred stock (par value $1.00 per share).. 0.5
Common stock (par value $0.50 per share)................. 52.8
Additional paid-in capital............................... 1,019.5
Retained earnings........................................ 634.1
Treasury stock (2,618,700 shares at cost)................ (34.7)
Minimum pension liability adjustment and other........... (9.8)
--------
Total shareholders' equity........................... 1,662.4
--------
$5,771.9
========
</TABLE>
See notes to consolidated financial statements.
THE LTV CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1997 1996
--------- --------
<S> <C> <C>
Operating activities
Net income (loss)........................................................... $ (1.5) $ 74.7
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss........................................................ 3.8 --
Special charge............................................................ 150.0 --
Depreciation and amortization............................................. 198.1 201.2
Income tax provision not payable in cash.................................. 0.9 41.6
Defined benefit pension expense........................................... 21.3 51.3
Postemployment benefit payments less (more) than related expense.......... (22.0) (0.3)
VEBA Trust contributions.................................................. (10.0) (11.3)
Changes in assets, liabilities and other.................................. (82.6) (29.1)
-------- --------
Net cash provided by operating activities............................... 258.0 328.1
-------- --------
Investing activities
Capital expenditures........................................................ (215.4) (139.1)
VP Buildings acquisition.................................................... (187.5) --
Investment in affiliates.................................................... (69.5) (69.1)
Net sales (purchases) of marketable securities.............................. 165.4 (76.2)
Other....................................................................... 14.6 (1.8)
-------- --------
Net cash used in investing activities..................................... (292.4) (286.2)
-------- --------
Financing activities
Proceeds from debt offering................................................. 289.8 --
Pension funding to restored plans........................................... (60.2) (144.2)
Preferred dividends paid.................................................... (1.7) (1.7)
Common dividends paid....................................................... (9.3) (6.3)
Share repurchases........................................................... (34.7) --
-------- --------
Net cash provided by (used in) financing activities....................... 183.9 (152.2)
-------- --------
Net increase (decrease) in cash and cash equivalents......................... 149.5 (110.3)
Cash and cash equivalents at beginning of period............................. 107.4 265.9
-------- --------
Cash and cash equivalents at end of period................................... $ 256.9 $ 155.6
======== ========
Supplemental cash flow information is presented as follows:
Interest payments........................................................... $ 6.1 $ 8.4
Income tax payments......................................................... 5.5 1.9
Capitalized interest........................................................ 11.9 7.2
Purchases of marketable securities.......................................... 5,591.2 3,279.4
Sales and maturities of marketable securities............................... 5,756.6 3,205.9
</TABLE>
See notes to consolidated financial statements.
THE LTV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unauditied)
NOTE (1)--The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and disclosures required by generally accepted accounting
principles for complete financial statements. All adjustments that are, in
the opinion of management, necessary for a fair presentation have been made
and are of a recurring nature unless otherwise disclosed herein. Certain
prior period amounts have been reclassified to conform with the current period
presentation. The results of operations for the interim periods are not
necessarily indicative of results of operations for a full year. For further
information, refer to the consolidated financial statements and the notes
thereto for the year ended December 31, 1996 included in the LTV Annual Report
to Shareholders incorporated by reference into the 1996 Annual Report on Form
10-K filed with the Securities and Exchange Commission.
NOTE (2) --In February 1997, the Financial Accounting Standards
Board ("FASB") issued Statement No. 128, "Earnings per Share," which requires
changes to the method currently used to compute earnings per share and becomes
effective at December 31, 1997. The impact of Statement No. 128 on the
calculation of primary and fully diluted earnings per share is not expected to
be material.
NOTE (3)--On July 2, 1997, the Company, through its new
wholly-owned subsidiary VP Buildings, Inc., purchased substantially all of the
assets and certain liabilities of Varco-Pruden Building Products Division of
United Dominion Industries, Inc. for cash of approximately $187.5 million,
subject to final closing adjustments and expenses. Varco-Pruden engineers and
manufactures pre-engineered, non-residential, low-rise steel building systems
for manufacturing, warehousing, school and commercial applications. This
transaction will be accounted for under the purchase method of accounting and,
accordingly, the results of operations of the acquired company are included in
the consolidated financial statements from the date of acquisition.
The following unaudited pro forma financial information for the
Company gives effect to the VP Buildings acquisition as if it had occurred on
January 1, 1997, with comparable pro forma information for 1996. These pro
forma results have been prepared for comparative purposes only and are not
necessarily representative of the results of operations that would have
resulted if the acquisition occurred at the beginning of the year or that may
result in the future. The pro forma results for the Company are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Net Sales .............................. $3,443.6 $3,445.0
Income before extraordinary loss........ 5.5 87.7
Net income.............................. 1.7 84.7
Earnings per share......................
Primary................................ $ 0.00 $ 0.78
Fully diluted.......................... $ 0.00 $ 0.78
</TABLE>
NOTE (4)--In July 1997, LTV announced its intention to close
permanently its Pittsburgh coke and byproduct plant by the end of 1997.
Closure of the plant, which has been in operation for over a century and has
reached the end of its useful life, resulted in a special charge in the third
quarter of 1997 of $150 million for employee costs, demolition, environmental
matters and facilities write-down. Approximately two-thirds is payable in
cash over a period of several years. The Company has engaged a consultant to
study the environmental clean-up of the facility.
In August 1997, the United Steelworkers of America ("USWA")
filed a grievance contesting the intended plant closing. The arbitration
proceedings began October 13, 1997, and the arbitrator's decision is expected
sometime after November 1997.
NOTE (5)--In September 1997, LTV issued $298.2 million Senior
Notes ($300 million face amount) due September 2007 at 8.20% interest payable
semiannually and guaranteed by LTV's wholly-owned subsidiary, LTV Steel
Company, Inc. The unamortized original issue discount results in an effective
interest rate of 8.25%. Proceeds of the offering were used to finance the
acquisition of VP Buildings and to redeem $100 million principal amount of
Senior Secured Convertible Notes due June 2003. At September 30, 1997, the
$100 million Senior Secured Convertible Notes were reclassified as current
other accrued liabilities and were redeemed, pursuant to a binding contract,
in October 1997. The premium associated with the early redemption resulted in
an extraordinary loss of $3.8 million net of tax.
NOTE (6)--LTV's wholly-owned subsidiary, LTV Steel Company,
Inc., has fully and unconditionally guaranteed the Company's obligation to pay
principal, premium, if any, and interest with respect to the Senior Notes due
September 2007.
The following supplemental consolidating condensed financial
statements of the LTV Corporation present the balance sheets as of September
30, 1997 and December 31, 1996 and statements of operations and cash flows
for the nine months ended September 30, 1997 and 1996. The LTV Corporation
(Parent), LTV Steel Company, Inc. (Guarantor) and the combined Non-Guarantor
Subsidiaries' investments in subsidiaries are accounted for using the equity
method. Necessary elimination entries have been made to consolidate the
Parent and all of its subsidiaries.
CONSOLIDATING CONDENSED BALANCE SHEET
(in millions)
<TABLE>
<CAPTION>
September 30, 1997
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and marketable
securities........................... $ 617.2 $ (29.6) $ 70.3 $ -- $ 657.9
Receivables........................... 3.5 (15.2) 508.8 -- 497.1
Inventories:
Finished goods....................... -- 570.4 42.7 -- 613.1
Raw materials and supplies........... -- 215.0 33.4 -- 248.4
Other current assets.................. 4.3 12.3 4.4 -- 21.0
-------- -------- ------ --------- --------
Total current assets................. 625.0 752.9 659.6 -- 2,037.5
Intercompany, net..................... 111.9 446.9 (558.8) -- --
Investments in affiliates and other
noncurrent assets.................... 1,385.9 249.9 431.8 (1,500.4) 567.2
Property, plant and equipment, net.... -- 2,947.3 219.9 -- 3,167.2
-------- -------- ------ --------- --------
Total assets......................... $2,122.8 $4,397.0 $752.5 $(1,500.4) $5,771.9
======== ======== ====== ========= --------
Total current liabilities............. $ 135.5 $773.6 $142.2 -- $1,051.3
Long-term debt........................ 298.2 56.0 -- -- 354.2
Postemployment health care and other
insurance benefits................... -- 1,392.3 171.7 -- 1,564.0
Pension benefits...................... -- 576.7 31.7 -- 608.4
Other................................. 26.7 479.5 25.4 -- 531.6
Shareholders' equity.................. 1,662.4 1,118.9 381.5 (1,500.4) 1,662.4
-------- -------- ------ --------- --------
Total liabilities and shareholders' $2,122.8 $4,397.0 $752.5 $(1500.4) $5,771.9
======== ======== ====== ========= --------
equity................................
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and marketable
securities........................... $ 628.6 $ (15.1) $ 60.3 $ -- $ 673.8
Receivables........................... 5.1 (16.0) 411.2 -- 400.3
Inventories:
Finished goods....................... -- 531.3 39.3 -- 570.6
Raw materials and supplies........... -- 207.9 23.8 -- 231.7
Other current assets.................. 3.1 7.2 1.6 -- 11.9
-------- -------- ------ --------- --------
Total current assets................. 636.8 715.3 536.2 -- 1,888.3
Intercompany, net..................... 15.1 475.5 (490.6) -- --
Investments in affiliates and other
noncurrent assets.................... 1,200.3 359.0 281.3 (1,435.2) 405.4
Property, plant and equipment, net.... -- 2,933.9 182.9 -- 3,116.8
-------- -------- ------ --------- --------
Total assets......................... $1,852.2 $4,483.7 $509.8 $(1,435.2) $5,410.5
-------- -------- ------ --------- --------
Total current liabilities............. $24.4 $ 759.1 $115.5 -- $ 899.0
Long-term debt........................ 100.0 52.6 -- -- 152.6
Postemployment health care and other
insurance benefits................... -- 1,430.5 165.5 -- 1,596.0
Pension benefits...................... -- 621.3 26.6 -- 647.9
Other................................. 17.1 362.2 25.0 -- 404.3
Shareholders' equity.................. 1,710.7 1,258.0 177.2 (1,435.2) 1,710.7
-------- -------- ------ --------- --------
Total liabilities and shareholders'
equity................................ $1,852.2 $4,483.7 $509.8 $(1,435.2) $5,410.5
======== ======== ====== ========= ========
</TABLE>
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS
(in millions)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................... $ -- $2,990.1 $834.1 $(525.1) $3,299.1
Costs and expenses:
Cost of products sold.................. -- 2,603.3 749.5 (525.1) 2,827.7
Depreciation and amortization.......... -- 182.5 15.6 -- 198.1
Selling, general and administrative.... 8.7 91.5 19.4 -- 119.6
Results of affiliates operations....... 13.9 (19.6) 26.3 5.7 26.3
Net interest and other................. (26.4) 5.1 (5.1) -- (26.4)
Special charge......................... -- 150.0 -- -- 150.0
------- -------- ------ ------- --------
Total................................ (3.8) 3,012.8 805.7 (519.4) 3,295.3
------- -------- ------ ------- --------
Income (loss) before income taxes....... 3.8 (22.7) 28.4 (5.7) 3.8
Income tax provision (credit)........... 1.5 (8.9) 11.1 (2.2) 1.5
------- -------- ------ ------- --------
Income (loss) before extraordinary loss. 2.3 (13.8) 17.3 (3.5) 2.3
Extraordinary loss...................... (3.8) -- -- -- (3.8)
------- -------- ------ ------- --------
Net income (loss)...................... $ (1.5) $ (13.8) $ 17.3 $ (3.5) $ (1.5)
======= ======== ====== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................ $ -- $2,922.0 $715.2 $(520.1) $3,117.1
Costs and expenses:
Cost of products sold............... -- 2,571.9 669.1 (520.1) 2,720.9
Depreciation and amortization....... -- 189.0 12.2 -- 201.2
Selling, general and administrative. 8.3 86.2 11.9 -- 106.4
Results of affiliates operations.... (96.7) (1.3) -- 98.0 --
Net interest and other.............. (28.1) 5.0 (4.8) -- (27.9)
------- --------- ------ ------- --------
Total............................. (116.5) $ 2,850.8 688.4 (422.1) 3,000.6
------- --------- ------ ------- --------
Income before income taxes........... 116.5 71.2 26.8 (98.0) 116.5
Income tax provision................. 41.8 25.6 9.6 (35.2) 41.8
------- --------- ------ ------- --------
Net income.......................... $ 74.7 $ 45.6 $ 17.2 $ (62.8) $ 74.7
======= ========= ====== ======= ========
</TABLE>
CONSOLIDATING CONDENSED CASH FLOWS STATEMENTS
(in millions)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in) operating $ (61.6) $ 257.2 $ 62.4 $ -- $ 258.0
activities...........................
Investing activities:
Capital expenditures................ -- (213.9) (1.5) -- (215.4)
Investment in VP Buildings.......... (187.5) -- -- -- (187.5)
Investment in affiliates............ -- -- (69.5) -- (69.5)
Net sales of marketable securities.. 165.4 -- -- -- 165.4
Other............................... (6.3) 0.3 20.6 -- 14.6
------- -------- ------ ------- -------
Net cash used in investing
activities....................... (28.4) (213.6) (50.4) -- (292.4)
------- -------- ------ ------- -------
Financing activities:
Proceeds from offering.............. 289.8 -- -- -- 289.8
Pension funding to restored plans... -- (58.1) (2.1) -- (60.2)
Dividends paid:
Preferred......................... (1.7) -- -- -- (1.7)
Common............................ (9.3) -- -- -- (9.3)
Shares repurchased.................. (34.7) -- -- -- (34.7)
------- -------- ------ ------- -------
Net cash provided by (used in)
financing activities............ 244.1 (58.1) (2.1) -- 183.9
------- -------- ------ ------- -------
Net increase (decrease) in cash and
cash equivalents.................... 154.1 (14.5) 9.9 -- 149.5
Cash and cash equivalents at
beginning of period................ 62.1 (15.1) 60.4 -- 107.4
------- -------- ------ ------- -------
Cash and cash equivalents at end of
period............................. $ 216.2 $ (29.6) $ 70.3 $ -- $ 256.9
======= ======== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in) operating $$(69.2) $339.9 $ 57.4 $ -- $ 328.1
activities...........................
Investing activities:
Capital expenditures................ -- (138.4) (0.7) -- (139.1)
Investment in affiliates............ -- -- (69.1) -- (69.1)
Net sales (purchases) of marketable
securities........................ (76.2) -- -- -- (76.2)
Other............................... 3.3 4.5 (9.6) -- (1.8)
------- -------- ------ ------- -------
Net cash used in investing
activities........................... (72.9) (133.9) (79.4) -- (286.2)
------- -------- ------ ------- -------
Financing activities:
Pension funding to restored plans... -- (140.8) (3.4) -- (144.2)
Dividends paid...................... (8.0) -- -- -- (8.0)
------- -------- ------ ------- -------
Net cash used in financing
activities...................... (8.0) (140.8) (3.4) -- (152.2)
------- -------- ------ ------- -------
Net increase (decrease) in cash and
cash equivalents.................... (150.1) 65.2 (25.4) -- (110.3)
Cash and cash equivalents at
beginning of period.................. 276.8 (89.9) 79.0 -- 265.9
------- -------- ------ ------- -------
Cash and cash equivalents at end of
period............................... $ 126.7 $ (24.7) $ 53.6 $ -- $ 155.6
======= ======== ====== ======= =======
</TABLE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
The LTV Corporation
We have audited the accompanying consolidated balance sheet of
The LTV Corporation (the "Company") as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 consolidated financial position
of The LTV Corporation at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Cleveland, Ohio Ernst & Young LLP
January 23, 1997
THE LTV CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Sales.................................................... $4,134.5 $4,283.2 $4,233.3
Costs and expenses:
Cost of products sold................................... 3,587.7 3,620.9 3,668.6
Depreciation and amortization........................... 265.7 251.9 241.8
Selling, general and administrative..................... 150.8 142.2 133.2
Net interest and other income........................... (42.4) (42.6) (13.0)
-------- -------- --------
Total................................................. 3,961.8 3,972.4 4,030.6
-------- -------- --------
Income from continuing operations before income taxes.... 172.7 310.8 202.7
Income tax provision:
Taxes payable (refundable).............................. 0.3 2.0 (1.5)
Taxes not payable in cash............................... 63.2 115.3 74.7
-------- -------- --------
Total................................................. 63.5 117.3 73.2
-------- -------- --------
Income from continuing operations........................ 109.2 193.5 129.5
Discontinued operations.................................. -- (8.7) (2.4)
-------- -------- --------
Net income............................................... $ 109.2 $ 184.8 $ 127.1
======== ======== ========
Earnings per share
Primary:
Continuing operations.......... $ 1.01 $ 1.79 $ 1.31
Discontinued operations........ -- (0.08) (0.02)
-------- -------- --------
Net income................... $ 1.01 $ 1.71 $ 1.29
======== ======== ========
Fully diluted:
Continuing operations.......... $ 1.01 $ 1.76 $ 1.29
Discontinued operations........ -- (0.08) (0.02)
-------- -------- --------
Net income................... $ 1.01 $ 1.68 $ 1.27
======== ======== ========
Dividends paid per common share... $ 0.09 $ -- $ --
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
THE LTV CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operating activities
Income from continuing operations....................................... $ 109.2 $ 193.5 $ 129.5
Adjustments to reconcile income to net cash
provided by operating activities:
Special credits....................................................... -- -- 171.0
Depreciation and amortization......................................... 265.7 251.9 241.8
Income tax provision not payable in cash.............................. 63.2 115.3 74.7
Defined benefit pension expense....................................... 64.3 124.0 119.8
Postemployment benefit payments less (more) than related expense...... 5.8 (7.6) 18.5
VEBA Trust contributions.............................................. (11.3) (19.1) --
Changes in assets and liabilities..................................... 10.8 104.0 (31.0)
Other................................................................. (13.2) (5.8) (8.2)
------- ------- -------
Net cash provided by operating activities........................... 494.5 756.2 716.1
------- ------- -------
Investing activities
Capital expenditures.................................................... (242.9) (204.8) (234.0)
Investment in steel-related businesses.................................. (78.5) (89.2) (0.9)
Net purchases of marketable securities.................................. (109.2) (99.7) (357.5)
Proceeds from dispositions of discontinued operations, businesses and
properties.............................................................. 11.2 94.4 184.2
Other................................................................... (17.2) (9.5) (13.6)
------- ------- -------
Net cash used in investing activities............................... (436.6) (308.8) (421.8)
------- ------- -------
Financing activities
Issuance of common stock................................................ -- -- 257.2
Pension funding to restored plans....................................... (204.7) (472.6) (642.2)
Receipt of escrowed funds............................................... -- -- 25.8
Payments on long-term debt.............................................. -- (41.1) (2.5)
Dividends paid - common................................................. (9.5) -- --
- preferred.................................................. (2.2) (2.2) (2.3)
Other................................................................... -- (1.0) (1.2)
------- ------- -------
Net cash used in financing activities............................... (216.4) (516.9) (365.2)
------- ------- -------
Net decrease in cash and cash equivalents................................ (158.5) (69.5) (70.9)
Cash and cash equivalents at beginning of year........................... 265.9 335.4 406.3
------- ------- -------
Cash and cash equivalents at end of year................................. $ 107.4 $ 265.9 $ 335.4
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
THE LTV CORPORATION
CONSOLIDATED BALANCE SHEET
(in millions, except per share data)
<TABLE>
December 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................................... $ 107.4 $ 265.9
Marketable securities................................................................... 566.4 457.2
-------- --------
673.8 723.1
Receivables, less allowance for doubtful accounts of $17.7 in 1996 and $17.1 in
1995.................................................................................. 400.3 396.1
Inventories:
Products.............................................................................. 570.6 512.6
Materials, purchased parts and supplies............................................... 231.7 229.9
-------- --------
Total inventories................................................................... 802.3 742.5
Prepaid expenses, deposits and other.................................................... 11.9 8.7
-------- --------
Total current assets................................................................ 1,888.3 1,870.4
-------- --------
Investments in affiliates................................................................ 256.3 167.8
Other noncurrent assets.................................................................. 149.1 201.7
Property, plant and equipment
Land and land improvements.............................................................. 68.7 69.5
Buildings............................................................................... 147.7 144.9
Machinery and equipment................................................................. 3,443.5 3,322.2
Construction in progress................................................................ 211.4 121.6
-------- --------
3,871.3 3,658.2
Less allowance for depreciation......................................................... (754.5) (518.0)
-------- --------
Total property, plant and equipment................................................. 3,116.8 3,140.2
-------- --------
$5,410.5 $5,380.1
======== ========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable...................................................................... $ 351.1 $ 255.0
Accrued employee compensation and benefits............................................ 372.9 408.4
Other accrued liabilities............................................................. 175.0 183.3
-------- --------
Total current liabilities........................................................... 899.0 846.7
-------- --------
Noncurrent liabilities
Long-term debt........................................................................ 152.6 150.4
Postemployment health care and other insurance benefits............................... 1,596.0 1,598.4
Pension benefits...................................................................... 647.9 988.7
Other................................................................................. 404.3 420.7
-------- --------
Total noncurrent liabilities........................................................ 2,800.8 3,158.2
-------- --------
Shareholders' equity
Convertible preferred stock - par value $1.00 per share............................... 0.5 0.5
Common stock - par value $0.50 per share; authorized 150.0 shares; issued and
outstanding 105.5 shares in 1996 and 1995........................................... 52.8 52.8
Additional paid-in capital............................................................ 1,021.1 958.0
Retained earnings..................................................................... 646.7 549.3
Minimum pension liability adjustment.................................................. (8.9) (184.8)
Other................................................................................. (1.5) (0.6)
-------- --------
Total shareholders' equity.......................................................... 1,710.7 1,375.2
-------- --------
$5,410.5 $5,380.1
======== ========
</TABLE>
THE LTV CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in millions)
<TABLE>
<CAPTION>
Common Minimum Restricted
Convertible Stock Additional Pension Stock and Total
Preferred Held for Common Paid-In Retained Liability Marketable Shareholders'
Stock Issuance Stock Capital Earnings Adjustment Securities Equity
----------- -------- ------ ---------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1994........ $ 1.0 $ 54.3 $ 41.9 $ 561.3 $ 246.1 $ (364.8) $ 539.8
Net income............. 127.1 127.1
Shares issued:
Public offering. 6.8 250.4 257.2
Stock Plans..... 1.0 5.4 $ (3.2) 3.2
Conversion of stock.... (0.5) (54.3) 3.2 51.6 --
Unrealized losses...... (1.2) (1.2)
Pension liability...... 359.0 359.0
Dividends paid:
Preferred....... 0.1 4.1 (6.5) (2.3)
----- ------ ------ -------- ------- -------- ------- --------
December 31, 1994...... 0.5 -- 53.0 872.8 366.7 (5.8) (4.4) 1,282.8
Net income............. 184.8 184.8
Taxes not payable in
cash.. 84.9 84.9
Shares issued:
Stock plans..... 0.1 0.8 0.9
Unrealized gains....... 3.0 3.0
Pension liability...... (179.0) (179.0)
Dividends paid:
Preferred....... (2.2) (2.2)
Other.................. (0.2) 0.2 --
----- ------ ------ -------- ------- -------- ------- --------
December 31, 1995...... 0.5 -- 52.8 958.0 549.3 (184.8) (0.6) 1,375.2
Net income............. 109.2 109.2
Taxes not payable in
cash.. 63.2 63.2
Unrealized losses...... (0.9) (0.9)
Pension liability...... 175.9 175.9
Dividends Paid:
Common.......... (9.5) (9.5)
Preferred....... (2.2) (2.2)
Other.................. (0.1) (0.1) (0.2)
----- ------ ------ -------- ------- -------- ------- --------
December 31, 1996...... $ 0.5 -- $ 52.8 $1,021.1 $ 646.7 $ (8.9) $ (1.5) $1,710.7
===== ======= ------ -------- ------- -------- ------- --------
</TABLE>
See notes to consolidated fin ancial statements.
THE LTV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The LTV Corporation ("LTV" or the "Company") is a fully
integrated steel producer that manufactures a diversified line of carbon steel
products consisting of hot rolled and cold rolled sheet, galvanized, tin mill
and tubular products. The Company operates two integrated steel mills
(Cleveland Works and Indiana Harbor Works) and various finishing, galvanizing
and processing facilities as well as tin mill and tubular operations. The
Company is a major supplier of flat rolled steel for the domestic
transportation, appliance and electrical equipment markets.
Principles of Consolidation
The consolidated financial statements include LTV and its
majority-owned subsidiaries. Investments in joint ventures and companies
owned 20% to 50% are accounted for by the equity method. The Company's
interest in the cumulative undistributed earnings of its unconsolidated
affiliates was $19.8 million at December 31, 1996, all of which was available
for dividend or other distribution to the Company.
Cost of products sold has been reduced by the equity in
earnings of raw materials and other affiliates of $16.2 million, $17.2 million
and $14.7 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
Marketable Securities
The Company determines the appropriate classification of
marketable securities at the time of purchase and reevaluates such designation
at each balance sheet date. Marketable securities have been classified as
available-for-sale and are carried at fair value, with unrealized holding
gains and losses reported as a separate component of shareholders' equity.
The cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization, interest
income, realized gains and losses and declines in value judged to be other
than temporary are included in net interest and other income. The cost of
securities sold is based on specific identification.
Inventories
Inventories are valued at the lower of cost or market, with
cost determined primarily by the "last-in, first-out" ("LIFO") method. The
amount by which inventory is reduced to state inventory at LIFO value is $26.3
million at December 31, 1996 and $26.2 million at December 31, 1995.
Liquidation of LIFO inventory quantities, carried at costs which prevailed in
earlier years, reduced cost of products sold by $1.6 million, $4.2 million and
$1.8 million during the years ended December 31, 1996, 1995 and 1994,
respectively. The current replacement value of inventories is $801.9 million
and $742.0 million at December 31, 1996 and 1995, respectively.
Property Costs and Depreciation
Fixed assets are recorded on the cost basis and include land,
buildings, machinery and equipment, and software and associated costs.
Depreciation is computed principally using a modified straight-line method
based upon estimated economic lives of assets and the levels of production
providing depreciation within a range of 80% to 120% of the straight-line
amount on individual major production facilities with decreased depreciation
at lower and increased depreciation at higher operating levels. During each of
the last three years, depreciation expense under this method has approximated
the computed straight-line amounts. In addition, a units-of-production method
is used for blast furnaces. The cost of buildings is depreciated over 45
years, and machinery and equipment is depreciated over an average life of
approximately 17 years.
When properties are retired or sold, their carrying value and
the related allowance for depreciation are eliminated from the property and
allowance for depreciation accounts, respectively. Generally, for normal
retirements, gains or losses are credited or charged to allowance for
depreciation accounts; for abnormal retirements, gains or losses are included
in income in the year of disposal.
The Company adopted Financial Accounting Standards Board
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present, and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount. The adoption did not
impact the results of operations.
Environmental Remediation Liabilities
The Company's policy is to accrue environmental remediation
liabilities when it is probable a liability exists and the costs can be
reasonably estimated. The Company's estimates of these undiscounted costs are
based on existing technology, current enacted laws and regulations, its
current legal obligations regarding remediation and site-specific costs. The
liabilities are adjusted when the effect of new facts or changes in law or
technology is determinable. The Company's liability for environmental
remediation totaled $84 million and $98 million at December 31, 1996 and 1995,
respectively.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
New Accounting Pronouncement
In October 1996, the Accounting Standards Executive Committee
of the American Institute of Certified Public Accountants issued Statement of
Position 96-1 ("SOP 96-1"), "Environmental Remediation Liabilities," which
clarifies the existing authoritative guidance on loss contingencies that apply
in determining environmental liabilities. The Company will adopt SOP 96-1 in
the first quarter of 1997 and, based on current circumstances, does not
believe the effect of adoption will be material to the results of operations.
MARKETABLE SECURITIES
The following is a summary of marketable securities at December
31 (in millions):
<TABLE>
<CAPTION>
Unrealized Unrealized
Holding Holding
Cost Gains Losses Fair Value
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1996
U.S. Government obligations.... $193.7 $0.2 $(0.3) $193.6
Corporate obligations.......... 267.8 0.3 (0.1) 268.0
Other.......................... 104.8 -- -- 104.8
------- ----- ------ -------
$ 566.3 $ 0.5 $ (0.4) $ 566.4
======= ===== ====== =======
1995
U.S. Government obligation..... $ 291.3 $ 1.6 -- $ 292.9
Corporate obligations.......... 144.1 0.2 -- 144.3
Other.......................... 20.0 -- -- 20.0
------- ----- ------ -------
$ 455.4 $ 1.8 -- $ 457.2
======= ===== ====== =======
</TABLE>
The cost and estimated fair value of marketable securities by
contractual maturity at December 31, 1996 are as follows (in millions):
<TABLE>
<CAPTION>
Cost Fair Value
------ -----------
<S> <C> <C>
Due in one year or less................... $292.5 $292.4
Due after one year through two years...... 63.2 63.2
Due after two years....................... 210.6 210.8
------ ------
$566.3 $566.4
====== ======
</TABLE>
OTHER LIABILITIES
Current accrued employee compensation and benefits included the
following at December 31 (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Pension benefits........................................ $24.1 $59.3
Postemployment health care and other insurance benefits. 134.5 137.6
Compensated absences.................................... 49.9 49.6
Other................................................... 164.4 161.9
------ ------
$372.9 $408.4
====== ======
</TABLE>
Current other accrued liabilities included the following at
December 31 (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accrued taxes other than income......... $ 91.2 $ 83.7
Accrued income taxes.................... 11.9 13.1
Other................................... 71.9 86.5
------ ------
$175.0 $183.3
====== ======
</TABLE>
Noncurrent other liabilities included the following at December
31 (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Benefits under the Coal Industry Retiree Health Benefit Act of 1992*............... $133.5 $135.6
Other employee benefits............................................................ 126.3 126.3
Environmental and plant rationalization............................................ 87.0 105.6
Other.............................................................................. 57.5 53.2
------ ------
$404.3 $420.7
====== ======
</TABLE>
- ---------------
* The Company accrued this obligation by recording an extraordinary charge of
$140 million in 1992.
DEBT AND CREDIT FACILITIES
Long-term debt consisted of the following at December 31 (in
millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Senior secured convertible notes due June 2003..... $100.0 $100.0
Notes due December 2020............................ 52.6 50.4
------ ------
$152.6 $150.4
====== ======
</TABLE>
The Company has no required long-term debt maturities occurring
within the next five years.
The senior secured convertible notes bear interest at the rate
of 8.5% if paid in cash or 10.5% if paid with additional convertible notes.
The holders of the convertible notes have the right to convert such notes, in
whole or in part, into shares of LTV common stock at a conversion price of
$19.50 per share (potentially 5,128,205 shares).
The notes due December 2020 are required to be prepaid within
120 days after the restored pension plans become fully funded. LTV also has
the option to partially or fully prepay the notes. The notes bear interest at
8.5%, which can be paid in cash or in additional notes.
The Company has two credit facilities with banks (the
"Receivables Facility" expiring in 2000 and the "Letter of Credit Facility"
expiring in 1999) that provide the Company with up to $470 million of
financing resources at prevailing market rates.
The Receivables Facility permits borrowings of up to $320
million for working capital requirements and general corporate purposes, $100
million of which may be used to issue letters of credit. At December 31,
1996, $285.5 million was permitted to be borrowed; however, no borrowings were
outstanding and letters of credit outstanding amounted to $22.7 million under
this facility. The borrower under the Receivables Facility is LTV Sales
Finance Company, a structured finance special purpose entity wholly owned by
LTV, which on a daily basis purchases and pledges essentially all of the
receivables generated by LTV. The creditors of LTV Sales Finance Company have
a claim on the assets of that company prior to those assets becoming available
to other creditors of LTV or its affiliates.
The Letter of Credit Facility is a separate credit facility
that provides for the issuance of up to $150 million in letters of credit. At
December 31, 1996, letters of credit totaling $82.9 million were outstanding
under this facility.
The long-term debt and Letter of Credit Facility agreements
contain various covenants that require the Company to maintain certain
financial ratios and amounts. These agreements, as well as an agreement with
the Pension Benefit Guaranty Corporation regarding the restored pension plans
("PBGC Agreement"), place certain restrictions on payments of dividends, stock
repurchases, capital expenditures, investments in subsidiaries and borrowings.
Under the terms of the most restrictive covenant, $155 million of retained
earnings are available for common stock dividend payments at December 31,
1996. Substantially all of the Company's receivables and inventories are
pledged as collateral under the convertible notes and credit facilities
agreements.
OPERATING LEASES
The Company leases certain manufacturing facilities and
equipment, office space and computer equipment under cancelable and
noncancelable leases that expire at various dates. Minimum future operating
lease obligations in effect at December 31, 1996 are as follows (in millions):
1997....................................... $41.5
1998....................................... 40.5
1999....................................... 26.7
2000....................................... 13.3
2001....................................... 11.7
Later years................................ 62.7
Total obligations.......................... $196.4
Rental expense on operating leases was $61.8 million, $58.4
million and $59.0 million for the years ended December 31, 1996, 1995 and
1994, respectively.
POSTEMPLOYMENT HEALTH CARE AND OTHER INSURANCE BENEFITS
The Company provides health care and other insurance benefits,
primarily life, for substantially all active, inactive and retired employees.
The health care plans are contributory and contain other cost-sharing features
such as deductibles, lifetime maximums and copayment requirements. The
components of periodic expense and cash payments for postemployment benefits
are as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during the period.......... $ 18.0 $ 14.7 $ 18.7
Interest cost on accumulated benefit obligation........... 120.0 131.9 130.2
Actual return on plan assets.............................. (5.9) (0.1) --
Net amortization and deferral............................. 4.3 (10.0) --
------ ------ ------
Total expense....................................... $136.4 $136.5 $148.9
====== ====== ======
Total cash payments................................. $130.6 $144.1 $130.4
====== ====== ======
</TABLE>
The actuarial and recorded liabilities for postemployment
benefits are as follows at December 31 (in millions):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accumulated benefit obligation:
Retirees.................................... $1,253.7 $1,275.6
Fully eligible active plan participants..... 121.3 123.9
Other active plan participants.............. 312.3 323.4
-------- --------
Total....................................... 1,687.3 1,722.9
Unrecognized net actuarial gains.................. 79.6 32.3
Plan assets at fair value......................... (36.4) (19.2)
-------- --------
Total liability included in the consolidated
balance sheet................................... 1,730.5 1,736.0
Less current portion.............................. (134.5) (137.6)
-------- --------
Noncurrent liability.............................. $1,596.0 $1,598.4
======== ========
</TABLE>
The actuarial assumptions used in the calculation of the
liability for postemployment benefits are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Discount rate.............................. 7.5% 7.25% 9.0%
Long-term rate of return on plan assets.... 9.0% 8.5% 8.5%
Projected health care cost trend rate...... 7.5% 8.0% 8.9%
Ultimate trend rate........................ 4.5% 4.5% 5.5%
Year ultimate trend rate is achieved....... 2003 2002 2001
</TABLE>
As part of the 1994 United Steelworkers of America ("USWA")
labor agreement, the Company is required to contribute to a Voluntary Employee
Beneficiary Association ("VEBA") Trust to prefund postemployment health care
and other insurance benefits for covered employees and retirees in addition to
making cash payments for such benefits on a current basis. The Company is
required to contribute to the VEBA trust a minimum of $5 million annually ($10
million in years when common stock dividends are declared) and additional
amounts based on defined cash flow as set forth in the labor agreement. The
required contribution made in 1996 was $11.3 million. Plan assets are
invested in a mutual fund, which primarily consists of equity securities
listed on national exchanges.
The effect on the present value of the accumulated benefit
obligation at December 31, 1996 of a 1% increase each year in the health care
cost trend rate used would result in an increase of $146 million in the
accumulated benefit obligation, and a $13 million increase in the total 1996
service and interest components of expense. The assumed discount rate
increase in 1996 resulted in a net decrease in the accumulated benefit
obligation of $38 million.
PENSION BENEFITS
The Company has various pension plans covering substantially
all of its employees. Current benefits for most employees are provided
through defined contribution plans with benefits based on age and compensation
levels. Pension costs for the defined contribution plans are accrued and
funded on a current basis.
The Company also has defined benefit plans, the benefits of
which are primarily for past service only, based on years of service and on
average compensation for certain years. The majority of these plans'
obligations are required to be funded by the year 2020 in accordance with the
PBGC Agreement.
The components of pension expense are as follows (in millions):
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Defined benefit plans:
Service cost - benefits earned during the period..... $ 6.4 $ 6.6 $ 3.5
Interest cost on projected benefit obligation........ 247.0 274.3 250.2
Actual return on plan assets......................... (405.1) (461.0) (14.8)
Net amortization and deferral........................ 215.9 304.1 (119.1)
------ ------ ------
Net pension cost of defined benefit plans............ 64.2 124.0 119.8
Defined contribution plans................................. 47.9 48.4 42.8
------ ------ ------
Total expense........................................ $112.1 $172.4 $162.6
====== ====== ======
</TABLE>
The following table sets forth the funded status of the
Company's defined benefit pension plans (in millions):
<TABLE>
<CAPTION>
At December 31, 1996 At December 31, 1995
----------------------------------- -----------------------------------
Plans With Plans With Plans With Plans With
Assets in Excess Obligations in Assets in Excess Obligations in
of Obligations Excess of Assets of Obligations Excess of Assets
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Actuarial present value:
Vested benefit obligation.................. $215.0 $2,918.7 $16.5 $ 3,300.8
Nonvested benefit obligation............... 26.8 221.0 0.5 275.9
------ -------- ----- ---------
Accumulated benefit obligation............. $241.8 $3,139.7 $17.0 $ 3,576.7
====== ======== ===== =========
Projected benefit obligation.................... $255.5 $3,139.7 $19.2 $ 3,588.3
Plan assets at fair value....................... 266.1 2,569.4 26.9 2,538.7
------ -------- ----- ---------
Plan assets in excess of (less than) projected
benefit obligation........................... 10.6 (570.3) 7.7 (1,049.6)
Unrecognized initial net asset existing at
transition..................................... (0.6) -- (1.0) --
Unrecognized prior service cost................. 12.4 126.9 0.4 156.3
Unrecognized net actuarial (gains) losses....... (2.7) (124.2) (1.7) 190.6
Adjustment required to recognize minimum
liability-shareholders' equity................. -- (8.9) -- (184.8)
-intangible asset.......................... -- (86.4) -- (154.4)
------ -------- ----- ---------
Prepaid (accrued) pension expense included in
the consolidated balance sheet................ $ 19.7 $ (662.9) $ 5.4 $(1,041.9)
====== ======== ===== =========
</TABLE>
The actuarial assumptions used to determine the pension asset
(liability) are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate........................... 7.5% 7.25% 9.0%
Long-term rate of return on plan assets. 9.0% 8.5% 8.5%
</TABLE>
Plan assets consist substantially of equity securities listed
on national exchanges, fixed income securities and cash equivalents. The
increase in the 1996 assumed discount rate decreased the accumulated benefit
obligation by $68 million, and such adjustment, together with favorable asset
return, was also the primary reason for the decreases in the shareholders'
equity minimum pension liability adjustment account of $176 million and the
intangible asset minimum pension liability account of $68 million.
TAXES
The provision for income taxes from continuing operations is as
follows (in millions):
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Current:
Federal................ $ 0.4 $ 0.4 $ 0.8
State.................. 0.4 2.0 (2.0)
Deferred..................... (0.5) (0.4) (0.3)
Amount not payable in cash... 63.2 115.3 74.7
----- ------ -----
Tax provision.......... $63.5 $117.3 $73.2
===== ====== =====
</TABLE>
The Company reports federal income tax expense before
consideration of pre-reorganization net deferred tax assets ($1.35 billion at
December 31, 1996). The Company's actual income tax cash payments are, and
will continue to be, significantly less than the total financial statement
expense amounts as the tax provision required by fresh-start financial
statement reporting is in excess of the Company's actual tax payments. As LTV
realized the benefits (through reduced cash tax payments) from
pre-reorganization net deferred tax assets, such benefit amounts first reduced
the intangible asset resulting from reorganization until it was fully
amortized in 1995. Subsequently realized tax benefits increase additional
paid-in capital. Tax benefits of $63.2 million, $115.3 million and $74.7
million were realized in 1996, 1995 and 1994, respectively. Amounts totaling
$63.2 million and $84.9 million in 1996 and 1995 were used to increase the
additional paid-in capital account of shareholders' equity.
The income tax effects of the factors accounting for the
differences between federal income tax computed at the statutory rate and the
recorded provision are as follows (in millions):
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Tax provision at statutory rates..... $60.5 $108.8 $70.9
Increases (decreases) resulting from:
Percentage depletion deduction. (5.0) (7.0) (6.4)
State taxes.................... 8.3 16.7 7.3
Other.......................... (0.3) (1.2) 1.4
----- ------ -----
Tax provision.................. $63.5 $117.3 $73.2
===== ====== =====
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities are as follows at December 31 (in millions):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Postemployment health care liability....... $ 690.1 $ 692.2
Net operating loss carryforwards........... 937.1 935.0
Pension liability.......................... 227.9 356.6
Other employee benefits.................... 165.7 175.0
Plant rationalization and environmental.... 62.9 70.2
Safe harbor tax leases..................... 117.6 126.1
Other...................................... 98.7 94.9
--------- ---------
Subtotal................................... 2,300.0 2,450.0
Deferred tax liabilities:
Tax over book depreciation................. (847.4) (846.7)
Inventory and other........................ (102.6) (103.3)
Subtotal................................... (950.0) (950.0)
Valuation allowance.............................. (1,350.0) (1,500.0)
--------- ---------
Total deferred taxes-net................... $ -- $ --
========= =========
</TABLE>
The evaluation of the realizability of the Company's net
deferred tax assets in future periods is made based upon historical and
projected operating performance and other factors for generating future
taxable income, such as intent and ability to sell assets. At this time, the
Company has established a valuation reserve for all of its net deferred tax
assets.
For income tax reporting purposes, LTV has a net operating loss
carryforward of $2.6 billion for regular income taxes, $2.5 billion of which
is not restricted as to use and will expire in the years 2000 through 2010.
The balance of the regular income tax net operating loss carryforward expires
in 1997 and 1998 and is restricted to offsetting future taxable income of the
respective companies that generated the losses. LTV has a federal alternative
minimum tax net operating loss carryforward of $1.5 billion that is
unrestricted as to its use and will expire in the years 2000 through 2010.
The Company's ability to reduce future income tax payments through the use of
net operating loss carryforwards could be significantly limited on an annual
basis if the Company were to undergo an Ownership Change within the meaning of
Section 382 of the Internal Revenue Code of 1986.
Alternative minimum taxes paid through 1996 of approximately
$42 million are available as a credit carryforward, and the period is not
limited. Investment tax credit carryforwards of approximately $12 million at
December 31, 1996 are recognized using the "flow through" method and expire in
1997 through 2003.
SHAREHOLDERS' EQUITY
LTV has authorized for issuance 20 million shares of preferred
stock with a $1.00 par value. At December 31, 1996, the Company has 500,000
outstanding shares of Series B Convertible Preferred Stock ("Series B"). This
issue has a stated liquidation preference value of $50 million, is senior to
all common stock and has weighted voting rights equal to that number of shares
of common stock into which it can be converted. Dividends on the Series B are
payable quarterly in either cash or common stock, at the election of LTV, at
the rate of 4.5% per annum on the stated value. Holders of the Series B have
the right to convert the stated value of their shares, in whole or in part,
into common stock at a conversion price of $17.09 per share (potentially
2,925,688 shares). LTV has the right to redeem the Series B on and after June
28, 1996 at $52.3 million, declining to $50.0 million at June 28, 2000.
On June 28, 1994, the Series A Convertible Preferred Stock, and
accrued dividends thereon, were mandatorily converted into 3.3 million shares
of common stock. The common stock held for issuance represented a $50.0
million cash investment in LTV on June 28, 1993, which resulted in 3.3 million
shares of common stock being issued on June 28, 1994.
During 1994, LTV issued 13.6 million shares of common stock
pursuant to a public offering. The Company's net proceeds of $257.2 million
from the offering were contributed to the Company's pension plans. Also in
1994, LTV issued 1.9 million shares of common stock pursuant to various stock
distribution plans.
The Company has a nonleveraged Employee Stock Ownership Plan
("ESOP"), for employees covered by the USWA labor agreement, that effectively
holds 3.9 million shares of common stock at December 31, 1996.
In June 1993, the Company was reorganized and common stock
reserved for potential future issuance includes the following:
a. Conversion of the Series B and the convertible notes as
previously discussed.
b. In accordance with a settlement agreement with the Internal
Revenue Service ("IRS"), payments in six equal annual installments of cash or
shares of common stock with an aggregate value of $6.5 million are required
to be made to the IRS commencing on June 28, 1994. The first of these
payments was satisfied with the issuance of 65,183 shares of common stock, and
the 1996 and 1995 payments were satisfied in cash.
c. In accordance with an agreement with the U.S. Environmental
Protection Agency ("EPA"), certain (if any) future environmental claims can be
settled in cash or common stock. Also, through June 28, 1997, if and when
shares are actually issued under this agreement, the ESOP is to receive
additional shares approximating 7.5% of such issued shares.
d. In June 1993, 8.5 million Series A Warrants were issued.
Each Series A Warrant is exercisable for 0.5582 of a share of common stock at
$16.28 per each full share purchased. The Series A Warrants are exercisable
through June 28, 1998. There have been 32,149 warrants exercised through
December 31, 1996.
The Company has also reserved for future issuance 3.5 million
shares of LTV common stock under incentive programs authorizing the granting
of stock options and restricted stock awards to directors, officers and other
key employees. The stock incentive programs are designed to encourage a
personal investment in LTV common stock from participating individuals. The
options to purchase common stock are primarily outstanding for terms of ten
years from date of grant and are granted at prices not lower than market price
at date of grant. The market value of restricted stock awarded has been
recorded as unearned compensation and is shown as a separate component of
shareholders' equity. Unearned compensation is primarily being amortized to
expense over the five-year vesting period. Transactions under these programs
are summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------------------------------------
1996 1995 1994
----------------------------- ----------------------------- -----------------------------
Shares Price Shares Price Shares Price
--------- --------------- --------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stock options:
Options outstanding at
beginning of period. 1,419,950 $14.17 - $19.33 1,147,639 $15.38 - $19.33 934,000 -- $15.38
Granted........... 321,680 12.21 - 14.31 398,700 14.17 - 16.13 272,705 $16.53 - 19.33
Exercised......... -- (5,000) 15.38 (22,066) 15.38
Canceled.......... (50,871) 14.78 - 19.33 (121,389) 15.38 - 19.33 (37,000) 15.38
--------- ---------------- --------- ---------------- --------- ----------------
Options outstanding at
end of period....... 1,690,759 $12.21 - $19.33 1,419,950 $14.17 - $19.33 1,147,639 $15.38 - $19.33
========= ================ ========= ================ ========= ================
Options exercisable at
end of period........... 1,093,347 $14.74 - $19.33 684,614 $14.74 - $19.33 297,896 $15.38 - $16.53
========= ================ ========= ================ ========= ================
Restricted Stock:
Shares outstanding at
beginning of period. 186,186 $14.00 - $18.88 191,430 $15.75- $18.88 -- -- --
Granted........... 2,348 14.13 10,856 14.00- 15.25 191,430 $15.75- $18.88
Unrestricted...... (3,685) 18.88 (16,100) 18.88 -- --
Canceled.......... (815) 18.88 -- -- -- --
--------- ---------------- --------- ---------------- --------- ----------------
Shares outstanding at
end of period....... 184,034 $14.00 - $18.88 186,186 $14.00- $18.88 191,430 $15.75- $18.88
========= ================ ========= ================ ========= ================
</TABLE>
In 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation," which permits
companies to recognize expense for stock-based awards in 1996 and 1995 based
on their fair value on the date of grant or to continue to follow Accounting
Principles Board ("APB") Opinion No. 25 with pro-forma disclosures. The
Company continues expense recognition of stock option programs in
accordance with APB Opinion No. 25. Application of the disclosure
requirements of the new statement resulted in amounts that are immaterial
and requires no additional disclosure.
EARNINGS PER SHARE
Primary earnings per share calculations for the years ended
December 31, 1996, 1995 and 1994 are based on average common and common
equivalent shares outstanding of 108.4 million, 108.3 million and 98.7 million,
respectively. Common equivalent shares principally included common stock that
is issuable in exchange for the Series B and for outstanding Series A Warrants.
Fully diluted earnings per share calculations for the years
ended December 31, 1996, 1995 and 1994 are based on fully diluted shares
outstanding of 108.4 million, 113.4 million and 103.8 million, respectively.
Fully diluted shares were determined by increasing the primary shares
outstanding to reflect the common stock issuable upon conversion of the
convertible notes.
COMMITMENTS AND CONTINGENCIES
The Company is the subject of various threatened or pending
legal actions, contingencies and commitments in the normal course of
conducting its business. The Company provides for costs relating to these
matters when a loss is probable and the amount is reasonably estimable. The
effect of the outcome of these matters on the Company's future results of
operations and liquidity cannot be predicted because any such effect depends
on future results of operations and the amount and timing of the resolution of
such matters. While it is not possible to predict with certainty, management
believes that the ultimate resolution of such matters will not have a material
adverse effect on the consolidated financial position of the Company.
LTV is subject to changing and increasingly stringent
environmental laws and regulations concerning air emissions, water discharges,
and waste disposal, as well as remediation activities that involve the
clean-up of environmental media such as soils and groundwater ("remediation
liabilities"). As a consequence, the Company has incurred, and will continue
to incur, substantial capital expenditures and operating and maintenance
expenses in order to comply with such requirements. Additionally, if any of
the Company's facilities are unable to meet required environmental standards
or laws, those operations could be temporarily or permanently closed.
Important examples of laws referred to above are the 1990 Clean
Air Act Amendments ("CAA Amendments"), the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA"), and related state and local laws. The CAA
Amendments and its state and local counterparts require progressively more
stringent air emission quality standards in the future. RCRA and related
state laws include so-called "corrective action" provisions that grant the
environmental agencies authority to require the Company to clean up
environmental media, such as soils and groundwater, under certain prescribed
conditions. These corrective action provisions, in most instances, are not
self-implementing and, in the Company's view, create no current legal
obligation. If, in the future, the Company were required to implement
corrective actions, the Company could be required to record additional
liabilities which cannot be estimated at this time, but could be
substantial.
As part of LTV's reorganization in 1993, an agreement
("Environmental Settlement Agreement" or "ESA") with the EPA was reached. The
ESA resolved or provided the means to resolve a significant portion of the
Company's environmental-related liabilities and also provided a basis for
settlement agreements concerning the environmental claims of several states.
The ESA settled certain Superfund Site liabilities identified at the time of
reorganization for $33 million as general unsecured claims. Management
believes that future prepetition environmental claims, if any, that are not
covered by the ESA will be subject to the dischargeability provisions of the
Federal Bankruptcy Code or to the provisions of the Joint Plan, subject to
judicially imposed due process requirements. General liabilities from
postpetition acts were not discharged or in any manner affected by the
reorganization. In addition, the Company retains responsibility for
environmental obligations for properties owned at confirmation of the Joint
Plan regardless of when the conduct that gives rise to the liability occurred.
A 1993 agreement with the USWA provided that a portion of the
requirements with respect to certain postemployment benefits would be secured
by a junior lien of $250 million on collateral with an unencumbered fair
market value of at least $500 million. The initial security was provided by
the grant of a mortgage on facilities having a carrying value of approximately
$500 million.
FINANCIAL INSTRUMENTS
Cash equivalents are investments in highly liquid, low-risk
money market mutual funds and commercial paper with maturities of three months
or less and are classified as held-to-maturity. The carrying amount of these
assets approximates fair value. The Company carries marketable securities at
fair value. The carrying amount of the Company's long-term debt approximates
fair value at December 31, 1996 and 1995, based on current market interest
rates.
The Company has entered into futures contracts to reduce its
exposure to fluctuations in costs caused by the price volatility of certain
metal commodities and natural gas supplies. The Company does not engage in
speculation and the results of these hedging transactions become part of the
cost of the commodity or supply being hedged. At December 31, 1996 and 1995,
the purchase value of these contracts totaled $10 million in each year. The
contracts extend for periods of up to two years. At December 31, 1996 and
1995, the fair value of the contracts, which is based on quoted market prices,
approximated the carrying value of zero.
LTV owns a preferred stock asset related to the sale of its
energy products segment with an aggregate redemption price and liquidation
preference of $14.3 million, plus accrued and unpaid dividends. The preferred
stock is subject to redemption at the option of LTV or the issuer beginning
August 2000. The estimated discounted cash flow value of the preferred stock
asset approximates its stated and carrying value at December 31, 1996.
Outstanding letters of credit totaled $107.6 million and $118.6
million at December 31, 1996 and 1995, respectively. The letters of credit
guarantee performance to third parties of various trade activities and tax
benefit transfer agreements. LTV has guaranteed approximately $13 million per
year through January 1999 for a joint venture's operating lease rental
obligation. The Company does not believe it is practicable to estimate the
fair value of the guarantees and does not believe exposure to loss is likely.
DISCONTINUED OPERATIONS
On August 1, 1995, LTV sold its energy products segment,
Continental Emsco Company ("Continental Emsco"), for $74.6 million, with $38.6
million of the proceeds used to reduce LTV's long-term debt. The loss of $8.7
million on the sale of the segment was recorded in the second quarter of 1995,
and Continental Emsco is reflected as a discontinued operation in LTV's
financial statements for all periods presented. Sales by the energy products
segment were $179.2 million through August 1, 1995 and $299.2 million in 1994.
OTHER FINANCIAL DATA
Net interest and other income included the following (in
millions):
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest and other income... $ 44.1 $ 53.8 $ 27.4
Interest expense............ (1.7) (11.2) (14.4)
------ ------ ------
Total................. $ 42.4 $ 42.6 $ 13.0
====== ====== ======
</TABLE>
The Company's sales to the transportation market have
approximated 30% of sales over each of the last three years. The Company also
sells to the steel service center and converter markets that, in turn, sell to
the transportation and other industries. Management does not believe
significant credit risk exists at December 31, 1996. Sales for the years
ended December 31, 1996, 1995 and 1994 to the Company's largest customer,
General Motors Corporation, represented approximately 11%, 12% and 11%,
respectively, of total sales.
The Company has incurred research and development expense of
$15.1 million, $14.8 million and $15.1 million for the years ended December
31, 1996, 1995 and 1994, respectively.
Supplemental cash flow information is presented as follows (in
millions):
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Changes in assets and liabilities which
provided (used) net cash:
Receivables.......................... $ (7.2) $ 68.5 $ (38.8)
Inventories.......................... (59.8) 9.1 13.0
Other assets......................... 12.9 39.4 0.5
Accounts payable..................... 96.1 (12.2) 27.3
Other liabilities.................... (31.2) (0.8) (33.0)
------- ------- -------
Total................................ $ 10.8 $ 104.0 $ (31.0)
======= ======= =======
Interest payments.......................... $ 13.4 $ 11.4 $ 17.1
Income tax payments........................ 2.1 2.2 0.6
Capitalized interest....................... 15.0 7.6 7.7
Purchases of marketable securities......... 4,681.9 8,734.8 1,719.0
Sales of marketable securities............. 4,574.6 8,636.9 1,360.3
</TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents quarterly financial information
(in millions, except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales
1996.................................. $ 993.1 $1,075.1 $1,048.9 $1,017.4
1995.................................. 1,084.9 1,113.2 1,040.2 1,044.9
Gross margin
1996.................................. 114.4 146.7 139.0 146.7
1995.................................. 172.1 193.7 150.4 146.1
Income from continuing operations
1996.................................. 21.2 50.6 44.7 56.2
1995.................................. 82.1 105.2 70.2 53.3
Net income
1996.................................. 13.3 32.0 29.4 34.5
1995.................................. 51.2 55.6 43.2 34.8
Market price per share
1996-High............................. $ 15.88 $ 14.50 $ 13.50 $ 12.13
-Low.................................. 12.25 11.38 10.63 10.00
1995-High............................. 17.88 15.25 17.25 15.25
-Low.................................. 12.63 13.25 13.63 13.25
Market price per Series A Warrant
1996-High............................. $ 3.13 $ 2.25 $ 1.63 $ 1.13
-Low.................................. 2.00 1.50 0.94 0.56
1995-High............................. 4.13 3.50 3.88 3.13
-Low.................................. 2.75 2.63 2.88 2.25
Earnings per share (1)
1996 - Primary:
Continuing operations................. $ 0.12 $ 0.30 $ 0.27 $ 0.32
Discontinued operations............... -- -- -- --
-------- -------- -------- --------
Net income............................ $ 0.12 $ 0.30 $ 0.27 $ 0.32
======== ======== ======== ========
1996 - Fully diluted:
Continuing operations................. $ 0.12 $ 0.29 $ 0.27 $ 0.32
Discontinued operations............... -- -- -- --
-------- -------- -------- --------
Net income............................ $ 0.12 $ 0.29 $ 0.27 $ 0.32
======== ======== ======== ========
1995 - Primary:
Continuing operations................. $ 0.47 $ 0.59 $ 0.40 $ 0.32
Discontinued operations............... -- (0.08) -- --
-------- -------- -------- --------
Net income............................ $ 0.47 $ 0.51 $ 0.40 $ 0.32
======== ======== ======== ========
1995 - Fully diluted:
Continuing operations................. $ 0.46 $ 0.58 $ 0.39 $ 0.32
Discontinued operations............... -- (0.08) -- --
-------- -------- -------- --------
Net income............................ $ 0.46 $ 0.50 $ 0.39 $ 0.32
======== ======== ======== ========
1996 - Dividends paid per common share...... $ -- $ 0.03 $ 0.03 $ 0.03
======== ======== ======== ========
</TABLE>
- ---------------
(1) Earnings per share are computed independently for each of the quarters
based on the weighted average number of shares outstanding for each
period, and the sum of the quarters may not necessarily be equal to the
full year earnings per share amount.
Supplemental Guarantor Information
LTV's wholly-owned subsidiary, LTV Steel Company, Inc., will
fully and unconditionally guarantee the Company's obligation to pay principal,
premium, if any, and interest with respect to the Notes offered by the Offering
Memorandum.
The following supplemental consolidating condensed financial
statements of The LTV Corporation present (in millions): balance sheets as of
December 31, 1996 and 1995; statements of income for the years ended December
31, 1996, 1995 and 1994; and statements of cash flows for the years ended
December 31, 1996, 1995 and 1994. The LTV Corporation (Parent), LTV Steel
Company, Inc. (Guarantor) and the combined Non-Guarantor Subsidiaries
investments in subsidiaries are accounted for using the equity method.
Necessary elimination entries have been made to consolidate the Parent and all
of its subsidiaries.
Management does not believe that separate financial statements
of the Guarantor for the Notes offered by the Offering Memorandum are material
to investors. Therefore, separate financial statements and other disclosures
concerning the Guarantor are not presented.
Consolidating Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and marketable
securities........................... $ 628.6 $ (15.1) $ 60.3 $ -- $ 673.8
Receivables........................... 5.1 (16.0) 411.2 -- 400.3
Inventories:
Finished goods....................... -- 531.3 39.3 -- 570.6
Raw materials and supplies........... -- 207.9 23.8 -- 231.7
Other current assets.................. 3.1 7.2 1.6 -- 11.9
-------- -------- -------- --------- --------
Total current assets................. 636.8 715.3 536.2 -- 1,888.3
Intercompany, net..................... 15.1 475.5 (490.6) -- --
Investments in affiliates and other
noncurrent assets.................... 1,200.3 359.0 281.3 (1,435.2) 405.4
Property, plant and equipment, net.... -- 2,933.9 182.9 -- 3,116.8
-------- -------- -------- --------- --------
Total assets......................... $1,852.2 $4,483.7 $ 509.8 $(1,435.2) $5,410.5
======== ======== ======== ========= ========
Total current liabilities............. $ 24.4 $ 759.1 $ 115.5 $ -- $ 899.0
Long-term debt........................ 100.0 52.6 -- -- 152.6
Postemployment health care and other
insurance benefits................... -- 1,430.5 165.5 -- 1,596.0
Pension benefits...................... -- 621.3 26.6 -- 647.9
Other................................. 17.1 362.2 25.0 -- 404.3
Shareholders' equity.................. 1,710.7 1,258.0 177.2 (1,435.2) 1,710.7
-------- -------- -------- --------- --------
Total liabilities and shareholders'
equity................................ $1,852.2 $4,483.7 $ 509.8 $(1,435.2) $5,410.5
======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and marketable
securities........................... $ 734.0 $ (89.9) $ 79.0 $ -- $ 723.1
Receivables........................... 13.4 (11.4) 394.1 -- 396.1
Inventories:
Finished goods....................... -- 476.5 36.1 -- 512.6
Raw materials and supplies........... -- 204.5 25.4 -- 229.9
Other current assets.................. 6.3 2.1 0.3 -- 8.7
-------- -------- -------- --------- --------
Total current assets................. 753.7 581.8 534.9 -- 1,870.4
Intercompany, net..................... (126.1) 541.5 (415.4) -- --
Investments in affiliates and other
noncurrent assets.................... 898.2 434.6 192.3 (1,155.6) 369.5
Property, plant and equipment, net.... -- 2,957.0 183.2 -- 3,140.2
-------- -------- -------- --------- --------
Total assets......................... $1,525.8 $4,514.9 $ 495.0 $(1,155.6) $5,380.1
======== ======== ======== ========= ========
Total current liabilities............. $ 24.3 $ 711.9 $ 110.5 $ -- $ 846.7
Long-term debt........................ 100.0 50.4 -- -- 150.4
Postemployment health care and other
insurance benefits................... -- 1,439.2 159.2 -- 1,598.4
Pension benefits...................... -- 950.8 37.9 -- 988.7
Other................................. 26.3 369.0 25.4 -- 420.7
Shareholders' equity.................. 1,375.2 993.6 162.0 (1,155.6) 1,375.2
-------- -------- -------- --------- --------
Total liabilities and shareholders'
equity................................ $1,525.8 $4,514.9 $495.0 $(1,155.6) $5,380.1
======== ======== ======== ========= ========
</TABLE>
Consolidating Condensed Statement of Income
<TABLE>
<CAPTION>
Year Ended December 31, 1996
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................ $ -- $3,872.0 $ 946.9 $ (684.4) $4,134.5
Costs and expenses:
Cost of products sold............... -- 3,396.2 875.9 (684.4) 3,587.7
Depreciation and amortization....... -- 249.6 16.1 -- 265.7
Selling, general and administrative. 9.8 124.8 16.2 -- 150.8
Results of affiliates operations.... (137.5) (7.4) -- 144.9 --
Net interest and other.............. (45.0) 5.2 (2.6) -- (42.4)
-------- -------- ------- ------- --------
Total............................. (172.7) 3,768.4 905.6 (539.5) 3,961.8
-------- -------- ------- ------- --------
Income before income taxes........... 172.7 103.6 41.3 (144.9) 172.7
Income tax provision................. 63.5 38.1 15.2 (53.3) 63.5
-------- -------- ------- ------- --------
Net income........................... $ 109.2 $ 65.5 $ 26.1 $ (91.6) $ 109.2
======== ======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................. $ -- $4,068.2 $ 957.5 $(742.5) $4,283.2
Costs and expenses:
Cost of products sold................ -- 3,495.9 867.5 (742.5) 3,620.9
Depreciation and amortization........ -- 236.7 15.2 -- 251.9
Selling, general and administrative.. 13.6 114.9 13.7 -- 142.2
Results of affiliates operations..... (270.1) (36.3) -- 306.4 --
Net interest and other............... (54.3) 15.8 (4.1) -- (42.6)
-------- -------- -------- ------- --------
Total.............................. (310.8) 3,827.0 892.3 (436.1) 3,972.4
-------- -------- -------- ------- --------
Income from continuing operations
before income taxes.................. 310.8 241.2 65.2 (306.4) 310.8
Income tax provision.................. 117.3 91.1 24.6 (115.7) 117.3
-------- -------- -------- ------- --------
Income before discontinued operations. 193.5 150.1 40.6 (190.7) 193.5
Discontinued operations............... (8.7) -- -- -- (8.7)
-------- -------- -------- ------- --------
Net income............................ $ 184.8 $ 150.1 $ 40.6 $(190.7) $ 184.8
======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................ $ -- $4,030.6 $ 938.3 $ (735.6) $4,233.3
Costs and expenses:
Cost of products sold............... -- 3,530.9 873.3 (735.6) 3,668.6
Depreciation and amortization....... -- 227.3 14.5 -- 241.8
Selling, general and administrative. 11.7 106.9 14.6 -- 133.2
Results of affiliates operations.... (190.8) (21.8) -- 212.6 --
Net interest and other.............. (23.6) 12.9 (2.3) -- (13.0)
-------- -------- -------- ---------- --------
Total............................. (202.7) 3,856.2 900.1 (523.0) 4,030.6
-------- -------- -------- ---------- --------
Income from continuing operations
before income taxes................. 202.7 174.4 38.2 (212.6) 202.7
Income tax provision................. 73.2 62.9 13.8 (76.7) 73.2
-------- -------- -------- ---------- --------
Income from continuing operations.... 129.5 111.5 24.4 (135.9) 129.5
Discontinued operations.............. (2.4) -- -- -- (2.4)
-------- -------- -------- ---------- --------
Net income........................... $ 127.1 $ 111.5 $ 24.4 $ (135.9) $ 127.1
======== ======== ======== ========== ========
</TABLE>
Consolidating Condensed Cash Flows Statement
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by operating activities. $ (92.0) $ 494.3 $ 92.2 $ -- $ 494.5
-------- -------- -------- ---------- --------
Investing activities:
Capital expenditures................. -- (222.1) (20.8) -- (242.9)
Investment in affiliates............. -- -- (78.5) -- (78.5)
Net sales (purchases) of marketable
securities......................... (109.2) -- -- -- (109.2)
Proceeds from dispositions of
discontinued operations,
businesses, properties and other... -- 1.9 9.3 -- 11.2
Other................................ (1.7) -- (15.5) -- (17.2)
-------- -------- -------- ---------- --------
Net cash used in investing
activities............................ (110.9) (220.2) (105.5) -- (436.6)
-------- -------- -------- ---------- --------
Financing activities:
Pension funding to restored plans.... -- (199.3) (5.4) -- (204.7)
Dividends paid....................... (11.7) -- -- -- (11.7)
-------- -------- -------- ---------- --------
Net cash used in financing
activities............................ (11.7) (199.3) (5.4) -- (216.4)
-------- -------- -------- ---------- --------
Net increase (decrease) in cash and
cash equivalents..................... (214.6) 74.8 (18.7) -- (158.5)
Cash and cash equivalents at
beginning of period................. 276.8 (89.9) 79.0 -- 265.9
-------- -------- -------- ---------- --------
Cash and cash equivalents at end of
period.............................. $ 62.2 $ (15.1) $ 60.3 $ -- $ 107.4
======== ======== ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by operating activities. $ 70.0 $ 648.9 $ 37.3 $ -- $ 756.2
Investing activities:
Capital expenditures................. -- (191.6) (13.2) -- (204.8)
Investment in affiliates............. -- -- (89.2) -- (89.2)
Net sales (purchases) of marketable
securities......................... (99.7) -- -- -- (99.7)
Proceeds from dispositions of
discontinued operations,
businesses, properties and other... -- 11.5 82.9 -- 94.4
Other................................ 2.9 -- (12.4) -- (9.5)
-------- -------- -------- ---------- --------
Net cash used in investing
activities....................... (96.8) (180.1) (31.9) -- (308.8)
-------- -------- -------- ---------- --------
Financing activities:
Pension funding to restored plans.... -- 458.3) (14.3) -- (472.6)
Dividends paid....................... (2.2) -- -- -- (2.2)
Payments on long-term debt........... (32.6) (6.0) (2.5) -- (41.1)
Other................................ -- -- (1.0) -- (1.0)
-------- -------- -------- ---------- --------
Net cash used in financing
activities....................... (34.8) (464.3) (17.8) -- (516.9)
-------- -------- -------- ---------- --------
Net increase (decrease) in cash and
cash equivalents..................... (61.6) 4.5 (12.4) -- (69.5)
Cash and cash equivalents at
beginning of year................... 338.4 (94.4) 91.4 -- 335.4
-------- -------- -------- ---------- --------
Cash and cash equivalents at end of
year................................ $ 276.8 $ (89.9) $ 79.0 $ -- $ 265.9
======== ======== ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
--------------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by operating activities. $ 78.0 $ 559.8 $ 78.3 $ -- $ 716.1
-------- -------- -------- ---------- --------
Investing activities:
Capital expenditures................. -- (222.7) (11.3) -- (234.0)
Investment in affiliates............. -- -- (0.9) -- (0.9)
Net sales (purchases) of marketable
securities......................... (357.5) -- -- -- (357.5)
Proceeds from dispositions of
discontinued operations,
businesses, properties and other... -- 180.5 3.7 -- 184.2
Other................................ -- -- (13.6) -- (13.6)
-------- -------- -------- ---------- --------
Net cash used in investing
activities....................... (357.5) (42.2) (22.1) -- (421.8)
-------- -------- -------- ---------- --------
Financing activities:
Pension funding to restored plans.... -- (619.0) (23.2) -- (642.2)
Dividends paid....................... (2.3) -- -- -- (2.3)
Issuance of common stock............. 257.2 -- -- -- 257.2
Receipt of escrowed funds............ -- -- 25.8 -- 25.8
Payments on long-term debt........... -- -- 2.5 -- (2.5)
Other................................ 0.6 -- (1.8) -- (1.2)
-------- -------- -------- ---------- --------
Net cash used in financing
activities........................ 255.5 (619.0) (1.7) -- (365.2)
-------- -------- -------- ---------- --------
Net increase (decrease) in cash and
cash equivalents..................... (24.0) (101.4) 54.5 -- (70.9)
Cash and cash equivalents at
beginning of year.................... 362.4 7.0 36.9 -- 406.3
-------- -------- -------- ---------- --------
Cash and cash equivalents at end of
year................................. $ 338.4 $ (94.4) $ 91.4 $ -- $ 335.4
======== ======== ======== ========== ========
</TABLE>
No person has been authorized to give any information or to
make any representations, other than those contained in this Prospectus, in
connection with the offering made hereby, and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or any other person. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create
any implication that there has been no change in the affairs of the Company
since the date hereof. This Prospectus does not constitute an offer to sell
or a solicitation of any offer to buy any securities offered hereby by anyone
in any jurisdiction in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do
so or to any person to whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
Page
<TABLE> ----
<S> <C>
Available Information............................ 2
Incorporation of Certain Information by
Reference........................................ 2
The Company...................................... 3
Risk Factors..................................... 4
Use of Proceeds.................................. 11
Consolidated Ratio of Earnings to Fixed
Charges.................................... 12
The Exchange Offer............................... 12
Description of Notes............................. 17
Tax Consequences to U.S. Holders................. 17
Plan of Distribution............................. 45
Legal Matters.................................... 46
Experts.......................................... 46
Index to Financial Statements.................... F-1
</TABLE>
Until March 11, 1998 (90 days after the date of this
Prospectus), all dealers effecting transactions in the New Notes, whether or
not participating in this distribution, may be required to deliver a
Prospectus. This requirement 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.
$300,000,000
THE LTV CORPORATION
8.20% Senior Exchange Notes due 2007
PROSPECTUS
December 4, 1997
Part II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Reference is made to Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL"), which enables a corporation in its original
certificate of incorporation or an amendment thereto to eliminate or limit the
personal liability of a director for violations of the director's fiduciary
duty, except (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
the unlawful payment of dividends or unlawful stock purchases or redemptions)
or (iv) for any transaction from which a director derived an improper personal
benefit.
Section 145 of the DGCL empowers the Company to indemnify,
subject to the standards set forth therein, any person in connection with any
action, suit or proceeding brought before or threatened by reason of the fact
that the person was a director, officer, employee or agent of such company, or
is or was serving as such with respect to another entity at the request of
such company. The DGCL also provides that the Company may purchase insurance
of behalf of any such director, officer, employee or agent.
The Company's Amended and Restated Certificate of Incorporation
provides in effect for the indemnification by the Company of each director and
officer of the Company to the fullest extent permitted by applicable law.
Item 21. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- -----------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Purchase Agreement
2.1* Restated Certificate of Incorporation of LTVdated June 28, 1993 (incorporated herein by
reference to Exhibit 3.1 to LTV's Registration Statement on Form S-1 [Registration No.
33-50217])
2.2* Amendments to LTV's Bylaws adopted on October 25, 1996 (incorporated herein by reference
to Exhibit (3)-(1) to LTV's Report on Form 10-Q for the quarter ended September 30, 1996)
2.3* Certificate of Incorporation of LTV Steel
2.4* Bylaws of LTV Steel
4.1* Form of Indenture between LTV and The Chase Manhattan Bank, as Trustee
4.2* Form of 8.20% Senior Note due 2007 of LTV (included in Exhibit 4.1)
4.3* Form of 8.20% Senior Exchange Note due 2007 of LTV (included in Exhibit 4.1)
4.4* Registration Rights Agreement dated September 22, 1997 among LTV, LTV Steel and the
Initial Purchasers
5.1* Opinion of Davis Polk & Wardwell regarding the validity of the Notes being registered
10.1 The LTV Change in Control and Severance Pay Plan I effective as of October 1, 1997.
12.1* Statement Re: Computation of Ratio of Earnings to Fixed Charges
21.1* Subsidiaries of LTV and LTV Steel
23.1* Consent of Davis Polk & Wardwell (included in Exhibit 5 above)
23.2* Consent of Ernst & Young LLP
24.1* Power of Attorney for LTV
24.2* Power of Attorney for LTV Steel
25.1* Statement of Eligibility and Qualification on Form T-1 under the Trust Indenture Act of The
Chase Manhattan Bank, as trustee
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Letters to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees
99.4* Form of Letter to Clients
</TABLE>
__________
*Previously filed.
Item 22. Undertakings
(a) The undersigned Registrants hereby undertake:
(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 arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii)
to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) For the purpose of determining any liability under
the Securities Act of 1933, each 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 of any of the securities being registered
which remain unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provision, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) To respond to requests for information that is incorporated
by reference into the prospectus pursuant to Item 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.
(d) To supply by means of 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
undersigned registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cleveland, Ohio, on the fourth day of December, 1997.
THE LTV CORPORATION
By: /s/ Glenn J. Moran
----------------------------
Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ David H. Hoag* Chairman of the Board of Directors December 4, 1997
- --------------------------- and Chief Executive Officer
David H. Hoag (Principal Executive Officer)
/s/ Arthur W. Huge* Senior Vice President and Chief December 4, 1997
- --------------------------- Financial Officer (Principal,
Arthur W. Huge Financial and Accounting Officer)
/s/ George T. Henning* Vice President and Controller December 4, 1997
- ---------------------------
George T. Henning
/s/ J. Peter Kelly* President, Chief Operating Officer December 4, 1997
- --------------------------- and a Director
J. Peter Kelly
/s/ Edgar L. Ball* Director December 4, 1997
- ---------------------------
Edgar L. Ball
/s/ Colin C. Blaydon* Director December 4, 1997
- ---------------------------
Colin C. Blaydon
/s/ William H. Bricker* Director December 4, 1997
- ---------------------------
William H. Bricker
/s/ John E. Jacob* Director December 4, 1997
- ---------------------------
John E. Jacob
/s/ Edward C. Joullian III* Director December 4, 1997
- ---------------------------
Edward C. Joullian III
/s/ M. Thomas Moore* Director December 4, 1997
- ---------------------------
M. Thomas Moore
/s/ Harold A. Poling* Director December 4, 1997
- ---------------------------
Harold A. Poling
/s/ Vincent A. Sarni* Director December 4, 1997
- ---------------------------
Vincent A. Sarni
/s/ Samuel K. Skinner* Director December 4, 1997
- ---------------------------
Samuel K. Skinner
/s/ Paul G. Stern* Director December 4, 1997
- ---------------------------
Paul G. Stern
/s/ Stephen B. Timbers* Director December 4, 1997
- ---------------------------
Stephen B. Timbers
/s/ Farah M. Walters* Director December 4, 1997
- ---------------------------
Farah M. Walters
*By: /s/ Glenn J. Moran
----------------------
Attorney-in-Fact
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, the
undersigned registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cleveland, Ohio, on the fourth day of December, 1997.
LTV STEEL COMPANY, INC.
By: /s/ Glenn J. Moran
---------------------------------
Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ David H. Hoag* Chairman of the Board of Directors and December 4, 1997
- --------------------------- Chief Executive Officer (Principal
David H. Hoag Executive Officer)
/s/ Arthur W. Huge* Senior Vice President (Principal Financial December 4, 1997
- --------------------------- and Accounting Officer) and a Director
Arthur W. Huge
/s/ George T. Henning* Vice President and Controller December 4, 1997
- ---------------------------
George T. Henning
/s/ J. Peter Kelly* Director December 4, 1997
- ---------------------------
J. Peter Kelly
*By: /s/ Glenn J. Moran
---------------------------
Attorney-in-Fact
</TABLE>
EXHIBIT 10.1
THE LTV CORPORATION
CHANGE IN CONTROL SEVERANCE PAY PLAN I
THE LTV CORPORATION
CHANGE IN CONTROL SEVERANCE PAY PLAN I
Table of Contents
Page
1. General Statement of Purpose...........................................1
2. Effective and Termination Dates........................................1
3. Definitions............................................................1
4. Eligibility; Termination Following a Change in Control.................6
5. Severance Compensation.................................................9
6. Certain Additional Payments by the Corporation.........................9
7. No Mitigation Obligation..............................................13
8. Certain Payments not Considered for Other Benefits, etc...............13
9. Confidentiality; Confidential Information; Noncompetition.............13
10. Release...............................................................13
11. Legal Fees and Expenses...............................................13
12. Employment Rights.....................................................14
13. Withholding of Taxes..................................................15
14. Successors and Binding Effect.........................................15
15. Governing Law.........................................................16
16. Validity..............................................................16
17. Captions..............................................................16
18. Construction..........................................................16
19. Administration of the Plan............................................16
20. Amendment and Termination.............................................17
21. Other Plans, etc......................................................18
Exhibit A - Severance Compensation
Exhibit B - Confidentiality and Non-Compete Agreement
Exhibit C - Release
THE LTV CORPORATION
CHANGE IN CONTROL SEVERANCE PAY PLAN I
1. General Statement of Purpose. The Board of Directors ("Board") of
The LTV Corporation (the "Corporation") has considered the effect a change in
control of the Corporation may have on executives of the Corporation and its
Affiliated Employers (as defined below). The executives have made and are
expected to continue to make major contributions to the short-term and
long-term profitability, growth and financial strength of the Corporation and
its Affiliated Employers. The Corporation recognizes that, as is the case for
most publicly held companies, the possibility of a change in control exists,
desires to assure itself of both the present and future continuity of
management, desires to establish certain minimum severance benefits for
certain of its executives applicable in a change in control, and wishes to
insure that its executives are not practically disabled from discharging their
duties in respect of a proposed or actual transaction involving a change in
control.
As a result, the Board believes that The LTV Corporation Change in
Control Severance Pay Plan I (the "Plan") will assist the Corporation in
attracting and retaining qualified executives. Accordingly, the Plan is
hereby adopted and supersedes any other change in control arrangement for
Executives (as defined below).
2. Effective and Termination Dates. The Plan shall be effective as of
October 1, 1997 (the "Effective Date"). The Plan will automatically terminate
on the later of (i) October 1, 2000 or (ii) the second anniversary of a Change
in Control (the "Termination Date"); provided, however, that on each
anniversary of the Effective Date, the Termination Date set forth in
Subsection (i) of this Section will automatically be extended for an
additional year unless, not later than 120 calendar days prior to such date,
the Corporation shall have given written notice to the Executives that the
Termination Date is not to be so extended.
3. Definitions. Where the following words and phrases appear in the
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates otherwise:
(a) "Affiliated Employer" means any corporation, partnership,
limited liability company, joint venture, unincorporated association
or other entity in which the Corporation has a direct or indirect
ownership or other equity interest.
(b) "Annual Incentive Pay" means an amount which is equal to the
Executive's target award under the Annual Incentive Program ("AIP")
component of the MIP (or equivalent plan for any Affiliated Employer)
for (i) the calendar year in which a Change in Control occurs, or if no
such target award has been established by the Committee or the Employer
for such year, then (ii) the Executive's target award under the AIP
component of the MIP (or equivalent plan for any Affiliated Employer)
for the calendar year next preceding the calendar year in which the
Change in Control occurs.
(c) "Base Salary" means, with respect to each Executive, the
annual base compensation of such Executive annualized at the rate in
effect immediately prior to the Change in Control or annualized at
such higher rate as may be in effect immediately prior to the
Executive's termination of employment. "Base Salary" shall include
any portion of the Executive's annual base compensation the receipt
of which the Executive has elected to defer.
(d) "Board" means the board of directors of the Corporation.
(e) "Cause" means that, prior to any termination of employment
pursuant to Section 4(c) or (d), the Executive shall have committed:
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his
employment with the Corporation or any Affiliated
Employer;
(ii) intentional wrongful damage to property, contractual
interests or business relationships of the
Corporation or any Affiliated Employer; or
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Corporation or any
Affiliated Employer in violation of any agreement
with or policy of the Corporation or any Affiliated
Employer;
and any such act shall have been materially harmful to the Corporation
or any Affiliated Employer. For purposes of the Plan, no act or failure
to act on the part of the Executive shall be deemed "intentional" if it
was due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done or omitted to be done by the Executive
not in good faith and without reasonable belief that his action or
omission was in the best interest of the Corporation and the Affiliated
Employers. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for "Cause" hereunder unless and until
there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of
the Board then in office at a meeting of the Board called and held for
such purpose, after reasonable notice to the Executive and an
opportunity for the Executive, together with his counsel (if the
Executive chooses to have counsel present at such meeting), to be heard
before the Board, finding that, in the good faith opinion of the Board,
the Executive had committed an act constituting "Cause" as herein
defined and specifying the particulars thereof in detail. Nothing
herein will limit the right of the Executive or his beneficiaries to
contest the validity or propriety of any such determination.
(f) "Change in Control" means the occurrence prior to the
Termination Date of any of the following events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
15% or more of the combined voting power of the then
outstanding Voting Stock of the Corporation; provided, however,
that for purposes of this Paragraph, the following acquisitions
shall not constitute a Change in Control: (A) any acquisition
directly from the Corporation that is approved by the Incumbent
Board, (B) any acquisition by the Corporation, (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any Subsidiary,
or (D) any acquisition by any Person pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of
Paragraph (iii) of this Subsection; or
(ii) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent Board
(either by a specific vote or by approval of the proxy
statement of the Corporation in which such person is named as a
nominee for director, without objection to such nomination)
shall be deemed to have been a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest (within the meaning of Rule 14a-11
of the Exchange Act) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board;
or
(iii) consummation of (A) a reorganization, merger or
consolidation of the Corporation, (B) a sale or other
disposition of all or substantially all of the assets of the
Corporation, (C) a reorganization, merger or consolidation of
LTV Steel or (D) a sale or other disposition of all or
substantially all of the assets of LTV Steel, (each, a
"Business Combination"), unless, in each case, immediately
following such Business Combination, (I) all or substantially
all of the individuals and entities who were the beneficial
owners of Voting Stock of the Corporation immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 66 2/3% of the then outstanding shares of
common stock (or comparable equity interests) and the combined
voting power of the then outstanding voting securities entitled
to vote generally in the election of directors (or comparable
governing persons) of the entity resulting from such Business
Combination (including, without limitation, an entity which as
a result of such transaction owns the Corporation, LTV Steel,
all or substantially all of the Corporation's assets or all or
substantially all of LTV Steel's assets either directly or
through one or more subsidiaries) in substantially the same
proportions relative to each other as their ownership,
immediately prior to such Business Combination, of the Voting
Stock of the Corporation, (II) no Person (other than the
Corporation, such entity resulting from such Business
Combination, or any employee benefit plan (or related trust)
sponsored or maintained by the Corporation, any Subsidiary or
such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of the
then outstanding shares of common stock (or comparable equity
interests) of the entity resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors (or comparable governing persons) of such
entity, and (III) at least a majority of the members of the
board of directors (or comparable governing persons) of the
entity resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such
Business Combination; or
(iv) approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation, except
pursuant to a Business Combination that complies with clauses
(I), (II) and (III) of Paragraph (iii) of this Subsection.
(g) "Code" means the Internal Revenue Code of 1986, as amended,
or any successor thereto.
(h) "Committee" means the Compensation and Organization Committee
of the Board.
(i) "Committee Action" means a writing by, or minutes of the
actions of, the Committee, the substance of which, as to an
Executive, has been communicated to such Executive.
(j) "Corporation" means The LTV Corporation.
(k) "Employee Benefits" means the perquisites, benefits and
service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which an Executive is entitled to participate, including
without limitation any savings, pension, supplemental executive
retirement, or other retirement income or welfare benefit, stock option,
performance share, performance unit, stock purchase, stock appreciation,
deferred compensation, incentive compensation, group or other life,
health, medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Corporation or any Affiliated
Employer), disability, salary continuation, expense reimbursement and
other employee benefit policies, plans, programs or arrangements that
may now exist or any policies, plans, programs or arrangements that may
be adopted hereafter by the Corporation or an Affiliated Employer.
(l) "Employer" means the Corporation and any Affiliated Employer
to which the Plan has been extended by the Board and which has
adopted the Plan.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Executive" means any employee of an Employer who is
designated by the Committee to be eligible under the Plan in a
Committee Action.
(o) "Incentive Pay" means Annual Incentive Pay and the LTIP.
(p) "LTIP" means the Long-Term Incentive Program component of the
MIP.
(q) "LTV Steel" means LTV Steel Company, Inc.
(r) "MIP" means The LTV Corporation Management Incentive Program
(amended and restated effective April 24, 1997), as it may be amended or
modified following the Effective Date of the Plan.
(s) "Plan" means The LTV Corporation Change in Control Severance
Pay Plan I.
(t) "Severance Pay" means the amounts payable as set forth in
Section 5(a) and (b).
(u) "Severance Compensation" means Severance Pay and other
benefits provided by Section 5(a) and (b).
(v) "Severance Period" means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing
until the earlier of (i) the second anniversary of the occurrence of
the Change in Control or (ii) the Executive's death.
(w) "Subsidiary" means an entity in which the Corporation
directly or indirectly beneficially owns 50% or more of the
outstanding Voting Stock.
(x) "Supplemental Salary" means an amount in addition to Base
Salary made available to the Executive that may be used by the
Executive to pay the Executive's cost of certain Employee Benefits.
(y) "Termination Date" means the date of termination of the
Plan as specified in Section 2.
(z) "Voting Stock" means securities entitled to vote generally
in the election of directors.
4. Eligibility; Termination Following a Change in Control.
(a) Subject to the limitations described below, the Plan
applies to Executives who are employed on the date that a Change in
Control occurs.
(b) If an Executive's employment is terminated by an Employer
during the Severance Period and such termination is without Cause,
the Executive will be entitled to the Severance Compensation
described in Section 5.
(c) An Executive who is designated in a Committee Action as
benefiting from the provisions of this Subsection may, during the
Severance Period, terminate his employment with an Employer with the
right to Severance Compensation upon the occurrence of one or more of
the following events (regardless of whether any other reason, other
than Cause, for such termination exists or has occurred, including
without limitation other employment):
(i) Failure by the Corporation or the Employer to elect
or reelect or otherwise to maintain the Executive in the office
or the position, or a substantially equivalent office or
position, of or with the Corporation or the Employer, as the
case may be, which the Executive held as an employee
immediately prior to a Change in Control, or the removal of, or
the failure to reelect, the Executive as a Director of the
Corporation (or any successor thereto) if the Executive was a
Director of the Corporation immediately prior to the Change in
Control;
(ii) (A) A significant adverse change in the nature or
scope of the authorities, powers, functions, responsibilities or
duties attached to the position with the Employer which the
Executive held immediately prior to the Change in Control, (B) a
reduction in the Executive's Base Salary, (C) a reduction in the
Executive's opportunities for Incentive Pay (including but not
limited to a reduction in target bonus percentage or target award
opportunity) provided by the Corporation, or (D) the termination
or denial of the Executive's rights to Employee Benefits or a
reduction in the scope or aggregate value thereof, any of which is
not remedied by the Corporation within 10 calendar days after
receipt by the Corporation of written notice from the Executive of
such change, reduction or termination, as the case may be;
(iii) A determination by the Executive (which determination
will be conclusive and binding upon the parties hereto provided it
has been made in good faith and in all events will be presumed to
have been made in good faith unless otherwise shown by the
Corporation by clear and convincing evidence) that a change in
circumstances has occurred following a Change in Control,
including, without limitation, a change in the scope of the
business or other activities for which the Executive was
responsible immediately prior to the Change in Control, which has
rendered the Executive substantially unable to carry out, has
substantially hindered the Executive's performance of, or has
caused the Executive to suffer a substantial reduction in, any of
the authorities, powers, functions, responsibilities or duties
attached to the position held by the Executive immediately prior
to the Change in Control, which situation is not remedied within
10 calendar days after written notice to the Corporation from the
Executive of such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Corporation or transfer of all or
substantially all of its business and/or assets, or all or
substantially all of the assets of LTV Steel, as the case may be,
unless the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which all
or substantially all of its business and/or assets, or all or
substantially all of the assets of LTV Steel, as the case may be,
have been transferred (directly or by operation of law) assumed
all duties and obligations of the Corporation under the Plan
pursuant to Section 14(a);
(v) The Corporation requires the Executive to have his
principal location of work changed, to any location that is in
excess of 75 miles from the location thereof immediately prior to
the Change in Control, or the Employer requires the Executive to
increase travel away from his office in the course of discharging
his responsibilities or duties to the Employer by more than 15
days in any calendar quarter, without, in either case, his prior
written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of its obligations under the Plan
by the Corporation or any successor thereto which is not remedied
by the Corporation within 10 calendar days after receipt by the
Corporation of written notice from the Executive of such breach.
(d) An Executive who is designated in a Committee Action as benefiting
from the provisions of this Subsection may, during the Severance Period,
terminate his employment with an Employer with the right to Severance
Compensation upon the occurrence of one or more of the following events
(regardless of whether any other reason, other than Cause, for such
termination exists or has occurred, including without limitation other
employment):
(i) (A) A reduction in the Executive's Base Salary, (B) a
reduction in the Executive's opportunities for Incentive Pay
(including but not limited to a reduction in target bonus
percentage or target award opportunity) provided by LTV Steel or
the Corporation, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the
scope or aggregate value thereof, any of which is not remedied
by the Corporation within 10 calendar days after receipt by the
Corporation of written notice from the Executive of such
reduction or termination, as the case may be;
(ii) The liquidation, dissolution, merger, consolidation or
reorganization of the Corporation or transfer of all or
substantially all of its business and/or assets, or all or
substantially all of the assets of LTV Steel, as the case may be,
unless the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which all
or substantially all of its business and/or assets, or all or
substantially all of the assets of LTV Steel, as the case may be,
have been transferred (directly or by operation of law) assumed
all duties and obligations of the Corporation under the Plan
pursuant to Section 14(a);
(iii) The Employer requires the Executive to have his
principal location of work changed, to any location that is in
excess of 75 miles from the location thereof immediately prior
to the Change in Control, or requires the Executive to increase
travel away from his office in the course of discharging his
responsibilities or duties to the Employer by more than 15 days
in any calendar quarter, without, in either case, his prior
written consent; or
(iv) Without limiting the generality or effect of the
foregoing, any material breach of its obligations under the
Plan by the Corporation or any successor thereto which is not
remedied by the Corporation within 10 calendar days after
receipt by the Corporation of written notice from the Executive
of such breach.
(e) A termination by an Employer pursuant to Subsection (b) of
this Section or by an Executive pursuant to Subsections (c) or (d) of
this Section will not affect any rights that the Executive may have
pursuant to any agreement, policy, plan, program or arrangement of the
Corporation or an Affiliated Employer providing Employee Benefits, which
rights shall be governed by the terms thereof, except that the Executive
shall be considered to be an employee of the Employer for the period for
which Severance Pay is calculated, and except for any rights to
severance compensation to which an Executive may be entitled upon
termination of employment under The LTV Corporation Executive Severance
Plan, which rights shall, during the Severance Period, be superseded by
the Plan.
(f) Notwithstanding the preceding provisions of this Section, an
Executive will not be entitled to Severance Compensation if his
employment with an Employer is terminated during the Severance Period
because:
(i) of the Executive's death; or
(ii) the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for, or
applicable to, the Executive immediately prior to the Change in
Control.
5. Severance Compensation.
(a) If an Executive's employment is terminated pursuant to
Section 4(b) or if an Executive terminates his employment pursuant to
Section 4(c) or 4(d), the Corporation will pay to the Executive as
Severance Pay the amounts described on Exhibit A within 10 business
days after the termination date, or, if later, upon the expiration of
the revocation period provided for in Exhibit C, and will continue to
provide to the Executive the other Severance Compensation described
on Exhibit A for the periods described therein.
(b) Without limiting the rights of an Executive at law or in
equity, if the Corporation fails to make any payment or provide any
benefit required to be made or provided hereunder on a timely basis, the
Corporation will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of The Wall Street Journal plus the lesser of 5% or
the maximum rate of interest allowed by law. Such interest will be
payable as it accrues on demand. Any change in such prime rate or
maximum rate will be effective on and as of the date of such change.
(c) Notwithstanding any provision of the Plan to the contrary,
the rights and obligations under this Section and under Sections 6 and
11 will survive any termination or expiration of the Plan or the
termination of an Executive's employment following a Change in Control
for any reason whatsoever.
6. Certain Additional Payments by the Corporation.
(a) Anything in the Plan to the contrary notwithstanding, in the
event that it shall be determined (as hereafter provided) that any
payment or distribution by the Corporation or any of its affiliates
to or for the benefit of an Executive, whether paid or payable or
distributed or distributable pursuant to the terms of the Plan or
otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right
or similar right, or the lapse or termination of any restriction on,
or the vesting or exercisability of, any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code (or any successor provision thereto) by reason of
being considered "contingent on a change in ownership or control" of
the Corporation, within the meaning of Section 280G of the Code (or
any successor provision thereto) or to any similar tax imposed by
state or local law, or any interest or penalties with respect to such
tax (such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional
payment or payments (collectively, a "Gross-Up Payment"); provided,
however, that no Gross-up Payment shall be made with respect to the
Excise Tax, if any, attributable to (i) any incentive stock option,
as defined by Section 422 of the Code ("ISO") granted prior to the
execution of the Plan, or (ii) any stock appreciation or similar
right, whether or not limited, granted in tandem with any ISO
described in clause (i). The Gross-Up Payment shall be in an amount
such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including
any Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.
(b) Subject to the provisions of Subsection (f) of this Section,
all determinations required to be made under this Section, including
whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid
by the Corporation to the Executive and the amount of such Gross-Up
Payment, if any, shall be made by the accounting firm serving as the
Corporation's independent public accountants immediately prior to the
change in control (the "Accounting Firm"). The Corporation shall
direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Corporation and the Executive
within 30 calendar days after the Termination Date, if applicable,
and any such other time or times as may be requested by the
Corporation or the Executive. If the Accounting Firm determines that
any Excise Tax is payable by the Executive, the Corporation shall pay
the required Gross-Up Payment to the Executive within 5 business days
after receipt of such determination and calculations with respect to
any Payment to the Executive. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall, at the same time
as it makes such determination, furnish the Corporation and the
Executive an opinion that the Executive has substantial authority not
to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application
of Section 4999 of the Code (or any successor provision thereto) and
the possibility of similar uncertainty regarding applicable state or
local tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have
been made by the Corporation should have been made (an
"Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Corporation exhausts or fails to
pursue its remedies pursuant to Subsection (f) of this Section and
the Executive thereafter is required to make a payment of any Excise
Tax, the Executive shall direct the Accounting Firm to determine the
amount of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the
Corporation and the Executive as promptly as possible. Any such
Underpayment shall be promptly paid by the Corporation to, or for the
benefit of, the Executive within 5 business days after receipt of
such determination and calculations.
(c) The Corporation and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Corporation or the Executive, as
the case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations
contemplated by Subsection (b) of this Section. Any determination by
the Accounting Firm as to the amount of the Gross-Up Payment shall be
binding upon the Corporation and the Executive.
(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent basis
with the determination of the Accounting Firm with respect to the Excise
Tax payable by the Executive. The Executive shall make proper payment
of the amount of any Excise Payment, and at the request of the
Corporation, provide to the Corporation true and correct copies (with
any amendments) of his federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Corporation, evidencing such
payment. If prior to the filing of the Executive's federal income tax
return, or corresponding state or local tax return, if relevant, the
Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, the Executive shall within 5 business days pay to the
Corporation the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Subsection (b) of this Section shall be borne by the
Corporation. If such fees and expenses are initially paid by the
Executive, the Corporation shall reimburse the Executive the full amount
of such fees and expenses within 10 business days after receipt from the
Executive of a statement therefor and reasonable evidence of his payment
thereof.
(f) The Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service or any other taxing authority
that, if successful, would require the payment by the Corporation of a
Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the Executive
actually receives notice of such claim and the Executive shall further
apprise the Corporation of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior
to the earlier of (i) the expiration of the 30-calendar-day period
following the date on which he gives such notice to the Corporation and
(ii) the date that any payment of amount with respect to such claim is
due. If the Corporation notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(A) provide the Corporation with any written records or
documents in his possession relating to such claim reasonably
requested by the Corporation;
(B) take such action in connection with contesting such claim
as the Corporation shall reasonably request in writing from time to
time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably
selected by the Corporation;
(C) cooperate with the Corporation in good faith in order
effectively to contest such claim; and
(D) permit the Corporation to participate in any proceedings
relating to such claim;
provided, however, that the Corporation shall bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Executive, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this Subsection,
the Corporation shall control all proceedings taken in connection with
the contest of any claim contemplated by this Subsection and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim (provided, however, that the Executive may
participate therein at his own cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Corporation shall determine; provided, however,
that if the Corporation directs the Executive to pay the tax claimed and
sue for a refund, the Corporation shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify
and hold the Executive harmless, on an after-tax basis, from any Excise
Tax or income or other tax, including interest or penalties with respect
thereto, imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to
which the contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Corporation's control of any
such contested claim shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced
by the Corporation pursuant to Subsection (f) of this Section, the
Executive receives any refund with respect to such claim, the Executive
shall (subject to the Corporation's complying with the requirements of
Subsection (f) of this Section) promptly pay to the Corporation the
amount of such refund (together with any interest paid or credited
thereon after any taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Corporation pursuant to
Section (f) of this Section, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the
Corporation does not notify the Executive in writing of its intent to
contest such denial or refund prior to the expiration of 30 calendar
days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of any such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Corporation to the Executive pursuant to this
Section.
7. No Mitigation Obligation. The Corporation hereby acknowledges
that it will be difficult and may be impossible for an Executive to find
reasonably comparable employment following his termination of employment with
the Corporation and the Affiliated Employers and that the non-competition
agreement required by Section 9 will further limit the employment
opportunities for an Executive. Accordingly, the provision of Severance
Compensation by the Corporation to an Executive in accordance with the terms
of the Plan is hereby acknowledged by the Corporation to be reasonable, and an
Executive will not be required to mitigate the amount of any payment provided
for in the Plan by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of an
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Section 2(a)(iii) of Exhibit A.
8. Certain Payments not Considered for Other Benefits, etc. The
Gross-up Payment, legal fee and expense reimbursement provided under Section
11 and reimbursements for outplacement counseling provided under Section 5 of
Exhibit A will not be included as earnings for the purpose of calculating
contributions or benefits under any employee benefit plan of the Corporation.
Such payments and payments of Severance Pay will not be made from any benefit
plan funds, and shall constitute an unfunded unsecured obligation of the
Corporation.
9. Confidentiality; Confidential Information; Noncompetition. Receipt of
Severance Compensation by an Executive is conditioned upon the Executive
executing and delivering to the Corporation a confidentiality and non-compete
agreement substantially in the form provided in Exhibit B for the period
specified on Exhibit A.
10. Release. Receipt of Severance Compensation by an Executive is
conditioned upon the Executive executing and delivering to the Corporation a
release substantially in the form provided in Exhibit C.
11. Legal Fees and Expenses.
(a) It is the intent of the Corporation that each Executive not be
required to incur legal fees and the related expenses associated with
the interpretation, enforcement or defense of his rights under the Plan
by litigation or otherwise (including making a claim pursuant to the
provisions of Section 19(d)) because the cost and expense thereof would
substantially detract from the benefits intended to be extended to each
Executive hereunder. Accordingly, if it should appear to an Executive
that the Corporation has failed to comply with any of its obligations
under the Plan or in the event that the Corporation or any other person
takes or threatens to take any action to declare the Plan void or
unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive hereunder,
the Corporation irrevocably authorizes the Executive from time to time
to retain counsel of his choice, at the expense of the Corporation as
hereafter provided, to advise and represent the Executive in connection
with any such interpretation, enforcement or defense, including without
limitation the initiation or defense of any litigation or other legal
action, whether by or against the Corporation or any director, officer,
stockholder or other person affiliated with the Corporation in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Corporation and such counsel, the Corporation
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Corporation
and the Executive agrees that a confidential relationship will exist
between the Executive and such counsel. Without respect to whether the
Executive prevails, in whole or in part, in connection with any of the
foregoing, the Corporation will pay and be solely financially
responsible for any and all attorneys' and related fees and expenses
incurred by the Executive in connection with any of the foregoing.
Notwithstanding the preceding provisions of this Subsection, legal fees
and related expenses will not be reimbursed pursuant to this Section if
an independent party satisfactory to the Corporation and the Executive
determines that the underlying claim by the Executive (i) is not likely
to exceed $5,000, (ii) is not eligible for reimbursement pursuant to
this Section, (iii) has no reasonable basis in law or fact or (iv) is
not being pursued in a manner consistent with the nature and magnitude
of such claim.
(b) Without limiting the obligations of the Corporation pursuant
to Subsection (a) of this Section, in the event a Change in Control
occurs, the performance of the Corporation's obligations under this
Section shall be secured by amounts deposited or to be deposited in
trust pursuant to certain trust agreements to which the Corporation
shall be a party, which amounts deposited shall in the aggregate be
not less than $500,000, providing that the fees and expenses of
counsel selected from time to time by the Executive pursuant to
Subsection (a) of this Section shall be paid, or reimbursed to the
Executive if paid by the Executive, either in accordance with the
terms of such trust agreements, or, if not so provided, on a regular,
periodic basis upon presentation by the Executive to the trustee of a
statement or statements prepared by such counsel in accordance with
its customary practices. Any failure by the Corporation to satisfy
any of its obligations under this Subsection shall not limit the
rights of the Executive hereunder. Subject to the foregoing, the
Executive shall have the status of a general unsecured creditor of
the Corporation and shall have no right to, or security interest in,
any assets of the Corporation or any Subsidiary.
12. Employment Rights. Nothing expressed or implied in the Plan shall
create any right or duty on the part of the Corporation, an Affiliated
Employer or an Executive to have the Executive remain in the employment of the
Corporation or an Affiliated Employer at any time prior to or following a
Change in Control. Any termination of employment of the Executive or the
removal of the Executive from the office or position in the Corporation or any
Affiliated Employer prior to a Change in Control but following the
commencement of any discussion with any third person that ultimately results
in a Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for all purposes of the Plan.
13. Withholding of Taxes. The Corporation may withhold from any amounts
payable under the Plan all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
14. Successors and Binding Effect.
(a) The Corporation shall require any successor, (including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Corporation
whether by purchase, merger, consolidation, reorganization or otherwise,
and such successor shall thereafter be deemed the Corporation for the
purposes of the Plan), to assume and agree to perform the obligations
under the Plan in the same manner and to the same extent the Corporation
would be required to perform if no such succession had taken place. The
Plan shall be binding upon and inure to the benefit of the Corporation
and any successor to the Corporation, but shall not otherwise be
assignable, transferable or delegable by the Corporation.
(b) The rights under the Plan shall inure to the benefit of and be
enforceable by each Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
(c) The rights under the Plan are personal in nature and neither
the Corporation nor any Executive shall, without the consent of the
other, assign, transfer or delegate the Plan or any rights or
obligations hereunder except as expressly provided in this Section.
Without limiting the generality of the foregoing, an Executive's
right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security
interest or otherwise, other than by a transfer by his or her will or
by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section, the
Corporation shall have no liability to pay any amount so attempted to
be assigned, transferred or delegated.
(d) The obligation of the Corporation to make payments and/or
provide benefits hereunder shall represent an unsecured obligation of
the Corporation.
(e) The Corporation recognizes that each Executive will have no
adequate remedy at law for breach by the Corporation of any of the
agreements contained herein and, in the event of any such breach, the
Corporation hereby agrees and consents that each Executive shall be
entitled to a decree of specific performance, mandamus or other
appropriate remedy to enforce performance of obligations of the
Corporation under the Plan.
15. Governing Law. The validity, interpretation, construction and
performance of the Plan shall be governed by the laws of the State of
Delaware, without giving effect to the principals of conflict of laws of such
State.
16. Validity. If any provisions of the Plan or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable
or otherwise illegal, the remainder of the Plan and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
17. Captions. The captions in the Plan are for convenience of reference
only and do not define, limit or describe the scope or intent of the Plan or
any part hereof and shall not be considered in any construction hereof.
18. Construction. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender and the singular shall be
deemed to include the plural, unless the context clearly indicates to the
contrary.
19. Administration of the Plan.
(a) In General: The Plan shall be administered by the Corporation,
which shall be the named fiduciary under the Plan.
(b) Delegation of Duties: The Corporation may delegate any of its
administrative duties, including, without limitation, duties with
respect to the processing, review, investigation, approval and payment
of Severance Pay and Gross-up Payments, to named administrator or
administrators.
(c) Regulations: The Corporation shall promulgate any rules and
regulations it deems necessary in order to carry out the purposes of the
Plan or to interpret the terms and conditions of the Plan; provided,
however, that no rule, regulation or interpretation shall be contrary to
the provisions of the Plan.
(d) Claims Procedure: Subject to the provisions of Section 6, the
Corporation shall determine the rights of any employee of the
Corporation to any Severance Compensation or a Gross-up Payment
hereunder. Any employee or former employee of the Corporation or an
Affiliated Employer who believes that he has not received any benefit
under the Plan to which he believes he is entitled, may file a claim in
writing with the General Manager of Human Resources of LTV Steel. The
Corporation shall, no later than 90 days after the receipt of a claim,
either allow or deny the claim by written notice to the claimant. If a
claimant does not receive written notice of the Corporation's decision
on his claim within such 90-day period, the claim shall be deemed to
have been denied in full.
A denial of a claim by the Corporation, wholly or partially, shall be
written in a manner calculated to be understood by the claimant and
shall include:
(i) the specific reason or reasons for the denial;
(ii) specific reference to pertinent Plan provisions on which
the denial is based;
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary; and
(iv) an explanation of the claim review procedure.
A claimant whose claim is denied (or his duly authorized representative)
may, within 30 days after receipt of denial of his claim, request a
review of such denial by the Corporation by filing with the Secretary of
the Corporation a written request for review of his claim. If the
claimant does not file a request for review with the Corporation within
such 30-day period, the claimant shall be deemed to have acquiesced in
the original decision of the Corporation on his claim. If a written
request for review is so filed within such 30-day period, the
Corporation shall conduct a full and fair review of such claim. During
such full review, the claimant shall be given the opportunity to review
documents that are pertinent to his claim and to submit issues and
comments in writing. The Corporation shall notify the claimant of its
decision on review within 60 days after receipt of a request for review.
Notice of the decision on review shall be in writing. If the decision
on review is not furnished to the claimant within such 60-day period,
the claim shall be deemed to have been denied on review.
(e) Revocability of Action: Any action taken by the
Corporation with respect to the rights or benefits under the Plan of
any Executive shall be revocable by the Corporation as to payments or
distributions not yet made to such person, and acceptance of
Severance Pay or a Gross-up Payment under the Plan constitutes
acceptance of and agreement to the Corporation making any appropriate
adjustments in future payments or distributions to such person to
offset any excess or underpayment previously made to him.
(f) Requirement of Receipt: Upon receipt of any Severance
Compensation or a Gross-up Payment hereunder, the Corporation
reserves the right to require any Executive to execute a receipt
evidencing the amount and payment of such Severance Compensation
and/or Gross-up Payment.
20. Amendment and Termination. The Corporation reserves the right,
except as hereinafter provided, at any time and from time to time, to amend,
modify, change or terminate the Plan and/or any Committee Action, including
any Exhibit thereto; provided, however, that any such amendment, modification,
change or termination that adversely affects the rights of any Executive who
benefits from Section 4(c) of the Plan may not be made without the written
consent of such Executive; and provided, further, however, that after the
occurrence of a Change in Control any such amendment, modification, change or
termination that adversely affects the rights of any Executive under the Plan
may not be made without the written consent of any such Executive.
21. Other Plans, etc. If the terms of this Plan are inconsistent with
the provisions of any other plan, program, contract or arrangement of the
Corporation or any Affiliated Employer, to the extent such plan, program,
contract or arrangement may be amended by the Corporation or an Affiliated
Employer, the terms of the Plan will be deemed to so amend such plan, program,
contract or arrangement, and the terms of the Plan will govern.
IN WITNESS WHEREOF, The LTV Corporation has caused the Plan to be
executed this ___ day of October, 1997.
THE LTV CORPORATION
______________________________
By:
Its:
THE LTV CORPORATION
CHANGE IN CONTROL SEVERANCE PAY PLAN I
EXHIBIT A
Severance Compensation
1. Severance Pay. Each Executive whose employment is terminated
pursuant to Section 4(b) or who terminates his employment pursuant to Section
4(c) or Section 4(d) shall, within 10 business days after such termination or,
if later, upon the expiration of the revocation period provided for in Exhibit
C, receive Severance Pay from the Corporation in a lump sum payment in an
amount equal to the multiple set forth in a Committee Action times the
Executive's Base Salary plus his Annual Incentive Pay.
2. Health and Life Benefits.
(a) Each Executive whose employment is terminated pursuant to
Section 4(b) or who terminates his employment pursuant to Section 4(c)
or Section 4(d) may continue, for himself and his eligible dependents,
health and life insurance benefits for the period immediately following
his termination of employment set forth in a Committee Action. During
any period of continued coverage pursuant to this Section, the Executive
will be required to pay the same cost of coverage, co-pays, deductibles
and other similar payments paid by active employees of his Employer
having elected the same type of coverage. The Executive shall cease to
be eligible for continued health and life insurance benefits provided
by the Plan if he (i) waives such coverage (unless the Employer's Plan
provides for reenrollment following waiver of coverage and the Executive
complies with all requirements for such reenrollment), (ii) fails to pay
any amount required for such coverage or (iii) becomes eligible for
other group health coverage (unless the Employer's Plan provides for
reenrollment following waiver of coverage under such circumstances and
the Executive complies with all requirements for such reenrollment).
(b) Following such period of continued coverage, if eligible, the
Executive shall be permitted to elect to enroll in Employer's health
care plan as a retiree (as such term is defined in the Employer's health
care plan) in accordance with the provisions of such health care plan.
(c) Health benefits provided in accordance with this Section shall
be applied to the maximum period of continuation coverage provided under
Section 4980B of the Code ("COBRA Coverage"). If the period for which
health benefits are provided in accordance with Subsection (a) of this
Section exceeds the maximum period of COBRA Coverage, additional
coverage for health benefits shall be provided in a manner to be
determined by the Corporation following the expiration of the maximum
period of COBRA Coverage for the remainder of the period provided in
Subsection (a) of this Section.
3. Stock Options, Restricted Stock and Performance Shares. Upon an
Executive's termination of employment pursuant to Section 4(b), Section 4(c)
or Section 4(d), and upon the later of the dates specified in Section 1 of
this Exhibit A, (i) all stock options granted under the MIP, or any successor
plan or similar plan, which have not otherwise vested shall be vested, (ii) the
restrictions on any restricted stock awarded under the MIP, including the
Management Stock Acquisition Program component of the MIP, or any successor
plan or similar plan, which have not otherwise been released shall be
released, and (iii) all performance share awards under the MIP for which the
measurement period has not yet expired or which otherwise have not vested
shall be earned assuming management objectives have been met at the target
level.
4. Financial Counseling. Each Executive whose employment is terminated
pursuant to Section 4(b) or who terminates his employment pursuant to Section
4(c) or Section 4(d) and who immediately prior to a Change in Control is
covered by the Corporation's financial counseling program, shall continue to
be provided such financial counseling for a period of 24 months from the date
of such termination.
5. Outplacement Counseling. Each Executive whose employment is
terminated pursuant to Section 4(b) or who terminates his employment pursuant
to Section 4(c) or Section 4(d) shall be reimbursed by the Corporation for
reasonable expenses incurred for outplacement counseling with a nationally
recognized outplacement firm (i) which do not exceed 20% of the Executive's
Base Salary and (ii) which are incurred by the Executive within 12 months
following such termination.
6. Supplemental Salary. Each Executive whose employment is terminated
pursuant to Section 4(b) or who terminates his employment pursuant to Section
4(c) or Section 4(d) shall continue to receive Supplemental Salary (less any
portion applicable to optional vacation), calculated as the applicable
percentage of his Base Salary, until the earliest of (i) the end of the period
of continued health and life benefits as provided in a Committee Action, (ii)
the termination of coverage under Section 2 of this Exhibit A and (iii) his
retirement.
7. Non-Compete Period. The non-competition period for each Executive
shall be the period specified in a Committee Action.
THE LTV CORPORATION
CHANGE IN CONTROL SEVERANCE PAY PLAN I
EXHIBIT B
Form of Confidentiality and Non-Compete Agreement
WHEREAS, the Executive's employment has been terminated in accordance
with Section 4(b), (c) or (d) of The LTV Corporation Change in Control
Severance Pay Plan I (the "Plan"); and
WHEREAS, the Executive is required to sign this Confidentiality and
Non-Compete Agreement in order to receive the Severance Compensation (as such
term is defined in the Plan) as described in Exhibit A of the Plan and the
other benefits described in the Plan.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agree as follows:
1. Effective Date of Agreement. This Agreement is effective on the date
hereof and will continue in effect as provided herein.
2. Confidentiality; Confidential Information. In consideration of the
payments to be made and the benefits to be received by the Executive pursuant
to the Plan:
(a) The Executive acknowledges and agrees that in the performance
of his duties as an employee of the Corporation or an Affiliated
Employer, he was brought into frequent contact with, had access to,
and became informed of confidential and proprietary information of
the Corporation and the Affiliated Employers and/or information which
is a trade secret of the Corporation (collectively, "Confidential
Information"), as more fully described in Subsection (b) of this
Section. The Executive acknowledges and agrees that the Confidential
Information of the Corporation and the Affiliated Employers gained by
the Executive during his association with the Corporation and the
Affiliated Employers was developed by and/or for the Corporation and
the Affiliated Employers through substantial expenditure of time,
effort and money and constitutes valuable and unique property of the
Corporation and the Affiliated Employers.
(b) The Executive will keep in strict confidence, and will not,
directly or indirectly, at any time, disclose, furnish, disseminate,
make available, use or suffer to be used in any manner any Confidential
Information of the Corporation or an Affiliated Employer without
limitation as to when or how the Executive may have acquired such
Confidential Information. The Executive specifically acknowledges that
Confidential Information includes any and all information, whether
reduced to writing (or in a form from which information can be obtained,
translated, or derived into reasonably usable form), or maintained in
the mind or memory of the Executive and whether compiled or created by
the Corporation or an Affiliated Employer, which derives independent
economic value from not being readily known to or ascertainable by
proper means by others who can obtain economic value from the disclosure
or use of such information, that reasonable efforts have been put forth
by the Corporation and the Affiliated Employers to maintain the secrecy
of Confidential Information, that such Confidential Information is and
will remain the sole property of the Corporation and the Affiliated
Employers, and that any retention or use by the Executive of
Confidential Information after the termination of the Executive's
employment with and services for the Corporation and the Affiliated
Employers shall constitute a misappropriation of the Corporation's
Confidential Information.
(c) The Executive further agrees that he shall return, within 10
days of the effective date of his termination as an employee of the
Corporation and the Affiliated Employers, in good condition, all
property of the Corporation and the Affiliated Employers then in his
possession, including, without limitation, whether in hard copy or in
media (i) property, documents and/or all other materials (including
copies, reproductions, summaries and/or analyses) which constitute,
refer or relate to Confidential Information of the Corporation or an
Affiliated Employer, (ii) keys to property of the Corporation or an
Affiliated Employer, (iii) files and (iv) blueprints or other drawings.
(d) The Executive further acknowledges and agrees that his
obligation of confidentiality shall survive until and unless such
Confidential Information of the Corporation or an Affiliated Employer
shall have become, through no fault of the Executive, generally known
to the public or the Executive is required by law (after providing
the Corporation with notice and opportunity to contest such
requirement) to make disclosure. The Executive's obligations under
this Section are in addition to, and not in limitation or preemption
of, all other obligations of confidentiality which the Executive may
have to the Corporation and the Affiliated Employers under general
legal or equitable principles or statutes.
3. Non-Compete. The Executive agrees that he will not, for a period of
years following his termination with the Corporation and the Affiliated
Employers, engage in Competitive Activity.
4. Nonsolicitation. The Executive further agrees that he will not,
directly or indirectly, for a period of years following his
termination with the Corporation and the Affiliated Employers:
(a) induce or attempt to induce customers, business relations or
accounts of the Corporation or any of the Affiliated Employers to
relinquish their contracts or relationships with the Corporation or any
of the Affiliated Employers; or
(b) solicit, entice, assist or induce other employees, agents or
independent contractors to leave the employ of the Corporation or any
of the Affiliated Employers or to terminate their engagements with the
Corporation and/or any of the Affiliated Employers or assist any
competitors of the Corporation or any of the Affiliated Employers in
securing the services of such employees, agents or independent
contractors.
5. Definitions. Where the following words and phrases appear in the
Agreement, they have the respective meanings set forth below, unless their
context clearly indicates otherwise:
(a) "Affiliated Employer" means any corporation, partnership, limited
liability company, joint venture, unincorporated association or other entity
in which the Corporation has a direct or indirect ownership or other equity
interest.
(b) "Competitive Activity" means the Executive's participation, without
the written consent of an officer of the Corporation, in the management of any
business enterprise if such enterprise engages in substantial and direct
competition with the Corporation or any Affiliated Employer and such
enterprise's sales of any product or service competitive with any product or
service of the Corporation or any Affiliated Employer amounted to 5% of such
enterprise's net sales for its most recently completely fiscal year and if the
Corporation's net sales of said product or service amounted to 5% of, as
applicable, the Corporation's or Affiliated Employer's net sales for its most
recently completed fiscal year. "Competitive Activity" will not include (i)
the mere ownership of 5% or more of securities in any such enterprise and the
exercise of rights appurtenant thereto or (ii) participation in the management
of any such enterprise other than in connection with the competitive
operations of such enterprise.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Agreement on the date set forth below.
Dated:___________________________ __________________________________
Executive
THE LTV CORPORATION
CHANGE IN CONTROL SEVERANCE PAY PLAN I
EXHIBIT C
Form of Release
WHEREAS, the Executive's employment has been terminated in accordance
with Section 4(b), (c) or (d) of The LTV Corporation Change in Control
Severance Pay Plan I (the "Plan"); and
WHEREAS, the Executive is required to sign this Release in order to
receive the Severance Compensation (as such term is defined in the Plan) as
described in Exhibit A of the Plan and the other benefits described in the
Plan.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to the Plan, which the Executive
acknowledges are in addition to payments and benefits which the Executive
would be entitled to receive absent the Plan (other than severance pay and
benefits under The LTV Corporation Executive Severance Plan), the Executive,
for himself and his dependents, successors, assigns, heirs, executors and
administrators (and his and their legal representatives of every kind), hereby
releases, dismisses, remises and forever discharges The LTV Corporation, its
predecessors, parents, subsidiaries, divisions, related or affiliated
companies, officers, directors, stockholders, members, employees, heirs,
successors, assigns, representatives, agents and counsel (the "Corporation")
from any and all arbitrations, claims, including claims for attorney's fees,
demands, damages, suits, proceedings, actions and/or causes of action of any
kind and every description, whether known or unknown, which Executive now has
or may have had for, upon, or by reason of any cause whatsoever ("claims"),
against the Corporation, including but not limited to:
(a) any and all claims arising out of or relating to Executive's
employment by or service with the Corporation and his termination from
the Corporation;
(b) any and all claims of discrimination, including but not
limited to claims of discrimination on the basis of sex, race, age,
national origin, marital status, religion or handicap, including,
specifically, but without limiting the generality of the foregoing,
any claims under the Age Discrimination in Employment Act, as
amended, Title VII of the Civil Rights Act of 1964, as amended, the
Americans with Disabilities Act, Ohio Revised Code Section 4101.17
and Ohio Revised Code Chapter 4112, including Sections 4112.02 and
4112.99 thereof; and
(c) any and all claims of wrongful or unjust discharge or breach
of any contract or promise, express or implied.
3. Executive understands and acknowledges that the Corporation does
not admit any violation of law, liability or invasion of any of his rights and
that any such violation, liability or invasion is expressly denied. The
consideration provided for this Release is made for the purpose of settling
and extinguishing all claims and rights (and every other similar or dissimilar
matter) that Executive ever had or now may have against the Corporation to the
extent provided in this Release. Executive further agrees and acknowledges
that no representations, promises or inducements have been made by the
Corporation other than as appear in the Plan.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) He has been advised by the Corporation to consult with legal
counsel prior to executing this Release, has had an opportunity to
consult with and to be advised by legal counsel of his choice, fully
understands the terms of this Release, and enters into this Release
freely, voluntarily and intending to be bound;
(c) He has been given a period of 21 days to review and consider
the terms of this Release, prior to its execution and that he may use as
much of the 21 day period as he desires; and
(d) He may, within 7 days after execution, revoke this Release.
Revocation shall be made by delivering a written notice of revocation to
the General Manager of Human Resources at the Corporation. For such
revocation to be effective, written notice must be actually received by
the General Manager of Human Resources at the Corporation no later than
the close of business on the 7th day after Executive executes this
Release. If Executive does exercise his right to revoke this Release,
all of the terms and conditions of the Release shall be of no force and
effect and the Corporation shall not have any obligation to make
payments or provide benefits to Executive as set forth in Sections 5, 6
and 11 of the Plan.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
6. Executive waives and releases any claim that he has or may have to
reemployment after __________________.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Release on the date set forth below.
Dated:___________________________ __________________________________
Executive
