<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ISSUER OF SENIOR NOTES REGISTERED HEREBY
------------------------
ARMCO INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OHIO 3312 31-0200500
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
ONE OXFORD CENTRE
301 GRANT STREET
PITTSBURGH, PA 15219-1415
(412) 255-9800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
GARY R. HILDRETH
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ARMCO INC.
ONE OXFORD CENTRE
301 GRANT STREET
PITTSBURGH, PA 15219-1415
(412) 255-9800
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES OF COMMUNICATIONS TO:
JONATHAN C. STAPLETON, ESQ.
ARNOLD & PORTER
399 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 715-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
9% Senior Notes Due 2007............. $150,000,000 100% $150,000,000 $45,455
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(2).
(2) Calculated pursuant to Rule 457(f)(2).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state.
<PAGE>
PROSPECTUS
OFFER TO EXCHANGE
ALL OUTSTANDING
9% SENIOR NOTES DUE 2007
FOR
9% SENIOR NOTES DUE 2007
OF
ARMCO INC.
-------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997 UNLESS EXTENDED
---------------------
Armco Inc., an Ohio corporation (the "Company"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange its outstanding 9% Senior Notes due 2007 (the "Old
Notes"), of which an aggregate of $150,000,000 in principal amount is
outstanding as of the date hereof, for an equal principal amount of newly issued
9% Senior Notes due 2007 (the "New Notes"). The form and terms of the New Notes
will be the same as the form and terms of the Old Notes except that (i) the New
Notes will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and hence will not bear legends restricting the transfer
thereof and (ii) the holders of the New Notes will not be entitled to certain
rights of holders of the Old Notes under the Registration Agreement (as defined
herein), which rights will terminate upon the consummation of the Exchange
Offer. The New Notes will evidence the same debt as the Old Notes and will be
issued pursuant to, and entitled to the benefits of, the same Indenture that
governs the Old Notes (the "Indenture"). The New Notes and the Old Notes are
sometimes referred to herein collectively as the "Senior Notes."
Interest on the Senior Notes is payable semiannually on March 15 and
September 15 in each year, commencing March 15, 1998. The Senior Notes are
redeemable at the option of Armco, in whole or in part, on or after September
15, 2002 at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In addition, prior to September 15,
2000, the Company, at its option, may redeem up to 33 1/3% of the aggregate
principal amount of the Senior Notes originally issued with the net cash
proceeds of one or more Equity Offerings (as defined) at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, to the date of
redemption; PROVIDED that at least 66 2/3% of the aggregate principal amount of
the Senior Notes originally issued remain outstanding after any such redemption.
See "Description of Senior Notes."
(CONTINUED ON NEXT PAGE)
------------------------
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY
ELIGIBLE HOLDERS IN EVALUATING THE EXCHANGE OFFER,
SEE "RISK FACTORS" BEGINNING ON PAGE 15.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
The Senior Notes are senior unsecured debt obligations of Armco ranking
equally with all other existing and future senior unsecured debt of Armco and
effectively junior to secured indebtedness of Armco, to the extent of the assets
securing the indebtedness, and to indebtedness of subsidiaries of Armco, to the
extent of the assets of such subsidiaries. At June 30, 1997, after giving pro
forma effect to the offering and sale of the Old Notes (the "Offering") and the
application of the net proceeds thereof, Armco would have had total consolidated
debt obligations of $389.3 million, of which $57.5 million of indebtedness would
have been secured by assets of Armco. In addition, borrowings under two
revolving credit facilities with total commitments of $170.0 million are secured
by certain inventory and receivables. At June 30, 1997, no borrowings were
outstanding under these facilities; $64.3 million of one facility was committed
to letters of credit. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Upon a Change of Control (as defined), each holder of the Senior Notes will
have the right to require the Company to repurchase such holder's Senior Notes
at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. Upon the occurrence of a
Change of Control prior to September 15, 2002, the Company, at its option, may
redeem all, but not less than all, of the outstanding Senior Notes at a
redemption price equal to 100% of the principal amount thereof, plus the
applicable Make-Whole Premium (as defined). In addition, the Company will be
obligated to offer to repurchase the Senior Notes at 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase in the event of certain asset sales. See "Description of Senior
Notes."
Prior to the Exchange Offer, there has been no public market for the Senior
Notes. The Company does not 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 that an active market for the New Notes will
develop. To the extent that a market for the New Notes does develop, the market
value of the New Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the Company's financial
condition and other conditions. Such conditions might cause the New Notes, to
the extent that they are actively traded, to trade at a significant discount
from face value. See "Risk Factors -- Lack of Public Market."
The New Notes will be available initially only in book-entry form. The
Company expects that the New Notes issued pursuant to the Exchange Offer will be
issued in the form of one or more fully registered global notes that will be
deposited with, or on behalf of, the Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., as its nominee. Beneficial
interests in the global note representing the New Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the DTC
and its participants. After the initial issuance of such global note, New Notes
in certificated form will be issued in exchange for the global note only in
accordance with the terms and conditions set forth in the Indenture. See
"Description of Senior Notes -- Book Entry Delivery and Form."
The Company will accept for exchange any and all Old Notes that are properly
tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on
, 1997 (if and as extended, the "Expiration Date"). Tenders of Old
Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. Old Notes may be
tendered only in integral multiples of $1,000. 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.
Based on a previous interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters to third
parties, 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 a holder thereof (other than (i) a broker-dealer who purchases
such New Notes
2
<PAGE>
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that 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 the holder is acquiring the New Notes in its
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Holders of Old Notes wishing to accept the Exchange Offer must represent
to the Company 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 meeting
the requirements of the Securities Act 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, in connection with
resale 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 180 days after
the Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company believes that, except for $12.0 million principal amount of Old
Notes held by two affiliates of the Company, none of the registered holders of
the Old Notes is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company. The Company has not entered into any arrangement
or understanding with any person to distribute the New Notes to be received in
the Exchange Offer, and to the best of the Company's information and belief,
each person participating in the Exchange Offer is acquiring the New Notes in
the ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the New Notes to be received in the
Exchange Offer.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
3
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act with respect to the
New Notes offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. For further information with respect to
the Company and the New Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. The Registration
Statement (and the exhibits and schedules thereto), as well as the periodic
reports and other information filed by the Company and the Guarantor with the
Commission, may be inspected and copied at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, New York, New York 10007 and Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
its public reference facilities in New York, New York and Chicago, Illinois at
the prescribed rates. The Commission maintains a site on the World Wide Web
("WWW") that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The Commission's WWW site is http://www.sec.gov. 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.
During such times as the Company is not subject to the reporting and
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company has agreed that for so long as any of the
Senior Notes remain outstanding to furnish to the holders of the Senior Notes
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms. In addition, the Company has agreed to make
available to any prospective purchaser of the Senior Notes or beneficial owner
of the Senior Notes in connection with any sale thereof the information required
by Rule 144A(d)(4) under the Securities Act, until such time as the Company has
either exchanged the Old Notes for New Notes or until such time as the holders
thereof have disposed of such Old Notes pursuant to an effective registration
statement filed by the Company. From and after the time the Company files a
registration statement with the Commission with respect to the New Notes, the
Company will file such quarterly and annual information with the Commission.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation other than as contained in this
Prospectus or the accompanying Letter of Transmittal, and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company. Neither this Prospectus nor the accompanying Letter
of Transmittal nor both together constitutes an offer to sell or a solicitation
of an offer to buy any security other than the New Notes offered hereby, nor
does it constitute an offer to sell or a solicitation of an offer to buy any
securities offered hereby to any person in any jurisdiction in which it is
unlawful to make such offer or solicitation to such person. Neither the delivery
of this Prospectus or the accompanying Letter of Transmittal or both together,
nor any sale made hereunder shall under any circumstances imply that the
information contained herein is correct as of any date subsequent to the date
hereof.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED HEREIN BY REFERENCE. UNLESS OTHERWISE INDICATED, INDUSTRY DATA
CONTAINED IN THIS PROSPECTUS HAVE BEEN DERIVED FROM PUBLICLY AVAILABLE SOURCES,
INCLUDING INDUSTRY TRADE JOURNALS AND FILINGS WITH THE COMMISSION, WHICH THE
COMPANY HAS NOT INDEPENDENTLY VERIFIED BUT BELIEVES TO BE RELIABLE.
INFORMATION CONTAINED OR INCORPORATED IN THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT ARE NOT HISTORICAL FACTS AND THAT INVOLVE RISKS
AND UNCERTAINTIES, SUCH AS THE STATEMENTS UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
"BUSINESS--ENVIRONMENTAL MATTERS" AND "BUSINESS--LEGAL MATTERS" REGARDING THE
COMPANY'S PROFITABILITY, FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS,
AS WELL AS THE ANTICIPATED PRODUCT MIX, COSTS, TONNAGE CAPABILITIES AND
PERFORMANCE CHARACTERISTICS. ACTUAL RESULTS, EVENTS AND PERFORMANCE COULD DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF THESE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, THE
FACTORS DISCUSSED HEREIN UNDER "RISK FACTORS" OR IN THE COMPANY'S FILINGS WITH
THE COMMISSION.
THE COMPANY
Armco Inc. ("Armco" or the "Company") is the largest domestic producer of
stainless sheet and strip and electrical steel, based on tons shipped. The
Company operates in two business segments: Specialty Flat-Rolled Steels and
Fabricated Products, which contributed 82% and 18%, respectively, of total sales
for the twelve months ended June 30, 1997. The Company's Specialty Flat-Rolled
Steels segment produces and finishes flat-rolled stainless, electrical and
galvanized carbon steel at five manufacturing locations in Pennsylvania and
Ohio. For the twelve months ended June 30, 1997, the Specialty Flat-Rolled
Steels segment had shipments of 1,167,000 tons. The Company's major customers in
this segment include automotive exhaust systems producers, manufacturers of
industrial and electrical equipment, other manufacturers, service centers and
converters. The Company's Fabricated Products segment consists of three
businesses: Douglas Dynamics, L.L.C., the largest North American manufacturer of
snowplows for four-wheel drive vehicles; Sawhill Tubular Division, a
manufacturer of a wide range of steel pipe and tubular products for use in
construction, industrial and plumbing markets; and Greens Port Industrial Park,
located in Houston, Texas. Total sales and EBITDA (as defined) for Armco were
$1,774.4 million and $132.2 million, respectively, for the twelve months ended
June 30, 1997.
Historically, consumption of stainless sheet and strip has grown at a faster
rate than the steel market as a whole. For example, between 1987 and 1996,
consumption of stainless sheet and strip in the United States had a compound
annual growth rate of 5.6% as compared to a rate of 2.8% for the total steel
market. Among the characteristics that make stainless a material of choice are
its resistance to corrosion, ability to withstand temperature extremes, high
strength-to-weight ratio, natural attractiveness and ease of maintenance. An
additional contributor to increased stainless steel usage is the requirement of
the 1990 amendments to the Clean Air Act that long-life materials such as
corrosion-resistant stainless steel be used in a number of applications,
including automotive exhaust systems where Armco has the leading U.S. market
position. From 1990 to 1996, stainless steel usage in automotive exhaust systems
grew from 25 pounds per vehicle to 52 pounds per vehicle. In addition to
increased usage per vehicle, automotive stainless demand has been driven by
strong North American production of 15.3 million, 14.9 million and 15.1 million
light vehicles in 1994, 1995 and 1996, respectively, as compared to an annual
average of 12.5 million vehicles from 1990 to 1993.
Electrical steels are iron-silicon alloys that, through special production
techniques, possess unique magnetic properties that make them desirable for the
generation, transmission and distribution of electricity. Armco believes it is
the largest domestic supplier and the only producer of a full product line of
electrical steels in the U.S.
5
<PAGE>
Armco's strategic objective is to enhance its position as a leading domestic
producer of specialty flat-rolled steels by focusing on its existing strong
market positions, especially in the automotive chrome and electrical steel
markets. Armco intends to strengthen its position in these markets by continuing
to focus on its core specialty steels business, by utilizing its recently
upgraded and improved facilities to produce higher quality products and by
providing improved customer service.
The Company has taken significant steps in recent years to become a focused
specialty steel company by streamlining its operations, investing in the
expansion and upgrade of its specialty flat-rolled steel facilities and
divesting or otherwise rationalizing certain unprofitable or non-strategic
operations. From 1993 through 1996, the Company sold or disposed of 13
operations and investments, generating cash proceeds of over $400 million.
Since 1993, the Company has invested approximately $235 million in two major
programs to upgrade its facilities and thereby increase productivity, lower
operating costs, increase yields and improve customer service. The first of
these programs included the installation at the Company's Mansfield, Ohio
facility of a state-of-the-art continuous thin-slab caster designed to produce
different grades of steel with rapid switchover from one grade to another. The
new casting process helps to ensure consistently high quality products because
it eliminates intermediate production steps and reduces the amount of rolling
required to achieve the desired thickness. The thin-slab caster, certain hot
mill upgrades and other modifications at the Mansfield plant were made over a
15-month period, at a total cost of approximately $140 million.
The second of these programs, which commenced in late 1994, consisted of $95
million of extensive capital improvements over a two-year period to upgrade and
expand the Company's stainless and electrical steel finishing facilities. This
strategic facilities upgrade was initiated to reduce existing production
constraints and increase specialty flat-rolled steel finishing capacity by
approximately 180,000 tons per year, particularly in chrome stainless steel,
electrical steels and specialty sheet and strip products. These upgrades were
completed during 1996. Armco now plans to focus on improving productivity and
quality at its specialty steel operations and anticipates further cost
reductions as these improvements are made.
In addition, the Company intends to continue to pursue research and
development activities. The Company's new equipment and more advanced technology
are helping customers to lower their total costs, by providing them with the
specific material selection and part design needed to match their manufacturing
processes. Furthermore, Armco has reorganized its research and technology
functions to facilitate more direct interaction with customers in the
development of new products and processes.
Armco's executive offices are located at One Oxford Centre, 301 Grant
Street, Pittsburgh, Pennsylvania 15219 (telephone (412) 255-9800).
6
<PAGE>
THE EXCHANGE
<TABLE>
<S> <C>
The Exchange Offer........................... The Company is offering to exchange $1,000
principal amount of New Notes for each $1,000
principal amount of Old Notes that are
properly tendered and accepted. The Company
will issue the New Notes on or promptly after
the Expiration Date. There are $150,000,000
aggregate principal amount of Old Notes
outstanding. See "The Exchange Offer."
Based on an interpretation of the staff of
the Commission set forth in no-action letters
issued to third parties, the Company believes
that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise
transferred by any holder thereof (other than
(i) a broker-dealer who purchases such New
Notes directly from the Company to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii)
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
that such holder has no arrangement or
understanding with any person to participate
in the distribution of such New Notes. In the
event that the Company's belief is
inaccurate, holders of New Notes who transfer
New Notes in violation of the prospectus
delivery provisions of the Securities Act and
without an exemption from registration
thereunder may incur liability thereunder.
The Company does not assume or indemnify
holders against such liability. The Exchange
Offer is not being made to, nor will the
Company accept surrenders for exchange from,
holders of Old Notes (i) in any jurisdiction
in which the Exchange Offer or the acceptance
thereof would not be in compliance with the
securities or blue sky laws of such
jurisdiction or (ii) if any holder is engaged
or intends to engage in a distribution of New
Notes. Each broker-dealer that receives New
Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by
such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus meeting the requirements
of the Securities Act in connection with any
resale of such New Notes. See "Plan of
Distribution."
Expiration Date.............................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1997,
unless extended, in which case the term
"Expiration Date"
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
shall mean the latest date and time to which
the Exchange Offer is extended. The Company
will accept for exchange any and all Old
Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered on or promptly after the
Expiration Date.
Conditions to the Exchange Offer............. The Company may terminate the Exchange Offer
if it determines that its ability to proceed
with the Exchange Offer could be materially
impaired due to any legal or governmental
action, any new law, statute, rule or
regulation, any interpretation by the staff
of the Commission of any existing law,
statute, rule or regulation or the failure to
obtain any necessary approvals of
governmental agencies or holders of the Old
Notes. The Company does not expect any of the
foregoing conditions to occur, although there
can be no assurances any such conditions will
not occur.
Procedures for Tendering Notes............... Each holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Old Notes and any other required
documentation to The Fifth Third Bank, as
Exchange Agent, at the address set forth
herein. By executing the Letter of
Transmittal, each holder will represent to
the Company that, among other things, the New
Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of
business of the person receiving such New
Notes, whether or not such person has an
arrangement or understanding with any person
to participate in the distribution of such
New Notes and that neither the holder nor any
such other person is an "affiliate," as
defined in Rule 405 under the Securities Act,
of the Company.
Special Procedures for Beneficial Owners..... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Old
Notes in the Exchange Offer should contact
such registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such beneficial
owner wishes to tender on such owner's own
behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering his Old Notes, either make
appropriate arrangements to register
ownership of the Old Notes in such owner's
name or obtain a properly completed bond
power from the registered holder.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date.
Guaranteed Delivery Procedures............... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes or the Letter of Transmittal
to The Fifth Third Bank, as Exchange Agent,
prior to the Expiration Date, must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights............................ Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date.
Certain Federal Income Tax Considerations.... For a discussion of certain federal income
tax considerations relating to the exchange
of the New Notes for the Old Notes, see
"Certain United States Federal Income Tax
Considerations."
Exchange Agent............................... The Fifth Third Bank is the Exchange Agent.
Its telephone number is (513) 744-8741. The
address of the Exchange Agent is set forth in
"The Exchange Offer -- Exchange Agent." The
Fifth Third Bank also serves as trustee under
the Indenture.
Conditions to the Exchange Offer............. The Exchange Offer is not conditioned on any
minimum principal amount of Old Notes being
tendered for exchange. The Exchange Offer is
subject to certain other customary
conditions, each of which may be waived by
the Company. See "The Exchange Offer --
Certain Conditions to the Exchange Offer."
</TABLE>
9
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions relating to the Old Notes.
Whenever defined terms of the Indenture not otherwise defined herein are
referred to, such defined terms are incorporated herein by reference. In the
event that an exchange offer is not consummated (or, under certain
circumstances, a resale shelf registration statement is not declared effective)
on or prior to March 11, 1998, the annual interest rate borne by the Senior
Notes will be increased by 0.5%. Upon consummation of an exchange offer or the
effectiveness of a resale shelf registration statement, the interest rate on the
Senior Notes will revert to the rate set forth on the cover page of this
Prospectus. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from September 15, 1997. Accordingly, registered holders of New Notes
on the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from September 15, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the Exchange
Offer. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
THE NEW NOTES
<TABLE>
<S> <C>
Securities Offered........................... $150,000,000 of 9% Senior Notes.
Maturity Date................................ September 15, 2007.
Interest Payment Dates....................... March 15 and September 15 of each year,
commencing March 15, 1998.
Redemption at Option of Company.............. The Senior Notes will be redeemable at the
option of Armco, in whole or in part, at any
time on or after September 15, 2002 at the
redemption prices set forth herein, plus
accrued and unpaid interest thereon, if any,
to the date of redemption. In addition, up to
33 1/3% of the aggregate principal amount of
the Senior Notes originally issued will be
redeemable at the option of Armco, at any
time prior to September 15, 2000, with the
net cash proceeds of one or more Equity
Offerings at the redemption prices set forth
herein, plus accrued and unpaid interest, if
any, to the date of redemption; PROVIDED that
at least 66 2/3% of the aggregate principal
amount of the Senior Notes originally issued
remain outstanding after any such redemption.
Furthermore, upon the occurrence of a Change
of Control prior to September 15, 2002, the
Senior Notes will be redeemable at the option
of Armco in whole, but not in part, at a
redemption price equal to 100% of the
principal amount thereof plus the applicable
Make-Whole Premium (as defined). See
"Description of Senior Notes -- Optional
Redemption."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Change of Control............................ Upon a Change of Control (as defined), the
Company will be obligated to offer to
repurchase all outstanding Senior Notes at a
price equal to 101% of their principal
amount, plus accrued and unpaid interest
thereon, if any, to the date of repurchase.
There can be no assurance that, in the event
of a Change of Control, the Company will
have, or be able to obtain, sufficient funds
to repurchase the Senior Notes or that the
Company will be permitted to do so under the
Credit Facilities (as defined) or any other
indebtedness outstanding at such time. See
"Description of Senior Notes -- Change of
Control."
Ranking...................................... The Senior Notes will be senior unsecured
obligations of the Company. Accordingly, the
Senior Notes will be senior to any
subordinated indebtedness of the Company and
will be effectively junior to secured
indebtedness of the Company, to the extent of
the assets securing such indebtedness, and to
indebtedness of subsidiaries of the Company,
to the extent of the assets of such
subsidiaries. At June 30, 1997, after giving
pro forma effect to the Offering and the
application of the net proceeds thereof,
Armco would have had total consolidated debt
of $389.3 million, of which $57.5 million of
indebtedness would have been secured by
assets of Armco. In addition, borrowings
under two revolving credit facilities with
total commitments of $170.0 million (the
"Credit Facilities") are secured by certain
inventory and receivables. At June 30, 1997,
no borrowings were outstanding under these
facilities; $64.3 million of one facility was
committed to letters of credit. See
"Capitalization" and "Management's Discussion
and Analysis of Financial Condition and
Results of Operations -- Liquidity and
Capital Resources."
Restrictive Covenants........................ The Indenture contains certain covenants
which restrict (among other things) the
ability of Armco and certain of its
subsidiaries to enter into certain
transactions with Affiliates, pay dividends
or make other Restricted Payments, Incur
Indebtedness, issue preferred stock of
subsidiaries, enter into Sale and Leaseback
Transactions, enter into certain Asset Sales,
incur Liens, impose restrictions on
distributions from Restricted Subsidiaries,
consummate mergers or sell, transfer or
convey all or substantially all of the
Company's assets.
Use of Proceeds.............................. The Company will not receive any proceeds
from the Exchange Offer. The net proceeds
from the sale
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
of the Old Notes were used to redeem
outstanding indebtedness of the Company with
an aggregate principal amount of $120
million, and for general corporate purposes.
Registration Rights Agreement................ Holders of New Notes (other than as set forth
below) will not be entitled to any
registration rights with respect to the New
Notes. Pursuant to the Registration
Agreement, the Company has agreed, for the
benefit of the holders of Old Notes, to file
a registration statement under the Securities
Act with respect to an exchange offer for the
Old Notes. The Registration Statement of
which this Prospectus is a part constitutes
the exchange offer registration statement
referred to in the Registration Agreement.
Under certain circumstances described in the
Registration Agreement, certain holders of
Senior Notes may require the Company to file,
and use reasonable best efforts to cause to
become effective, a shelf registration
statement under the Securities Act that would
cover resales of Senior Notes by such
holders. See "Registration Rights Agreement."
</TABLE>
RISK FACTORS
Holders of the Old Notes should consider carefully all of the information
set forth in this Prospectus and, in particular, the information set forth under
"Risk Factors" before making a decision to tender their Old Notes for exchange
pursuant to the Exchange Offer.
12
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table summarizes certain consolidated financial data, which
should be read in connection with the Company's consolidated financial
statements and the related notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997 (the "Consolidated
Financial Statements") incorporated by reference herein and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
consolidated financial data presented below for the years ended December 31,
1996, 1995 and 1994 have been derived from the Company's audited financial
statements. The consolidated financial data presented below as of and for the
six months ended June 30, 1997 and 1996 are derived from the Company's unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments (consisting of only normal recurring
adjustments) which the Company considers necessary for a fair presentation of
the Company's financial position and results of operations for these periods.
Operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for future periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
INCOME STATEMENT DATA
Net sales.............................................................. $ 931.6 $ 881.2 $ 1,724.0 $ 1,559.9 $ 1,437.6
Special charges (a).................................................... -- -- (8.8) -- (35.0)
Operating profit....................................................... 47.2 27.3 74.7 69.0 39.2
Interest expense, net.................................................. (12.3) (12.7) (26.2) (21.1) (23.3)
Income from continuing operations...................................... 29.6 2.9 26.0 23.5 65.8
Income from discontinued operations.................................... 1.3 -- 6.5 6.3 11.9
Net income............................................................. 30.9 2.9 32.5 29.8 77.7
OTHER DATA
Depreciation and amortization.......................................... $ 30.8 $ 29.3 $ 58.7 $ 52.8 $ 48.8
Non-cash postretirement benefit expense (b)............................ (3.3) 2.5 7.8 13.0 11.9
Cash employee benefits for shutdown operations......................... 21.4 17.6 32.9 38.3 45.9
Capital expenditures................................................... 15.1 27.0 59.8 159.5 96.4
Preferred stock dividends declared..................................... 8.9 8.9 17.9 17.9 17.8
EBITDA (c)............................................................. 56.6 41.5 117.1 96.5 89.0
Ratio of EBITDA to interest expense, net............................... 4.6x 3.3x 4.5x 4.6x 3.8x
Ratio of net debt to EBITDA (d)........................................ N/A N/A 1.7x 2.6x 1.9x
Ratio of earnings to fixed charges (e)................................. 2.6x 1.2x 1.7x 1.5x 1.6x
SPECIALTY FLAT-ROLLED STEELS (IN THOUSANDS OF TONS)
Total shipments........................................................ 638 611 1,140 939 815
Total production....................................................... 752 743 1,439 1,153 947
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents.............................................. $ 175.2 $ 181.0 $ 168.9 $ 136.8 $ 202.8
Working capital........................................................ 266.4 237.8 213.6 194.8 258.6
Total assets........................................................... 1,907.7 1,916.3 1,867.8 1,896.6 1,934.9
Total debt............................................................. 364.3 392.8 371.5 387.4 374.3
Long-term employee benefit obligations................................. 1,203.7 1,216.5 1,200.2 1,165.9 1,221.9
Preferred stock........................................................ 185.9 185.9 185.9 185.9 185.9
Total shareholders' deficit............................................ (190.3) (233.0) (212.0) (230.4) (218.5)
</TABLE>
13
<PAGE>
- ------------------------
(a) In 1996, the Company recognized a special charge of $5.9 million to record a
change in the estimated loss on the sale of its nonresidential construction
business and a $2.9 million special charge primarily for the writedown of
inventory and severance costs related to its decision to discontinue a line
of light truck equipment manufactured by the Company's snowplow and ice
control equipment business. In 1994, the Company recorded a special charge
of $20.0 million for expenses associated with the temporary idling and
restructuring of its steelmaking facilities in Mansfield and Dover, Ohio and
a charge of $15.0 million related to a decision by Eastern Stainless
Corporation to sell substantially all of its assets to Avesta Sheffield
Holding Company, a stainless steel plate manufacturer, for cash and the
assumption of certain liabilities.
(b) For the six months ended June 30, 1997, the postretirement benefit expense
was less than cash payments.
(c) "EBITDA" represents, for any relevant period, operating profit before
special charges, depreciation and amortization and non-cash postretirement
benefit expense (to the extent non-cash postretirement benefit expense
exceeds cash payments) and after deducting cash employee benefits for
shutdown operations. The Company believes that EBITDA, as presented,
provides useful information regarding the Company's ability to service its
debt, but should not be considered in isolation or as a substitute for
consolidated income statement data prepared in accordance with generally
accepted accounting principles, and may differ from "Consolidated EBITDA" as
described in "Description of Senior Notes."
(d) "Net debt" is defined as total debt obligations less cash and cash
equivalents.
(e) For purpose of calculating the ratio of earnings to fixed charges, pretax
income (loss) from continuing operations plus fixed charges have been
divided by fixed charges. Fixed charges consist of interest and the portion
of rent deemed representative of the interest factor.
14
<PAGE>
RISK FACTORS
HOLDERS OF THE OLD NOTES SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION
SET FORTH IN THE PROSPECTUS AND, IN PARTICULAR, SHOULD EVALUATE THE FOLLOWING
RISKS BEFORE TENDERING THEIR OLD NOTES IN THE EXCHANGE OFFER, ALTHOUGH THE RISK
FACTORS SET FORTH BELOW (OTHER THAN "-- CONSEQUENCES OF FAILURE TO EXCHANGE OLD
NOTES") ARE GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE NEW NOTES.
HIGHLY LEVERAGED FINANCIAL POSITION
The Company is substantially leveraged. As of June 30, 1997, after giving
effect to the Offering, the anticipated redemption of $100.0 million principal
amount of the Company's 11 3/8% Senior Notes Due 1999 (the "11 3/8% Senior
Notes") and $20.0 million principal amount of the 9.20% Debentures Due 2000 (the
"9.20% Debentures") from the proceeds thereof, and the payment on July 15, 1997
of $5.0 million of current maturities on the 9.20% Debentures (together, the
"Repayment Adjustments"), the Company would have had total consolidated debt of
$389.3 million and a shareholders' deficit of $193.3 million, resulting in a
total capitalization of $196.0 million.
In addition, under a receivables facility, the Company sells substantially
all of its trade receivables to a wholly-owned subsidiary. In January 1996, this
subsidiary entered into a five-year revolving credit agreement with a group of
banks providing up to $120.0 million for revolving credit loans and letters of
credit secured by the subsidiary's receivables. At June 30, 1997, no borrowings
were outstanding under this credit facility. However, $64.3 million of the
facility was committed to letters of credit. The Company also has a $50.0
million revolving credit facility that matures on December 31, 1998, secured by
certain of its inventories. At June 30, 1997, no borrowings were outstanding
under this facility.
At June 30, 1997, after giving effect to the Repayment Adjustments, Armco
had approximately $207.3 million of debt that becomes due by the year 2000,
including $14.8 million, $22.4 million, $22.5 million and $147.6 million in
1997, 1998, 1999 and 2000, respectively. In addition, the Company has
substantial financial obligations related to its employee postretirement plans
for medical and life insurance and pensions. See "-- Substantial Employee
Postretirement Benefit Obligations."
The Company's high leverage may have adverse consequences, including the
following: (i) the ability of the Company to obtain additional financing for
working capital, capital expenditures and debt service requirements or other
purposes may be impaired; (ii) the Company may be more highly leveraged than
companies with which it competes, which may place it at a competitive
disadvantage; (iii) the Company's flexibility in responding to changing business
and economic conditions could be restricted; and (iv) the Company may be more
vulnerable in the event of a downturn or disruption in its business or in the
economy generally. While Armco expects to be able to repay the balance of its
indebtedness through cash generated from operations and the proceeds of asset
sales, it may be necessary to obtain new credit arrangements and other sources
of financing in order to meet its future debt service and working capital
requirements and to fund its projected capital projects. Although to date the
Company has been able to obtain financing on satisfactory terms, there can be no
assurance that this will continue to be the case. These and other factors could
have an adverse effect on the marketability, price and future value of the
Senior Notes and the Company's ability to pay the interest thereon and the
principal amount thereof.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
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 provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will register
Old Notes under the
15
<PAGE>
Securities Act. See "Registration Rights Agreement." Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than (i) a broker-dealer who purchases
such New Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) 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 holders' business and such holders, other than
broker-dealers, have no arrangement or understanding with any person to
participate in the distribution of such New Notes. However, the Commission has
not considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Each Holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of such New Notes and has
no arrangement or understanding to participate in a distribution of New Notes.
If any Holder is an affiliate of the Company or is engaged in or intends to
engage in or 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) may 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 pursuant to the Exchange Offer must acknowledge that such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus
meeting the requirements of the Securities Act 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 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. 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
jurisdictions or any exemption from registration or qualification is available
and is complied with. The Company has agreed, pursuant to the Registration
Rights Agreement, subject to certain limitations specified therein, to register
or qualify the New Notes for offer or sale under the securities laws of such
jurisdictions as any holder reasonably requests in writing. Unless a holder so
requests, the Company does not currently intend to register or qualify the sale
of the New Notes in any such jurisdictions. See "The Exchange Offer."
RELIANCE ON THE AUTOMOTIVE INDUSTRY
The Company's sales directly to the automotive market accounted for
approximately 31%, 33% and 36% of its net sales in 1994, 1995, and 1996,
respectively. In the first six months of 1997, the percentage of Armco's sales
directly to the automotive market declined slightly from the 1996 level. In
addition, a substantial amount of the Company's sales to steel distribution
centers and converters consists of products that are resold (in original or
modified form) to the automotive industry. The North American automotive
industry has historically experienced significant fluctuations in demand, based
on such factors as general economic conditions, interest rates and consumer
confidence, and significant fluctuations in production due to strikes,
lock-outs, work stoppages or other production interruptions in the automotive
industry. Any material deterioration in the sale of automobiles could have a
material adverse impact on the Company's results of operations.
16
<PAGE>
In recent years automotive industry demand for stainless sheet and strip
steel has been high, with total industry shipments of such material increasing
from approximately 223,000 tons in 1992 to approximately 402,000 tons in 1996.
However, there can be no assurance that shipments of stainless sheet and strip
to automotive manufacturers will remain high or continue to grow. Although North
American automotive industry light vehicle production increased from
approximately 12.5 million units in 1992 to 15.1 million units in 1996, there
can be no assurance that such production levels will be maintained.
COMPETITION AND OTHER FACTORS
The Company faces intense competition from domestic and foreign steel
producers, foreign producers of components and other products and manufacturers
of competing products other than steel, including aluminum, plastics, composites
and ceramics. Competition is based primarily on price, with factors such as
reliability of supply, service and quality also being important in certain
segments.
In addition to existing competition, two steel companies have recently
entered, or announced plans to enter, the specialty steel market. In 1995, Nucor
Corporation, a mini-mill steel company, entered the automotive chrome stainless
steel business with the addition of an argon-oxygen decarburization (AOD) vessel
at its Crawfordsville, Indiana melt shop. In late 1996, AK Steel Corporation
("AK Steel"), an integrated steel company, announced plans to build a steel
finishing facility in Rockport, Indiana that will include equipment capable of
processing specialty steel. When completed, this facility will provide AK Steel
with substantial stainless steel processing and finishing capacity. Increases in
the production capacity and efficiency of these and other domestic producers,
together with possible new entrants into the specialty steel market, are
expected to result in intensified competition that could exert downward pressure
on pricing and market share.
The Company's competitors in the domestic galvanized steel market include
many of the large integrated and mini-mill flat rolled producers. Since 1989,
significant flat-rolled mini-mill capacity has been constructed and these
mini-mills now compete with integrated domestic steel producers in most
flat-rolled steel markets. Mini-mills generally rely on less capital-intensive
hot metal sources, have smaller, non-unionized workforces resulting in lower
employment costs per ton shipped and are relatively free of many of the
employee, environmental and other obligations that have traditionally burdened
non-mini-mill steel producers. There is significant flat-rolled and galvanized
capacity under construction or announced with various planned commissioning
dates in the next several years. Given the increased competition that is
expected as the new capacity comes on line, the Company may experience downward
pressure on pricing in its galvanized product line.
Competition is also presented, to a lesser degree, by foreign producers.
Some of these foreign producers have lower labor costs and are subsidized by
their governments. Their decisions with regard to production and sales may be
influenced more by political and social considerations than prevailing market
forces. Many foreign steel producers continue to ship into the United States
market despite decreasing profit margins or losses. Depending on a number of
market factors, including the strength of the dollar, import levels, and the
effectiveness of U.S. trade laws, pricing of the Company's products could be
adversely affected.
The steel industry, including the specialty steel sector, historically has
been cyclical in nature, reflecting the cyclicality of many of the principal
markets it serves, including the automotive, appliance and construction
industries, and changes in total industry demand. Since 1993, steel prices have
fluctuated, with average prices in 1996 lower than average 1995 prices. Although
demand has been strong since 1993, there can be no assurance that demand will
continue at current levels or that increased production capacity or efficiency
of competitors, or increased foreign and domestic competition will not adversely
affect pricing and margins. The industry is also vulnerable to price increases
in raw materials or energy, which represent a major component of per ton
production costs. See "Business -- Raw Materials and Energy Sources."
17
<PAGE>
Most of the Company's domestic production and maintenance employees are
represented by unions, although some operations are not unionized. There can be
no assurance as to the results of negotiations of future collective bargaining
agreements, whether future collective bargaining agreements will be negotiated
without production interruptions or the possible effects of future collective
bargaining agreements, or the negotiation thereof, on the Company's financial
condition and results of operations. Furthermore, labor disputes and resulting
work stoppages or slowdowns occasionally occur in the steel industry. There can
be no assurance that work stoppages or slowdowns will not occur in the Company's
future in connection with labor negotiations or otherwise.
SUBSTANTIAL EMPLOYEE POSTRETIREMENT BENEFIT OBLIGATIONS
The Company has substantial financial obligations related to its employee
postretirement plans for medical and life insurance and pensions. Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106") requires accrual of
retiree medical and life insurance benefits during the employee's service rather
than recognition of costs as claims are paid. In accordance with SFAS 106, a
liability has been established for the present value of the estimated future
unfunded medical and life insurance benefit obligations. As of December 31,
1996, the Company had accumulated postretirement health care and life insurance
benefit obligations estimated at $783.2 million, and had accrued a balance sheet
liability of $1,050.2 million for these postretirement obligations. The cash
payments for actual postretirement health and life insurance claims were $55.2
million in 1996 and $31.3 million for the six months ended June 30, 1997.
In accordance with Statement of Financial Accounting Standards No. 87,
"Employer's Accounting for Pensions," the Company has recognized an accrued
pension liability of $193.7 million at December 31, 1996. The funded status of
the Company's pension plans at December 31, 1996 shows plan assets of $2,007.5
million exceeding projected benefit obligations by $7.2 million.
The amount of the Company's postretirement benefit obligations could be
materially increased due to adverse developments in health care costs or in the
financial markets. In addition, the amount of the obligations could increase due
to plant shutdowns, layoffs or other similar events.
FUTURE USE OF NET OPERATING LOSS CARRYFORWARDS
At December 31, 1996, the Company had net operating loss carryforwards
("NOLs") for federal income tax purposes of approximately $1,120.5 million,
representing a portion of the net deferred tax asset recorded on the Company's
balance sheet of $328.5 million. These NOLs expire in varying amounts in the
period 1998-2011. To utilize such NOLs, the Company must generate taxable income
equal in amount to the NOLs prior to expiration. The Company operates in a
highly cyclical industry and, consequently, has had a history of generating and
then utilizing NOLs. During the years 1987-1989, Armco utilized approximately
$350.0 million of NOLs. While Armco has incurred tax losses for the past seven
fiscal years, Armco's management believes that it is more likely than not that
Armco will generate sufficient taxable income to realize a portion of the tax
benefit associated with future deductible temporary differences and NOLs prior
to their expiration. This belief is based upon, among other factors, changes in
operations that have occurred during the last five years, as well as
consideration of available tax planning strategies. Specifically, cost savings
associated with new capital investments are being realized and are expected to
continue to improve operating results. However, there is no certainty that the
deferred tax asset reflected on the Company's consolidated balance sheets will
actually be fully utilized. See Note 3 to the Consolidated Financial Statements
of the Company for the year ended December 31, 1996, which are incorporated by
reference herein.
18
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POTENTIAL ENVIRONMENTAL EXPENDITURES
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act, certain analogous state laws, and the federal Resource
Conservation and Recovery Act, past disposal of wastes, whether on-site or at
other locations (including former Company facilities), may result in the
imposition of clean-up obligations by federal or state regulatory authorities,
even when the wastes were disposed of in accordance with applicable laws and
requirements in existence at the time of the disposal. The federal government
has asserted that joint and several liability applies in hazardous waste
litigation and courts have held that, absent proof that damages are allocable or
subject to allocation, joint and several liability will be applied. The Company
has been named as a defendant, or identified as a potentially responsible party,
in various proceedings wherein the federal government seeks reimbursement for,
or to compel clean-up of, hazardous waste sites. The Company has been required
to perform or fund such clean-up or participate in cleanup with others at a
number of sites at which its facilities disposed of wastes in the past and may,
from time to time, be required to remediate or join with others in the
remediation of other locations as these sites are identified by federal or state
authorities. In addition, environmental exit costs with respect to the Company's
ongoing businesses (which costs it is the Company's policy not to accrue until a
decision is made to dispose of a property), may be incurred if the Company makes
a decision to dispose of additional properties. These costs include remediation
and closure costs such as for clean-up of soil contamination, closure of waste
treatment facilities and monitoring commitments. The Company has retained
certain environmental liabilities relating to businesses and properties sold by
the Company. While the Company believes that the ultimate liability for the
environmental remediation matters identified to date, including the clean-up,
closure and monitoring of waste sites and formerly owned facilities and
businesses, will not materially affect its consolidated financial condition or
liquidity, the identification of additional sites, increases in remediation
costs with respect to identified sites, the failure of other potentially
responsible parties to contribute their share of remediation costs, decisions to
dispose of additional properties and other changed circumstances may result in
increased costs to the Company, which could have a material effect on its
financial condition, liquidity and results of operations.
The Company has spent substantial amounts in recent years to control air and
water pollution pursuant to applicable environmental requirements. The Company
also has spent and will continue to spend substantial amounts for proper waste
disposal and for the investigation and cleanup of properties that require
remediation as a result of past waste disposal. Statutory and regulatory
requirements in this area are continuing to evolve and, accordingly, it is not
possible to predict with certainty the type and magnitude of expenditures that
will be required in the future. However, the Company has estimated aggregate
expenditures of approximately $20.0 million for capital projects for pollution
control during the five-year period 1997-2001, of which approximately $7.5
million is related to control of air pollution as required by amendments to the
federal Clean Air Act, corresponding state laws, and implementing regulations.
In addition to the direct impact on the Company, the Clean Air Act amendments
are expected to increase the operating costs of electrical utilities which rely
on fossil fuels and this, in turn, could result in increased costs for utility
services of which certain operations of the Company are significant consumers.
See "Business--Environmental Matters."
LACK OF PUBLIC MARKET
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes were sold by the Company on September 12, 1997 to a limited number of
institutional investors and are eligible for trading in the Private Offerings,
Resale and Trading through Automated Linkages (PORTAL) Market. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Old Notes could be adversely affected. There
is no existing trading market for the New Notes, and there can be no assurance
regarding the future development of a market for the New Notes, or the ability
of Holders of the New Notes to sell their New Notes or the price at which such
Holders may be able to sell their New Notes. If such a market were to develop,
the New Notes could trade
19
<PAGE>
at prices that may be higher or lower than their principal amount or purchase
price, depending on many factors, including prevailing interest rates, the
Company's operating results and the market for similar securities. Therefore,
there can be no assurance as to the liquidity of any trading market for the New
Notes or that an active public market for the New Notes will develop. The
Company does not intend to apply for listing or quotation of the New Notes on
any securities exchange or stock market.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on Holders of the New Notes.
SENIOR NOTES REPURCHASE UPON CHANGE OF CONTROL
Under the terms of the Indenture pursuant to which the Senior Notes have
been issued, upon the occurrence of a Change of Control (as defined), the
Company is required to offer to repurchase all of the outstanding Senior Notes,
and to repurchase all Senior Notes tendered in response to such offer, at 101%
of the principal amount thereof, plus accrued and unpaid interest thereon. The
provisions of the Indenture relating to a Change of Control in and of themselves
may not afford holders of the Senior Notes protection in the event of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect holders of the
Senior Notes, if such transaction is not the type of transaction included within
the definition of a Change of Control. A transaction involving the Company's
management or its affiliates, or a transaction involving a recapitalization,
will result in a Change of Control if such transaction otherwise constitutes a
change in control within the meaning of such definition. Furthermore, there can
be no assurance that the Company will have adequate resources to repurchase or
refinance all indebtedness owing under the Senior Notes in the event a Change of
Control offer is required to be made. If the Company does not have sufficient
financial resources to effect a Change of Control offer, it would be required to
seek additional financing from outside sources to enable it to repurchase the
Senior Notes. There can be no assurance that such financing would be available
to the Company on satisfactory terms. Any failure of the Company to pay the
purchase price with respect to such Change of Control offer when due will give
the Trustee (as defined) and the holders of the Senior Notes the rights
described under "Description of Senior Notes--Events of Default." See
"Description of Senior Notes--Change of Control."
USE OF PROCEEDS
On September 12, 1997 the Company issued $150 million principal amount of
Old Notes. The Old Notes were sold by the Company to a limited number of
institutional investors pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. The Company will use the net proceeds from the offering
of the Senior Notes to redeem an aggregate of $100.0 million principal amount of
the Company's 11 3/8% Senior Notes (which have been called for redemption by the
Company, at an initial redemption price of 102%, on October 15, 1997) and $20.0
million principal amount of its 9.20% Debentures (which have been called for
redemption, at par, on October 15, 1997), and for general corporate purposes.
Pending such redemption, the Company may use a portion of the proceeds of the
Offering to repurchase from time to time, in open market purchases or otherwise,
a portion of the 11 3/8% Senior Notes and 9.20% Debentures.
20
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of Armco at
June 30, 1997, and as adjusted to give effect to the Offering, the application
of the estimated net proceeds therefrom as described in "Use of Proceeds" and
the payment on July 15, 1997 of $5.0 million of current maturities on the 9.20%
Debentures. This table should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto included in the Company's
Quarterly Report on Form 10-Q incorporated by reference herein.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
<S> <C> <C>
HISTORICAL AS ADJUSTED
----------- -----------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................................................ $ 175.2 $ 193.2
----------- -----------
----------- -----------
CURRENT MATURITIES OF LONG-TERM DEBT..................................................... $ 27.3 $ 22.3
LONG-TERM DEBT (less current maturities)
Credit Facilities (a).................................................................. -- --
Variable rate notes due 2001........................................................... 26.8 26.8
5% Note Due 2000....................................................................... 12.8 12.8
11 3/8% Senior Notes Due 1999.......................................................... 100.0 --
9.20% Debentures Due 2000.............................................................. 20.0 --
9 3/8% Senior Notes Due 2000........................................................... 125.0 125.0
9% Senior Notes Due 2007............................................................... -- 150.0
Sinking fund debentures................................................................ 28.5 28.5
8 1/8% pollution control revenue bonds due 2005........................................ 12.1 12.1
Variable rate economic development revenue bonds due 2020.............................. 8.5 8.5
Other long-term debt................................................................... 3.3 3.3
----------- -----------
Total long-term debt............................................................... 337.0 367.0
SHAREHOLDERS' DEFICIT
Class A Preferred Stock................................................................ 137.6 137.6
Class B Preferred Stock................................................................ 48.3 48.3
Common stock, par value $.01 per share (b)............................................. 1.1 1.1
Additional paid-in capital............................................................. 967.4 967.4
Accumulated deficit (c)................................................................ (1,341.9) (1,344.9)
Other.................................................................................. (2.8) (2.8)
----------- -----------
Total shareholders' deficit........................................................ (190.3) (193.3)
----------- -----------
Total capitalization............................................................... $ 174.0 $ 196.0
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(a) As of June 30, 1997, no amounts were borrowed under the Credit Facilities,
which have a total commitment of $170.0 million; however, $64.3 million of
one facility was committed to letters of credit. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(b) Common Stock outstanding does not include 25,933,495 shares issuable upon
the conversion of outstanding shares of cumulative preferred stock or the
exercise of outstanding stock options.
(c) The redemption of the Company's indebtedness as described in "Use of
Proceeds" is expected to result in an extraordinary loss of approximately
$3.0 million.
21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following table summarizes certain selected consolidated financial data,
which should be read in connection with the Company's Consolidated Financial
Statements and the notes thereto and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The selected consolidated
financial data as of and for the years ended December 31, 1996, 1995, 1994, 1993
and 1992 have been derived from the Company's audited financial statements. The
selected consolidated financial data presented below as of and for the six
months ended June 30, 1997 and 1996 are derived from the Company's unaudited
consolidated financial statements. The unaudited financial statements include
all adjustments (consisting of only normal recurring adjustments) which the
Company considers necessary for a fair presentation of the Company's financial
position and results of operations for these periods. Operating results for the
six months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for future periods.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales................................................... $ 931.6 $ 881.2 $ 1,724.0 $ 1,559.9 $ 1,437.6 $ 1,664.0
--------- --------- --------- --------- --------- ---------
Gross profit................................................ 98.0 75.6 174.3 167.2 170.6 144.5
Selling and administrative expenses......................... (50.8) (48.3) (90.8) (98.2) (96.4) (125.0)
Special charges (b)......................................... -- -- (8.8) -- (35.0) (165.5)
--------- --------- --------- --------- --------- ---------
Operating profit............................................ 47.2 27.3 74.7 69.0 39.2 (146.0)
Interest expense, net....................................... (12.3) (12.7) (26.2) (21.1) (23.3) (37.7)
Gain on sale of investments in joint ventures and related
stock..................................................... -- -- -- 27.2 62.6 --
Equity in losses of ASC, L.P. (c)........................... -- -- -- -- -- (27.9)
Sundry other, net........................................... (4.0) (11.1) (21.1) (49.6) (41.4) (43.2)
Credit (provision) for income taxes......................... (1.3) (0.6) (1.4) (2.0) 28.7 7.3
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations.................... 29.6 2.9 26.0 23.5 65.8 (247.5)
Discontinued operations..................................... 1.3 -- 6.5 6.3 11.9 (79.5)
Extraordinary losses........................................ -- -- -- -- -- (7.3)
Cumulative effect of changes in accounting for
postretirement and postemployment benefits and income
taxes..................................................... -- -- -- -- -- (307.5)
--------- --------- --------- --------- --------- ---------
Net income (loss)........................................... $ 30.9 $ 2.9 $ 32.5 $ 29.8 $ 77.7 $ (641.8)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
OTHER DATA
Depreciation and amortization............................... $ 30.8 $ 29.3 $ 58.7 $ 52.8 $ 48.8 $ 53.2
Non-cash postretirement benefit expense (d)................. (3.3) 2.5 7.8 13.0 11.9 29.3
Cash employee benefits for shutdown operations.............. 21.4 17.6 32.9 38.3 45.9 44.3
Capital expenditures........................................ 15.1 27.0 59.8 159.5 96.4 53.9
Preferred stock dividends declared.......................... 8.9 8.9 17.9 17.9 17.8 17.8
EBITDA (e).................................................. 56.6 41.5 117.1 96.5 89.0 57.7
Ratio of EBITDA to interest expense, net.................... 4.6x 3.3x 4.5x 4.6x 3.8x 1.5x
Ratio of net debt to EBITDA (f)............................. N/A N/A 1.7x 2.6x 1.9x 3.5x
Ratio of earnings to fixed charges (g)...................... 2.6x 1.2x 1.7x 1.5x 1.6x --
SPECIALTY FLAT-ROLLED STEELS (IN THOUSANDS OF TONS)
Total shipments............................................. 638 611 1,140 939 815 1,065
Total production............................................ 752 743 1,439 1,153 947 1,490
<CAPTION>
<S> <C>
1992(A)
---------
<S> <C>
INCOME STATEMENT DATA
Net sales................................................... $ 1,673.2
---------
Gross profit................................................ 163.4
Selling and administrative expenses......................... (135.6)
Special charges (b)......................................... (185.1)
---------
Operating profit............................................ (157.3)
Interest expense, net....................................... (35.0)
Gain on sale of investments in joint ventures and related
stock..................................................... --
Equity in losses of ASC, L.P. (c)........................... (234.1)
Sundry other, net........................................... (9.8)
Credit (provision) for income taxes......................... 34.0
---------
Income (loss) from continuing operations.................... (402.2)
Discontinued operations..................................... (19.3)
Extraordinary losses........................................ (8.4)
Cumulative effect of changes in accounting for
postretirement and postemployment benefits and income
taxes..................................................... --
---------
Net income (loss)........................................... $ (429.9)
---------
---------
OTHER DATA
Depreciation and amortization............................... $ 46.7
Non-cash postretirement benefit expense (d)................. --
Cash employee benefits for shutdown operations.............. 27.0
Capital expenditures........................................ 59.4
Preferred stock dividends declared.......................... 10.3
EBITDA (e).................................................. 47.5
Ratio of EBITDA to interest expense, net.................... 1.4x
Ratio of net debt to EBITDA (f)............................. 5.3x
Ratio of earnings to fixed charges (g)...................... --
SPECIALTY FLAT-ROLLED STEELS (IN THOUSANDS OF TONS)
Total shipments............................................. 839
Total production............................................ 1,087
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents.................................... $ 175.2 $ 181.0 $ 168.9 $ 136.8 $ 202.8 $ 183.5
Working capital.............................................. 266.4 237.8 213.6 194.8 258.6 272.4
Total assets................................................. 1,907.7 1,916.3 1,867.8 1,896.6 1,934.9 1,904.7
Total debt................................................... 364.3 392.8 371.5 387.4 374.3 388.0
Long-term employee benefit obligations (h)................... 1,203.7 1,216.5 1,200.2 1,165.9 1,221.9 1,249.9
Preferred stock.............................................. 185.9 185.9 185.9 185.9 185.9 185.9
Total shareholders' equity (deficit)......................... (190.3) (233.0) (212.0) (230.4) (218.5) (313.1)
<CAPTION>
<S> <C>
1992(A)
-----------
<S> <C>
BALANCE SHEET DATA
Cash and cash equivalents.................................... $ 171.3
Working capital.............................................. 436.3
Total assets................................................. 1,869.9
Total debt................................................... 421.7
Long-term employee benefit obligations (h)................... 541.6
Preferred stock.............................................. 185.9
Total shareholders' equity (deficit)......................... 342.3
</TABLE>
- ------------------------
(a) In April 1992, Armco acquired Cyclops Industries, Inc. ("Cyclops"), a
producer of flat-rolled carbon and stainless steel products, tubular steel
products, high performance alloy products and products and related services
for non-residential construction. The transaction was accounted for as a
"purchase" whereby Armco recorded the acquisition at its cost at the
acquisition date, and the reported income of Armco includes the operations
of Cyclops commencing April 25, 1992.
(b) In 1996, Armco recognized a special charge of $5.9 million to record a
change in the estimated loss on the sale of its nonresidential construction
business and a $2.9 million special charge primarily for the writedown of
inventory and severance costs related to its decision to discontinue a line
of light truck equipment manufactured by Armco's snowplow and ice control
equipment business. In 1994, Armco recorded a special charge of $20.0
million for expenses associated with the temporary idling and restructuring
of its steelmaking facilities in Mansfield and Dover, Ohio and a charge of
$15.0 million related to a decision by Eastern Stainless Corporation to sell
substantially all of its assets to Avesta Sheffield Holding Company, a
stainless steel plate manufacturer, for cash and the assumption of certain
liabilities. In 1993, as part of its strategy to focus on the production of
specialty flat-rolled steel, Armco sold its Brazilian operations and decided
to exit a number of domestic businesses, recording special charges totaling
$165.5 million. In 1992, Armco recorded special charges, totaling $185.1
million, associated with a series of restructuring actions undertaken to
reduce costs, improve profitability and strengthen Armco's competitive
position.
(c) Armco Steel Company, L.P. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Other Investments."
(d) For the six months ended June 30, 1997 the postretirement benefit expense
was less than cash payments.
(e) "EBITDA" represents, for any relevant period, operating profit before
special charges, depreciation and amortization and non-cash postretirement
benefit expense (to the extent non-cash postretirement benefit expense
exceeds cash payments) and after deducting cash employee benefits for
shutdown operations. The Company believes that EBITDA, as presented,
provides useful information regarding the Company's ability to service its
debt, but should not be considered in isolation or as a substitute for
consolidated income statement data prepared in accordance with generally
accepted accounting principles, and may differ from "Consolidated EBITDA" as
described in "Description of Senior Notes."
(f) "Net debt" is defined as total debt obligations less cash and cash
equivalents.
(g) For purposes of calculating the ratio of earnings to fixed charges, pretax
income (loss) from continuing operations plus fixed charges have been
divided by fixed charges. Fixed charges consist of interest and the portion
of rent deemed representative of the interest factor. For the years ended
December 31, 1993 and 1992, earnings as defined were insufficient to cover
fixed charges by $264.4 million and $461.2 million, respectively.
(h) In 1993, Armco adopted SFAS No. 106, EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis is based on, and should be read in
conjunction with, the Company's Consolidated Financial Statements incorporated
herein by reference.
OPERATING RESULTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CUSTOMER SALES
Specialty Flat-Rolled Steels..................................... $ 777.9 $ 748.2 $ 1,421.2 $ 1,277.0 $ 1,114.4
Fabricated Products.............................................. 153.7 133.0 302.8 282.9 323.2
--------- --------- --------- --------- ---------
Total........................................................ $ 931.6 $ 881.2 $ 1,724.0 $ 1,559.9 $ 1,437.6
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OPERATING PROFIT (a)
Specialty Flat-Rolled Steels..................................... $ 44.7 $ 32.2 $ 72.9 $ 76.0 $ 40.5
Fabricated Products.............................................. 14.5 7.9 22.8 22.0 30.9
Corporate General................................................ (12.0) (12.8) (21.0) (29.0) (32.2)
--------- --------- --------- --------- ---------
Total........................................................ $ 47.2 $ 27.3 $ 74.7 $ 69.0 $ 39.2
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(a) In 1996, operating profit for the Fabricated Products segment includes
special charges totaling $8.8 million. In 1994, operating profit for the
Specialty Flat-Rolled Steels segment includes special charges totaling $35.0
million.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net sales in the six months ended June 30, 1997 were higher by $50.4 million
than in the six months ended June 30, 1996, primarily due to increased volume of
specialty semi-finished products and higher sales of galvanized steel products
in the Specialty Flat-Rolled Steels segment, as well as sales growth in
snowplows and tubular products in the Fabricated Products Segment.
Operating profit in the six-month period ended June 30, 1997 included $2.2
million for income generated by Greens Port Industrial Park ("Greens Port"),
which Armco began consolidating in the Fabricated Products business segment on
January 1, 1997. Prior to 1997, Greens Port was held for sale and its results
were reported in "sundry other, net."
Operating profit in the six months ended June 30, 1997 and 1996 included
income of $2.0 million and $4.2 million, respectively, related to partial
settlement of business interruption insurance claims. Excluding the results of
Greens Port and the insurance credits, operating profit increased by $19.9
million in the first six months of 1997 over the same period in 1996, primarily
due to a substantial improvement in the Specialty Flat-Rolled Steels business
segment, higher sales of snowplows and favorable experience in pension and
retiree medical benefit expenses.
Net income for the six months ended June 30, 1997 included $1.3 million for
a tax refund related to a company in the divested Aerospace and Strategic
Materials business segment. Armco's net income also improved as a result of
lower expenses related to long-term benefit obligations for employees of Armco
facilities that have been divested. The reduction of $13.7 million was primarily
due to favorable investment returns on pension plan assets and lower pension and
retiree medical benefit costs.
24
<PAGE>
1996 COMPARED TO 1995
Net sales in 1996 were 11% higher than in 1995, primarily due to higher
shipments of automotive exhaust stainless, electrical and carbon steels in the
Specialty Flat-Rolled Steels segment. Higher sales were also achieved by Douglas
Dynamics L.L.C. ("Douglas Dynamics"), Armco's snowplow manufacturer. See "--
Business Segment Results -- Fabricated Products."
Operating profit increased 8% in 1996 due to a significant reduction in
losses at Armco's Mansfield and Dover, Ohio facilities in the Specialty
Flat-Rolled Steels segment, an increase in profits from Douglas Dynamics and
lower employee benefit costs. These improvements were offset, in part, by lower
profits in the remainder of the Specialty Flat-Rolled Steels segment, due to
higher imports and weak pricing in certain chrome nickel products plus higher
sales of less profitable carbon steel. The decrease in Mansfield and Dover
operating losses reflects improved operating practices and higher levels of
production compared with 1995, which was a ramp-up period following a year-long
idling of these facilities. Employee benefit expenses were lower in 1996
primarily as a result of increased funding of the pension plans during 1995 and
1996 and lower interest rates on Armco's liability for retiree health care and
life insurance benefits.
Included in the 1996 operating profit were special charges totaling $8.8
million for a loss on the sale of Armco's nonresidential construction business
and a decision to exit a line of light truck equipment manufactured by Douglas
Dynamics. Operating profit also included nonrecurring income totaling $8.6
million from claim settlements, including the partial settlement of a business
interruption insurance claim.
In 1995, Armco sold all of the shares of AK Steel Holding Corporation it had
received in the initial public offering and recapitalization of Armco Steel
Company, L.P., recognizing a gain of $27.2 million.
Included in income from continuing operations from 1996 were the
above-mentioned special charges and claim settlements and a $6.3 million gain,
which results from the recognition of gains previously deferred in connection
with asset sales at an industrial park owned by Armco. Armco elected to defer
gains resulting from individual asset sales at this site because of uncertainty
concerning realization of the carrying value of the remaining property. The
gains were recognized following receipt, in March 1996, of an independent
appraiser's report indicating that the remaining land, buildings and dock
facilities in the park had a market value in excess of Armco's historical cost
carrying value.
Income from discontinued operations in 1996 consisted of a $6.5 million
increase in the gain on the sale of Armco's Aerospace and Strategic Materials
business segment related to a federal income tax settlement. In 1995, Armco
recognized, in income from discontinued operations, equity income of $6.3
million from National-Oilwell, a joint venture divested in January 1996.
1995 COMPARED TO 1994
Net sales increased in 1995 over 1994 because of strong markets and higher
prices for stainless and electric steels, and the addition of sales from Armco's
modernized facilities in Mansfield and Dover which resumed operations in April
1995. The Mansfield and Dover plants, idled in March of 1994, recorded sales
which were $52.1 million higher in 1995 than in 1994. However, Armco's net sales
in 1994 included $52.8 million from Eastern Stainless Corporation, which has
since been divested. Excluding the results of Mansfield, Dover and Eastern
Stainless, 1995 net sales were 9% higher than 1994 sales. Increased sales for
the year in the Specialty Flat-Rolled Steels segment and by Sawhill Tubular
Division ("Sawhill Tubular") were partially offset by a decline in sales at
Douglas Dynamics.
During 1994, special charges totaling $35.0 million were recorded for
expenses associated with idling the Mansfield and Dover facilities and for
employee benefit and other charges related to the sale of assets by Eastern
Stainless.
25
<PAGE>
The 1995 results of the Butler, Pennsylvania and Coshocton and Zanesville,
Ohio plants in the Specialty Flat-Rolled Steels segment exceeded 1994 operating
profit by 22%. In addition, results improved at Sawhill Tubular. However,
excluding special charges, operating profit in 1995 was down $5.2 million from
1994, as higher losses generated by the ramp-up of the Mansfield facility and
lower profits from Douglas Dynamics more than offset the improvements.
Income from continuing operations in 1994 reflected the completion of an
initial public offering and recapitalization of Armco Steel Company, L.P., for
which Armco recognized a pretax gain of $36.5 million, and a $30.0 million tax
benefit. Also in 1994, Armco sold 90% of its investment in North American
Stainless for $73.0 million in cash, recognizing a $26.1 million gain.
BUSINESS SEGMENT RESULTS
SPECIALTY FLAT-ROLLED STEELS
Armco's Specialty Flat-Rolled Steels businesses produce and finish
flat-rolled stainless, electrical and carbon steels at plants in Butler,
Pennsylvania and Coshocton, Dover, Mansfield and Zanesville, Ohio. The segment
also includes the results of international trading companies that buy and sell
steel and manufactured steel products. Through September 30, 1994, the segment
included stainless steel plate products, which were produced by Eastern
Stainless Corporation, Armco's former 84%-owned subsidiary in Baltimore,
Maryland. Armco stopped consolidating its results on that date following a
decision by Eastern Stainless to sell substantially all of its assets to a third
party.
Customer sales and shipments by major product line and annual production
were:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------------------------- -------------------------------
1997 1996 1996 1995
---------------------- ---------------------- -------------------- ---------
SALES TONS SALES TONS SALES TONS SALES
--------- ----- --------- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, TONS IN THOUSANDS)
Specialty flat-rolled (a)....................... $ 568.4 389 $ 584.2 386 $ 1,108.0 739 $ 1,013.3
Specialty semi-finished......................... 105.2 87 70.9 50 133.9 97 130.5
Stainless plate................................. -- -- -- -- -- -- --
Galvanized and other carbon..................... 86.6 162 75.6 175 144.2 304 94.1
Other........................................... 17.7 -- 17.5 -- 35.1 -- 39.1
--------- --- --------- --- --------- --------- ---------
Total........................................... $ 777.9 638 $ 748.2 611 $ 1,421.2 1,140 $ 1,277.0
--------- --- --------- --- --------- --------- ---------
--------- --- --------- --- --------- --------- ---------
Raw steel production............................ 752 743 1,439
<CAPTION>
1994
----------------------
TONS SALES TONS
--------- --------- -----
<S> <C> <C> <C>
Specialty flat-rolled (a)....................... 647 $ 875.3 604
Specialty semi-finished......................... 78 80.2 64
Stainless plate................................. -- 52.8 22
Galvanized and other carbon..................... 214 62.1 125
Other........................................... -- 44.0 --
--------- --------- ---
Total........................................... 939 $ 1,114.4 815
--------- --------- ---
--------- --------- ---
Raw steel production............................ 1,153 947
</TABLE>
- ------------------------
(a) The specialty flat-rolled product line consists of automotive exhaust
stainless, specialty strip and sheet, and electrical steels.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Customer sales for the segment were 4% higher in the six months ended June
30, 1997 than in the same period in 1996, primarily as a result of increased
volume of specialty semi-finished products and higher sales of galvanized steel
products. The segment's average sales per ton decreased from 1996 to 1997 due to
the effects of high levels of imports of stainless and electrical steels,
partially offset by a shift in carbon steel product mix to higher-priced
galvanized products from lower-priced hot bands. Specialty strip and sheet and
semi-finished products were affected most by weakening prices.
Shipments of specialty flat-rolled products, which include automotive
exhaust stainless, electrical steel and specialty strip and sheet, were
approximately the same in the respective six-month periods ended June 30, 1997
and 1996. However, 1997 average sales per ton declined 3% from the first six
months of 1996, reflecting the elimination of raw material surcharges on
stainless steel and increased import competition on certain grades of chrome
nickel stainless and cold rolled non-oriented electrical steels.
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Specialty semi-finished shipments increased substantially in 1997 over 1996,
primarily as a result of increased sales of chrome nickel hot bands. However, a
15% reduction in average sales per ton for the first six months of 1997 compared
to 1996 reflected worldwide market softness and import competition.
Carbon steel shipments in the second quarter of 1997 increased as a result
of strong demand for galvanized steel, partially offset by the elimination of
carbon hot band shipments and the increased use of Armco's melt capacity for
specialty products. In the first half of 1996, Armco began exiting the lower-
priced hot band market, shifting to higher-priced galvanized steel products and
thus increasing average sales per ton by 24% from the first six months of 1996
to the first six months of 1997.
Second quarter operating profit increased in 1997 as a result of higher
sales and lower costs. The lower costs were primarily due to more stable
operating conditions and favorable experience in pension and retiree medical
benefit costs. Costs in 1996 were adversely affected by several planned outages
necessary to complete equipment upgrades. These outages disrupted operations and
resulted in the increased use of outside processors. Specialty Flat-Rolled
Steels' operating profit included gains of $2.0 and $4.2 million in the first
six months of 1997 and 1996, respectively, from the partial settlement of a
business interruption insurance claim.
1996 COMPARED TO 1995
Customer sales in 1996 exceeded 1995 levels primarily due to higher sales of
automotive exhaust stainless, electrical and galvanized steels. A 21% increase
in shipped tons was made possible by progressively higher operating levels at
Mansfield in the second half of 1996. The higher operating levels were achieved
despite several planned outages necessary to complete equipment upgrades.
Average sales per ton in 1996 was lower than in the prior year, primarily
due to higher import penetration in a number of product lines, increased sales
of lower-priced carbon products and the elimination of raw material price
surcharges on certain stainless steels. Armco and other specialty steel
producers add raw material surcharges to the price of their products to
compensate for higher costs incurred when the price of key raw materials such as
nickel, chromium or molybdenum rises above certain levels. In 1996, raw material
prices fell below these levels.
Automotive exhaust stainless shipments reached record levels in 1996, as the
Mansfield plant shipped significantly more of this product line than in the
prior year. Strong production of North American light vehicles and increased use
of stainless in exhaust systems stimulated demand in 1996.
Shipments of electrical steel products increased as a result of generally
healthy market conditions and some easing of capacity constraints. Driven by
housing starts, demand remained strong for grain oriented electrical steel used
in utility distribution transformers. However, shipments of non-oriented
electrical steel used in motors and generators suffered under pressure from
imports, which increased substantially in the second half of 1996.
Specialty strip and sheet shipments declined slightly in the year-to-year
comparison due to softer market conditions and increased import penetration.
Average sales per ton were lower in 1996 compared to 1995 as a result of the
elimination of raw material surcharges and base price erosion, resulting from an
increased level of imports.
Specialty semi-finished shipments increased in 1996, primarily due to export
sales. A reduction in average sales per ton reflected worldwide market softness
and the elimination of raw material surcharges. Sales of specialty semi-finished
products have also been adversely affected by import competition.
Armco's carbon steel shipments increased in 1996 compared to 1995. In the
first half of 1996, Armco exited the lower-priced carbon hot band market,
shifting the carbon steel product mix to more galvanized steel, thereby
increasing average sales per ton in the year-to-year comparison.
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During 1996, operating profit for this segment was lower than in 1995 due to
price erosion on specialty strip and sheet and specialty semi-finished products
and several planned equipment outages, including outages necessary to upgrade
Armco's finishing facilities as part of the strategic facilities plan. The
outages and the subsequent process of restarting and returning these facilities
to full capability contributed to higher costs and lower yields. To meet demand
during this period, Armco used outside processors to finish some of its
stainless steels, resulting in increased costs.
Specialty Flat-Rolled Steels' 1996 operating profit included $8.6 million of
income from various claims settlements, including the partial settlement of a
business interruption insurance claim for a 1995 unplanned outage. The outage
resulted in the use of alternative and more costly product routings, and lost
sales.
Operating profit in 1996 also included a $39.5 million loss from the
Mansfield and Dover facilities, compared to a loss of $104.2 million in 1995
while Mansfield was ramping up. The 1996 loss was due, in part, to a number of
planned and unplanned equipment outages and to higher than expected operating
costs.
1995 COMPARED TO 1994
The Mansfield and Dover plants were idled from March 1994 through the first
quarter of 1995, although Dover began limited operations early in the first
quarter of 1995. By mid-year, the Dover plant was fully operational. With the
completion of its new thin-slab caster and modernized hot strip mill, Mansfield
restarted in April 1995. The restart was hampered by process control system
difficulties and the failure of the refractory lining and a skid in the new
walking beam furnace. The furnace problems necessitated an unscheduled 17-day
outage.
Customer sales in 1995 increased 15% over 1994 sales, as demand for most
products remained strong throughout the year. Pricing also remained strong as a
result of raw material surcharges on products containing nickel, chromium and
molybdenum, January 1995 price increases for electrical steel and industry-wide
price increases for chrome nickel products.
Armco's shipments of automotive exhaust stainless increased in 1995,
principally as a result of continued strength in North American light vehicle
production and increased use of stainless steel in exhaust systems.
Shipments of electrical steel remained at a high level, sustained by strong
demand for both grain oriented and non-oriented electrical steels. Armco's
orders for non-oriented electrical steel were further increased in 1995 by a
54-day strike at a major domestic competitor; however, Armco's ability to ship
this product was limited by capacity constraints.
The increase in Armco's shipments of specialty strip and sheet was primarily
attributable to broad-based increases in the automotive, consumer and industrial
markets, especially in the first half of 1995, as well as the strike mentioned
above. In the second half, demand slowed due to normal seasonal factors as well
as liquidation of customer inventories.
Specialty semi-finished shipments, which consist of hot bands and slabs,
grew 22% in 1995 on strong demand from North American customers.
Customer sales for the segment were also affected by the idling and restart
of the Mansfield and Dover plants and by the divestment of Eastern Stainless.
Sales by Mansfield and Dover increased by $52.1 million in 1995. Eastern
Stainless sales of $52.8 million were recognized in 1994, before Armco stopped
consolidating the results of this business as a result of the divestment.
During 1994, Armco recognized a $20.0 million special charge related to its
decision to idle and restructure the Mansfield and Dover plants, while
installing a new thin-slab continuous caster. The special
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charge consisted of $11.2 million for employee benefits, primarily group
insurance and supplemental unemployment benefits, and $8.8 million to write down
inventories and fixed assets.
In 1994, Eastern Stainless decided to sell substantially all of its assets
for cash and the assumption of certain liabilities, and Armco recognized a $15.0
million special charge related to that decision. On March 14, 1995, the
transaction was completed. Net liabilities not assumed by the buyer or satisfied
by the sale proceeds were assumed by Armco. On the date of sale, the net
liabilities assumed by Armco, including amounts recorded at the establishment of
a $15.0 million special charge, totaled $53.0 million.
Specialty Flat-Rolled Steels' operating profit in 1995 was almost double
that of 1994. Included in the 1995 operating results was a $104.2 million
operating loss from the Mansfield and Dover plants, primarily as a result of the
start-up problems described above. The 1994 Specialty Flat-Rolled Steels
operating profit included losses of $86.0 million from the Mansfield and Dover
facilities, primarily as a result of the idling. The remaining operations in
this segment realized a 22% increase in operating profit from 1994 to 1995.
OUTLOOK
The strategic facilities upgrades were completed during 1996, and Armco
believes that it will be able to operate its plants without major scheduled
disruptions in the foreseeable future. Armco is focusing on improving
productivity and quality at its specialty flat-rolled steels operations and
anticipates further cost reductions as these improvements are made.
Third quarter 1997 shipments of automotive chrome stainless are expected to
decline from second quarter levels due to normal vehicle model changeovers.
While light vehicle production remained strong in the first half of the year,
recent automotive sales figures trailed those of a year ago, raising concerns
about weakening demand.
Armco expects electrical products, in general, to be under pressure due to
softening demand and continued high levels of imports. Demand for specialty
strip and sheet and semi-finished products has increased, but pricing remains
low due to pressure from imports.
FABRICATED PRODUCTS
The Fabricated Products business segment includes the results of Sawhill
Tubular, a manufacturer of steel pipe and tubing; Douglas Dynamics, a
manufacturer of snowplows and ice control products; and Greens Port Industrial
Park, located in Houston, Texas.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Customer sales increased $20.7 million for the first six months of 1997,
primarily due to higher sales at Douglas Dynamics and Sawhill Tubular, and the
consolidation of Greens Port. Higher customer sales at Douglas Dynamics
reflected a significant improvement in snowplow shipments primarily due to an
expanded sales network and the introduction of new products. Higher sales at
Sawhill Tubular were a result of volume increases along most major product
lines. Greens Port recorded sales of $3.5 million in the first six months of
1997 from loading dock fees and rental of land and buildings. During 1996,
Greens Port revenues were not included in the segment.
Douglas Dynamics' and Sawhill Tubular's operating profit were substantially
higher in 1997 than 1996. Douglas Dynamics' results improved due to
manufacturing efficiencies achieved during the year and reduced operating
expenses following the decision in 1996 to exit certain unprofitable product
lines. The increase in Sawhill Tubular's profits was also driven by lower costs.
This segment's operating profit in the first six months of 1997 included $2.2
million from Greens Port.
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1996 COMPARED TO 1995
1996 customer sales in this segment were 7% above 1995 levels, largely due
to higher sales at Douglas Dynamics. Snowplow shipments in 1996 were the second
highest achieved in Douglas Dynamics' history, due to near record snowfalls and
strong light truck sales. Although Sawhill Tubular's shipment volumes increased
in the year-to-year comparison, this was offset by lower prices caused by
increased domestic competitive pressures and a high level of imports.
In 1996, Armco recorded a special charge of $5.9 million for the estimated
loss on the sale of its nonresidential construction business. In 1996, Armco
negotiated an agreement to sell the business and the sale was effective January
1, 1997. The charge primarily relates to the writedown of assets and recognition
of additional employee benefit liabilities.
Also in 1996, Armco recorded a $2.9 million special charge primarily for the
writedown of inventories and severance costs related to the decision to
discontinue a line of light truck equipment manufactured by Douglas Dynamics.
Excluding this special charge, Douglas Dynamics' operating profit was
substantially higher in 1996 than in 1995. Increased sales and cost reductions
related to the elimination of production outsourcing were partially offset by
higher fixed manufacturing, administrative and selling costs, primarily related
to the introduction of new products.
Sawhill Tubular recorded a decrease in operating profits primarily as a
result of higher costs for steel hot bands compared to product selling prices.
1995 COMPARED TO 1994
Customer sales decreased by 12% in 1995 compared to 1994, primarily as a
result of eliminating the sales of Bowman Metal Deck, a manufacturer of steel
roof and floor decking, which was sold in December 1994, and lower sales by
Douglas Dynamics. The severe winter weather in early 1994 led to the best sales
year in Douglas Dynamics' history; however, the mild winter preceding the 1995
selling season resulted in lower annual snowplow sales. Sawhill Tubular sales
were 3% higher than 1994.
Lower operating profit in 1995 resulted from the reduced sales at Douglas
Dynamics, which was partially offset by Sawhill Tubular's return to
profitability. Douglas Dynamics cut operating costs by reducing manpower to
match lower order backlog, decreasing the amount of production previously
performed by outside parties and periodically ceasing production to control
inventory levels. However, these actions could not fully offset the effects of
the lower sales volume of snowplows and other equipment sales, and higher
expenses related to new product development. Sawhill Tubular's return to
profitability was driven by increased sales, complemented by operational
improvements and cost reduction programs, which not only led to improved
results, but also brought about reductions in inventories.
OUTLOOK
Douglas Dynamics' sales are expected to be somewhat lower in the second half
of 1997 than in the same period in 1996. However, savings from manufacturing
efficiencies and cost reduction programs are expected to result in improved
operating profit. Sawhill Tubular's 1997 sales and profitability are expected to
exceed those of 1996 due to lower costs and higher volume in certain product
lines.
DISCONTINUED OPERATIONS
AEROSPACE AND STRATEGIC MATERIALS
Oregon Metallurgical Corporation ("Oremet"), formerly 80% owned by Armco,
was part of the Aerospace and Strategic Materials business segment that Armco
sold in 1985. Prior to the sale, Armco filed a suit on behalf of Oremet in the
U.S. Claims Court, claiming refunds and interest on federal and state taxes.
Pursuant to the sales agreement, Armco retained the benefit of its share of any
proceeds of this
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action, net of taxes imposed on Oremet and the buyer. In 1988, as a result of a
favorable settlement with the Internal Revenue Service ("IRS"), Armco recorded a
$15.2 million net of tax adjustment to the gain on the sale of this business
segment. In 1996, Armco and Oremet reached agreement with the IRS that the 1988
refund of taxes and interest should not itself have been taxable to Oremet,
further increasing the net proceeds, resulting in Armco recording an additional
$6.5 million gain on the sale. In the first half of 1997, Armco recognized a
$1.3 million gain for a state tax refund.
NATIONAL-OILWELL
National-Oilwell, which sells oil field tubular pipe, and produces and sells
drilling and production equipment and process pumps used in the world's oil and
gas services industry, was a joint venture equally owned by subsidiaries of
Armco and USX Corporation.
Armco and USX reached a definitive agreement, dated September 22, 1995, to
sell their respective partnership interests in National-Oilwell to an entity
formed by Duff & Phelps/Inverness, First Reserve Funds and National-Oilwell
management. The sale was completed on January 16, 1996. For its 50% interest,
Armco received $77.0 million in cash, and receivables with a face value of $13.0
million. The receivables were recorded at a discounted value of $10.6 million.
After recording $2.1 million for recognition of deferred foreign translation
losses and miscellaneous expenses, no gain or loss was recognized on the
transaction.
ARMCO FINANCIAL SERVICES GROUP (AFSG)
AFSG consists of insurance companies that have stopped writing new business
and are being liquidated. These companies have not written any new business for
retention except for an immaterial amount of guaranteed renewable accident and
health business since 1986. The number of policyholders of this business has
decreased from approximately 4,000 at December 31, 1986 to 1,007 at December 31,
1995 and 870 at December 31, 1996.
There are various pending matters relating to litigation, arbitration and
regulatory affairs arising out of the runoff operations of AFSG companies,
including matters related to Northwestern National Insurance Company (NNIC), a
runoff company currently involved in, among other matters, litigation with
respect to certain reinsurance programs.
In March 1997, a group of international insurance companies, previously
affiliated with AFSG and sold in 1991, filed an application for voluntary
liquidation in the United Kingdom. NNIC is currently investigating its exposure
with respect to transactions entered into with these companies in the event the
companies are unable to meet their insurance obligations.
Armco believes that its investment in AFSG will not be materially affected
as a result of pending claims, contingent liabilities or matters related to AFSG
identified to date.
LIQUIDITY AND FINANCIAL RESOURCES: Claims are paid by using AFSG's
investment portfolio and the related investment income from such portfolio. The
portfolio had a net market value of $172.3 million at December 31, 1996. AFSG
believes the existing invested assets, related future income and other assets
will provide sufficient funds to meet all future claims payments.
AFSG's loss reserves net of reinsurance recoverables decreased to $102.2
million at December 31, 1996 from $118.7 million at December 31, 1995. AFSG
estimates that 60% of the claims will be paid in the next five years and that
substantially all of the claims will be paid by the year 2017. The ultimate
amount of the claims as well as the timing of the claims payments are estimated
based on an annual review of loss reserves performed by AFSG's independent and
consulting actuaries.
OUTLOOK: Armco management continues to believe, based on current facts and
circumstances and the opinions of outside counsel and advisors, that future
charges, if any, resulting from the runoff of AFSG will
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not be material to Armco's financial condition or liquidity. However, it is
possible that due to fluctuations in Armco's results, future developments could
have a material effect on the results of one or more future interim or annual
periods.
OTHER INVESTMENTS
ARMCO STEEL COMPANY, L.P. (ASC)
On April 7, 1994, ASC, a limited partnership 50% owned by a subsidiary of
Armco, completed an initial public offering and recapitalization. As part of
this transaction, the business and assets of ASC were transferred to AK Steel
Holding Corporation, a newly formed, publicly traded company. In exchange for
its interest in ASC, Armco received 1,023,987 shares of AK Steel common stock,
representing approximately four percent of the outstanding shares. The number of
shares received and other terms of the restructuring and recapitalization were
determined by arm's-length negotiations.
As a result of the transaction, in 1994 Armco recognized a nonrecurring
pretax gain of $36.5 million, primarily as a result of its release from certain
obligations to make future cash payments to the former joint venture and
recognition of deferred pension curtailment gains established at ASC's
formation. In light of this transaction, Armco also concluded that the
realizable amount of its deferred tax asset had increased and so recorded a tax
benefit of $30.0 million.
In 1995, Armco sold all of the AK Steel common stock it had received as a
result of the initial public offering and recapitalization for a total of $27.2
million, recognizing a gain of the same amount.
Under a toll-rolling agreement that is in effect through the year 2002, AK
Steel hot rolls stainless steel for Armco. The Company believes that if this
agreement were not to be extended, it could obtain comparable services from
other suppliers at competitive rates.
NORTH AMERICAN STAINLESS (NAS)
Armco and Acerinox S.A. of Spain each owned a 50% partnership interest in
NAS through their respective subsidiaries, First Stainless, Inc. and Stainless
Steel Invest, Inc. NAS operates a state-of-the-art chrome nickel stainless steel
finishing plant in Carrollton, Kentucky. In 1994, Armco's subsidiary sold 90% of
its 50% equity interest in NAS to its partner for $73.0 million in cash, and
Armco recorded a $26.1 million gain on the sale. Armco decided to sell most of
its investment in NAS because NAS needed cash infusions from its partners to
expand its operations, while Armco chose to use its resources to support its
core business operations. In connection with the transaction, Armco entered into
an annual supply contract with NAS to provide the former joint venture with
semi-finished stainless steel at market prices.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through cash provided by
operations, the issuance of debt and asset sales. Its principal uses of cash
have been operating activities, capital expenditures, debt service and preferred
stock dividends. Cash provided by operations was $34.6 million for the six
months ended June 30, 1997, compared to $9.7 million for the six months ended
June 30, 1996, and $42.6 million for the year ended December 31, 1996 as
compared to $15.5 million for 1995.
At June 30, 1997, Armco had $175.2 million of cash and cash equivalents,
compared to $168.9 million at December 31, 1996. Cash and cash equivalents
increased $6.3 million during the first six months of 1997, primarily due to
$34.6 million of cash generated by operations, partially offset by capital
expenditures of $15.1 million, preferred stock dividends of $8.9 million and
principal payments on debt of $7.4 million.
Trade receivables and payables increased 28% and 20%, respectively, during
the first half of 1997, reflecting the higher midyear sales and operating levels
experienced by the Specialty Flat-Rolled Steels
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segment. Increased trade receivables are also the result of normal preseason
extended-term sales by Douglas Dynamics.
At June 30, 1997, Armco had in place two bank credit facilities, totaling
$170.0 million with total borrowing availability of $91.4 million. Under a
receivables facility, Armco sells substantially all its trade receivables to a
wholly owned subsidiary, Armco Funding Corporation (AFC). In January 1996, AFC
entered into a five-year revolving credit agreement with a group of banks led by
The Chase Manhattan Bank, providing up to $120.0 million for revolving credit
loans and letters of credit secured by AFC's receivables. At June 30, 1997,
there were no outstanding borrowings under this credit facility; however, $64.3
million of the facility was committed to letters of credit.
In January 1996, Armco entered into a three-year revolving credit agreement
with a group of banks led by The Chase Manhattan Bank, providing up to $50.0
million for revolving credit loans secured by Armco's inventories. The credit
agreement subjects Armco to certain restrictions and covenants related to, among
other things, minimum working capital, minimum net income, current ratio and
interest coverage ratio requirements. At June 30, 1997, there were no
outstanding borrowings under this credit facility.
In addition to any amount borrowed under the Credit Facilities, at June 30,
1997, after giving effect to the Offering, the application of net proceeds
therefrom and the payment on July 15, 1997 of $5.0 million of current maturities
on the 9.20% Debentures, Armco had approximately $207.3 million of debt that
becomes due by the year 2000, including $14.8 million, $22.4 million, $22.5
million and $147.6 million in 1997, 1998, 1999 and 2000, respectively.
Armco anticipates that its capital expenditures for the last six months of
1997 will total approximately $40.0 million. Armco expects that its 1997 cash
requirements, including amounts for debt service, preferred stock dividends and
capital expenditures, will be paid out of existing cash balances and cash
generated from operations.
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BUSINESS
Armco was incorporated as an Ohio corporation in 1917 as a successor to a
New Jersey corporation incorporated in 1899 and is the largest domestic producer
of stainless sheet and strip and electrical steel, based on tons shipped. The
Company operates in two primary business segments: Specialty Flat-Rolled Steels
and Fabricated Products, which contributed 82% and 18%, respectively, of total
sales for the twelve months ended June 30, 1997. The Company's Specialty
Flat-Rolled Steels segment produces and finishes flat-rolled stainless,
electrical and galvanized carbon steel at five manufacturing locations in
Pennsylvania and Ohio. For the twelve months ended June 30, 1997, the Specialty
Flat-Rolled Steels segment had shipments of 1,167,000 tons. The Company's major
customers in this segment include automotive exhaust systems producers,
manufacturers of industrial and electrical equipment, other manufacturers,
service centers and converters. The Company's Fabricated Products segment
consists of three businesses: Douglas Dynamics, the largest North American
manufacturer of snowplows for four-wheel drive vehicles; Sawhill Tubular, a
manufacturer of a wide range of steel pipe and tubular products for use in
construction, industrial and plumbing markets; and Greens Port Industrial Park,
located in Houston, Texas. Total sales and EBITDA (as defined) for Armco were
$1,774.4 million and $132.2 million, respectively, for the twelve months ended
June 30, 1997.
Historically, consumption of stainless sheet and strip has grown at a faster
rate than the steel market as a whole. For example, between 1987 and 1996,
consumption of stainless sheet and strip in the United States had a compound
annual growth rate of 5.6% as compared to a rate of 2.8% for the total steel
market. Among the characteristics that make stainless a material of choice are
its resistance to corrosion, ability to withstand temperature extremes, high
strength-to-weight ratio, natural attractiveness and ease of maintenance. An
additional contributor to increased stainless steel usage is the requirement of
the 1990 amendments to the Clean Air Act that long-life materials such as
corrosion-resistant stainless steel materials be used in a number of
applications, including automotive exhaust systems where Armco has the leading
U.S. market position. From 1990 to 1996, stainless steel usage in automotive
exhaust systems grew from 25 pounds per vehicle to 52 pounds per vehicle. In
addition to increased usage per vehicle, automotive stainless demand has been
driven by strong North American production of 15.3 million, 14.9 million and
15.1 million light vehicles in 1994, 1995 and 1996, respectively, as compared to
an annual average of 12.5 million vehicles from 1990 to 1993.
Electrical steels are iron-silicon alloys that, through special production
techniques, possess unique magnetic properties that make them desirable for use
in the generation, transmission and distribution of electricity. Armco believes
it is the largest domestic supplier and the only producer of a full product line
of electrical steels in the U.S.
Armco's strategic objective is to enhance its position as a leading domestic
producer of specialty flat-rolled steels by focusing on its existing strong
market positions, especially in the automotive chrome and electrical steel
markets. Armco intends to strengthen its position in these markets by continuing
to focus on its core specialty steels business, by utilizing its recently
upgraded and improved facilities to produce higher quality products and by
providing improved customer service.
The Company has taken significant steps in recent years to become a focused
specialty steel company by streamlining its operations, investing in the
expansion and upgrade of its Specialty Flat-Rolled Steel facilities and
divesting or otherwise rationalizing certain unprofitable or non-strategic
operations. From 1993 through 1996, the Company sold or disposed of 13
operations and investments, generating cash proceeds of over $400 million.
Since 1993, the Company has invested approximately $235 million in two major
programs to upgrade its facilities and thereby to increase productivity, lower
operating costs, increase yields and improve customer service. The first of
these programs included the installation at the Company's Mansfield, Ohio
facility of a state-of-the-art continuous thin-slab caster designed to produce
different grades of steel with rapid switchover from one grade to another. The
new casting process helps to ensure consistently high
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quality products because it eliminates intermediate production steps and reduces
the amount of rolling required to achieve the desired thickness. The thin-slab
caster, certain hot mill upgrades and other modifications at the Mansfield plant
were made over a 15-month period, at a total cost of approximately $140 million.
The second of these programs, which commenced in late 1994, consisted of $95
million of extensive capital improvements over a two-year period to upgrade and
expand the Company's stainless and electrical steel finishing facilities. This
strategic facilities upgrade was initiated to reduce existing production
constraints and increase specialty flat-rolled steel finishing capacity by
approximately 180,000 tons per year, particularly in chrome stainless steel,
electrical steels and specialty sheet and strip products. These facilities
upgrades were completed during 1996. Armco now plans to focus on improving
productivity and quality at its specialty steel operations and anticipates
further cost reductions as these improvements are made.
In addition, the Company intends to continue to pursue research and
development activities. The Company's new equipment and more advanced technology
are helping customers to lower their total costs, by providing them with the
specific material selection and part design needed to match their manufacturing
processes. Furthermore, Armco has reorganized its research and technology
functions to facilitate more direct interaction with customers in the
development of new products and processes.
SPECIALTY FLAT-ROLLED STEEL
INDUSTRY OVERVIEW
The specialty steel industry is a relatively small but distinct segment of
the overall steel industry that represented approximately 2% of domestic steel
tonnage but accounted for approximately 10% of domestic steel revenues in 1996.
Specialty steels refer to alloy tool steel, electrical steel and stainless
sheet, plate, bar, rod, wire and welded pipe and tube products. These steels
differ from basic carbon steel by their metallurgical composition. Electrical
steels have properties that make them desirable in the generation,
transportation and use of electricity. Stainless steels are made with a high
alloy content, which permits their use in environments that demand exceptional
hardness, toughness and strength, resistance to corrosion and abrasion, ability
to withstand temperature extremes or combinations thereof. Unlike high-volume
carbon steel, specialty steels are generally produced in relatively small
quantities utilizing special processing techniques designed to meet more
exacting specifications and tolerances. Specialty steel products sell at higher
prices and generate higher average profit margins than carbon steel products.
Stainless steel contains elements such as chromium, nickel and molybdenum
that give it the unique qualities of resistance to rust and corrosion, ability
to withstand temperature extremes, high strength, good wear characteristics,
natural attractiveness, and ease of maintenance. Stainless steel is used in the
automotive and aerospace industries, and in the manufacture of food handling,
chemical processing, pollution control, medical and health equipment and other
products where its combination of strength, durability and attractiveness is
desirable. Electrical steels are iron-silicon alloys which, through special
production techniques, possess unique magnetic properties that make them
desirable for use as energy efficient material in such applications as
electrical transformers, motors and generators.
Armco expects that long-term demand for stainless steel will continue to be
positively affected by its increasing use in the manufacture of consumer durable
goods and industrial applications. Per capita stainless steel usage in many
developed countries significantly exceeds per capita usage in the United States
and Armco believes that this is an indication of the growth potential of demand
for stainless steel in the United States. In addition, the 1990 amendments to
the Clean Air Act have resulted in the increasing use of corrosion-resistant
materials in a number of applications for which stainless steel is well suited,
including industrial pollution control devices and motor vehicle exhaust systems
for use in the United States, where Armco now has the leading market share.
Another factor that Armco believes will affect
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demand positively is the increasing issuance of new car bumper-to-bumper
warranties and the use of stainless steel in passenger restraint systems and
other functional components.
PRODUCTS
Armco produces flat-rolled stainless steel and electrical steel strip and
sheet products that are used in a diverse range of consumer durables and
industrial applications. During the last three years, approximately 79% of
Armco's sales of specialty flat-rolled steel has been stainless and electrical
steels, 9% has been specialty semi-finished and 8% has been galvanized carbon
steel. The remaining sales in this segment of Armco's business are primarily
related to the foreign subsidiaries that buy, warehouse, and sell specialty
steel products. Major markets served are automotive, industrial machinery and
electrical equipment, construction and service centers.
In the stainless steel market, Armco is the leading producer of chrome
grades used primarily in the domestic market for automotive exhaust components.
Stainless steel, which formerly was not used in parts of the exhaust system
other than the catalytic converter, is now used in the entire exhaust system,
from manifold to tailpipe, by many auto manufacturers. Armco has developed a
number of specialty grades for this application. Armco is also known for its
"bright anneal" chrome grade finishes utilized for automotive and appliance trim
and other chrome grades used for cutlery, kitchen utensils, scissors and
surgical instruments. Specialty chrome nickel grades produced by Armco are used
in household cookware, restaurant and food processing equipment and medical
equipment. Other Armco stainless products include functional stainless steel
manufactured for automotive, agricultural, heating, air conditioning and various
industrial uses.
Armco is the only United States manufacturer of a complete line of
flat-rolled electrical steel products. It is also the only domestic manufacturer
utilizing laser scribing technology. In this process, the surface of electrical
steel is etched with high-technology lasers that refine the magnetic domains of
the steels, resulting in superior electrical efficiency. Major electrical
products categories are: Regular Grain Oriented ("RGO"), used in the cores of
power and distribution transformers, Cold Rolled Non-Oriented ("CRNO"), used for
electrical motors, generators and lighting ballasts; and TRAN
COR-Registered Trademark-H which is used in power transformers and is the only
high permeability electrical steel made domestically.
Additionally, Armco produces a full range of hot-dipped galvanized products
primarily for use in the heating, ventilation and air conditioning ("HVAC")
market.
OPERATING FACILITIES
Armco's Specialty Flat-Rolled Steels businesses produce and finish
flat-rolled stainless, electrical and galvanized steels at manufacturing
operations located in Butler, Pennsylvania, and Coshocton, Dover, Mansfield and
Zanesville, Ohio. The Butler and Mansfield plants produce both semi-finished and
finished stainless and electrical steels in sheet and hot band form. The
Coshocton facility finishes stainless steel in strip and sheet form and the
Zanesville facility finishes stainless and electrical strip and sheet. In
addition, the Mansfield plant produces commodity grades of carbon steel sheet,
most of which is coated at a galvanizing facility at the Dover plant. The
segment also includes the results of European marketing companies that sell
steel and manufactured steel products.
The Butler facility, which is situated on 1,300 acres with 3.2 million
square feet of buildings, continuously casts 100% of its steel. At Butler,
melting takes place in three 170-ton electric arc furnaces that feed the world's
largest (175-ton) argon-oxygen decarburization unit and a 170-ton vacuum
degassing unit for refining molten metal that, in turn, feed two double strand
continuous casters. Butler operates a hot-strip mill, anneal and pickle units
and two fully-automated tandem and cold-rolling mills. It also has various
intermediate and finishing operations for both stainless and electrical steels.
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The finishing plant in Coshocton, Ohio, located on 650 acres, is housed in a
600,000 square-foot plant and has three Sendzimer cold-rolling mills, four
anneal and pickle lines, three bright anneal lines, two 4-high mills for cold
reduction and other processing equipment, including temper rolling, slitting and
packaging facilities.
The Mansfield, Ohio plant consists of a 1.4 million square-foot facility,
including a melt shop with two electric arc furnaces (170-ton and 120-ton), a
120-ton argon-oxygen decarburization unit, a thin-slab continuous caster, a six
stand hot strip mill, a five stand tandem cold rolling mill and a pickle line.
The Dover, Ohio plant consists of a 600,000 square-foot facility including a
galvanizing line, stack anneal furnaces and a temper mill.
Under a plan to upgrade the facilities at Mansfield to enhance their steel
production capability and improve the operating performance of both the
Mansfield and Dover facilities, Armco installed a thin-slab caster and made
related plant modifications at Mansfield. The new state-of-the-art continuous
thin-slab caster is designed to produce three different types of steels
(stainless, electrical and carbon) with rapid switchover from one type to
another. The installation of the thin-slab caster, certain hot mill upgrades and
other modifications at the Mansfield plant were made over a 15-month period at a
cost totaling approximately $140 million. The casting process used at Mansfield
helps to ensure consistently high quality because it eliminates intermediate
production steps and reduces the amount of rolling required to achieve desired
thickness. The new caster can produce slabs from three to five inches thick, up
to 50 inches wide, and up to 60 feet in length.
Armco's Zanesville, Ohio plant, with 508,000 square feet of buildings on 88
acres, is a finishing facility for some of the steel produced at Butler and
Mansfield and has a Sendzimer cold-rolling mill, anneal and pickle lines, high
temperature box anneal and other decarburization and coating units.
In the fourth quarter of 1994, Armco announced an extensive capital
improvement program under which it spent $95 million over a two-year period to
upgrade and expand its stainless and electrical steel finishing facilities. The
program was initiated to reduce existing products constraints and increase
specialty steel finishing capacity by approximately 180,000 tons per year,
particularly in electrical steels, specialty strip and sheet products and chrome
stainless steel. The strategic facilities upgrades were completed during 1996
and Armco now believes that it is positioned to operate its plants without major
disruption throughout 1997. Armco plans to focus on improving productivity and
quality at its specialty steels operations and anticipates further cost
reductions as these improvements are made.
FABRICATED PRODUCTS SEGMENT
The Fabricated Products segment is described below:
Douglas Dynamics is the largest North American manufacturer of snowplows for
four-wheel drive pick-up trucks and utility vehicles. Douglas Dynamics, which is
headquartered in Milwaukee, Wisconsin, and has manufacturing plants in Rockland,
Maine, Milwaukee, Wisconsin and Johnson City, Tennessee, sells its snowplows and
ice control products under the names Western Products and Fisher Engineering
through independent distributors in the United States and Canada.
Sawhill Tubular manufactures a wide range of steel pipe and tubular products
for use in the construction, industrial and plumbing markets at plants in Sharon
and Wheatland, Pennsylvania and Warren, Ohio.
Greens Port Industrial Park operates a loading dock on the Houston Ship
Channel and leases buildings and land located on its property.
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EMPLOYEES
At June 30, 1997, Armco had approximately 6,000 employees. Most of Armco's
domestic production and maintenance employees are represented by international,
national or independent local unions, although some operations are not
unionized.
Armco has agreements with independent unions at the specialty steel plants
in Butler, Pennsylvania and Zanesville, Ohio. In May 1996, members of the
Zanesville Armco Organization ratified a new four-year labor agreement. In
October 1996, members of the Butler Armco Independent Union ratified a new
five-year labor agreement. The agreements with the Butler Armco Independent
Salaried Union and the Butler Armco Independent Plant Protection Union expire on
September 30, 1997.
Armco has agreements with United Steelworkers of America at Sawhill Tubular
plants. In February, 1996, employees at Sawhill Tubular's Wheatland plant
ratified a new four-year agreement and in June 1996, employees at Sawhill
Tubular's Warren plant ratified a new agreement which will expire September 30,
2000. The agreement at Sawhill Tubular's Sharon plant will expire September 30,
1999. In addition, the agreements with the United Steelworkers of America at the
Mansfield and Dover operations expire August 31, 1999.
COMPETITION
The Company faces intense competition from domestic and foreign steel
producers, foreign producers of components and other products and manufacturers
of competing products other than steel, including aluminum, plastics, composites
and ceramics. Competition is based primarily on price, with factors such as
reliability of supply, service and quality also being important in certain
segments.
In addition to existing competition, two steel companies have recently
entered, or announced plans to enter, the specialty steel market. In 1995, Nucor
Corporation, a mini-mill steel company, entered the automotive chrome stainless
steel business with the addition of an argon-oxygen decarburization (AOD) vessel
at its Crawfordsville, Indiana melt shop. In late 1996, AK Steel Corporation, an
integrated steel company, announced plans to build a steel finishing facility in
Rockport, Indiana that will include equipment capable of processing specialty
steel. When completed, this facility will provide AK Steel with substantial
stainless steel processing and finishing capacity. Increases in the production
capacity and efficiency of these and other domestic producers, together with
possible new entrants into the specialty steel market, are expected to result in
intensified competition that could exert downward pressure on price and market
share.
The Company's competitors in the domestic galvanized steel market include
many of the large integrated and mini-mill flat rolled producers. Since 1989,
significant flat-rolled mini-mill capacity has been constructed and these
mini-mills now compete with integrated domestic steel producers in most
flat-rolled steel markets. Mini-mills generally rely on less capital-intensive
hot metal sources, have smaller, non-unionized workforces resulting in lower
employment costs per ton shipped and are relatively free of many of the
employee, environmental and other obligations that have traditionally burdened
non-mini-mill steel producers. There is significant flat-rolled and galvanized
capacity under construction or announced with various planned commissioning
dates in the next several years. Given the increased competition that is
expected as the new capacity comes on line, the Company may experience downward
pressure on pricing in its galvanized product line.
Competition is also presented, to a lesser degree, by foreign producers.
Some of these foreign producers have lower labor costs and are subsidized by
their governments. Their decisions with regard to production and sales may be
influenced more by political and social considerations than prevailing market
forces. Many foreign steel producers continue to ship into the United States
market despite decreasing profit margins or losses. Depending on a number of
market factors, including the strength of the dollar,
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import levels, and the effectiveness of U.S. trade laws, pricing of the
Company's products could be adversely affected.
In 1995, led by the Specialty Steel Industry of North America, the
industry's trade organization, a major initiative was begun with European
specialty steel producers to attempt to reach a consensus on a Multilateral
Specialty Steel Agreement ("MSSA") for specialty steel producers only. During
1996, framework terms for the MSSA were agreed to by U.S. specialty steel
producers and specialty steel producers in Europe. However, as a result of new
demands by European specialty steel producers, negotiations have broken off and
there appears to be little likelihood of a final agreement in the foreseeable
future.
RAW MATERIALS AND ENERGY SOURCES
Raw materials represent a major component of production costs in the steel
industry. The principal raw materials used by Armco in the production of steels
are iron and carbon steel scrap, chrome and nickel and their ferroalloys,
stainless steel scrap, silicon, molybdenum and zinc. These materials are
purchased in the open market from various outside sources. Since much of this
purchased raw material is not covered by long-term contracts, availability and
price are subject to world market conditions. Chrome, nickel and certain other
materials in mined alloy form can be acquired only from foreign sources, many of
them located in developing countries that may be subject to unstable political
and economic conditions that might disrupt supplies or affect the price of these
materials. A significant portion of the chrome and nickel requirements, however,
is obtained from stainless steel scrap rather than mined alloys. While certain
raw materials have been in short supply from time to time, Armco currently is
not experiencing and does not anticipate any problems obtaining appropriate
materials in amounts sufficient to meet its production needs. Armco also uses
large amounts of electricity and natural gas in the manufacture of its products.
It is expected that such energy sources will continue to be reasonably available
in the foreseeable future.
LEGAL MATTERS
There are various other claims pending against the Company and its
subsidiaries involving product liability, reinsurance and insurance
arrangements, environmental, antitrust, employee benefits and other matters
arising out of the conduct of the business of Armco. Armco's management believes
that the ultimate liability, if any, resulting from any of these claims will not
materially affect the consolidated financial position or liquidity of Armco and
its subsidiaries.
ENVIRONMENTAL MATTERS
Armco, in common with other United States manufacturers, is subject to
various federal, state and local requirements for environmental controls
relating to its operations. Armco has devoted, and will continue to devote,
significant resources to control air and water pollutants, to dispose of wastes,
and to remediate sites of past waste disposal. Armco estimates capital
expenditures for pollution control in its manufacturing operations will
aggregate about $20.0 million for the years 1997-2001, with the largest
expenditures being made in the Specialty Flat-Rolled Steels segment.
Approximately $7.5 million is related to control of air pollution pursuant to
regulations currently promulgated under the Clean Air Act, as amended, and
corresponding state laws. A substantial portion of capital expenditures is also
attributable to control of water pollution under the Clean Water Act. These
projections, which have been prepared internally and without independent
engineering or other assistance, reflect Armco's current analysis of probable
required capital projects for pollution control. During the period 1991 through
1996, Armco's capital expenditures for pollution control projects aggregated
approximately $35.8 million, including $7.7 million in 1996. Statutory and
regulatory requirements in this area continue to evolve and, accordingly, the
type and magnitude of expenditures may change. For example, costs that cannot
presently be quantified may arise in the future due to implementation of the
recently revised National Ambient Air Quality Standards for particulate matter
and ozone.
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Armco has been named as a defendant, or identified as a potentially
responsible party, in various governmental proceedings regarding cleanup of
certain past waste disposal sites. Armco is also a defendant in various private
lawsuits alleging property damage and personal injury from waste disposal sites
and former Company facilities. Joint and several liability could be imposed on
Armco or other parties for these matters; thus, theoretically, one party could
be held liable for all costs related to a site. While such governmental and
private actions are being contested, the outcome of individual matters cannot be
predicted with assurance. However, based on its experience with such cases and a
review of current claims, Armco expects that in most cases any ultimate
liability will be apportioned between Armco and other financially viable
parties.
From time to time, Armco has been and may be subject to penalties or other
requirements as a result of administrative actions by regulatory agencies and to
claims for indemnification for properties it has previously owned or leased. The
Company has retained certain liabilities relating to the business and properties
sold by the Company. In addition, environmental exit costs may be incurred if
Armco decides to dispose of additional properties. It is Armco's policy not to
accrue such costs until a decision is made to dispose of a property.
Based on current facts and circumstances known to Armco, Armco's experience
with site remediation, an understanding of current environmental laws and
regulations, environmental assessments, the existence of other financially
viable parties, expected remediation methods and the years in which Armco is
expected to make payments toward each remediation (which range from the current
year to 30 years or more in the future), Armco believes that the ultimate
liability for environmental remediation matters identified to date will not
materially affect its consolidated financial condition or liquidity. However, it
is possible that, due to fluctuations in Armco's results future developments
with respect to such matters could have a material effect on the results of
operations of future interim or annual periods.
Furthermore, the identification of additional sites, changes in known
circumstances with respect to identified sites, the failure of other parties to
contribute their share of remediation costs decisions to dispose of additional
properties and other changed circumstances may result in increased costs to
Armco, which could have a material effect on its consolidated financial
condition, liquidity and results of operations in future interim or annual
periods. However, it is not possible to determine whether additional loss, due
to changed circumstances, will occur or to reasonably estimate the amount or
range of any potential additional loss.
Statutes and regulations relating to the protection of the environment have
resulted in higher operating costs and capital investments by the industries in
which Armco operates. Although it cannot predict precisely how changes in
environmental requirements will affect its businesses, Armco does not believe
such requirements would adversely affect its competitive position. See "Risk
Factors--Potential Environmental Expenditures."
RESEARCH AND DEVELOPMENT
Armco conducts a broad range of research and development activities aimed at
improving its existing products and manufacturing processes and developing new
products and processes. Armco's research and development activities are carried
out primarily at a central technology center located in Middletown, Ohio. This
center is engaged in applied materials research related to iron and steel,
nonferrous materials and new materials. In addition, the materials and
metallurgy departments at each operating unit develop and implement improvements
to products and processes that are directly connected with the activities of
such operating unit. Armco spent $13.1 million, $14.0 million, and $12.0
million, respectively, on research in the years 1996, 1995 and 1994.
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THE EXCHANGE OFFER
The Old Notes were sold by the Company on September 12, 1997 to a limited
number of institutional investors (the "Purchasers"). In connection with the
sale of the Old Notes, the Company and the Purchasers entered into a
registration rights agreement dated as of September 9, 1997 (the "Registration
Agreement"), which requires the Company (i) to cause the Old Notes to be
registered under the Securities Act or (ii) to file with the Commission a
registration statement under the Securities Act with respect to the New Notes of
the Company identical in all material respects to the Old Notes, and to use its
best efforts to cause such registration statement to become effective under the
Securities Act. The Company is further obligated, upon the effectiveness of that
registration statement, to offer the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of New Notes, which will be
issued without a restrictive legend and may be reoffered and resold by the
holder without restrictions or limitations under the Securities Act. A copy of
the Registration Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Exchange Offer is being made
pursuant to the Registration Agreement to satisfy the Company's obligations
thereunder. The term "Holder" with respect to the Exchange Offer means any
person in whose name Old Notes are registered on the Company's books or any
other person who has obtained a properly completed assignment from the
registered holder.
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 , 1997, provided, however, that if the Company,
in its sole discretion, has extended the period of time during 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, $150,000,000 aggregate principal amount
of the Old Notes is outstanding. Except for an aggregate of $12,000,000
principal amount of Old Notes held by two affiliates of the Company, the Company
believes that all outstanding Old Notes are eligible to be exchanged for New
Notes which will then be freely transferrable by the holders thereof. This
Prospectus, together with the Letter of Transmittal, is first being sent on or
about , 1997, to all Holders of Old Notes known to the Company. The
Company's obligation to accept Old Notes for exchange pursuant to the Exchange
Offer is subject to certain customary 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 for exchange of any Old Notes, by giving oral or
written notice of such extension to the Holders thereof 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.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 or any integral multiple thereof.
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 and 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.
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PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. 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, including
all other documents required by such Letter of Transmittal, to The Fifth Third
Bank (the "Exchange Agent") at one of the addresses set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (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
(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.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's behalf, such owner must, prior
to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal Rights"), as the case may be, must be guaranteed (see
"-- Guaranteed Delivery Procedures") 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 guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of 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 exactly as the name or names of the registered
holder or holders appear on the Old Notes 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 Note not properly tendered or not to 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 to waive any defects
or irregularities or conditions of the Exchange Offer as to any particular
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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 tenders of Old Notes for exchange must be
cured within such reasonable period of time as the Company shall determine. None
of the Company, the Exchange Agent or any other person shall be under any duty
to give notification of 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 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 their authority to so
act must be submitted with the Letter of Transmittal.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the Holder, and that neither the Holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the New Notes. If any Holder or any such other person is
an "affiliate", as defined under Rule 405 of the Securities Act, of the Company
or is engaged in or intends to engage in, or has an arrangement or understanding
with any person to participate in, a distribution of such New Notes to be
acquired pursuant to the Exchange Offer, such Holder or any such other person
(i) may not rely on the applicable interpretation of the staff of the SEC 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, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. See "Plan of Distribution." 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.
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 will be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive as set forth below under "Description of Senior Notes--Book-Entry,
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes, or, if no interest
has been paid, from September 15, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the Exchange
Offer. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of accrued interest on such Old Notes otherwise payable on
any interest payment date the record date for which occurs on or after
consummation of the Exchange Offer. If the Exchange Offer is not consummated and
a resale shelf registration statement is not declared effective on or prior to
March 11, 1998, the annual interest rate borne by the Senior Notes
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will be increased by 0.5%. Upon consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, the interest rate on the
Senior Notes will revert to the rate set forth on the cover page of this
Prospectus. See "Registration Rights Agreement." Old Notes not tendered or not
accepted for exchange will continue to accrue interest from and after the date
of consummation of the Exchange Offer.
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, a properly completed and duly executed Letter of
Transmittal 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 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 procedure 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.
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 within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or a facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" or or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
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) on or prior to 5:00 p.m., New York City
time, on the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and 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 three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, 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, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
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<PAGE>
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New
York City time, on 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 in which case such guarantee will
not be required. 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 will 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, and subject to
its obligations pursuant to the Registration Rights Agreement, 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 New Notes for exchange, any of the following
events shall occur.
(i) any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted 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 any of
the foregoing rights shall not be deemed a waiver of any such right and 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 is threatened by the Commission or in effect with
respect to the Registration Statement of which this Prospectus is a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
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EXCHANGE AGENT
The Fifth Third 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 or Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
The Fifth Third Bank, Exchange Agent
By Mail:
Corporate Trust Operations
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Paul Smith
By Hand or Overnight Courier
Corporate Trust Operations
38 Fountain Square Plaza
Mail Drop 1090 F5-4129
Cincinnati, Ohio 45263
Attention: Paul Smith
By Facsimile:
(513) 744-8909
Confirm by Telephone:
(513) 744-8741
DELIVERY OF THE LETTER OF TRANSMITTAL 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 OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, among others.
TRANSFER TAXES
Holders who tender their Old Notes for exchanges 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 registering tendering holder will be responsible for the payment of the
applicable transfer tax thereon.
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<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
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 provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will register
Old Notes under the Securities Act. See "Registration Rights Agreement". Based
on interpretations by the staff of the Commission, as set forth in no-action
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by holders thereof (other than 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 or such holders' business and such
holders, other than broker-dealers, have no arrangement or understanding with
any person to participate in the distribution of such New Notes. However, the
Commission has not considered the Exchange Offer in the context of a no-action
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the Exchange Offer as in such other
circumstances. Each Holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage in, a distribution of such New
Notes and has no arrangement or understanding to participate in a distribution
of New Notes. If any Holder is an affiliate of the Company or is engaged in or
intends to engage in or 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) may 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 pursuant to the Exchange Offer must acknowledge that such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus
meeting the requirements of the Securities Act 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 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. 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
jurisdictions or any exemption from registration or qualification is available
and is complied with. The Company has agreed, pursuant to the Registration
Agreement, subject to certain limitations specified therein, to register or
qualify the New Notes for offer or sale under the securities laws of such
jurisdictions as any holder reasonably requests in writing. Unless a holder so
requests, the Company does not currently intend to register or qualify the sale
of the New Notes in any such jurisdictions.
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<PAGE>
DESCRIPTION OF SENIOR NOTES
The Old Notes were issued under an Indenture, dated as of October 1, 1992,
between the Company and The Fifth Third Bank, as trustee (the "Trustee"), as
supplemented by Supplemental Indenture No. 1, dated as of October 1, 1992,
Supplemental Indenture No. 2, dated as of September 1, 1997 and Supplemental
Indenture No. 3, dated as of , 1997 and as further supplemented from
time to time by supplemental indentures or modified from time to time by
resolutions of the Board of Directors of the Company (the "Board of Directors")
as provided in the indenture (such indenture, as so supplemented or modified,
being hereinafter referred to as the "Indenture"). The Old Notes and the New
Notes will be treated as a single class of securities under the Indenture. The
following statements with respect to the Senior Notes are summaries of certain
provisions of the Indenture and do not purport to be complete and are qualified
in their entirety by reference to the provisions of the Indenture and the Senior
Notes. A copy of the Indenture is available from the Company upon request.
Unless otherwise defined herein capitalized terms have the meanings given them
in the Indenture.
GENERAL
The Senior Notes will mature on September 15, 2007 and will bear interest at
the rate per annum of 9%. Interest on the Senior Notes will accrue from
September 12, 1997 or from the most recent interest payment date to which
interest has been paid, and will be payable semiannually in arrears on March 15
and September 15 of each year, commencing March 15, 1998, to the registered
Holders thereof at the close of business on the March 1 or September 1, as the
case may be, immediately preceding such interest payment date. The Senior Notes
will be limited to an aggregate principal amount of $150,000,000.
The interest rate on the Senior Notes is subject to increase in certain
circumstances if the Company does not file a registration statement relating to
the Registered Exchange Offer on a timely basis, if the registration statement
is not declared effective on a timely basis or if certain other conditions are
not satisfied, all as further described under "Registration Rights Agreement."
Interest on the Senior Notes will be computed on the basis of a 360-day year
of twelve months. Principal and interest on the Senior Notes will be payable at
the office of the Paying Agent, but, at the option of the Company, interest may
be paid by check mailed to the registered Holders at their registered address.
The Senior Notes may be presented for transfer or exchange at such office
without any service charge, but the Company may require a sum sufficient to
cover any tax or other governmental charges payable in connection therewith. The
Company shall not be required to exchange or register the transfer of (i) any
Senior Notes for a period of fifteen days next preceding any selection of Senior
Notes to be redeemed or (ii) any Senior Notes selected, called or being called
for redemption. The Senior Notes will be issued in registered form only, without
coupons, in denominations of $1,000 or any integral multiple thereof.
The Senior Notes will be unsecured obligations of the Company and will rank
on a parity with all other unsecured senior indebtedness of the Company. The
Senior Notes will be senior to any subordinated indebtedness of the Company and
will be effectively junior to secured indebtedness of the Company, to the extent
of the assets securing the indebtedness, and to indebtedness of subsidiaries of
the Company, to the extent of the assets of such subsidiaries. At June 30, 1997,
the Company had total consolidated debt obligations of $389.3 million, of which
$57.5 million of indebtedness was secured by assets of the Company. In addition,
the borrowings under Armco's $170.0 million Credit Facilities are secured by
certain of Armco's inventory and receivables. Approximately $100.0 million of
the Company's 11 3/8% Senior Notes and $20.0 million of its 9.20% Debentures
will be repaid using a portion of the net proceeds of the Senior Notes offered
hereby. The Indenture does not limit the aggregate amount of Debt Securities
that may be issued thereunder. The Indenture provides that Debt Securities may
be issued from time to time in one or more series.
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<PAGE>
OPTIONAL REDEMPTION
On or after September 15, 2002, the Senior Notes may, from time to time, be
redeemed, in whole or in part, at the option of the Company upon not less than
30 nor more than 60 days' prior notice to Holders, at the redemption prices set
forth below (expressed in percentages of the principal amount thereof), plus
accrued and unpaid interest thereon, to the Redemption Date.
<TABLE>
<CAPTION>
REDEMPTION PERIOD PERCENTAGE
- ----------------------------------------------- -----------
<S> <C>
September 15, 2002 to September 14, 2003 104.50%
September 15, 2003 to September 14, 2004 103.00%
September 15, 2004 to September 14, 2005 101.50%
September 15, 2005 and thereafter 100.00%
</TABLE>
At any time prior to September 15, 2000 the Company, at its option, may
redeem up to 33 1/3% of the aggregate principal amount of Senior Notes
originally issued with the net proceeds of one or more Equity Offerings of the
Company at a redemption price equal to 109.00% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the date of redemption
PROVIDED, HOWEVER, that after any such redemption at least 66 2/3% of the
aggregate principal amount of the original issue of the Senior Notes remains
outstanding. Any such redemption must occur on or prior to 120 days after the
receipt of such net proceeds.
In addition, upon the occurrence of a Change of Control prior to September
15, 2002, the Company, at its option, may redeem all, but not less than all, of
the outstanding Senior Notes at a redemption price equal to 100% of the
principal amount thereof plus the applicable Make-Whole Premium. The Company
shall give not less than 30 nor more than 60 days' prior notice to Holders of
such redemption within 30 days following the applicable Change of Control.
If less than all of the Senior Notes are to be redeemed, the selection of
the Senior Notes to be redeemed shall be made as provided in the Indenture.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the right
to require the Company to repurchase such Holder's Senior Notes, in whole or in
part, in integral multiples of $1,000, pursuant to the Change of Control Offer
described in the next succeeding paragraph at the Repurchase Price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Change of Control Payment Date.
Within 30 calendar days subsequent to the date of any Change of Control, the
Company shall mail a notice to each Holder and to the Trustee stating: (i) that
a Change of Control has occurred and a Change of Control Offer is being made as
described in this paragraph, and that all Senior Notes that are timely tendered
will be accepted for payment; (ii) the Repurchase Price and the Change of
Control Payment Date, which shall be a date occurring no earlier than 30 days
and no later than 60 days subsequent to the date on which such notice is mailed;
(iii) that any Senior Note (or any portion thereof) accepted for payment
pursuant to the Change of Control Offer (and duly paid on the Change of Control
Payment Date) will cease to accrue interest after the Change of Control Payment
Date; and (iv) any other 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 the decision to tender their Senior Notes, or
is necessary to enable Holders to tender their Senior Notes (or any portion
thereof) and to have such Senior Notes repurchased pursuant to this covenant.
Notwithstanding the foregoing, if any Senior Note (or any portion thereof)
accepted for payment shall not be so paid pursuant to the provisions of this
covenant, then, from the Change of Control Payment Date until the principal of
(and premium) and interest on such Senior Note is paid, interest shall be paid
on the
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<PAGE>
unpaid principal (and premium) and, to the extent permitted by law, on any
accrued but unpaid interest thereon, in each case at the rate prescribed
therefor by such Senior Note.
Neither the Board of Directors nor the Trustee under the Indenture may waive
the Company's obligation to make a Change of Control Offer.
Certain of the instruments governing other outstanding indebtedness of the
Company include provisions requiring payment or repurchase of such indebtedness
at the election of the holders thereof, similar to the Change of Control
repurchase, including the indenture for the $100.0 million 11 3/8% Senior Notes
Due 1999 and the indenture for the $125.0 million 9 3/8% Senior Notes Due 2000,
both of which series rank equally with the Senior Notes, and the Company's
$170.0 million Credit Facilities, the indebtedness under which is secured by
certain of the Company's inventory and receivables. There can be no assurance
that the Company will have adequate resources to repurchase or refinance all
indebtedness owing under the Senior Notes, and the other indebtedness that may
contemporaneously become due, in the event a Change of Control Offer is required
to be made. If the Company does not have sufficient financial resources to
effect a Change of Control Offer, it would be required to seek additional
financing from outside sources to enable it to repurchase the Senior Notes.
There can be no assurance that such financing would be available to the Company
on satisfactory terms. Any failure of the Company to pay the purchase price with
respect to such Change of Control Offer when due constitutes an Event of Default
and will give the Trustee and the holders of the Senior Notes the rights
described under "--Events of Default."
The term "all or substantially all" as used in the definition of "Change of
Control" (see "--Certain Definitions") has not been interpreted under New York
law (which is the governing law of the Indenture) to represent a specific
quantitative test. As a consequence, in the event the holders of the Senior
Notes elected to exercise their rights under the Indenture and the Company
elected to contest such election, there could be no assurance as to how a court
interpreting New York law would interpret the phrase.
The provisions of the Indenture relating to a Change of Control in and of
themselves may not afford Holders of the Senior Notes protection in the event of
a highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect Holders of the
Senior Notes, if such transaction is not the type of transaction included within
the definition of a Change of Control. See "--Certain Definitions" for the
definition of "Change of Control." A transaction involving the Company's
management or its affiliates, or a transaction involving a recapitalization of
the Company, will result in a Change of Control if such transaction otherwise
constitutes a change in control within the meaning of such definition.
The Company shall comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act and other securities laws or regulations in
connection with the repurchase of the Senior Notes as described above. To the
extent that the provisions of any securities laws or regulations conflict with
the Change of Control provisions of the Indenture, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the Indenture by virtue thereof.
The existence of a Holder's right to require the Company to repurchase the
Senior Notes in respect of a Change of Control may deter a third party from
acquiring the Company in a transaction that constitutes a Change of Control.
SINKING FUND
There will be no mandatory sinking fund payments for the Senior Notes.
CERTAIN COVENANTS
The Indenture covenants more particularly described below limit, among other
things, the ability of the Company and its Restricted Subsidiaries to engage in
a highly leveraged transaction, whether such
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transaction is initiated or supported by the Company, its management or
affiliates or an unrelated third party.
TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, conduct any business or enter
into any transaction or series of transactions (including, but not limited to,
the sale, transfer, disposition, purchase, exchange or lease of assets or
Property, the making of any Investment, the giving of any Guarantee, or the
rendering of any service) with or for the benefit of any Affiliate of the
Company (other than the Company), unless (i) such transaction or series of
transactions is on terms no less favorable in the aggregate (including such
factors as quality, delivery, service and acceptance by customers of the Company
or such Subsidiary) to the Company or such Subsidiary than those that could be
obtained in a comparable arm's-length transaction with an entity that is not an
Affiliate of the Company or such Subsidiary, and (ii) with respect to a
transaction or series of transactions outside the ordinary course of business
that has a Fair Market Value equal to or greater than $5,000,000, the terms
thereof are set forth in writing and the Board of Directors (including a
majority of the disinterested directors thereof) approves such transaction or
series of transactions and, in its good faith judgment, believes that such
transaction or series of transactions complies with clause (i) of this
paragraph, as evidenced by a Certified Resolution.
The foregoing limitations do not apply to (i) any transaction with an
officer or director of the Company or any Subsidiary of the Company entered into
in the ordinary course of business consistent with past practice (including
compensation or employee benefit arrangements with any officer or director of
the Company or any Subsidiary of the Company) and the cash-out of supplemental
pension benefits, or (ii) transactions between the Company and its Restricted
Subsidiaries or among such Restricted Subsidiaries.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment if, at the time of and after giving effect to the proposed
Restricted Payment (i) any Default or Event of Default has occurred and is
continuing, or (ii) the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of "--Limitation on Indebtedness,"
or (iii) the aggregate amount expended or committed for all Restricted Payments
from the date of the closing of the Offer made hereby (the amount so expended or
committed, if other than in cash, to be determined in good faith by the Board of
Directors and evidenced by a Certified Resolution) exceeds the sum of (A) 50% of
the aggregate Consolidated Net Income of the Company and its Restricted
Subsidiaries (or, if Consolidated Net Income shall be a deficit, minus 100% of
such deficit) subsequent to June 30, 1997 and ending on the last day of the
fiscal quarter immediately preceding the date of such Restricted Payment, (B)
100% of the aggregate net proceeds, including cash and the Fair Market Value of
Property other than cash, received by the Company subsequent to the date of the
closing of the Offer made hereby, from capital contributions from its
stockholders or from the issuance or sale (other than to a Subsidiary) of
Qualified Capital Stock of the Company or of any convertible securities or debt
obligations which have been converted into, exchanged for or satisfied by the
issuance of Qualified Capital Stock, and (C) the amount of the net reduction in
Investments made as Restricted Payments in accordance with this sentence in
Unrestricted Subsidiaries resulting from (1) the payment of cash dividends or
the repayment in cash of the principal of loans or the cash return on any
Investment, in each case to the extent received by the Company or any wholly
owned Restricted Subsidiary of the Company from Unrestricted Subsidiaries, (2)
to the extent that any Investment in an Unrestricted Subsidiary that was made
after the date of the closing of the Offering made hereby is sold for cash or
otherwise liquidated or repaid for cash, the after-tax cash return of capital
with respect to such Investment (less the cost of disposition, if any) or (3)
the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries, such
aggregate amount of the net reduction in such Investments not to exceed, in the
case of any Unrestricted Subsidiary, the amount of such Investments made as
Restricted Payments previously made by the Company or any Restricted Subsidiary
in such Unrestricted Subsidiary, which amount was included in the calculation of
the amount of Restricted Payments.
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<PAGE>
The foregoing limitations do not prevent the Company or its Restricted
Subsidiaries from (i) paying a dividend on its Capital Stock within 60 days
after declaration thereof if, on the declaration date, the Company could have
paid such dividend in compliance with the Indenture; (ii) repurchasing shares of
its Capital Stock (A) solely in exchange for other shares of its Capital Stock
(other than Redeemable Stock), (B) to eliminate fractional shares or odd lots
for up to an aggregate consideration in any fiscal year of the Company not to
exceed $2,000,000, (C) pursuant to an order of a court of competent
jurisdiction, or (D) in connection with repurchase provisions under employee
stock option and stock purchase agreements or other agreements to compensate
management employees of the Company; (iii) making cash payments in respect of
stock appreciation rights granted to employees of the Company; (iv) the purchase
for value of shares of Capital Stock of the Company (A) held by directors,
officers or employees upon death, disability, retirement, or termination of
employment or (B) to fund capital stock-based, long-term incentive programs, not
to exceed $10,000,000 in the aggregate; (v) Restricted Payments for the
redemption, repurchase or other acquisition of shares of Capital Stock of the
Company in satisfaction of indemnification or other claims arising under any
merger, consolidation, asset purchase or investment or similar acquisition
agreement permitted under the Indenture, pursuant to which such shares of
Capital Stock were issued; (vi) making payments to purchase or redeem
Indebtedness made by exchange for, or out of the proceeds of, the substantially
concurrent (A) sale or issuance of Capital Stock (other than Redeemable Stock)
of the Company, or (B) Incurrence of Indebtedness of the Company that is
contractually subordinated in right of payment to the Senior Notes and has a
Stated Maturity later than the Stated Maturity of the Senior Notes and an
Average Life greater than the remaining Average Life of any of the Senior Notes;
(vii) declaring and paying dividends on the Preferred Stock of the Company
outstanding on the date of the closing of the Offer made hereby; (viii) making
Investments in Affiliates up to an aggregate of $15,000,000; (ix) making an
Investment in an Affiliate as a result of which such Affiliate becomes a
Restricted Subsidiary in compliance with "--Restricted and Unrestricted
Subsidiaries"; (x) making an Investment by contributing or otherwise
transferring to any Person or Persons all or any part of the Non-Core Businesses
enumerated in clauses (i) through (v) of the definition of "Non-Core
Businesses"; and (xi) making other Restricted Payments in an aggregate amount
not to exceed $25,000,000 (after giving effect to the amount of the net
reduction in any Investments made as Restricted Payments in reliance on this
clause (xi) resulting from (1) the payment of cash dividends or the repayment in
cash of the principal of loans or the cash return on any such Investment, in
each case to the extent received by the Company or any wholly owned Restricted
Subsidiary of the Company from Unrestricted Subsidiaries, (2) to the extent that
any such Investment in an Unrestricted Subsidiary is sold for cash or otherwise
liquidated or repaid for cash, the after-tax cash return of capital with respect
to such Investment (less the cost of disposition, if any) or (3) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries).
The payments permitted to be made pursuant to clauses (ii)(A), (iii) (but
only to the extent any such payments are included in determining Consolidated
Net Income), (vi), (ix) and (x) of the preceding paragraph shall be excluded for
purposes of any future calculations pursuant to the first paragraph of this
covenant of the aggregate amount of Restricted Payments outstanding. The
payments permitted to be made pursuant to clauses (i), (ii)(B), (ii)(C),
(ii)(D), (iii) (but only to the extent that any such payments are not included
in determining Consolidated Net Income), (iv), (v), (vii), (viii) and (xi) shall
be included for purposes of any future calculations pursuant to the first
paragraph of this covenant of the aggregate amount of Restricted Payments
outstanding.
LIMITATION ON INDEBTEDNESS. The Company will not, directly or indirectly,
Incur any Indebtedness unless, immediately after the date of the transaction
giving rise to such Indebtedness and after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds thereof as if
such Indebtedness had been Incurred and the proceeds thereof applied on the
first day of the Determination Period, the Consolidated Interest Coverage Ratio
of the Company at such date exceeds the ratio of 2.0 to 1.0.
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Notwithstanding the foregoing, the Company may Incur the following
Indebtedness (although any Indebtedness so Incurred shall be included, to the
extent outstanding at the Determination Date, in any subsequent determination of
the Consolidated Interest Coverage Ratio): (i) Indebtedness Incurred by the
Company or by Armco Funding Corporation under the Credit Facilities, PROVIDED
that the aggregate principal amount of all Indebtedness Incurred under this
clause (i) at any one time outstanding does not exceed the greater of (A)
$225,000,000 and (B) the sum of (1) 80% of the book value of the accounts
receivable of the Company and its Restricted Subsidiaries and (2) 50% of the
book value of the inventory of the Company and its Restricted Subsidiaries, in
the case of clauses (B)(1) and (B)(2) of this proviso, as of the end of the most
recent fiscal quarter for which financial information in respect thereof is
available immediately prior to the date of such Incurrence, determined in
accordance with GAAP; (ii) Indebtedness evidenced by the Senior Notes; (iii)(A)
Indebtedness of the Company in respect of Capital Lease Obligations or (B)
Capital Expenditure Indebtedness directly Incurred by the Company, PROVIDED that
the aggregate principal amount of all Indebtedness Incurred under clauses
(iii)(A) and (B) of this paragraph and the Indebtedness Incurred under clause
(iv) under "--Limitation on Restricted Subsidiary Indebtedness and Preferred
Stock" does not exceed $100,000,000 at any one time outstanding; (iv)
Indebtedness under Interest Rate Protection Agreements, PROVIDED that the
obligations under such agreements are related to payment obligations on
Indebtedness otherwise permitted by the terms of this covenant; (v) Indebtedness
of the Company to any wholly owned Restricted Subsidiary of the Company (but
only so long as such Indebtedness is held by such wholly owned Restricted
Subsidiary); (vi) Indebtedness outstanding on the date of the closing of the
Offer made hereby; (vii) Permitted Refinancing Indebtedness; (viii) surety
obligations of the Company and its Restricted Subsidiaries entered into in the
ordinary course of business, (ix) Indebtedness of the Company and its Restricted
Subsidiaries Incurred to finance the purchase of insurance in the ordinary
course of business, (x) Indebtedness of the Company and its Restricted
Subsidiaries Incurred from the honoring by a bank or other financial institution
of a check or draft inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness is extinguished
within two business days of notice of any such Incurrence, and (xi) Indebtedness
not otherwise permitted to be Incurred under clauses (i) through (x) of this
paragraph, which, together with any other outstanding Indebtedness Incurred
under this clause (xi) of this paragraph, has an aggregate principal amount not
in excess of $40,000,000 at any one time outstanding.
LIMITATION ON RESTRICTED SUBSIDIARY INDEBTEDNESS AND PREFERRED STOCK. The
Company will not permit any of its Restricted Subsidiaries to Incur, directly or
indirectly, any Indebtedness or Preferred Stock, except: (i) (A) Indebtedness or
Preferred Stock outstanding on the date of the closing of the Offer made hereby
or (B) Indebtedness Incurred under the Credit Facilities to the extent permitted
by clause (i) of the second paragraph under "--Limitation on Indebtedness"; (ii)
Indebtedness or Preferred Stock issued to and held by the Company or a wholly
owned Restricted Subsidiary of the Company (but only so long as such
Indebtedness or Preferred Stock is held or owned by the Company or a wholly
owned Restricted Subsidiary of the Company); (iii)(A) Indebtedness of a
Restricted Subsidiary in respect of Capital Lease Obligations or (B) Capital
Expenditure Indebtedness directly Incurred by a Restricted Subsidiary, PROVIDED
that after giving effect to such Indebtedness the Company could Incur at least
$1.00 of additional Indebtedness pursuant to the first paragraph of "--
Limitation on Indebtedness"; (iv)(A) Indebtedness of a Restricted Subsidiary in
respect of Capital Lease Obligations or (B) Capital Expenditure Indebtedness
directly Incurred by a Restricted Subsidiary, PROVIDED that the aggregate
principal amount of all Indebtedness Incurred under clauses (iv)(A) and (iv)(B)
of this paragraph and the Indebtedness Incurred under clause (iii) of the second
paragraph under "-- Limitation on Indebtedness" does not exceed $100,000,000 at
any one time outstanding; and (v) Indebtedness or Preferred Stock Incurred in
exchange for, or the proceeds of which are used to Refinance, Indebtedness or
Preferred Stock of equal or higher ranking referred to in clauses (i) through
(iv) of this paragraph, so long as (A) the principal amount of such Indebtedness
or the liquidation value of such Preferred Stock so Incurred does not exceed the
principal amount or liquidation value of the Indebtedness or Preferred Stock so
exchanged or Refinanced and (B) the Indebtedness or Preferred Stock so Incurred
has a Stated Maturity or final redemption date later than the Stated Maturity
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or final redemption date (if any) of, and an Average Life that is longer than
that of, the Indebtedness or Preferred Stock being exchanged or Refinanced.
Any Indebtedness or Preferred Stock Incurred pursuant to clauses (i) through
(v) of the preceding paragraph will be included, to the extent outstanding at
the Determination Date, in any subsequent determination of the Consolidated
Interest Coverage Ratio.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into, assume, Guarantee or otherwise become liable with respect to any
Sale and Leaseback Transaction, except for a Sale and Leaseback Transaction not
exceeding 360 days unless: (i) the Company or such Restricted Subsidiary is
permitted to Incur such Indebtedness under "--Limitation on Indebtedness" or
"--Limitation on Restricted Subsidiary Indebtedness and Preferred Stock,"
respectively; (ii) the Company or such Restricted Subsidiary would be permitted
to Incur a Lien to secure Indebtedness or enter into a Sale and Leaseback
Transaction pursuant to the second paragraph under "--Limitation on Liens" or
Incur a Lien on such Property that is the subject of such Sale and Leaseback
Transaction pursuant to clause (ii) of the first paragraph of "--Limitation on
Liens" without equally and ratably securing the Senior Notes; (iii) the Company
or such Restricted Subsidiary receives consideration at least equal to the Fair
Market Value of the Property transferred; and (iv) if the Sale and Leaseback
Transaction is, directly or indirectly, entered into, or assumed or Guaranteed
by, the Company or such Restricted Subsidiary, or the Company or such Restricted
Subsidiary otherwise becomes liable with respect thereto, more than 360 days
after the Property subject to such Sale and Leaseback Transaction is acquired or
constructed by the Company or such Restricted Subsidiary, the Company applies
the proceeds of such Sale and Leaseback Transaction, net of all reasonable
out-of-pocket expenses Incurred by the Company or such Restricted Subsidiary in
connection therewith, which are customarily Incurred in connection with the Sale
and Leaseback Transactions of such kind, in accordance with the provisions under
"--Limitation on Asset Sales" as if such Sale and Leaseback Transaction were an
Asset Sale.
LIMITATION ON LIENS. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Lien on or with
respect to any Property of the Company or such Restricted Subsidiary, or any
interest therein or any income or profits therefrom, unless the Senior Notes are
secured equally and ratably with (or prior to) any and all other Indebtedness
secured by such Lien, except for: (i) any Lien securing Indebtedness permitted
under clause (i) of the second paragraph under "--Limitation on Indebtedness";
(ii) any Lien (A) in respect of Capital Lease Obligations or Capital Expenditure
Indebtedness permitted to be Incurred by the terms of the first paragraph or
clause (iii) of the second paragraph under "--Limitation on Indebtedness" or
clauses (iii) or (iv) of the first paragraph under "--Limitation on Restricted
Subsidiary Indebtedness and Preferred Stock," (B) existing on any Property of a
Person at the time such Person is merged or consolidated with or into the
Company or any Restricted Subsidiary or becomes a Restricted Subsidiary (and not
Incurred in anticipation of such transaction) or (C) existing on any Property at
the time of the acquisition thereof (and not Incurred in anticipation of such
transaction) whether or not assumed by the Company or any Restricted Subsidiary;
PROVIDED that in any such case such Lien may extend only to the Property so
acquired or constructed and improvements thereon, and, in the case of any such
Lien in respect of Capital Lease Obligations and Capital Expenditure
Indebtedness, the real property on which such Property is located; (iii) any
Lien Incurred to secure the performance of statutory obligations, bids, trade
contracts, leases, surety or appeal bonds, performance or return-of-money bonds
or other obligations of a like nature Incurred in the ordinary course of
business; (iv) any Lien to secure industrial revenue or development or pollution
control bonds; (v) any Lien to secure any Refinancing (or successive
Refinancings), in whole or in part, of any Indebtedness secured by Liens
referred to in clauses (i) through (iv) of this paragraph so long as such Lien
does not extend to any other Property and the Indebtedness so secured is not
increased; (vi) any Lien securing only the Senior Notes; (vii) any Lien in favor
of the Company or a wholly owned Restricted Subsidiary; (viii) any Lien for
taxes or assessments by other governmental charges or levies; (ix) any Lien to
secure obligations under
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worker's compensation, unemployment insurance or other social security
legislation, including Liens with respect to judgments which are not currently
dischargeable; (x) materialmen's, mechanics', worker's, warehousemen's,
landlord's and carriers' Liens or other like Liens created by law (or in a lease
agreement in the case of landlord's Liens) and arising in the ordinary course of
business; (xi) any Lien existing on the date of the closing of the Offer made
hereby; (xii) easements, rights of way, zoning and other similar restrictions or
encumbrances Incurred in the ordinary course of business; and (xiii) attachment,
judgment and other similar Liens arising in connection with court proceedings,
PROVIDED that the execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are currently being contested in good
faith by appropriate proceedings.
In addition to the foregoing, the Company and its Restricted Subsidiaries
may Incur a Lien to secure Indebtedness or enter into a Sale and Leaseback
Transaction, without equally and ratably securing the Senior Notes, if the sum
of (i) the amount of Indebtedness secured by all Liens entered into after the
date of the closing of the Offer made hereby and (ii) the Attributable Value of
all Sale and Leaseback Transactions or Capital Lease Obligations in respect
thereof entered into after the date of the closing of the Offer made hereby and
otherwise prohibited by this Indenture does not exceed 10% of the Company's
Consolidated Net Tangible Assets.
LIMITATION CONCERNING DISTRIBUTIONS OR TRANSFERS BY RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, cause to exist or become effective or enter into any encumbrance
or restriction (other than pursuant to law or regulation) on the ability of any
Restricted Subsidiary: (i) to pay dividends or make any other distributions in
respect of its Capital Stock or pay any Indebtedness or other obligation owed to
the Company or any other Restricted Subsidiary of the Company; (ii) to make
loans or advances to the Company or any Restricted Subsidiary of the Company; or
(iii) to transfer any of its Property to the Company or any other Restricted
Subsidiary, except for any encumbrance or restrictions pursuant to any agreement
in effect on the date of the closing of the Offer made hereby or any Refinancing
thereof containing encumbrances or restrictions no greater than in the agreement
so Refinanced.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any
Restricted Subsidiary to, consummate any Asset Sale unless: (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at least
equal to the Fair Market Value of the Property disposed of and (ii) at least 75%
of the consideration received by the Company or such Restricted Subsidiary for
such Property (other than Non-Core Businesses enumerated in clauses (i) through
(v) of the definition of "Non-Core Businesses") is in the form of cash, cash
equivalents, readily marketable securities or non-cash consideration that is
immediately converted to cash, or the assumption by the purchaser of such
Property of Senior Indebtedness (PROVIDED such Senior Indebtedness was not
Incurred in connection with or in anticipation of such Asset Sale), PROVIDED
that the Company must, at the Company's option, (A) (1) commit, or cause such
Restricted Subsidiary to commit (such commitments to include amounts anticipated
to be expended pursuant to the Company's capital investment plan (x) as adopted
by the Board of Directors and (y) evidenced by the filing of an officer's
certificate with the Trustee stating that the total amount of the Net Cash
Proceeds of such Asset Sale is less than the aggregate amount contemplated to be
expended pursuant to such capital investment plan within 24 months of the
consummation of such Asset Sale) within 270 days of the consummation of such
Asset Sale, to apply the Net Cash Proceeds of such Asset Sale to reinvest in
Additional Core Assets or, if the applicable Asset Sale was a sale of a Non-Core
Business, in Additional Assets and (2) apply, or cause such Restricted
Subsidiary to apply, pursuant to such commitment (which includes amounts
actually expended under the capital investment plan authorized by the Board of
Directors), such Net Cash Proceeds of such Asset Sale within 24 months of the
consummation of such Asset Sale; PROVIDED THAT if any commitment under this
clause (A) is terminated or rescinded after the 225th day after the consummation
of such Asset Sale, the Company or such Restricted Subsidiary, as the case may
be, shall have 45 days after such termination or rescission to (a) apply such
Net Cash Proceeds pursuant to clause (B) or (C) below, or (b) to commit, or
cause such Restricted Subsidiary to commit, to
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apply the Net Cash Proceeds of such Asset Sale to reinvest in Additional Core
Assets or in Additional Assets, as the case may be and/or (B) offer to apply an
amount equal to such Net Cash Proceeds (or remaining Net Cash Proceeds) to the
repayment of any Senior Indebtedness, or (to the extent of Net Cash Proceeds
received from an Asset Sale by such Restricted Subsidiary) debt of a Restricted
Subsidiary, and repay such Indebtedness of any lender or debt holder who accepts
such offer or, in the case of any Indebtedness under a revolving credit
facility, repay an amount outstanding thereunder equal to such Net Cash Proceeds
and concurrently therewith, effect a permanent reduction in the committed
availability thereunder; and/or (C) offer to apply an amount equal to such Net
Cash Proceeds (or remaining Net Cash Proceeds) to the repayment of the Senior
Notes and repurchase any Senior Notes properly tendered in acceptance of such
prepayment offer (the "Prepayment Offer") on a pro rata basis at a purchase
price at least equal to 100% of their principal amount plus interest accrued to
the date of such repurchase; PROVIDED, HOWEVER, that in the event the Net Cash
Proceeds resulting from any Asset Sale, after giving effect to the purchase of
Additional Core Assets or Additional Assets, as the case may be, and/or the
repayment of Senior Indebtedness, are less than $10,000,000, the application of
an amount equal to such Net Cash Proceeds to a pro rata offer to repurchase the
Senior Notes may be deferred until such time as such Net Cash Proceeds, together
with Net Cash Proceeds from any prior or subsequent Asset Sales not otherwise
applied in accordance with this paragraph, are at least equal to $10,000,000. To
the extent that any portion of the amount of Net Cash Proceeds remains after
compliance with the preceding sentence and PROVIDED that all Holders have been
given the opportunity to tender their Senior Notes for repurchase as provided in
clause (C) above, the Company or such Restricted Subsidiary may use such
remaining amount for general corporate purposes.
Within 280 days from the date of an Asset Sale, the Company shall, if it
chooses (or is obligated) to apply an amount equal to any remaining Net Cash
Proceeds (or any portion thereof) to fund an offer to repurchase the Senior
Notes, send a written Prepayment Offer Notice, by first-class mail, to the
Holders of the Senior 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 the Prepayment Offer.
The Prepayment Offer Notice will also state (i) that the Company is offering to
purchase Senior Notes pursuant to the provisions of the Indenture described
herein under "--Limitation on Asset Sales," (ii) that any Senior Note (or any
portion thereof) accepted for payment (and duly paid on the Purchase Date)
pursuant to the Prepayment Offer will cease to accrue interest after the
Purchase Date, (iii) the Expiration Date of the Prepayment Offer, which will be,
subject to any contrary requirements of applicable law, not less than 30 days
nor more than 60 days after the date of such Prepayment Offer, (iv) a Purchase
Date (which shall be the settlement date for the purchase of Senior Notes and
shall be within five business days after the Expiration Date), (v) the aggregate
principal amount of Senior Notes to be purchased and the purchase price thereof
and (vi) a description of the procedure which a Holder must follow and any other
information necessary to tender all or any portion of such Holder's Senior
Notes.
Notwithstanding the foregoing, if any Senior Note (or any portion thereof)
accepted for payment shall not be so paid pursuant to the provisions described
in the preceding paragraph, then, from the Purchase Date until the principal of
(and premium, if any) and interest on such Senior Note is paid, interest shall
be paid on the unpaid principal (and premium, if any) and, to the extent
permitted by law, on any accrued but unpaid interest thereon, in each case, at
the rate prescribed therefor by such Senior Note.
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RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The Company may designate a
Subsidiary (including a newly formed or newly acquired Subsidiary) of the
Company or any of its Restricted Subsidiaries as an Unrestricted Subsidiary if
(i) such Subsidiary has total assets of $1,000 or less, or (ii) such designation
is effective immediately upon such Person becoming a Subsidiary of either the
Company or any of its Restricted Subsidiaries. Unless so designated as an
Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or
any of its Restricted Subsidiaries shall be classified as a Restricted
Subsidiary thereof. Except as provided in clause (i) of this paragraph, no
Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. Subject
to the next succeeding paragraph, an Unrestricted Subsidiary may be redesignated
as a Restricted Subsidiary. The designation of an Unrestricted Subsidiary or the
removal of such designation in compliance with the next succeeding paragraph
shall be made by the Board of Directors pursuant to a Certified Resolution
delivered to the Trustee and shall be effective as of the date specified in the
applicable Certified Resolution, which shall not be prior to the date such
Certified Resolution is delivered to the Trustee.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition, the redesignation of an Unrestricted Subsidiary or otherwise)
unless, after giving effect to such action, transaction or series of
transactions, (i) on a pro forma basis, the Company could Incur at least $1.00
of additional Indebtedness pursuant to the first paragraph under "--Limitation
on Indebtedness," (ii) such Subsidiary could then Incur, pursuant to clauses
(ii), (iii) or (iv) of the first paragraph under "--Limitation on Restricted
Subsidiary Indebtedness and Preferred Stock," all Indebtedness as to which it is
obligated at such time, (iii) no Default or Event of Default would occur or be
continuing, and (iv) there exist no Liens with respect to the Property of such
Subsidiary other than Liens permitted to be Incurred under "--Limitation on
Liens."
The Company will not, and will not permit any of its Restricted Subsidiaries
to, take any action or enter into any transaction or series of transactions that
would result in any such Restricted Subsidiary ceasing to be a Subsidiary (other
than a merger or consolidation with the Company or another Restricted
Subsidiary) unless, after giving effect to such action, transaction or series of
transactions, either: (i)(A) neither the Company nor any of its Affiliates
(other than a Person that is an Affiliate by virtue of its ownership of Capital
Stock or control of the Company) shall own any Capital Stock of such former
Restricted Subsidiary or any successor in interest to the business thereof, and
(B) there shall not exist any Indebtedness of the former Restricted Subsidiary
or any successor in interest to the business thereof in favor of the Company or
any of its Restricted Subsidiaries; or (ii) the Company and its Restricted
Subsidiaries would be permitted to make a Restricted Payment in the amount of
the aggregate Investment (excluding (A) any Investment to the extent of cash or
the Fair Market Value of Property other than cash received by the Company or its
Restricted Subsidiary, as the case may be, in respect of or as a repayment of
such Investment, and (B) the amount of Indebtedness of the former Restricted
Subsidiary received by the Company or its Restricted Subsidiaries as part of the
consideration for the acquisition of the Capital Stock or assets of such former
Restricted Subsidiary), if any, made in the former Restricted Subsidiary after
the date of the closing of the Offer made hereby.
MERGER, CONSOLIDATION. The Company will not merge or consolidate with any
other corporation (other than a merger of a Restricted Subsidiary into the
Company in which the Company is the continuing corporation) or sell, transfer or
convey its Property or assets as an entirety or substantially as an entirety to
any Person other than a wholly owned Restricted Subsidiary, unless (i) the
entity formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, transfer or conveyance is made shall be a
corporation organized and existing under the laws of the United States of
America or a State or the District of Columbia and such corporation expressly
assumes, by supplemental indenture satisfactory to the Trustee, executed and
delivered to the Trustee by such corporation, the due and punctual payment of
the principal of, premium, if any, and interest on all the Senior Notes,
according to their tenor, and the due and punctual performance and observance of
all of the covenants and
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conditions of the Indenture to be performed by the Company; (ii) immediately
before and after giving effect to such transaction or series of transactions, no
Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis (including, without limitation, any Indebtedness Incurred or
anticipated to be Incurred in connection with such transaction or series of
transactions), the Company (or the surviving entity if the Company is not
continuing) would be able to Incur at least $1.00 of additional Indebtedness
under the first paragraph of "--Limitation on Indebtedness," or, in the case of
a merger or consolidation of the Company into or with a wholly owned Restricted
Subsidiary, the Consolidated Interest Coverage Ratio of the surviving entity
would be no less than the Consolidated Interest Coverage Ratio of the Company
immediately prior to such merger or consolidation; (iv) immediately after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness Incurred or anticipated to be
Incurred in connection with such transaction or series of transactions) as if
such transaction had occurred on the first day of the Determination Period, the
Company (or the surviving entity if the Company is not continuing) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately prior to the transaction or series of transactions; and
(v) the Trustee shall have received an Opinion of Counsel as conclusive evidence
that any such consolidation, merger, sale, conveyance or acquisition, and any
such assumption, complies with the provisions of this covenant.
EVENTS OF DEFAULT
The Indenture provides that, if an Event of Default specified therein with
respect to any series of Debt Securities shall have happened and be continuing,
either the Trustee or the Holders of 25% in principal amount of the Outstanding
Debt Securities of such series may declare the principal of all the Debt
Securities of such series to be due and payable (and, in the case of certain
Events of Default involving a bankruptcy event with respect to the Company, such
principal shall become immediately due and payable, without any requirement of
notice or declaration).
Events of Default in respect of any series of Debt Securities as set forth
in the Indenture include: (i) default for 30 days in payment of any interest
installment or any sinking or analogous fund payment; (ii) default in payment of
principal on the Debt Securities of any series when due whether at stated
maturity, when called for redemption, by declaration, or otherwise; (iii)
default for 30 days after notice to the Company by the Trustee or by Holders of
25% in aggregate principal amount of the Outstanding Debt Securities in the
performance of any other covenant in the Indenture with respect to the Debt
Securities of such series; and (iv) certain events of bankruptcy and insolvency.
In addition to the Events of Default that are provided in the Indenture with
respect to all Debt Securities, Supplemental Indenture No. 2 provides that the
following shall be additional Events of Default with respect to the Senior Notes
that will be subject to the procedures and other provisions of such Indenture:
(i) a default by the Company or any of its Significant Restricted Subsidiaries
under any bonds, debentures, mortgages, indentures, agreements or instruments
under which they may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money of the Company or any Significant Restricted
Subsidiary, whether such indebtedness now exists or shall be created after the
date of the closing of the Offer made hereby, and such indebtedness shall have
been accelerated (or shall have matured) and such indebtedness remains unpaid,
PROVIDED that the principal amount of such indebtedness with respect to which
any such default and acceleration (or maturity) has occurred and is continuing,
together with the principal amount of all other such indebtedness with respect
to which such a default and acceleration (or maturity) has occurred and is
continuing, aggregates $5,000,000 or more; or (ii) the entry by a court of
competent jurisdiction of one or more judgments or orders against the Company or
any of its Significant Restricted Subsidiaries in an uninsured aggregate amount
in excess of $5,000,000 is not discharged, waived, stayed or satisfied for a
period of 60 consecutive days.
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The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default with respect to the Debt Securities of any series, give
to the Holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; PROVIDED that, except in the case of default in
the payment of principal of, or premium, if any, or interest on any of the Debt
Securities of such series, the Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interest of the Holders of the Debt Securities of such series. The term
"default" for the purpose of this provision means the happening of any of the
Events of Default specified above, except that any grace period or notice
requirement is eliminated.
The Indenture contains provisions entitling the Trustee, subject to the duty
of the Trustee during an Event of Default to act with the required standard of
care, to be indemnified by the Holders of the Debt Securities before proceeding
to exercise any right or power under the Indenture at the request of Holders of
the Debt Securities.
The Indenture provides that the Holders of a majority in principal amount of
the outstanding Debt Securities of any series may direct the time, method and
place of conducting proceedings for remedies available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to such
series. In certain cases, the Holders of a majority in principal amount of the
outstanding Debt Securities of any series may, on behalf of the Holders of all
Debt Securities of such series, waive any past default or Event of Default with
respect to the Debt Securities of such series or compliance with certain
provisions of the Indenture, except, among other things, a default not
theretofore cured in payment of the principal of, or premium, if any, or
interest on, any of the Debt Securities of such series.
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate stating whether or not any default exists.
WAIVERS
The provisions of the various covenants discussed above cannot be waived,
except that, in certain cases, the Holders of a majority in principal amount of
the outstanding Senior Notes may on behalf of the Holders of all Senior Notes
waive any past Default or Event of Default with respect to the Senior Notes,
including a breach of covenant, other than a Default not theretofore cured in
payment of the principal of, or premium, if any, or interest on, any of the
Senior Notes. No such waiver, however, shall extend to any subsequent or other
Default or impair any right consequent thereon.
DEFEASANCE
The Indenture provides that the Company, at its option, (i) will be
Discharged from any and all obligations in respect of any series of Debt
Securities (except in each case for certain obligations to register the transfer
or exchange of Debt Securities, replace stolen, lost or mutilated Debt
Securities, maintain paying agencies and hold moneys for payment in trust) on
the 91st day after satisfaction of the conditions set forth below, or (ii) will
not thereafter be subject to certain provisions of the Indenture (including the
Events of Default described above other than defaults on payments due on the
Debt Securities), in each case if the Company irrevocably deposits or causes to
be deposited with the Trustee, in trust, money or Government Obligations which
through the payment of interest thereon and principal thereof in accordance with
their terms will provide money, in an amount sufficient to pay all the principal
of, and interest on, such series not later than one day before the dates such
payments are due in accordance with the terms of such series. To exercise any
such option, there shall not exist any Event of Default or event which would
become an Event of Default with notice or lapse of time or both, which shall
have occurred and be continuing at the time of such deposit, and the Company
shall deliver to the Trustee an Opinion of Counsel to the effect that (A) the
deposit and related defeasance would not cause the Holders of such series to
recognize income, gain or loss for federal income tax purposes and, in the case
of a Discharge pursuant to clause (i), accompanied by a ruling to such effect
received from or published by the United States Internal
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Revenue Service, and (B) if such series of Debt Securities are then listed on
the New York Stock Exchange, such Debt Securities would not be delisted as a
result of the exercise of such option.
The Indenture also provides that if at any time (i) all Debt Securities
theretofore authenticated (other than any Debt Securities which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as provided
in the Indenture) shall have been delivered to the Trustee for cancellation, or
(ii) all Debt Securities not theretofore canceled or delivered to the Trustee
for cancellation shall have become due and payable, or will become due and
payable in accordance with their terms, within one year, and the Company shall
deposit or cause to be deposited with the Trustee, in trust, funds sufficient to
pay at maturity the entire amount of all such Debt Securities not theretofore
delivered to the Trustee for cancellation, including principal and interest due
or to become due to such date of maturity and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then the
Indenture shall cease to be of further effect, and on demand of and at the cost
and expense of the Company, the Trustee shall execute proper instruments
acknowledging satisfaction of and discharging the Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Debt Securities of each series to be
affected, to execute supplemental indentures adding any provisions to or
changing or eliminating any of the provisions of the Indenture or modifying the
rights of the Holders of the Debt Securities of such series to be affected,
except that no such supplemental indenture may, without the consent of the
Holders of affected Debt Securities, among other things, change the fixed
maturity of any Debt Securities, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, or reduce the relative ranking of
any Debt Securities, or reduce the aforesaid percentage of Debt Securities of
any series the consent of the Holders of which is required for any such
supplemental indenture.
THE TRUSTEE
The Fifth Third Bank is the Trustee under the Indenture. The Trustee
maintains normal banking relationships with the Company and its subsidiaries,
including as a participant in the Company's Credit Facilities. The Trustee may
perform certain services for and transact other business with the Company from
time to time in the ordinary course of business.
CERTAIN DEFINITIONS
Set forth 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 (i) any Property or assets (other than
Indebtedness and Capital Stock) that the Board of Directors determines to be
useful in the conduct of the business of the Company and its Subsidiaries,
whether or not such business is conducted on the date of the original issuance
of the Senior Notes ("Approved Business"), (ii) the 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, or (iii) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted Subsidiary
described in clause (ii) or (iii) above is primarily engaged in an Approved
Business.
"Additional Core Assets" means (i) any Property or assets (other than
Indebtedness or Capital Stock) used or intended for use in the Core Business,
(ii) the Capital Stock of a Person engaged in the Core
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Business that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary engaged in
the Core Business, or (iii) Capital Stock constituting a minority interest in
any Person that at such time is a Restricted Subsidiary engaged in the Core
Business.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership,
membership or other ownership interests, by contract or otherwise), provided
that, in any event, each Unrestricted Subsidiary shall be deemed to be an
Affiliate of the Company and of each other Subsidiary. Notwithstanding the
foregoing, no individual shall be deemed to be an Affiliate of a Person solely
by reason of his or her being an officer or director (or equivalent) of such
Person and neither the Company nor any of its Restricted Subsidiaries shall be
deemed to be Affiliates of each other.
"AFSC" means Armco Financial Services Corporation.
"Asset Sale" means, with respect to any Person, any transfer, conveyance,
sale, lease or other disposition (including, without limitation, dispositions
pursuant to any consolidation or merger, but excluding any Restricted Payment or
Sale and Leaseback Transaction) by such Person or any of its Restricted
Subsidiaries (including any consolidation, merger or other sale of any such
Restricted Subsidiaries with, into or to another Person in a transaction in
which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but
excluding a disposition by a Restricted Subsidiary of such Person to such Person
or a wholly owned Restricted Subsidiary of such Person or by such Person to a
wholly owned Restricted Subsidiary of such Person) in any single transaction or
series of transactions of (i) shares of Capital Stock (other than directors'
qualifying shares) or other ownership interests of a Restricted Subsidiary of
such Person, (ii) all or substantially all the Property of any division,
business segment or comparable line of business of such Person or any of its
Restricted Subsidiaries or (iii) any other Property of such Person or any of its
Restricted Subsidiaries having a Fair Market Value in excess of $5,000,000 and
transferred, conveyed, sold, leased or otherwise disposed of outside of the
ordinary course of business of such Person or Restricted Subsidiary; PROVIDED
that the term "Asset Sale," when used with respect to the Company, shall not
include (x) any asset disposition permitted pursuant to "--Merger,
Consolidation" which constitutes a disposition of all or substantially all of
the Company's assets, (y) a disposition of obsolete assets in the ordinary
course of business, or (z) a sale or transfer of accounts receivable under the
Credit Facilities.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with GAAP, discounted from the last date of
such initial term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease Obligation with like
term in accordance with GAAP. The net amount of rent required to be paid under
any such lease for any such period shall be the aggregate amount of rent payable
by the lessee with respect to such period after excluding amounts required to be
paid on account of insurance, taxes, assessments, utility, operating and labor
costs and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated. "Attributable Value" means, as to a Capital Lease Obligation under
which any Person is at the time liable and at any date as of which the amount
thereof is to be determined, the capitalized amount thereof that would appear on
the face of the balance sheet of such Person in accordance with GAAP.
"Average Life" means, as of any date, with respect to any debt security or
Redeemable Preferred Stock, the quotient obtained by dividing (i) the sum of the
products of (x) the number of years from such
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date to the date of each scheduled principal or redemption (including any
sinking fund or mandatory redemption payment requirements) of such debt or
equity security multiplied in each case by (y) the amount of such principal or
redemption payment by (ii) the sum of all such principal or redemption payments.
"Capital Expenditure Indebtedness" means Indebtedness Incurred by any Person
to finance the purchase or construction of any Property acquired (other than
from an Affiliate) or constructed by such Person so long as (i) the purchase or
construction price for such Property is or should be included in "addition to
property, plant or equipment" in accordance with GAAP, (ii) the acquisition or
construction of such Property is not part of any acquisition of a Person or
business unit, and (iii) such Indebtedness is Incurred within 360 days of the
acquisition or completion of construction of such Property.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Indebtedness arrangement
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with GAAP.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person.
"Change of Control" means an event or series of events by which (i)(A) the
Company consolidates with or merges into any other Person or conveys, transfers
or leases all or substantially all of its assets to any Person or group of
Persons or (B) any Person consolidates with or merges into the Company, in the
case of either (A) or (B) pursuant to a transaction or series of transactions
(other than a transaction or series of transactions between the Company and a
wholly owned Restricted Subsidiary of the Company) as a result of which the
existing shareholders of the Company immediately prior thereto hold less than
50% of the combined voting power of the Voting Stock of the surviving Person, or
(ii) any "person" or "group" (each as defined in Section 13(d)(3) of the
Exchange Act) becomes the "beneficial owner" (as defined under Rule 13d-3 of the
Exchange Act), directly or indirectly, of 50% or more of the total voting power
of all classes of Voting Stock of the Company, or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (together with any new or replacement directors whose
election by the Board of Directors or whose nomination for election by the
Company's stockholders was approved by a vote of at least 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 directors then in
office.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Senior Notes. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Securities" or (ii) if such release (or any successor release) is not published
or does not contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, (B) if the
Trustee is able to obtain only one Reference Treasury Dealer Quotation from the
Reference Treasury Dealers, such Quotation, or (C) if the Trustee is not able to
obtain any Reference Treasury Dealer Quotations from the Reference Treasury
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Dealers, the average of the Reference Treasury Dealer Quotations obtained from
two other Primary Treasury Dealers designated by the Company as Reference
Treasury Dealers for the purpose of determining such Comparable Treasury Price.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer as of 3:30 p.m., New
York time, on the third business day preceding such redemption date.
"Consolidated EBITDA" of any Person means, for any period, the Consolidated
Net Income of such Person, (i) increased (to the extent deducted in determining
Consolidated Net Income) by the sum of (A) all income taxes of such Person and
its Restricted Subsidiaries paid or accrued in accordance with GAAP (other than
income taxes attributable to extraordinary gains), (B) the Consolidated Interest
Expense of such Person and its Restricted Subsidiaries for such period, other
than interest capitalized by such Person or its Restricted Subsidiaries during
such period, (C) depreciation and amortization expenses of such Person and its
Restricted Subsidiaries for such period, including without limitation,
amortization of capitalized debt issuance costs; and (D) other non-cash items of
such Person and its Restricted Subsidiaries for such period to the extent such
non-cash items reduce Consolidated Net Income (excluding any non-cash charge
that will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made) MINUS non-cash items to the extent such non-cash
items increase the Consolidated Net Income (excluding any items which represent
the reversal of any accrual or reserve for cash charges established in any prior
period) of such Person and its Restricted Subsidiaries and (ii) decreased (to
the extent included in determining Consolidated Net Income) by any revenues
accrued but not received by such Person or any of its Restricted Subsidiaries
from any other Person (other than such Person or its Restricted Subsidiaries) in
respect of any Investment for such period, all as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means, with respect to any Person,
the ratio of (i) the aggregate amount of Consolidated EBITDA of such Person for
the four consecutive fiscal quarters for which consolidated financial statements
in respect thereof are available immediately prior to the relevant Transaction
Date (the "Determination Period") to (ii) the aggregate amount of Consolidated
Interest Expense of such Person for the Determination Period; PROVIDED, HOWEVER,
that for purposes of calculating the Consolidated Interest Coverage Ratio of any
specified Person, the Consolidated EBITDA and Consolidated Interest Expense of
such specified Person shall be calculated on a PRO FORMA basis as if the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio had taken place on the first day of the Determination Period, and
shall (A) include the Consolidated Interest Expense in respect of any
Indebtedness Incurred by such Person subsequent to the first day of the
Determination Period and prior to the Transaction Date as if such Indebtedness
had been Incurred on the first day of the Determination Period, (B) exclude,
from the first day of the Determination Period, the Consolidated Interest
Expense in respect of (1) any Indebtedness of such Person that has been redeemed
or retired subsequent to the first day of the Determination Period and prior to
the Transaction Date and (2) if the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio is an Incurrence of
Indebtedness, any Indebtedness (x) that the Company anticipates as of the time
of determination will be redeemed or retired with the proceeds of, and within 90
days following the Incurrence of, such Indebtedness giving rise to such need or
(y) with respect to which the Company has deposited or caused to be deposited
irrevocably with the Trustee or Fiscal Agent for such Indebtedness funds
sufficient to redeem or retire such Indebtedness or has irrevocably committed to
redeem such Indebtedness, (C) include the Consolidated EBITDA and Consolidated
Interest Expense of any other Person acquired subsequent to the first day of the
Determination Period and prior to the Transaction Date by such specified Person
as a Restricted Subsidiary of such specified Person as if such Person had been
acquired on the first day of the Determination Period, (D) exclude, from the
first day of the Determination Period, the Consolidated EBITDA of such specified
Person directly attributable to any Property of such specified Person
(including, without limitation, Capital Stock) which was the subject of an Asset
Sale at any time subsequent to the first
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day of the Determination Period and prior to the Transaction Date and (E) for
purposes of "--Limitation on Indebtedness" and "--Merger, Consolidation," where
the Consolidated Interest Coverage Ratio is calculated to give effect to the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio, such calculation shall also include the Consolidated EBITDA and
Consolidated Interest Expense of any other Person to be acquired by such
specified Person as a Restricted Subsidiary of such specified Person in
connection with the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio. When the Consolidated Interest Coverage
Ratio is determined with respect to the Company, the term "Restricted
Subsidiary" shall be deemed to include any Unrestricted Subsidiary that became a
Restricted Subsidiary at any time between the first day of the Determination
Period and the Transaction Date, PROVIDED that such Subsidiary is a Restricted
Subsidiary on the Transaction Date.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication (i) the sum of (A) the aggregate amount of cash and
non-cash interest expense (net of interest income) of such Person and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP in respect of Indebtedness (including, without limitation,
(u) capitalized interest, (v) any amortization of debt discount, (w) net costs
associated with Interest Rate Protection Agreements (including any amortization
of discounts), (x) the interest portion of any deferred payment obligation, (y)
all accrued interest, and (z) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptances or similar
facilities) paid, accrued or scheduled to be paid or accrued, during such
period; (B) Preferred Stock dividends of such Person (and of its Restricted
Subsidiaries if paid to a Person other than such Person or its Restricted
Subsidiaries) declared and payable in cash; (C) the portion of any rental
obligation of such Person or its Restricted Subsidiaries in respect of any
Capital Lease Obligation allocable to interest expense in accordance with GAAP;
(D) the portion of any rental obligation of such Person or its Restricted
Subsidiaries in respect of any Sale and Leaseback Transaction allocable to
interest expense (determined as if such were treated as a Capital Lease
Obligation); and (E) to the extent any Indebtedness of any other Person is
Guaranteed by such Person or any of its Restricted Subsidiaries (other than
Guarantees relating to obligations of customers, either of such Person or any of
its Restricted Subsidiaries, that are made in the ordinary course of business
consistent with the past practices of such Person or such Restricted
Subsidiaries), the aggregate amount of interest paid, accrued or scheduled to be
paid or accrued, by such other Person during such period attributable to any
such Indebtedness, less (ii) to the extent included in (i) above, amortization
or write-off of deferred financing costs of such Person and its Restricted
Subsidiaries during such period and any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness of such Person
and its Restricted Subsidiaries prior to its Stated Maturity; in the case of
both (i) and (ii) above, after elimination of intercompany accounts among such
Person and its Restricted Subsidiaries and as determined in accordance with
GAAP.
"Consolidated Net Income" of any Person means, for any period, the aggregate
net income (or net loss) of such Person and its Restricted Subsidiaries for such
period on a consolidated basis determined in accordance with GAAP; PROVIDED that
there shall be excluded therefrom, without duplication, (i) all items classified
as extraordinary, (ii) any net loss or net income of any Person other than such
Person and its Restricted Subsidiaries, except to the extent of the amount of
dividends or other distributions actually paid to such Person or its Restricted
Subsidiaries by such other Person during such period, (iii) the net income of
any Person acquired by such Person or any of its Restricted Subsidiaries in a
pooling-of-interests transaction for any period prior to the date of such
acquisition, (iv) any gain or loss, net of taxes, realized on the termination of
any employee pension benefit plan, (v) gains or losses in respect of Asset Sales
by such Person or its Restricted Subsidiaries, (vi) the net income of any
Restricted Subsidiary of such Person to the extent that the payment of dividends
or other distributions to such Person is restricted by contract or otherwise,
except for any dividends or distributions actually paid by such Restricted
Subsidiary to such Person, (vii) any extraordinary, unusual or nonrecurring
gains or losses (and related tax effects) in accordance with GAAP, and (viii)
the effect of the adoption of Statement of Financial Accounting Standards No.
106 ("SFAS 106") to the extent expenses recognized pursuant to such adoption
exceed the
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amounts with respect to such expenses which would have been recognized during
such period using the "pay as you go" accounting method; PROVIDED FURTHER that
there shall be included in determining the net income or net loss of such person
expenses that would have been recognized using the "pay as you go" accounting
method to the extent that such expenses exceed the expenses recognized during
such period pursuant to SFAS 106.
"Consolidated Net Tangible Assets" of any Person means the sum of Tangible
Assets of such Person and its Restricted Subsidiaries after eliminating
inter-company items, all determined in accordance with GAAP, including
appropriate deductions for any minority interest in Tangible Assets of such
Restricted Subsidiaries.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less amounts attributable to Redeemable Stock of
such Person.
"Core Business" means the specialty flat-rolled steel business.
"Corporation" includes corporations, associations, companies and business
trusts.
"Credit Facilities" means the two bank credit facilities dated as of
December 22, 1995 between the Company and Armco Funding Corporation,
respectively, on the one hand, and the banks signatory thereto on the other, and
all related notes, collateral documents, guarantees, instruments and other
agreements executed in connection therewith, as the same may be amended,
modified, supplemented, restated or Refinanced from time to time.
"Default" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
"Discharge" or "Discharged" means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by, and obligations
under, the Debt Securities of such series and to have satisfied all the
obligations under this Indenture relating to the Debt Securities of such series
(and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same and satisfaction of and discharging this
Indenture).
"Eligible Receivables" means, as of any date, trade receivables (less
allowance for doubtful accounts) of the Company and its Restricted Subsidiaries
that would be shown on a consolidated balance sheet of the Company and its
Restricted Subsidiaries as of that date prepared in accordance with GAAP.
"Equity Offering" means a registered public offering of common stock of the
Company resulting in net proceeds to the Company in excess of $25,000,000.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Fair Market Value" means, with respect to the total consideration received
pursuant to any Asset Sale or any non-cash consideration received by any Person,
the fair market value of such consideration as determined in good faith by the
Board of Directors as evidenced by a Certified Resolution.
"fiscal year" means, with respect to the Company, the twelve consecutive
months ending December 31.
"GAAP" or "generally accepted accounting principles," with respect to any
computation required or permitted hereunder shall, except as otherwise
specifically provided, mean such accounting principles as are generally accepted
in the United States of America at the date of such computation.
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"Guarantee" by an Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person, (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or to purchase (or to advance or supply funds
for the purchase of) any security for the payment of such Indebtedness, (ii) to
purchase Property, securities or services for the purpose of assuring the holder
of such Indebtedness of the payment of such Indebtedness, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness (and "Guaranteed," "Guaranteeing" and "Guarantor" shall have
meanings correlative to the foregoing); PROVIDED, HOWEVER, that a Guarantee by
any Person shall not include endorsements by such Person for collection or
deposit, in either case, in the ordinary course of business.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" 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 becoming
Indebtedness shall not be deemed an Incurrence of such Indebtedness.
"Indebtedness" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (i) any obligation of such Person for borrowed
money, (ii) any obligation of such Person evidenced by bonds, debentures, notes,
Guarantees or other similar instruments, including, without limitation, any such
obligations Incurred in connection with acquisition of Property or businesses,
(iii) any reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Person, (iv) any obligation of such Person issued or assumed as the
deferred purchase price of Property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business), (v)
any Capital Lease Obligation of such Person, (vi) the maximum fixed redemption
or repurchase price of Redeemable Stock of such Person at the time of
determination, (vii) any payment obligation of such Person under Interest Rate
Protection Agreements at the time of determination, (viii) any obligation to pay
rent or other payment amounts of such Person with respect to any Sale and
Leaseback Transaction to which such Person is a party and (ix) any obligation of
the type referred to in clauses (i) through (viii) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has Guaranteed or is responsible or liable, directly or indirectly, as obligor,
Guarantor or otherwise. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Redeemable Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture; PROVIDED, HOWEVER, that if such Redeemable Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock. The amount of Indebtedness 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 of any contingent obligations in
respect thereof at such date.
"Interest Rate Protection Agreement" means, with respect to any Person, any
interest rate swap agreement, interest rate cap agreement, currency swap
agreement or other financial agreement or arrangement designed to protect such
Person or its Restricted Subsidiaries against fluctuations in interest rates or
currency exchange rates, as in effect from time to time.
"Investment" means, with respect to any Person, any direct, indirect or
contingent (i) payment or transfer (including, without limitation, by means of
any payment for Property or services for the account or use of another Person)
of cash, Capital Stock or other Property, or assumption of Indebtedness, made by
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such Person in exchange for Capital Stock, notes or bonds of, or as a capital
contribution to, any other Person or (ii) loan, advance or other extension of
credit (including, without limitation, by means of a Guarantee, letter of credit
or similar arrangement other than advances or loans to customers in the ordinary
course of business that are recorded as accounts receivable of such Person or
its Restricted Subsidiaries in accordance with GAAP) made by such Person to or
on behalf of any other Person.
"Lien" means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien
(statutory or other), charge, easement, encumbrance, preference, priority or
other security or similar agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Make-Whole Premium" means, with respect to a Senior Note, an amount equal
to the greater of (i) 1.0% of the outstanding principal amount of such Senior
Note and (ii) the excess of (a) the present value of the remaining interest,
premium and principal payments due on such Senior Note as if such Senior Note
were redeemed on September 15, 2002, computed using a discount rate equal to the
Treasury Rate plus 75 basis points, over (b) the outstanding principal amount of
such Senior Note.
"Net Cash Proceeds" from any Asset Sale by any Person or its Restricted
Subsidiaries means cash, cash equivalents or readily marketable securities
received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration received
in the form of assumption of Indebtedness or other obligations relating to the
Properties sold or otherwise conveyed or received in any other non-cash form
unless such non-cash consideration is immediately converted into cash therefrom
by such Person or its Restricted Subsidiaries), net of (i) all reasonable
out-of-pocket expenses of such Person or such Restricted Subsidiary Incurred in
connection with an Asset Sale of such type, including, without limitation, all
legal, title and recording tax expenses, commissions and other fees and expenses
Incurred (but excluding any finder's fee or broker's fee payable to any
Affiliate of such Person) and all federal, state, provincial, foreign and local
taxes arising in connection with such Asset Sale that are paid or required to be
accrued as a liability under GAAP by such Person or its Restricted Subsidiaries,
(ii) all payments made by such Person or its Restricted Subsidiaries on any
Indebtedness which is secured by such Properties in accordance with the terms of
any Lien upon or with respect to such Properties or which must, by the terms of
such Lien, 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, and (iii)
all distributions and other payments made to minority interest holders in
Restricted Subsidiaries of such Person as a result of such Asset Sale; PROVIDED
that, in the event that any consideration for an Asset Sale (which would
otherwise constitute Net Cash Proceeds) is required to be held in escrow pending
determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Cash Proceeds only at
such time as it is released to such Person or its Restricted Subsidiaries from
escrow, and PROVIDED that any non-cash consideration received in connection with
an Asset Sale, which is subsequently converted to cash, shall be deemed to be
Net Cash Proceeds at such time and shall thereafter be applied in accordance
with "--Limitation on Asset Sales."
"Non-Core Businesses" means the following businesses of the Company,
including any tangible and intangible Property and assets held by such
businesses (excluding cash, Indebtedness and Capital Stock of any other Person
(other than Capital Stock of Subsidiaries of AFSC that do not, directly or
indirectly, hold Property or assets of the Core Business) held by such
businesses), substantially as conducted and reported on June 30, 1997, (i) the
Company's Sawhill Tubular Division, (ii) Douglas Dynamics, L.L.C., (iii) Greens
Port Industrial Park, (iv) the Company's steelmaking facilities in Dover, Ohio,
(v) AFSC and Subsidiaries of AFSC that do not, directly or indirectly, hold
Property or assets of the Core Business and (vi) any other business other than
the Core Business.
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"Permitted Refinancing Indebtedness" means Indebtedness of the Company, the
proceeds of which are used to Refinance outstanding Indebtedness of the Company
or any Restricted Subsidiary, PROVIDED that (i) if the Indebtedness being
Refinanced is PARI PASSU with or subordinated in right of payment to the Senior
Notes, then such Indebtedness is PARI PASSU with or subordinated in right of
payment to, as the case may be, the Senior Notes at least to the same extent as
the Indebtedness being Refinanced, (ii) such Indebtedness is scheduled to mature
no earlier than the Indebtedness being Refinanced and (iii) such Indebtedness
has an Average Life at the time such Indebtedness is Incurred that is equal to
or greater than the Average Life of the Indebtedness being Refinanced; PROVIDED
FURTHER that such Indebtedness is in an aggregate principal amount (or, if such
Indebtedness is issued at a price less than the principal amount thereof, has an
aggregate original issue price) not in excess of the aggregate principal amount
then outstanding of the Indebtedness being Refinanced (or if the Indebtedness
being Refinanced was issued at a price less than the principal amount thereof,
then not in excess of the amount of liability in respect thereof determined in
accordance with GAAP) plus (A) prepayment premium and accrued interest on and
defeasance costs associated with such Indebtedness being Refinanced and (B) plus
fees and expenses associated with the Incurrence of such refinancing
Indebtedness.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of 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, without limitation, Capital Stock in any other Person.
"Qualified Capital Stock" means Capital Stock of the Company or any of its
Restricted Subsidiaries that does not by its terms require any dividends,
distributions, mandatory prepayment or redemption prior to the first anniversary
following the Stated Maturity of the Senior Notes.
"Redeemable Stock" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including, on the happening of
an event), is required to be redeemed or is redeemable at the option of the
holder thereof, in whole or part, prior to the Stated Maturity of the Senior
Notes, or is exchangeable for debt at any time, in whole or part, prior to the
Stated Maturity of the Senior Notes.
"Redemption Date" means, when used with respect to any Senior Note to be
redeemed, the date fixed for redemption of such Senior Note pursuant to Article
IV of Supplemental Indenture No. 2 and the Senior Notes.
"Redemption Price" means, when used with respect to any Senior Note to be
redeemed, the price fixed for redemption of such Senior Note pursuant to Article
IV of Supplemental Indenture No. 2 and the Senior Notes, plus accrued and unpaid
interest thereon to the Redemption Date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc and Chase
Securities Inc. and their respective successors; PROVIDED, HOWEVER, that if any
of the foregoing shall cease to be a primary U.S. Government securities dealer
in New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another nationally recognized investment banking firm that is a Primary
Treasury Dealer.
"Refinance" means, with respect to any Indebtedness, to renew, extend,
refinance, refund, replace or repurchase, or be substituted for, such
Indebtedness and "Refinancing" means the renewal, extension, refinancing,
refunding, replacement or repurchasing of, or substitution for, such
Indebtedness.
"Restricted Payment" means (i) a dividend or other distribution declared and
paid on the Capital Stock of the Company or to the Company's stockholders (in
their capacity as such), or declared and paid to
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any Person other than the Company or a Restricted Subsidiary of the Company on
the Capital Stock of any Restricted Subsidiary of the Company, in each case,
other than dividends, distributions or payments payable or made solely in
Qualified Capital Stock, (ii) a payment made by the Company or any of its
Restricted Subsidiaries (other than to the Company or any Restricted Subsidiary
of the Company) to purchase, redeem, acquire or retire any Capital Stock of the
Company or of a Restricted Subsidiary, (iii) a payment made by the Company or
any of its Restricted Subsidiaries to redeem, repurchase, defease (including,
but not limited to, in-substance or legal defeasance) or otherwise acquire or
retire for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund or mandatory redemption payment, Indebtedness of the
Company which is subordinate (whether pursuant to its terms or by operation of
law) in right of payment to the Senior Notes and which was scheduled to mature
(after giving effect to any and all options to extend the maturity thereof) on
or after the Stated Maturity of the Senior Notes or (iv) a payment made by the
Company or any of its Restricted Subsidiaries to purchase, acquire, retire or
redeem any Indebtedness of or equity interest in or otherwise to make any
Investment in any Affiliate thereof or in any Person that would become an
Affiliate thereof in connection with or as a result of such investment;
PROVIDED, that Restricted Payments shall not include any payment or transfer of
any Capital Stock of any Person in exchange for, or to purchase or otherwise
acquire, Capital Stock of, or an equity interest in, another Person that is, or
other Persons that are, or will, as part of such transaction, become, the
successor or successors to substantially all of the assets and business of such
first Person.
"Restricted Subsidiary" means, (i) with respect to the Company, (A) any
Subsidiary of the Company that exists on the date of the closing of the Offer
made hereby other than AFSC and its Subsidiaries, (B) any other Subsidiary of
the Company that the Company has not designated as an Unrestricted Subsidiary
pursuant to the first paragraph under "--Restricted and Unrestricted
Subsidiaries" and, (ii) with respect to a Person other than the Company and its
Subsidiaries, a Subsidiary of such other Person.
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such Person or a Restricted Subsidiary of such Person and is thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Restricted Subsidiaries.
"Senior Indebtedness" means, at any date, any outstanding Indebtedness of
the Company that is PARI PASSU in right of payment with the Senior Notes.
"Significant Restricted Subsidiary" means each Restricted Subsidiary of the
Company that (i) during the most recent four consecutive fiscal quarters of the
Company for which financial information in respect thereof is available
accounted for more than 10% of the Consolidated EBITDA of the Company or (ii) is
the owner, directly or indirectly, of more than 10% of the Consolidated Net
Tangible Assets of the Company, PROVIDED that clause (i) shall be determined on
a pro forma basis in the case of a Restricted Subsidiary that became a
Restricted Subsidiary during or subsequent to the end of such four-consecutive-
fiscal-quarter period as if the transaction in which it became a Restricted
Subsidiary occurred on the first day of such period.
"Stated Maturity" means, when used with respect to any security, the date
specified in such security as the fixed date on which the principal or
redemption price of such security is due and payable and, when used with respect
to any installment of interest on a security, the fixed date on which such
installment of interest is due and payable. The Stated Maturity of a Capital
Lease Obligation 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.
"Subsidiary," with respect to any Person, means (i) a corporation a majority
of whose Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such Person, by such
Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person, or (ii) any other Person (other than a corporation)
in which such Person, one
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or more Subsidiaries of such Person, or such Person and one or more Subsidiaries
of such Person, directly or indirectly, at the date of determination thereof has
at least a majority ownership interest.
"Tangible Assets" of any Person means, at any date, the gross book value as
shown by the accounting books and records of such Person of all its Property,
less the net book value of all items that would be classified as intangibles
under GAAP, including, without limitation, (i) licenses, patents, patent
applications, copyrights, trademarks, trade names, goodwill, noncompete
agreements and organizational expenses, (ii) unamortized debt discount and
expense, (iii) all reserves for depreciation, obsolescence, depletion and
amortization of its Properties and (iv) all other proper reserves which in
accordance with GAAP should be provided in connection with the business
conducted by such Person.
"Transaction Date" means the date of any transaction giving rise to the need
to calculate the Consolidated Interest Coverage Ratio.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Unrestricted Subsidiary" means (i) AFSC and its Subsidiaries and, (ii) any
Subsidiary of the Company that the Company has classified, pursuant to the first
paragraph of "--Restricted and Unrestricted Subsidiaries," as an Unrestricted
Subsidiary and that has not been reclassified as a Restricted Subsidiary
pursuant to such paragraph.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only as long as no
senior class of securities has such voting power by reason of any contingency.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Old Notes have been, and the
New Notes will be, issued in the form of one or more global notes (the "Global
Notes"). The Global Notes will be deposited with, or on behalf of, the
Depositary and registered in the name of the Depositary or its nominee. Except
as set forth below, a Global Note may be transferred, in whole and not in part,
only to the Depositary or another nominee of the Depositary. Investors may hold
their beneficial interests in a Global Note directly through the Depositary if
they have an account with the Depositary or directly through organizations which
have accounts with the Depositary.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company and organized under the laws 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 pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depositary was created to hold securities
of institutions that have accounts with the Depositary ("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. The Depositary's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depositary'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, whether directly or indirectly.
Upon the issuance of a Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the principal amount of the New
Notes represented by such Global Note to the accounts of participants. Ownership
of beneficial interests in a Global Note will be limited to participants or
persons
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that may hold interests through participants. Ownership of beneficial interests
in such Global Note will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to participants' interest) and such participants (with respect to
the owners of beneficial interests in the Global Note other than participants).
The laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer or pledge beneficial interests in a
Global Note.
So long as the Depositary, or its nominee, is the registered Holder and
owner of a Global Note, the Depositary or such nominee, as the case may be, will
be considered the sole legal owner and Holder of the related New Notes for all
purposes of such New Notes and the Indenture. Except as set forth below, owners
of beneficial interests in a Global Note will not be entitled to have the New
Notes represented by such Global Note registered in their names, will not
receive or be entitled to receive physical delivery of Certificated Notes in
definitive form (the "Certificated Notes") and will not be considered to be the
owners or Holders of any New Notes under such Global Note. The Company
understands that under existing industry practice, in the event that an owner of
a beneficial interest in a Global Note desires to take any action that the
Depositary, as the Holder of such Global Note, is entitled to take, the
Depositary would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and interest on New Notes represented by a Global
Note registered in the name of and held by the Depositary or its nominee will be
made to the Depositary or its nominee, as the case may be, as the registered
owner and Holder of such Global Note.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
the Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in a Global Note held through
such participants will be governed by standing instructions and customary
practices and will be the responsibility of such participants. The Company will
not have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in a Global
Note for any New Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between the Depositary and its participants or the relationship
between such participants and the owners of beneficial interests in such Global
Note owning through such participants.
Unless and until it is exchanged in whole or in part for Certificated Notes,
a Global Note may not be transferred except as a whole by the Depositary to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in Global Notes among participants of the
Depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
The New Notes represented by a Global Note are exchangeable for Certificated
Notes of like tenor in denominations of U.S.$1,000 and integral multiples
thereof if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Note or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange Act,
(ii) the Company in its discretion at any time determines not to have all of the
New Notes represented by such Global Note or (iii) a default entitling the
Holders of the New Notes to accelerate the maturity thereof has occurred and is
continuing. Any New Note that is exchangeable pursuant to the preceding sentence
is exchangeable for Certificated Notes issuable in authorized denominations and
registered in such names as the Depositary shall direct. Subject to the
foregoing, a Global Note is not exchangeable, except for a Global Note of the
same aggregate denomination to be registered in the name of the Depositary or
its nominee.
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REGISTRATION RIGHTS AGREEMENT
Pursuant to the Registration Agreement, the Company has agreed, for the
benefit of the holders of the Senior Notes, at the Company's cost, to use its
best efforts (i) to file the Registration Statement of which this Prospectus is
a part with the Commission on or before November 11, 1997, (ii) cause the
Registration Statement to be declared effective under the Securities Act no
later than February 9, 1998, and (iii) to consummate the Exchange Offer by March
11, 1998. The Company will keep the Exchange Offer open for not less than 30
days (or longer if required by applicable law) after the date notice of the
Exchange Offer is mailed to the holders of the Old Notes.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
or if for any reason the Registration Statement is not declared effective by
February 9, 1998, the Company will, in lieu of effecting the registration of the
New Notes pursuant to the Registration Statement or upon the request of an
Initial Purchaser under certain circumstances, and in either case, at its cost,
use its best efforts to (i) as promptly as practicable, file with the Commission
a shelf registration covering resales of the Senior Notes (the "Shelf
Registration Statement"), (ii) cause the Shelf Registration Statement to be
declared effective under the Securities Act by March 11, 1998 (or promptly in
the event of a request by an Initial Purchaser) and (iii) keep effective the
Shelf Registration Statement until two years after its effective date (or until
one year after its effective date if such Shelf Registration Statement is filed
at the request of an Initial Purchaser). The Company will in the event of the
filing of a Shelf Registration Statement, provide to each holder of the Senior
Notes covered by the Shelf Registration Statement copies of the prospectus that
is part of the Shelf Registration Statement, notify each holder when the Shelf
Registration Statement has been filed and when it has become effective and take
certain other actions as are required to permit unrestricted resales of the
Senior Notes. A holder that sells Senior Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement that are applicable to such a holder
(including certain indemnification obligations). In addition, each holder of the
Senior Notes will be required to deliver information to be used in connection
with the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Agreement in order to have its Senior Notes included in the Shelf Registration
Statement and to benefit from the provisions regarding Special Interest set
forth in the following paragraphs.
In the event that either (i) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 60th day following the date of
original issuance of the Senior Notes, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 150th day following the
date of original issuance of the Senior Notes or (iii) the Exchange Offer is not
consummated or a Shelf Registration Statement with respect to the Senior Notes
is not declared effective on or prior to the 180th day following the date of
original issuance of the Senior Notes, interest in addition to stated interest
on the Senior Notes will accrue from and including the next day following each
of (a) such 60-day period in the case of clause (i) above and (b) such 150-day
period in the case of clause (ii) above and (c) such 180-day period in the case
of clause (iii) above. In each case such additional interest (the "Special
Interest") will be payable in cash semiannually in arrears each March 15, and
September 15, commencing March 15, 1998, at a rate per annum equal to 0.5% of
the principal amount of the Senior Notes. The aggregate amount of Special
Interest payable pursuant to the above provisions will in no event exceed 1.0%
per annum of the principal amount. Upon (1) the filing of the Exchange Offer
Registration Statement after the 60-day period described in clause (i) above,
(2) the effectiveness of the Exchange Offer Registration Statement after the
150-day period described in clause (ii) above or (3) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 180-day period described in clause (iii) above, the
Special Interest attributable to the occurrence of any event described in such
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clause (1), (2) or (3) will cease to accrue from the date of such filing,
effectiveness or consummation, as the case may be.
In the event that a Shelf Registration Statement is declared effective, if
the Company fails to keep such Registration Statement continuously effective and
generally useable for resales for the period required by the Registration
Agreement, then from the next day following such time as the Shelf Registration
Statement is no longer effective or useable until the earlier of (i) the date
that the Shelf Registration Statement is again deemed effective or is useable,
(ii) the date that is the second anniversary of the original issuance of the
Senior Notes or (iii) the date as of which all of the Senior Notes are sold
pursuant to the Shelf Registration Statement, Special Interest will accrue at a
rate per annum equal to 0.5% of the principal amount of the Senior Notes (to be
increased to 1.0% if and when the Shelf Registration Statement is no longer
effective for 30 days or more) and shall be payable in cash, semiannually in
arrears each March 15 and September 15, commencing March 15, 1998.
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which has been filed as an Exhibit to the Registration Statement of which this
Prospectus forms a part.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the acquisition, ownership and disposition of the
New Notes. This discussion is a summary for general information only and does
not consider all aspects of U.S. federal income tax that may be relevant to the
exchange of Old Notes for New Notes pursuant to the Exchange Offer and to the
ownership, and disposition of the New Notes by a prospective investor in light
of that investor's personal circumstances. This discussion also does not address
the federal income tax consequences of ownership of New Notes not held as
capital assets within the meaning of Section 1221 of the U.S. Internal Revenue
Code of 1986 as amended (the "Code"), or the federal income tax consequences to
investors subject to special treatment under the federal income tax laws, such
as dealers in securities or foreign currency, tax-exempt entities, banks,
thrifts, insurance companies, persons that hold the New Notes as part of a
"straddle," a "hedge" against currency risk or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar, and
investors in pass-through entities. In addition, this discussion is generally
limited to the tax consequences to initial holders. It does not describe any tax
consequences arising out of the tax laws of any state, local or foreign
jurisdiction.
This discussion is based upon the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing are subject to change, possibly on a retroactive basis and any such
change could affect the continuing validity of this discussion.
PROSPECTIVE HOLDERS OF THE NEW NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF
ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION TO THEIR PARTICULAR SITUATIONS.
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be a taxable exchange for federal income tax purposes. As a result,
there should be no federal income tax consequences to Holders exchanging the Old
Notes for the New Notes pursuant to the Exchange Offer.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a New Note that is (i) a citizen or
resident (as defined in 7701(b)(1) of the Code) of the United States, (ii) a
corporation organized under the laws of the United States or any political
subdivision thereof or
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therein, (iii) an estate or trust, the income of which is subject to U.S.
federal income tax regardless of the source, or (iv) a trust if a U.S. court is
able to exercise primary supervision over the trust's administration and one or
more U.S. persons have authority to control all of the trust's substantial
decisions (a "U.S. Holder"). Certain U.S. federal income tax consequences
relevant to a holder other than a U.S.Holder (a "Non-U.S. Holder") are discussed
separately below.
STATED INTEREST
Interest on a New Note will be taxable to a U.S. Holder as ordinary interest
income at the time it accrues or is received in accordance with such holder's
method of accounting for tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE SENIOR NOTES
Upon the disposition of a New Note by sale, exchange or redemption, the U.S.
Holder will generally recognize gain or loss equal to the difference between (i)
the amount realized on the disposition (other than amounts attributable to
accrued interest) and (ii) the U.S. Holder's tax basis in the New Note. In
general, a U.S. Holder's tax basis in a New Note will be the same immediately
after the exchange as its basis in the Old Note immediately before the exchange
and such basis will be reduced by any payments other than payments of qualified
stated interest made on such New Note.
Assuming the New Note is held as a capital asset, such gain or loss will
generally constitute capital gain or loss and will be long-term capital gain or
loss if the U.S. Holder has held such New Note for longer than one year (the
holding period of such New Note will include the holding period of the exchanged
Old Note). The Taxpayer Relief Act of 1997 generally reduces tax rates on
capital gains recognized by individuals in respect of capital assets held for
more than 18 months. Owners are advised to consult with their own tax advisors
as to the consequences of the Taxpayer Relief Act of 1997 in their particular
circumstances.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under the Code, a U.S. Holder of a New Note may be subject, under certain
circumstances, to information reporting and/or backup withholding at a 31% rate
with respect to cash payments in respect of interest or the gross proceeds from
dispositions thereof. This withholding applies only if the holder (i) fails to
furnish its social security or other taxpayer identification number ("TIN")
within a reasonable time after a request therefor, (ii) furnishes an incorrect
TIN, (iii) fails to report interest properly, or (iv) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that it is not subject
to backup withholding. Any amount withheld from a payment to a U.S. Holder under
the backup withholding rules is allowable as a credit (and may entitle such
holder to a refund) against such holder's U.S. federal income tax liability,
provided that the required information is furnished to the Service. Certain
persons are exempt from backup withholding, including corporations and financial
institutions. Holders of New Notes should consult their tax advisors as to their
qualification for exemption from withholding and the procedure for obtaining
such exemption.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a note that is not (i) a citizen or
resident of the United States, (ii) a corporation organized under the laws of
the United States or any political subdivision thereof or therein, (iii) an
estate or trust, the income of which is subject to U.S. federal income tax
regardless of the source, or (iv) a trust if a U.S. court is able to exercise
primary supervision over the trust's administration and one or more U.S. persons
have the authority to control all of the trust's substantial decisions (a
"Non-U.S. Holder").
This discussion does not deal with all aspects of U.S. federal income and
estate taxation that may be relevant to the exchange of Old Notes for New Notes
pursuant to the Exchange Offer and to the
74
<PAGE>
ownership or disposition of the New Notes by any particular Non-U.S. Holder in
light of that Holder's personal circumstances, including holding the New Notes
through a partnership. For example, persons who are partners in foreign
partnerships and beneficiaries of foreign trusts or estates who are subject to
U.S. federal income tax because of their own status, such as United States
residents or foreign persons engaged in a trade or business in the United
States, may be subject to U.S. federal income tax even though the entity is not
subject to income tax on the disposition of its New Note.
For purposes of the following discussion, interest and gain on the sale,
exchange or other disposition of the New Note will be considered "U.S. trade or
business income" if such income or gain is (i) effectively connected with the
conduct of a U.S. trade or business or (ii) in the case of a treaty resident,
attributable to a U.S. permanent establishment (or to a fixed base) in the
United States.
STATED INTEREST
Generally, any interest paid to a Non-U.S. Holder of a New Note that is not
"U.S. trade or business income" will not be subject to United States tax if the
interest qualifies as "portfolio interest." Generally, interest on the New Notes
will qualify as portfolio interest if (i) the Non-U.S. Holder does not actually
or constructively own 10% or more of the total voting power of all voting stock
of the Company and is not a controlled foreign corporation with respect to which
the Company is a "related person" within the meaning of the Code, and (ii) the
beneficial owner, under penalty of perjury, certifies that the beneficial owner
is not a United States person and such certificate provides the beneficial
owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest that do not
qualify for the portfolio interest exception and that are not U.S. trade or
business income will be subject to U.S. federal income tax at the rate of 30%
unless a U.S. income tax treaty applies to reduce or eliminate withholding. U.S.
trade or business income will be taxed at regular U.S. rates rather than the 30%
gross rate. To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is U.S. trade or business income, the Non-U.S.
Holder must provide a properly executed Form 1001 or 4224, as applicable, prior
to the payment of interest. The Forms 1001 and 4224 must be periodically
updated.
SALE, EXCHANGE OR REDEMPTION OF SENIOR NOTES
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange or
redemption of a New Note generally will not be subject to U.S. federal income
tax, unless (i) such gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who holds the New Note
as a capital asset and is present in the United States for 183 days or more in
the taxable year of the disposition, or (iii) the Non-U.S. Holder is subject to
tax pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
FEDERAL ESTATE TAX
New Notes held (or treated as held) by an individual who is a Non-U.S.
Holder at the time of his death will not be subject to U.S. federal estate tax
provided that the individual does not actually or constructively own 10% or more
of the total voting power of all voting stock of the Company and income on the
New Notes was not U.S. trade or business income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-U.S. Holder
any interest that is subject to withholding or that is exempt from U.S.
withholding tax pursuant to a tax treaty or the portfolio interest exception.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-U.S. Holder resides.
75
<PAGE>
In the case of payments of principal on the New Notes by the Company to a
Non-U.S. Holder, the regulations provide that backup withholding and information
reporting will not apply to payments if the Holder certifies to its non-U.S.
status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor its paying agent has actual knowledge
that the holder is a United States person or that the conditions of any other
exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of New Notes to or through
the United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
its non-U.S. status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
Holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a New
Note to or through a non-U.S. office of a non-U.S. broker that is not a U.S.
related person will not be subject to information reporting or backup
withholding. For this purpose, a "U.S. related person" is (i) a "controlled
foreign corporation" for U.S. federal income tax purposes, or (ii) a foreign
person 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment (or for
such part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a United States
trade or business.
In the case of the payment of proceeds from the disposition of New Notes to
or through a non-U.S. office of a broker that is either a U.S. person or a "U.S.
related person," regulations require information reporting on the payment,
unless the broker has documentary evidence in its files that the owner is a Non-
U.S. Holder and the broker has no knowledge to the contrary. Backup withholding
will not apply to payments made through foreign offices of a broker that is a
U.S. person or a U.S. related person (absent actual knowledge that the payee is
a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
76
<PAGE>
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 meeting
the requirements of the Securities Act 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 resales 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 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
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 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 commission
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 meeting the
requirements of the Securities Act, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed, pursuant to the Registration Agreement, to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the Senior Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for Armco
by Arnold & Porter, New York, New York.
EXPERTS
The "Consolidated Financial Statements" for the years ended December 31,
1996 and 1995 incorporated by reference in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports included
herein, and are included in reliance upon reports of such firm given upon their
authority as experts in accounting and auditing.
77
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for its fiscal year ended December
31, 1996, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997 and the Company's current report on Form 8-K
dated August 28, 1997, which were previously filed with the Commission pursuant
to the Exchange Act (File No. 1-873-2), are incorporated herein by reference.
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 Exchange Offer shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents (not including exhibits to such
documents, unless such exhibits are specifically incorporated by reference in
such documents) are available without charge upon written or oral request
directed to Armco Inc., One Oxford Centre, 301 Grant Street, Pittsburgh,
Pennsylvania 15219 (telephone (412) 255-9800), Attention: Corporate Secretary.
78
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE
HEREBY EXCEPT AS CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. 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 DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE 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 AN OFFER
OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary..............................
Risk Factors....................................
Use of Proceeds.................................
Capitalization..................................
Selected Historical Consolidated Financial and
Other Data....................................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations....................................
Business........................................
The Exchange Offer..............................
Description of Senior Notes.....................
Registration Rights Agreement...................
Certain Federal Income Tax Consequences.........
Plan of Distribution............................
Legal Matters...................................
Experts.........................................
Incorporation of Certain Documents by
Reference.....................................
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS EXCHANGE OFFER), ALL
DEALERS OFFERING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN
THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
$150,000,000
ARMCO INC.
9% SENIOR NOTES DUE 2007
[LOGO]
------------------
PROSPECTUS
------------------
DATED , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1701.13(E) of the Ohio Revised Code, under which law Armco is
incorporated, grants corporations the power to indemnify a director, officer,
employee or agent against expenses, including attorney's fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with any proceeding, other than a derivative action, to which he is a
party by reason of the fact that he is or was a director, officer, employee or
agent of the corporation or was serving in a similar capacity with another
entity at the request of the corporation if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, he had
no reason to believe his conduct was unlawful. In the case of a derivative
action, indemnification is limited to expenses and no indemnification shall be
made in respect of (i) any claim, issue or matter as to which such person is
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless, and only to the extent that, a court determines,
despite the adjudication of liability, but in view of all the circumstances of
the case, that such person is fairly and reasonably entitled to indemnity for
expenses or (ii) any action or suit in which the only liability asserted against
a director is pursuant to Section 1701.95 of the Revised Code dealing with
unlawful loans, dividends and distribution of assets. Indemnification for
expenses is mandatory under the statutory provisions if the person has been
successful on the merits or otherwise in any such proceeding. The
indemnification authorized by statute is not exclusive.
Article IV of Armco's Regulations provides that Armco shall indemnify
directors, officers, employees or agents to the full extent permitted by
applicable law and may, subject to certain exceptions, do so in cases where
applicable law does not provide for indemnification if authorized by the
directors upon the determination that such indemnification is in the best
interest of Armco.
Armco maintains insurance policies insuring Armco and its directors and
officers against claims resulting from defined acts or omissions to act, subject
to various exclusions, including pollution and antitrust claims and claims
resulting from dishonesty. After certain deductibles, policies cover up to
$50,000,000 for all losses in the year.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
3.1 -- Articles of Incorporation of Armco Inc., as amended as of April 4, 1996 (incorporated herein by
reference to Exhibit 3(a) to Armco's Annual Report on Form 10-K for the year ended December 31,
1996).
3.2 -- Regulations of Armco Inc. (incorporated herein by reference to Exhibit 3(b) to Armco's Annual
Report on Form 10-K for the year ended December 31, 1996).
4.1 -- Armco hereby agrees to furnish to the Securities and Exchange Commission, upon its request, a copy
of each instrument defining the rights of holders of long-term debt of Armco and its subsidiaries,
omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K.
4.2 -- Indenture, dated as of October 1, 1992, between the Company and Fifth Third Bank (the "Indenture")
(incorporated herein by reference to Exhibit 4 to Armco's Registration Statement on Form S-3, No.
33-51806 ("Registration No. 33-51806")).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
4.3 -- Supplemental Indenture No. 1, dated as of October 1, 1992, to the Indenture (incorporated herein
by reference to Exhibit 4(b) to Armco's Report on Form 8-K dated October 1, 1992).
<S> <C>
4.4 -- Supplemental Indenture No. 2, dated as of September 1, 1997, to the Indenture (including form of
Senior Notes).*
4.5 -- Form of Supplemental Indenture No. 3, dated as of , 1997, to the Indenture.**
4.6 -- Registration Agreement, dated as of September 9, 1997 among Armco, Salomon Brothers Inc and Chase
Securities Inc.*
5 --Opinion of Arnold and Porter.**
10.1 -- Deferred Compensation Plan for Directors (incorporated herein by reference to Exhibit 10(a) to
Armco's Annual Report on Form 10-K for the year ended December 31, 1996).
10.2 -- 1993 Long-Term Incentive Plan of Armco Inc. (incorporated herein by reference to Exhibit 10 to
Armco's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993).
10.3 -- Severance Agreements (incorporated herein by reference to Exhibit 10(a) to Armco's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1988 (SEC File No. 001-00873)).
10.4 -- 1988 Restricted Stock Plan (incorporated herein by reference to Exhibit 10(i) to Armco's Annual
Report on Form 10-K for the year ended December 31, 1988 (SEC File No. 001-00873)).
10.5 -- Executive Supplemental Deferred Compensation Plan Trust (incorporated herein by reference to
Exhibit 10(b) to Armco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1988 (SEC
File No. 001-00873)).
10.6 -- Executive Supplemental Deferred Compensation Plan (incorporated herein by reference to Exhibit
10(c) to Armco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1988 (SEC File No.
001-00873)).
10.7 -- Pension Plan for Outside Directors (incorporated herein by reference to Exhibit 10(p) to Armco's
Annual Report on Form 10-K for the year ended December 31, 1989 (SEC File No. 001-00873)).
10.8 -- Key Management Severance Policy (incorporated herein by reference to Exhibit 10(p) to Armco's
Annual Report on Form 10-K for the year ended December 31, 1990).
10.9 -- Minimum Pension Plan (incorporated herein by reference to Exhibit 10(r) to Armco's Annual Report
on Form 10-K for the year ended December 31, 1991).
10.10 -- Stainless Steel Toll Rolling Services Agreement (incorporated herein by reference from Exhibit
10(s) to Armco's Annual Report on Form 10-K for the year ended December 31, 1993).
10.11 -- Equity Exchange Agreement (incorporated herein by reference to Exhibit 2 to Armco's Form 8-K dated
April 7, 1994).
10.12 -- Stock Purchase Agreement among Armco Inc., Armco Financial Services Corporation and Vik Brothers
Insurance, Inc. dated as of August 2, 1994 (incorporated herein by reference to Exhibit 10 to
Armco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
10.13 -- Asset Sale Agreement By and Among Armco Inc., Eastern Stainless Corporation, Avesta Sheffield
East, Inc. and Avesta Sheffield Holding Co. dated as of February 9, 1995 (incorporated herein by
reference to Exhibit 2 to Armco's Form 8-K dated March 14, 1995).
<S> <C>
10.14 -- Purchase Agreement, as amended, among Oilwell, Inc., National Supply Company, Inc., USX
Corporation, Armco Inc. and NOW Holdings, Inc. (incorporated herein by reference to Exhibit 2 to
Armco's Form 8-K dated January 16, 1996).
10.15 -- Rights Agreement dated as of February 23, 1996 between Armco Inc. and Fifth Third Bank
(incorporated herein by reference to Exhibit 10(p) to Armco's Form 10-K for the year ended December
31, 1995).
12 --Ratio of Earnings to Fixed Charges.**
21 -- List of subsidiaries of Armco (incorporated herein by reference to Exhibit 21 to Armco's Annual
Report on Form 10-K for the year ended December 31, 1996).
23.1 --Consent of Deloitte & Touche LLP.*
23.2 --Consent of Arnold and Porter.**
24 --Powers of Attorney.*
25 -- Statement of Eligibility on Form T-1 of The Fifth Third Bank (incorporated herein by reference to
Exhibit 26 to Registration No. 33-51806).
99.1 --Form of Letter of Transmittal.**
</TABLE>
- ------------------------
* Filed herewith
** To be filed by amendment
(B) SCHEDULES
All schedules are omitted as the required information is presented in the
Registrant's consolidated financial statements or related notes or such
schedules are not applicable.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 question 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.
(b) The undersigned Registrant hereby undertakes 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.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Armco Inc., certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Pittsburgh, Commonwealth of Pennsylvania.
<TABLE>
<S> <C> <C>
Date: September 29, 1997 ARMCO INC.
By: *
-----------------------------------------
James F. Will
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on September 29, 1997.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
* Chairman of the Board, September 29, 1997
- ------------------------------ President, Chief Executive
James F. Will Officer and Director
* Vice President and Chief September 29, 1997
- ------------------------------ Financial Officer
Jerry W. Albright
* Vice President and September 29, 1997
- ------------------------------ Controller
John N. Davis
* Director September 29, 1997
- ------------------------------
Paula H.J. Cholmondeley
* Director September 29, 1997
- ------------------------------
David A. Duke
* Director September 29, 1997
- ------------------------------
Dorothea C. Gilliam
* Director September 29, 1997
- ------------------------------
John C. Haley
* Director September 29, 1997
- ------------------------------
Bruce E. Robbins
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Director
- ------------------------------
Burnell R. Roberts
* Director September 29, 1997
- ------------------------------
John D. Turner
* By his signature set forth below, Gary R. Hildreth has signed this
Registration Statement as attorney for the persons noted above, in the
capacities above stated, pursuant to powers of attorney filed with the
Securities and Exchange Commission as exhibits to this Registration
Statement.
By: /s/ GARY R. HILDRETH
-------------------------
Gary R. Hildreth
ATTORNEY-IN-FACT
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Articles of Incorporation of Armco Inc., as amended as of April 4, 1996 (incorporated
herein by reference to Exhibit 3(a) to Armco's Annual Report on Form 10-K for the year
ended December 31, 1996).
3.2 -- Regulations of Armco Inc. (incorporated herein by reference to Exhibit 3(b) to Armco's
Annual Report on Form 10-K for the year ended December 31, 1996).
4.1 -- Armco hereby agrees to furnish to the Securities and Exchange Commission, upon its
request, a copy of each instrument defining the rights of holders of long-term debt of
Armco and its subsidiaries, omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K.
4.2 -- Indenture, dated as of October 1, 1992, between the Company and Fifth Third Bank (the
"Indenture") (incorporated herein by reference to Exhibit 4 to Armco's Registration
Statement on Form S-3, No. 33-51806 ("Registration No. 33-51806")).
4.3 -- Supplemental Indenture No. 1, dated as of October 1, 1992, to the Indenture (incorporated
herein by reference to Exhibit 4(b) to Armco's Report on Form 8-K dated October 1, 1992).
4.4 -- Supplemental Indenture No. 2, dated as of September 1, 1997, to the Indenture (including
form of Senior Notes).*
4.5 -- Form of Supplemental Indenture No. 3, dated as of , 1997, to the Indenture.**
4.6 -- Registration Agreement, dated as of September 9, 1997 among Armco, Salomon Brothers Inc
and Chase Securities Inc.*
5 --Opinion of Arnold and Porter.**
10.1 -- Deferred Compensation Plan for Directors (incorporated herein by reference to Exhibit
10(a) to Armco's Annual Report on Form 10-K for the year ended December 31, 1996).
10.2 -- 1993 Long-Term Incentive Plan of Armco Inc. (incorporated herein by reference to Exhibit
10 to Armco's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993).
10.3 -- Severance Agreements (incorporated herein by reference to Exhibit 10(a) to Armco's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1988 (SEC File No.
001-00873)).
10.4 -- 1988 Restricted Stock Plan (incorporated herein by reference to Exhibit 10(i) to Armco's
Annual Report on Form 10-K for the year ended December 31, 1988 (SEC File No. 001-00873)).
10.5 -- Executive Supplemental Deferred Compensation Plan Trust (incorporated herein by reference
to Exhibit 10(b) to Armco's Quarterly Report on Form 10-Q for the quarter ended June 30,
1988 (SEC File No. 001-00873)).
10.6 -- Executive Supplemental Deferred Compensation Plan (incorporated herein by reference to
Exhibit 10(c) to Armco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1988
(SEC File No. 001-00873)).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
10.7 -- Pension Plan for Outside Directors (incorporated herein by reference to Exhibit 10(p) to
Armco's Annual Report on Form 10-K for the year ended December 31, 1989 (SEC File No.
001-00873)).
<S> <C> <C>
10.8 -- Key Management Severance Policy (incorporated herein by reference to Exhibit 10(p) to
Armco's Annual Report on Form 10-K for the year ended December 31, 1990).
10.9 -- Minimum Pension Plan (incorporated herein by reference to Exhibit 10(r) to Armco's Annual
Report on Form 10-K for the year ended December 31, 1991).
10.10 -- Stainless Steel Toll Rolling Services Agreement (incorporated herein by reference from
Exhibit 10(s) to Armco's Annual Report on Form 10-K for the year ended December 31, 1993).
10.11 -- Equity Exchange Agreement (incorporated herein by reference to Exhibit 2 to Armco's Form
8-K dated April 7, 1994).
10.12 -- Stock Purchase Agreement among Armco Inc., Armco Financial Services Corporation and Vik
Brothers Insurance, Inc. dated as of August 2, 1994 (incorporated herein by reference to
Exhibit 10 to Armco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994).
10.13 -- Asset Sale Agreement By and Among Armco Inc., Eastern Stainless Corporation, Avesta
Sheffield East, Inc. and Avesta Sheffield Holding Co. dated as of February 9, 1995
(incorporated herein by reference to Exhibit 2 to Armco's Form 8-K dated March 14, 1995).
10.14 -- Purchase Agreement, as amended, among Oilwell, Inc., National Supply Company, Inc., USX
Corporation, Armco Inc. and NOW Holdings, Inc. (incorporated herein by reference to Exhibit
2 to Armco's Form 8-K dated January 16, 1996).
10.15 -- Rights Agreement dated as of February 23, 1996 between Armco Inc. and Fifth Third Bank
(incorporated herein by reference to Exhibit 10(p) to Armco's Form 10-K for the year ended
December 31, 1995).
12 --Ratio of Earnings to Fixed Charges.**
21 -- List of subsidiaries of Armco (incorporated herein by reference to Exhibit 21 to Armco's
Annual Report on Form 10-K for the year ended December 31, 1996).
23.1 --Consent of Deloitte & Touche LLP.*
23.2 --Consent of Arnold and Porter.**
24 --Powers of Attorney.*
25 -- Statement of Eligibility on Form T-1 of The Fifth Third Bank (incorporated herein by
reference to Exhibit 26 to Registration No. 33-51806).
99.1 --Form of Letter of Transmittal.**
</TABLE>
- ------------------------
* Filed herewith
** To be filed by amendment
<PAGE>
ARMCO INC.
To
THE FIFTH THIRD BANK,
Trustee
------------------------------------------
SUPPLEMENTAL INDENTURE NO. 2
Dated as of September 1, 1997
to
INDENTURE
Dated as of October 1, 1992
------------------------------------------
U.S. $150,000,000
9% Senior Notes Due 2007
<PAGE>
ARMCO INC.
SUPPLEMENTAL INDENTURE NO. 2
Dated as of September 1, 1997
9% Senior Notes Due 2007
9% Senior Exchange Notes Due 2007
SUPPLEMENTAL INDENTURE NO. 2, dated as of September 1, 1997, between
ARMCO INC., a corporation duly organized and existing under the laws of the
State of Ohio with executive offices located at One Oxford Centre, 301 Grant
Street, Pittsburgh, PA 15219-1415 (hereinafter sometimes called the
"Company") and The Fifth Third Bank with offices located at 38 Fountain
Square Plaza, Cincinnati, Ohio 45263 (hereinafter sometimes called the
"Trustee") as Trustee under an indenture of the Company dated as of October
1, 1992 (the "Base Indenture") as supplemented by Supplemental Indenture No.
1 dated as of October 1, 1992 (together, the "Indenture").
RECITALS OF THE COMPANY
Section 2.01 of the Indenture provides for the issuance from time to
time of debentures, notes, bonds or other evidences of indebtedness (the
"Debt Securities") of the Company, issuable for the purposes and subject to
the limitations contained in the Indenture. The Company has duly authorized
the creation of an issue of its Debt Securities named its 9% Senior Notes Due
2007 (hereinafter the "Initial Notes") of the tenor and in the amount
hereinafter set forth and, if and when issued pursuant to a registered
exchange for the Initial Notes as contemplated by the Registration Agreement,
the Company's 9% Senior Exchange Notes Due 2007, (hereinafter the "Exchange
Notes" and, together with the Initial Notes, the "Notes").
Section 10.01 of the Indenture provides that the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may
from time to time and at any time enter into one or more indentures
supplemental to the Indenture to establish, among other things, the form and
terms of Debt Securities of any series as permitted by Section 2.02 of the
Indenture and to add to the covenants of the Company for the benefit of the
Holders of all or any series of Debt Securities or to surrender any right or
power therein conferred upon the Company.
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 2, and all things necessary have been done to make
the Notes, when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations of the
Company, and to make this Supplemental Indenture No. 2 a valid agreement of
the Company, in accordance with its terms.
<PAGE>
NOW, THEREFORE, THIS SUPPLEMENTAL
INDENTURE NO. 2 WITNESSETH:
For and in consideration of the premises and the purchase of the
Debt Securities of the series provided for herein, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Debt Securities of such series, as follows:
ARTICLE I.
The Series of Notes
SECTION 101. The aggregate principal amount (except as provided in
Section 2.08 of the Indenture) of Notes which may be authenticated and
delivered according to the terms of this Supplemental Indenture No. 2 is
specified in Section 2.2 of Appendix A hereto. The Initial Notes and the
Exchange Notes shall for purposes of the Indenture, constitute a single
Series of Debt Securities.
SECTION 102. Provisions relating to the Initial Notes and the
Exchange Notes are set forth in Appendix A, which is hereby incorporated in
and expressly made part of this Supplemental Indenture No. 2. The Initial
Notes and the Trustee's certificate of authentication shall be substantially
in the form of Exhibit 1 to Appendix A which is hereby incorporated in and
expressly made a part of this Supplemental Indenture No. 2. The Exchange
Notes and the Trustee's certificate of authentication shall be substantially
in the form of Exhibit 2 to Appendix A, which is hereby incorporated in and
expressly made a part of this Supplemental Indenture No. 2. The Notes may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to the
Company). Each Note shall be dated the date of its authentication. The
terms of the Notes set forth in Exhibits 1 and 2 to Appendix A are part of
the terms of this Supplemental Indenture No. 2. If any provision of this
Supplemental Indenture No. 2 limits, qualifies, or conflicts with any term or
provision of the Notes, such provision in the Notes shall control.
ARTICLE II.
Relation To Indenture; Definitions
SECTION 201. Relation to the Indenture. This Supplemental
Indenture No. 2 constitutes an integral part of the Indenture and shall be
construed in connection with and as part of the Indenture.
SECTION 202. Definitions in the Indenture. For all purposes of
this Supplemental Indenture No. 2, capitalized terms used herein without
definition shall have the meanings specified in the Indenture. If any term
is defined in this Supplemental Indenture No. 2
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<PAGE>
and in the Indenture, such term shall have the meaning assigned to it in this
Supplemental Indenture No. 2.
SECTION 203. Definitions. For all purposes of this Supplemental
Indenture No. 2, except as expressly provided or the context otherwise
requires:
"Additional Assets" means (i) any Property or assets (other than
Indebtedness and Capital Stock) that the Board of Directors determines to be
useful in the conduct of the business of the Company and its Subsidiaries,
whether or not such business is conducted on the date of the original
issuance of the Notes ("Approved Business"), (ii) the 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, or (iii)
Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clause (ii) or (iii) above is primarily engaged in an
Approved Business.
"Additional Core Assets" means (i) any Property or assets (other
than Indebtedness or Capital Stock) used or intended for use in the Core
Business, (ii) the Capital Stock of a Person engaged in the Core Business
that becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Restricted Subsidiary engaged in the
Core Business, or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary engaged in the Core
Business.
"Affiliate" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership, membership or other ownership interests, by contract or
otherwise), provided that, in any event, each Unrestricted Subsidiary shall
be deemed to be an Affiliate of the Company and of each other Subsidiary.
Notwithstanding the foregoing, no individual shall be deemed to be an
Affiliate of a Person solely by reason of his or her being an officer or
director (or equivalent) of such Person and neither the Company nor any of
its Restricted Subsidiaries shall be deemed to be Affiliates of each other.
"AFSC" means Armco Financial Services Corporation.
"Asset Sale" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (including, without limitation,
dispositions pursuant to any consolidation or merger, but excluding any
Restricted Payment or Sale and Leaseback Transaction) by such Person or any
of its Restricted Subsidiaries (including any consolidation, merger or other
sale of any such Restricted Subsidiaries with, into or to another Person in a
transaction in which such Restricted Subsidiary ceases to be a Restricted
Subsidiary, but excluding a disposition by a Restricted Subsidiary of such
Person to such Person or a wholly owned Restricted Subsidiary of such Person
or by such Person to a wholly owned Restricted Subsidiary of such Person) in
any single transaction or series of transactions of (i) shares of
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<PAGE>
Capital Stock (other than directors' qualifying shares) or other ownership
interests of a Restricted Subsidiary of such Person, (ii) all or
substantially all the Property of any division, business segment or
comparable line of business of such Person or any of its Restricted
Subsidiaries or (iii) any other Property of such Person or any of its
Restricted Subsidiaries having a Fair Market Value in excess of $5,000,000
and transferred, conveyed, sold, leased or otherwise disposed of outside of
the ordinary course of business of such Person or Restricted Subsidiary;
provided that the term "Asset Sale," when used with respect to the Company,
shall not include (x) any asset disposition permitted pursuant to Section 310
which constitutes a disposition of all or substantially all of the Company's
assets, (y) a disposition of obsolete assets in the ordinary course of
business or (z) a sale or transfer of accounts receivable under the Credit
Facilities.
"Attributable Value" means, as to any particular lease under which
any Person is at the time liable other than a Capital Lease Obligation, and
at any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from
the last date of such Initial term to the date of determination at a rate per
annum equal to the discount rate which would be applicable to a Capital Lease
Obligation with like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but
no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
"Attributable Value" means, as to a Capital Lease Obligation under which any
Person is at the time liable and at any date as of which the amount thereof
is to be determined, the capitalized amount thereof that would appear on the
face of the balance sheet of such Person in accordance with GAAP.
"Average Life" means, as of any date, with respect to any debt
security or Redeemable Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of (x) the number of years from such date to the date
of each scheduled principal or redemption (including any sinking fund or
mandatory redemption payment requirements) of such debt or equity security
multiplied in each case by (y) the amount of such principal or redemption
payment by (ii) the sum of all such principal or redemption payments.
"Bankruptcy Code" means the Federal Bankruptcy Act or Title 11 of
the United States Code.
"Capital Expenditure Indebtedness" means Indebtedness Incurred by
any Person to finance the purchase or construction of any Property acquired
(other than from an Affiliate) or constructed by such Person so long as (i)
the purchase or construction price for such Property is or should be included
in "addition to property, plant or equipment" in accordance with GAAP, (ii)
the acquisition or construction of such Property is not part of any
acquisition of a Person or business unit, and (iii) such Indebtedness is
Incurred within 360 days of the acquisition or completion of construction of
such Property.
5
<PAGE>
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Indebtedness
arrangement conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital
lease or a liability on the face of a balance sheet of such Person in
accordance with GAAP.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however
designated) in such Person and any rights (other than debt securities
convertible into an equity interest), warrants or options to subscribe for or
to acquire an equity interest in such Person.
"Change of Control" means an event or series of events by which
(i)(A) the Company consolidates with or merges into any other Person or
conveys, transfers or leases all or substantially all of its assets to any
Person or group of Persons or (B) any Person consolidates with or merges into
the Company, in the case of either (A) or (B) pursuant to a transaction or
series of transactions (other than a transaction or series of transactions
between the Company and a wholly owned Restricted Subsidiary of the Company)
as a result of which the existing shareholders of the Company immediately
prior thereto hold less than 50% of the combined voting power of the Voting
Stock of the surviving Person, or (ii) any "person" or "group" (each as
defined in Section 13(d)(3) of the Exchange Act) becomes the "beneficial
owner" (as defined under Rule 13d-3 of the Exchange Act), directly or
indirectly, of 50% or more of the total voting power of all classes of Voting
Stock of the Company, or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (together with any new or replacement directors whose election by
the Board of Directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least 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 directors then in office.
"Change of Control Offer" has the meaning given such term in Section
305(a).
"Change of Control Payment Date" has the meaning given such term in
Section 305(b).
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker that would be utilized,
at the time of selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption
date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations
6
<PAGE>
for such redemption date, (B) if the Trustee is able to obtain only one
Reference Treasury Dealer Quotation from the Reference Treasury Dealers, such
Quotation, or (C) if the Trustee is not able to obtain any Reference Treasury
Dealer Quotations from the Reference Treasury Dealers, the average of the
Reference Treasury Dealer Quotations obtained from two other Primary Treasury
Dealers designated by the Company as Reference Treasury Dealers for the
purpose of determining such Comparable Treasury Price.
"Consolidated EBITDA" of any Person means, for any period, the
Consolidated Net Income of such Person, (i) increased (to the extent deducted
in determining Consolidated Net Income) by the sum of (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP (other than income taxes attributable to extraordinary gains), (B)
the Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period, other than interest capitalized by such Person
or its Restricted Subsidiaries during such period, (C) depreciation and
amortization expenses of such Person and its Restricted Subsidiaries for such
period, including without limitation, amortization of capitalized debt
issuance costs, and (D) other non-cash items of such Person and its
Restricted Subsidiaries for such period to the extent such non-cash items
reduce Consolidated Net Income (excluding any non-cash charge that will
require cash payments and for which an accrual or reserve is, or is required
by GAAP to be, made) minus non-cash items to the extent such non-cash items
increase the Consolidated Net Income (excluding any items which represent the
reversal of any accrual or reserve for cash charges established in any prior
period) of such Person and its Restricted Subsidiaries and (ii) decreased (to
the extent included in determining Consolidated Net Income) by any revenues
accrued but not received by such Person or any of its Restricted Subsidiaries
from any other Person (other than such Person or its Restricted Subsidiaries)
in respect of any Investment for such period, all as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means, with respect to any
Person, the ratio of (i) the aggregate amount of Consolidated EBITDA of such
Person for the four consecutive fiscal quarters for which consolidated
financial statements in respect thereof are available immediately prior to
the relevant Transaction Date (the "Determination Period") to (ii) the
aggregate amount of Consolidated Interest Expense of such Person for the
Determination Period; provided, however, that for purposes of calculating the
Consolidated Interest Coverage Ratio of any specified Person, the
Consolidated EBITDA and Consolidated Interest Expense of such specified
Person shall be calculated on a pro forma basis as if the transaction giving
rise to the need to calculate the Consolidated Interest Coverage Ratio had
taken place on the first day of the Determination Period, and shall (A)
include the Consolidated Interest Expense in respect of any Indebtedness
Incurred by such Person subsequent to the first day of the Determination
Period and prior to the Transaction Date as if such Indebtedness had been
Incurred on the first day of the Determination Period, (B) exclude, from the
first day of the Determination Period, the Consolidated Interest Expense in
respect of (1) any Indebtedness of such Person that has been redeemed or
retired subsequent to the first day of the Determination Period and prior to
the Transaction Date and (2) if the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio is an Incurrence of
Indebtedness, any Indebtedness (x) that the Company anticipates as of the
time of determination will be redeemed or retired with the proceeds of, and
within 90 days following the Incurrence of, such Indebtedness giving rise to
such need or (y)
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<PAGE>
with respect to which the Company has deposited or caused to be deposited
irrevocably with the Trustee or Fiscal Agent for such Indebtedness funds
sufficient to redeem or retire such Indebtedness or has irrevocably committed
to redeem such Indebtedness, (C) include the Consolidated EBITDA and
Consolidated Interest Expense of any other Person acquired subsequent to the
first day of the Determination Period and prior to the Transaction Date by
such specified Person as a Restricted Subsidiary of such specified Person as
if such Person had been acquired on the first day of the Determination
Period, (D) exclude, from the first day of the Determination Period, the
Consolidated EBITDA of such specified Person directly attributable to any
Property of such specified Person (including, without limitation, Capital
Stock) which was the subject of an Asset Sale at any time subsequent to the
first day of the Determination Period and prior to the Transaction Date and
(E) for purposes of Section 303 and Section 310 where the Consolidated
Interest Coverage Ratio is calculated to give effect to the transaction
giving rise to the need to calculate the Consolidated Interest Coverage
Ratio, such calculation shall also include the Consolidated EBITDA and
Consolidated Interest Expense of any other Person to be acquired by such
specified Person as a Restricted Subsidiary of such specified Person in
connection with the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio. When the Consolidated Interest
Coverage Ratio is determined with respect to the Company, the term
"Restricted Subsidiary" shall be deemed to include any Unrestricted
Subsidiary that became a Restricted Subsidiary at any time between the first
day of the Determination Period and the Transaction Date, provided that such
Subsidiary is a Restricted Subsidiary on the Transaction Date.
"Consolidated Interest Expense" means, with respect to any Person
for any period, without duplication (i) the sum of (A) the aggregate amount
of cash and non-cash interest expense (net of interest income) of such Person
and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP in respect of Indebtedness
(including, without limitation, (u) capitalized interest, (v) any
amortization of debt discount, (w) net costs associated with Interest Rate
Protection Agreements (including any amortization of discounts), (x) the
interest portion of any deferred payment obligation, (y) all accrued
interest, and (z) all commissions, discounts and other fees and charges owed
with respect to letters of credit, bankers' acceptances or similar
facilities) paid, accrued or scheduled to be paid or accrued, during such
period; (B) Preferred Stock dividends of such Person (and of its Restricted
Subsidiaries if paid to a Person other than such Person or its Restricted
Subsidiaries) declared and payable in cash; (C) the portion of any rental
obligation of such Person or its Restricted Subsidiaries in respect of any
Capital Lease Obligation allocable to interest expense in accordance with
GAAP; (D) the portion of any rental obligation of such Person or its
Restricted Subsidiaries in respect of any Sale and Leaseback Transaction
allocable to interest expense (determined as if such were treated as a
Capital Lease Obligation); and (E) to the extent any Indebtedness of any
other Person is Guaranteed by such Person or any of its Restricted
Subsidiaries (other than Guarantees relating to obligations of customers,
either of such Person or any of its Restricted Subsidiaries, that are made in
the ordinary course of business consistent with the past practices of such
Person or such Restricted Subsidiaries), the aggregate amount of interest
paid, accrued or scheduled to be paid or accrued, by such other Person during
such period attributable to any such Indebtedness, less (ii) to the extent
included in (i) above, amortization or write-off of deferred financing costs
of such Person and its Restricted
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Subsidiaries during such period and any charge related to any premium or
penalty paid in connection with redeeming or retiring any Indebtedness of
such Person and its Restricted Subsidiaries prior to its Stated Maturity; in
the case of both (i) and (ii) above, after elimination of intercompany
accounts among such Person and its Restricted Subsidiaries and as determined
in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the aggregate
net income (or net loss) of such Person and its Restricted Subsidiaries for
such period on a consolidated basis determined in accordance with GAAP;
provided that there shall be excluded therefrom, without duplication, (i) all
items classified as extraordinary, (ii) any net loss or net income of any
Person other than such Person and its Restricted Subsidiaries, except to the
extent of the amount of dividends or other distributions actually paid to
such Person or its Restricted Subsidiaries by such other Person during such
period, (iii) the net income of any Person acquired by such Person or any of
its Restricted Subsidiaries in a pooling-of-interests transaction for any
period prior to the date of such acquisition, (iv) any gain or loss, net of
taxes, realized on the termination of any employee pension benefit plan, (v)
gains or losses in respect of Asset Sales by such Person or its Restricted
Subsidiaries, (vi) the net income of any Restricted Subsidiary of such Person
to the extent that the payment of dividends or other distributions to such
Person is restricted by contract or otherwise, except for any dividends or
distributions actually paid by such Restricted Subsidiary to such Person,
(vii) any extraordinary, unusual or nonrecurring gains or losses (and related
tax effects) in accordance with GAAP, and (viii) the effect of the adoption
of Statement of Financial Accounting Standards No. 106 ("SFAS 106") to the
extent expenses recognized pursuant to such adoption exceed the amounts with
respect to such expenses which would have been recognized during such period
using the "pay as you go" accounting method; provided further that there
shall be included in determining the net income or net loss of such person
expenses that would have been recognized using the "pay as you go" accounting
method to the extent that such expenses exceed the expenses recognized during
such period pursuant to SFAS 106.
"Consolidated Net Tangible Assets" of any Person means the sum of
Tangible Assets of such Person and its Restricted Subsidiaries after
eliminating inter-company items, all determined in accordance with GAAP,
including appropriate deductions for any minority interest in Tangible Assets
of such Restricted Subsidiaries.
"Consolidated Net Worth" of any Person means the stockholders'
equity of such Person and its Restricted Subsidiaries, as determined on a
consolidated basis in accordance with GAAP, less amounts attributable to
Redeemable Stock of such Person.
"Core Business" means the specialty flat-rolled steel business.
"Corporation" includes corporations, associations, companies and
business trusts.
"Credit Facilities" means the two bank credit facilities dated as of
December 22, 1995 between the Company or Armco Funding Corporation, on the
one hand, and the banks signatory thereto on the other, and all related
notes, collateral documents, guarantees, instruments
9
<PAGE>
and other agreements executed in connection therewith, as the same may be
amended, modified, supplemented, restated or Refinanced from time to time.
"Default" means any event, act or condition the occurrence of which
is, or after notice or the passage of time or both would be, an Event of
Default.
"Determination Period" has the meaning specified in Section 203
under the definition of "Consolidated Interest Coverage Ratio."
"Discharge" or "Discharged" means that the Company shall be deemed
to have paid and discharged the entire indebtedness represented by, and
obligations under the Notes and to have satisfied all the obligations under
the Indenture relating to the Notes (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same and
satisfaction of and discharging this Supplemental Indenture No. 2).
"Eligible Receivables" means, as of any date, trade receivables
(less allowance for doubtful accounts) of the Company and its Restricted
Subsidiaries that would be shown on a consolidated balance sheet of the
Company and its Restricted Subsidiaries as of that date prepared in
accordance with GAAP.
"Equity Offering" means a registered public offering of common stock
of the Company resulting in net proceeds to the Company in excess of $25.0
million.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder.
"Expiration Date" has the meaning specified in Section 309.
"Fair Market Value" means, with respect to the total consideration
received pursuant to any Asset Sale or any non-cash consideration received by
any Person, the fair market value of such consideration as determined in good
faith by the Board of Directors as evidenced by a Certified Resolution.
"fiscal year" means, with respect to the Company, the twelve
consecutive months ending December 31.
"GAAP" or "generally accepted accounting principles," with respect
to any computation required or permitted hereunder shall, except as otherwise
specifically provided, mean such accounting principles as are generally
accepted in the United States of America at the date of such computation.
"Guarantee" by an Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including, without
limitation, any obligation of such Person, (i) to purchase or pay (or advance
or supply
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funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (ii) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that a Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either
case, in the ordinary course of business.
"Incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or
otherwise), extend, assume, Guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required
pursuant to GAAP or otherwise, of any such Indebtedness or obligation on the
balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and
"Incurring" 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 becoming Indebtedness shall not be deemed an
Incurrence of such Indebtedness.
"Indebtedness" means at any time (without duplication), with respect
to any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such Person for
borrowed money, (ii) any obligation of such Person evidenced by bonds,
debentures, notes, Guarantees or other similar instruments, including,
without limitation, any such obligations Incurred in connection with
acquisition of Property or businesses, (iii) any reimbursement obligation of
such Person with respect to letters of credit, bankers' acceptances or
similar facilities issued for the account of such Person, (iv) any obligation
of such Person issued or assumed as the deferred purchase price of Property
or services (but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business), (v) any Capital Lease Obligation
of such Person, (vi) the maximum fixed redemption or repurchase price of
Redeemable Stock of such Person at the time of determination, (vii) any
payment obligation of such Person under Interest Rate Protection Agreements
at the time of determination, (viii) any obligation to pay rent or other
payment amounts of such Person with respect to any Sale and Leaseback
Transaction to which such Person is a party and (ix) any obligation of the
type referred to in clauses (i) through (viii) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has Guaranteed or is responsible or liable, directly or indirectly, as
obligor, Guarantor or otherwise. For purposes of the preceding sentence, the
maximum fixed repurchase price of any Redeemable Stock that does not have a
fixed repurchase price shall be calculated in accordance with the terms of
such Redeemable Stock as if such Redeemable Stock were repurchased on any
date on which Indebtedness shall be required to be determined pursuant to
this Supplemental Indenture No. 2; provided, however, that if such Redeemable
Stock is not then permitted to be repurchased, the repurchase price shall be
the book value of such Redeemable Stock. The amount of Indebtedness 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 of any
contingent obligations in respect thereof at such date.
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"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the Trustee after consultation with the Company.
"Initial Issue Date" means, September 12, 1997.
"Interest Rate Protection Agreement" means, with respect to any
Person, any interest rate swap agreement, interest rate cap agreement,
currency swap agreement or other financial agreement or arrangement designed
to protect such Person or its Restricted Subsidiaries against fluctuations in
interest rates or currency exchange rates, as in effect from time to time.
"Investment" means, with respect to any Person, any direct, indirect
or contingent (i) payment or transfer (including, without limitation, by
means of any payment for Property or services for the account or use of
another Person) of cash, Capital Stock or other Property, or assumption of
Indebtedness, made by such Person in exchange for Capital Stock, notes or
bonds of, or as a capital contribution to, any other Person or (ii) loan,
advance or other extension of credit (including, without limitation, by means
of a Guarantee, letter of credit or similar arrangement other than advances
or loans to customers in the ordinary course of business that are recorded as
accounts receivable of such Person or its Restricted Subsidiaries in
accordance with GAAP) made by such Person to or on behalf of any other Person.
"Lien" means, with respect to any Property, any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or other), charge, easement, encumbrance,
preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such
Property (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of
the foregoing).
"Make-Whole Premium" means, with respect to a Note, an amount equal
to the greater of (i) 1.0% of the outstanding principal amount of such Note
and (ii) the excess of (a) the present value of the remaining interest,
premium and principal payments due on such Note as if such Note were redeemed
on September 15, 2002, computed using a discount rate equal to the Treasury
Rate plus 75 basis points, over (b) the outstanding principal amount of such
Note.
"Net Cash Proceeds" from any Asset Sale by any Person or its
Restricted Subsidiaries means cash, cash equivalents or readily marketable
securities received (including by way of sale or discounting of a note,
installment receivable or other receivable, but excluding any other
consideration received in the form of assumption of Indebtedness or other
obligations relating to the Properties sold or otherwise conveyed or received
in any other non-cash form unless such non-cash consideration is immediately
converted into cash therefrom by such Person or its Restricted Subsidiaries),
net of (i) all reasonable out-of-pocket expenses of such Person or such
Restricted Subsidiary Incurred in connection with an Asset Sale of such type,
including, without limitation, all legal, title and recording tax expenses,
commissions and other fees and expenses Incurred (but excluding any finder's
fee or broker's fee payable to any Affiliate of such Person) and all federal,
state, provincial, foreign and local taxes arising in connection with such
Asset Sale that are paid or required to be accrued as a liability under GAAP
by such Person or its Restricted Subsidiaries, (ii) all payments made by such
Person or its Restricted Subsidiaries on
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any Indebtedness which is secured by such Properties in accordance with the
terms of any Lien upon or with respect to such Properties or which must, by
the terms of such Lien, 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, and (iii) all distributions and other payments made to minority
interest holders in Restricted Subsidiaries of such Person as a result of
such Asset Sale; provided that, in the event that any consideration for an
Asset Sale (which would otherwise constitute Net Cash Proceeds) is required
to be held in escrow pending determination of whether a purchase price
adjustment will be made, such consideration (or any portion thereof) shall
become Net Cash Proceeds only at such time as it is released to such Person
or its Restricted Subsidiaries from escrow, and provided that any non-cash
consideration received in connection with an Asset Sale, which is
subsequently converted to cash, shall be deemed to be Net Cash Proceeds at
such time and shall thereafter be applied in accordance with Section 309.
"Non-Core Businesses" means the following businesses of the Company,
including any tangible and intangible Property assets (excluding cash,
Indebtedness and Capital Stock of any other Person (other than Capital Stock
of Subsidiaries of AFSC that do not, directly or indirectly, hold Property or
assets of the Core Business) held by such businesses), substantially as
conducted and reported on June 30, 1997, (i) the Company's Sawhill Tubular
division, (ii) Douglas Dynamics, L.L.C., (iii) Greens Port Industrial Park,
(iv) the Company's steelmaking facilities in Dover, Ohio, (v) AFSC and
Subsidiaries of AFSC that do not, directly or indirectly, hold Property or
assets of the Core Business and (vi) any other business other than the Core
Business.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Notes on behalf of the Company.
"Permitted Refinancing Indebtedness" means Indebtedness of the
Company, the proceeds of which are used to Refinance outstanding Indebtedness
of the Company or any Restricted Subsidiary, provided that (i) if the
Indebtedness being Refinanced is pari passu with or subordinated in right of
payment to the Notes, then such Indebtedness is pari passu with or
subordinated in right of payment to, as the case may be, the Notes at least
to the same extent as the Indebtedness being Refinanced, (ii) such
Indebtedness is scheduled to mature no earlier than the Indebtedness being
Refinanced and (iii) such Indebtedness has an Average Life at the time such
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being Refinanced; provided further that such Indebtedness is
in an aggregate principal amount (or, if such Indebtedness is issued at a
price less than the principal amount thereof, has an aggregate original issue
price) not in excess of the aggregate principal amount then outstanding of
the Indebtedness being Refinanced (or if the Indebtedness being Refinanced
was issued at a price less than the principal amount thereof, then not in
excess of the amount of liability in respect thereof determined in accordance
with GAAP) plus (A) prepayment premium and accrued interest on and defeasance
costs associated with such Indebtedness being Refinanced and (B) plus fees
and expenses associated with the Incurrence of such refinancing Indebtedness.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the
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payment of dividends or as to the distribution of assets upon any voluntary
or involuntary liquidation, dissolution or winding up of such Person, to
shares of Capital Stock of any other class of such Person.
"Prepayment Offer" has the meaning given such term in Section 309(a).
"Prepayment Offer Notice" has the meaning given such term in Section
309(b).
"Primary Treasury Dealer" has the meaning given such term in this
Section 203 as set forth in the definition of Reference Treasury Dealer.
"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, without limitation, Capital Stock in any
other Person.
"Qualified Capital Stock" means Capital Stock of the Company or any
of its Restricted Subsidiaries that does not by its terms require any
dividends, distributions, mandatory prepayment or redemption prior to the
first anniversary following the Stated Maturity of the Notes.
"Redeemable Stock" of any Person means any equity security of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including, on the
happening of an event), is required to be redeemed or is redeemable at the
option of the holder thereof, in whole or part, prior to the Stated Maturity
of the Notes, or is exchangeable for debt at any time, in whole or part,
prior to the Stated Maturity of the Notes.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for redemption of such Note pursuant to Article IV
of this Supplemental Indenture No. 2 and the Notes.
"Redemption Price" means, when used with respect to any Note to be
redeemed, the price fixed for redemption of such Note pursuant to Article IV
of this Supplemental Indenture No. 2 and the Notes, plus accrued and unpaid
interest thereon to the Redemption Date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc and
Chase Securities Inc. and their respective successors; provided, however,
that if any of the foregoing shall cease to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
shall substitute therefor another nationally recognized investment banking
firm that is a Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer as of 3:30 p.m., New
York time, on the third business day preceding such redemption date.
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"Refinance" means, with respect to any Indebtedness, to renew,
extend, refinance, refund, replace or repurchase, or be substituted for, such
Indebtedness and "Refinancing" means the renewal, extension, refinancing,
refunding, replacement or repurchasing of, or substitution for, such
Indebtedness.
"Registration Agreement" means, the registration agreement dated
September 9, 1997 between the Company and the Initial Purchasers, for
themselves and as representatives of each subsequent Holder of the Notes.
"Repurchase Price" has the meaning given such term in Section 305.
"Restricted Payment" means (i) a dividend or other distribution
declared and paid on the Capital Stock of the Company or to the Company's
stockholders (in their capacity as such), or declared and paid to any Person
other than the Company or a Restricted Subsidiary of the Company on the
Capital Stock of any Restricted Subsidiary of the Company, in each case,
other than dividends, distributions or payments payable or made solely in
Qualified Capital Stock, (ii) a payment made by the Company or any of its
Restricted Subsidiaries (other than to the Company or any Restricted
Subsidiary of the Company) to purchase, redeem, acquire or retire any Capital
Stock of the Company or of a Restricted Subsidiary, (iii) a payment made by
the Company or any of its Restricted Subsidiaries to redeem, repurchase,
defease (including, but not limited to, in-substance or legal defeasance) or
otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund or mandatory redemption
payment, Indebtedness of the Company which is subordinate (whether pursuant
to its terms or by operation of law) in right of payment to the Notes and
which was scheduled to mature (after giving effect to any and all options to
extend the maturity thereof) on or after the Stated Maturity of the Notes or
(iv) a payment made by the Company or any of its Restricted Subsidiaries to
purchase, acquire, retire or redeem any Indebtedness of or equity interest in
or otherwise to make any Investment in any Affiliate thereof or in any Person
that would become an Affiliate thereof in connection with or as a result of
such investment; provided, that Restricted Payments shall not include any
payment or transfer of any Capital Stock of any Person in exchange for, or to
purchase or otherwise acquire, Capital Stock of, or an equity interest in,
another Person that is, or other Persons that are, or will, as part of such
transaction, become, the successor or successors to substantially all of the
assets and business of such first Person.
"Restricted Subsidiary" means, (i) with respect to the Company, (A)
any Subsidiary of the Company that exists on the Initial Issue Date other
than AFSC and its Subsidiaries, (B) any other Subsidiary of the Company that
the Company has not designated as an Unrestricted Subsidiary pursuant to
Section 311(a) and, (ii) with respect to a Person other than the Company and
its Subsidiaries, a Subsidiary of such other Person.
"Sale and Leaseback Transaction" means, with respect to any Person,
any direct or indirect arrangement pursuant to which Property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such
Person or one of its Restricted Subsidiaries.
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"Senior Indebtedness" means, at any date, any outstanding
Indebtedness of the Company that is pari passu in right of payment with the
Notes.
"Significant Restricted Subsidiary" means each Restricted Subsidiary
of the Company that (i) during the most recent four consecutive fiscal
quarters of the Company for which financial information in respect thereof is
available accounted for more than 10% of the Consolidated EBITDA of the
Company or (ii) is the owner, directly or indirectly, of more than 10% of the
Consolidated Net Tangible Assets of the Company, provided that clause (i)
shall be determined on a pro forma basis in the case of a Restricted
Subsidiary that became a Restricted Subsidiary during or subsequent to the
end of such four-consecutive-fiscal-quarter period as if the transaction in
which it became a Restricted Subsidiary occurred on the first day of such
period.
"Stated Maturity" means, when used with respect to any security, the
date specified in such security as the fixed date on which the principal or
redemption price of such security is due and payable and, when used with
respect to any installment of interest on a security, the fixed date on which
such installment of interest is due and payable. The Stated Maturity of a
Capital Lease Obligation 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.
"Subsidiary," with respect to any Person, means (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such Person, by such Person and one or more Subsidiaries of such
Person or by one or more Subsidiaries of such Person, or (ii) any other
Person (other than a corporation) in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has
at least a majority ownership interest.
"Tangible Assets" of any Person means, at any date, the gross book
value as shown by the accounting books and records of such Person of all its
Property, less the net book value of all items that would be classified as
intangibles under GAAP, including, without limitation, (i) licenses, patents,
patent applications, copyrights, trademarks, trade names, goodwill,
noncompete agreements and organizational expenses, (ii) unamortized debt
discount and expense, (iii) all reserves for depreciation, obsolescence,
depletion and amortization of its Properties and (iv) all other proper
reserves which in accordance with GAAP should be provided in connection with
the business conducted by such Person.
"Transaction Date" means the date of any transaction giving rise to
the need to calculate the Consolidated Interest Coverage Ratio.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity (computed as
of the second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
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"Unrestricted Subsidiary" means (i) AFSC and its Subsidiaries and,
(ii) any Subsidiary of the Company that the Company has classified, pursuant
to Section 311(a) as an Unrestricted Subsidiary and that has not been
reclassified as a Restricted Subsidiary pursuant to Section 311(a).
"Voting Stock" of any Person means Capital Stock of such Person
which ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only as
long as no senior class of securities has such voting power by reason of any
contingency.
ARTICLE III.
Covenants
SECTION 301. Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, conduct any business or enter into
any transaction or series of transactions (including, but not limited to, the
sale, transfer, disposition, purchase, exchange or lease of assets or
Property, the making of any Investment, the giving of any Guarantee, or the
rendering of any service) with or for the benefit of any Affiliate of the
Company (other than the Company), unless (i) such transaction or series of
transactions is on terms no less favorable in the aggregate (including such
factors as quality, delivery, service and acceptance by customers of the
Company or such Subsidiary) to the Company or such Subsidiary than those that
could be obtained in a comparable arm's-length transaction with an entity
that is not an Affiliate of the Company or such Subsidiary, and (ii) with
respect to a transaction or series of transactions outside the ordinary
course of business that has a Fair Market Value equal to or greater than
$5,000,000, the terms thereof are set forth in writing and the Board of
Directors (including a majority of the disinterested directors thereof)
approves such transaction or series of transactions and, in its good faith
judgment, believes that such transaction or series of transactions complies
with clause (i) of this Section 301(a), as evidenced by a Certified
Resolution.
(b) The limitations contained in Section 301(a) shall not apply to
(i) any transaction with an officer or director of the Company or any
Subsidiary of the Company entered into in the ordinary course of business
consistent with past practice (including compensation or employee benefit
arrangements with any officer or director of the Company or any Subsidiary of
the Company) and the cash-out of supplemental pension benefits, or (ii)
transactions between the Company and its Restricted Subsidiaries or among
such Restricted Subsidiaries.
SECTION 302. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment if, at the time of and after giving effect to the proposed Restricted
Payment:
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(i) any Default or Event of Default has occurred and is continuing;
(ii) the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to Section 303(a); or
(iii) the aggregate amount expended or committed for all Restricted
Payments from the Initial Issue Date (the amount so expended or committed, if
other than in cash, to be determined in good faith by the Board of Directors
and evidenced by a Certified Resolution) exceeds the sum of (A) 50% of the
aggregate Consolidated Net Income of the Company and its Restricted
Subsidiaries (or, if Consolidated Net Income shall be a deficit, minus 100%
of such deficit) subsequent to June 30, 1997 and ending on the last day of
the fiscal quarter immediately preceding the date of such Restricted Payment,
(B) 100% of the aggregate net proceeds, including cash and the Fair Market
Value of Property other than cash, received by the Company subsequent to the
Initial Issue Date, from capital contributions from its stockholders or from
the issuance or sale (other than to a Subsidiary) of Qualified Capital Stock
of the Company or of any convertible securities or debt obligations which
have been converted into, exchanged for or satisfied by the issuance of
Qualified Capital Stock, and (C) the amount of the net reduction in
Investments made as Restricted Payments in accordance with this sentence in
Unrestricted Subsidiaries resulting from (1) the payment of cash dividends or
the repayment in cash of the principal of loans or the cash return on any
Investment, in each case to the extent received by the Company or any wholly
owned Restricted Subsidiary of the Company from Unrestricted Subsidiaries,
(2) to the extent that any Investment in an Unrestricted Subsidiary that was
made after the Initial Issue Date is sold for cash or otherwise liquidated or
repaid for cash, the after-tax cash return of capital with respect to such
Investment (less the cost of disposition, if any) or (3) the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries, such aggregate amount
of the net reduction in such Investments not to exceed, in the case of any
Unrestricted Subsidiary, the amount of such Investments made as Restricted
Payments previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in the calculation of the
amount of Restricted Payments.
(b) The limitations contained in Section 302(a) shall not prevent
the Company or its Restricted Subsidiaries from:
(i) paying a dividend on its Capital Stock within 60 days after
declaration thereof if, on the declaration date, the Company could have paid
such dividend in compliance with the Indenture;
(ii) repurchasing shares of its Capital Stock (A) solely in
exchange for other shares of its Capital Stock (other than Redeemable Stock),
(B) to eliminate fractional shares or odd lots for up to an aggregate
consideration in any fiscal year of the Company not to exceed $2,000,000, (C)
pursuant to an order of a court of competent jurisdiction, or (D) in
connection with repurchase provisions under employee stock option and stock
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purchase agreements or other agreements to compensate management employees of
the Company;
(iii) making cash payments in respect of stock appreciation rights
granted to employees of the Company;
(iv) the purchase for value of shares of Capital Stock of the
Company (A) held by directors, officers or employees upon death, disability,
retirement, or termination of employment or (B) to fund capital stock-based,
long-term incentive programs, not to exceed $10,000,000 in the aggregate;
(v) Restricted Payments for the redemption, repurchase or other
acquisition of shares of Capital Stock of the Company in satisfaction of
indemnification or other claims arising under any merger, consolidation,
asset purchase or investment or similar acquisition agreement permitted under
the Indenture, pursuant to which such shares of Capital Stock were issued;
(vi) making payments to purchase or redeem Indebtedness made by
exchange for, or out of the proceeds of, the substantially concurrent (A)
sale or issuance of Capital Stock (other than Redeemable Stock) of the
Company, or (B) Incurrence of Indebtedness of the Company that is
contractually subordinated in right of payment to the Notes and has a Stated
Maturity later than the Stated Maturity of the Notes and an Average Life
greater than the remaining Average Life of any of the Notes;
(vii) declaring and paying dividends on the Preferred Stock of the
Company outstanding on the date of the Initial Issue Date;
(viii) making Investments in Affiliates up to an aggregate of
$15,000,000;
(ix) making an Investment in an Affiliate as a result of which such
Affiliate becomes a Restricted Subsidiary in compliance with the provisions
of Section 311;
(x) making an Investment by contributing or otherwise transferring
to any Person or Persons all or any part of the Non-Core Businesses
enumerated in clauses (i) through (v) of the definition of "Non-Core
Businesses"; and
(xi) making other Restricted Payments in an aggregate amount not to
exceed $25,000,000 (after giving effect to the amount of the net reduction in
any Investments made as Restricted Payments in reliance on this clause (xi)
resulting from (A) the payment of cash dividends or the repayment in cash of
the principal of loans or the cash return on any such Investment, in each
case to the extent received by the Company or any wholly owned Restricted
Subsidiary of the Company from Unrestricted Subsidiaries, (B) to the extent
that any such Investment in an Unrestricted Subsidiary is sold for cash or
otherwise liquidated or repaid for cash, the after-tax cash return of capital
with respect to such Investment (less the cost of disposition, if any) or (C)
the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries).
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(c) The payments permitted to be made pursuant to clauses (ii)(A),
(iii) (but only to the extent any such payments are included in determining
Consolidated Net Income), (vi), (ix) and (x) of Section 302(b) shall be
excluded for purposes of any future calculations pursuant to Section 302(a)
of the aggregate amount of Restricted Payments outstanding. The payments
permitted to be made pursuant to clauses (i), (ii)(B), (ii)(C), (ii)(D),
(iii) (but only to the extent that any such payments are not included in
determining Consolidated Net Income), (iv), (v), (vii), (viii) and (xi) of
Section 302(b) shall be included for purposes of any future calculations
pursuant to Section 302(a) of the aggregate amount of Restricted Payments
outstanding.
SECTION 303. Limitation on Indebtedness.
(a) The Company shall not, directly or indirectly, Incur any
Indebtedness unless, immediately after the date of the transaction giving
rise to such Indebtedness and after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds thereof as if
such Indebtedness had been Incurred and the proceeds thereof applied on the
first day of the Determination Period, the Consolidated Interest Coverage
Ratio of the Company at such date exceeds the ratio of 2.0 to 1.0.
(b) The limitations contained in Section 303(a) shall not prevent
the Company from Incurring the following Indebtedness (although any
Indebtedness so Incurred shall be included, to the extent outstanding at the
Determination Date, in any subsequent determination of the Consolidated
Interest Coverage Ratio):
(i) Indebtedness Incurred by the Company or by Armco Funding
Corporation under the Credit Facilities, provided that the aggregate
principal amount of all Indebtedness Incurred under this clause (i) at
any one time outstanding does not exceed the greater of (A) $225,000,000
and (B) the sum of (1) 80% of the book value of the accounts receivable
of the Company and its Restricted Subsidiaries and (2) 50% of the book
value of the inventory of the Company and its Restricted Subsidiaries, in
the case of clauses (B)(1) and (B)(2) of this proviso, as of the end of
the most recent fiscal quarter for which financial information in respect
thereof is available immediately prior to the date of such Incurrence,
determined in accordance with GAAP;
(ii) Indebtedness evidenced by the Notes;
(iii) (A) Indebtedness of the Company in respect of Capital Lease
Obligations or (B) Capital Expenditure Indebtedness directly Incurred by
the Company, provided that the aggregate principal amount of all
Indebtedness Incurred under subclauses (A) and (B) of this clause (iii)
and the Indebtedness Incurred under Section 304(a)(iv) does not exceed
$100 million at any one time outstanding;
(iv) Indebtedness under Interest Rate Protection Agreements,
provided that the obligations under such agreements are related to
payment obligations on Indebtedness otherwise permitted by the terms of
this covenant;
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(v) Indebtedness of the Company to any wholly owned Restricted
Subsidiary of the Company (but only so long as such Indebtedness is held
by such wholly owned Restricted Subsidiary);
(vi) Indebtedness outstanding on the Initial Issue Date;
(vii) Permitted Refinancing Indebtedness;
(viii) surety obligations of the Company and its Restricted
Subsidiaries entered into in the ordinary course of business;
(ix) Indebtedness of the Company and its Restricted Subsidiaries
Incurred to finance the purchase of insurance in the ordinary course of
business;
(x) Indebtedness of the Company and its Restricted Subsidiaries
Incurred from the honoring by a bank or other financial institution of a
check or draft inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness is
extinguished within two business days of notice of any such Incurrence;
and
(xi) Indebtedness not otherwise permitted to be Incurred under
clauses (i) through (x) of this Section 303(b), which, together with any
other outstanding Indebtedness Incurred under clause (xi) of this Section
303(b), has an aggregate principal amount not in excess of $40,000,000 at
any one time outstanding.
SECTION 304. Limitation on Restricted Subsidiary Indebtedness and
Preferred Stock.
(a) The Company shall not permit any of its Restricted Subsidiaries
to Incur, directly or indirectly, any Indebtedness or Preferred Stock, except:
(i)(A) Indebtedness or Preferred Stock outstanding on the Initial
Issue Date or (B) Indebtedness Incurred under the Credit Facilities to
the extent permitted by clause (i) of Section 303(b);
(ii) Indebtedness or Preferred Stock issued to and held by the
Company or a wholly owned Restricted Subsidiary of the Company (but only
so long as such Indebtedness or Preferred Stock is held or owned by the
Company or a wholly owned Restricted Subsidiary of the Company);
(iii) (A) Indebtedness of a Restricted Subsidiary in respect of
Capital Lease Obligations or (B) Capital Expenditure Indebtedness
directly Incurred by a Restricted Subsidiary, provided that after giving
effect to such Indebtedness the Company could Incur at least $1.00 of
additional Indebtedness pursuant to Section 303(a);
(iv) (A) Indebtedness of a Restricted Subsidiary in respect of
Capital Lease Obligations or (B) Capital Expenditure Indebtedness
directly Incurred by a Restricted
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Subsidiary, provided that the aggregate principal amount of all
Indebtedness Incurred under clauses (iv)(A) and (iv)(B) of this Section
304(a) and the Indebtedness Incurred under Section 303(b)(iii) does not
exceed $100 million at any one time outstanding; and
(v) Indebtedness or Preferred Stock Incurred in exchange for, or
the proceeds of which are used to Refinance, Indebtedness or Preferred
Stock of equal or higher ranking referred to in clauses (i) through (iv)
of this Section 304(a), so long as (A) the principal amount of such
Indebtedness or the liquidation value of such Preferred Stock so Incurred
does not exceed the principal amount or liquidation value of the
Indebtedness or Preferred Stock so exchanged or Refinanced and (B) the
Indebtedness or Preferred Stock so Incurred has a Stated Maturity or
final redemption date later than the Stated Maturity or final redemption
date (if any) of, and an Average Life that is longer than that of, the
Indebtedness or Preferred Stock being exchanged or Refinanced.
(b) Any Indebtedness or Preferred Stock Incurred pursuant to
clauses (i) through (v) of Section 304(a) will be included, to the extent
outstanding at the Determination Date, in any subsequent determination of the
Consolidated Interest Coverage Ratio.
SECTION 305. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require the Company to repurchase such Holder's Notes, in
whole or in part, in integral multiples of $1,000, pursuant to the offer
described in Section 305(b) (the "Change of Control Offer") at a price (the
"Repurchase Price") in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Payment Date.
(b) Within 30 calendar days subsequent to the date of any Change of
Control, the Company shall mail a notice to each Holder and to the Trustee
stating:
(i) that a Change of Control has occurred and a Change of Control
Offer is being made pursuant to this Section 305, and that all Notes that
are timely tendered will be accepted for payment;
(ii) the Repurchase Price and the repurchase date, which shall be a
date occurring no earlier than 30 days and no later than 60 days
subsequent to the date on which such notice is mailed (the "Change of
Control Payment Date");
(iii) that any Note (or any portion thereof) not tendered will
continue to accrue interest;
(iv) that any Note (or any portion thereof) accepted for payment
pursuant to the Change of Control Offer (and duly paid on the Change of
Control Payment Date) will cease to accrue interest after the Change of
Control Payment Date;
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(v) that any Holder electing to have a Note (or any portion
thereof) repurchased pursuant to a Change of Control Offer will be
required to surrender the Note, with the form entitled "Election of
Holder to Require Repurchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice on or prior to
the close of business on the Change of Control Payment Date;
(vi) that any Holder will be entitled to withdraw such election if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes the Holder delivered for repurchase
and a statement that such Holder is withdrawing the Holder's election to
have such Notes repurchased;
(vii) that any Holder that elects to have a portion of its Notes
repurchased must specify the principal amount that is being tendered for
repurchase, which principal amount must be in an integral multiple of
$1000; and
(viii) any other 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 the decision to
tender their Notes (including, but not limited to, a description of the
circumstances and relevant facts regarding the events requiring the
Company to make the Change of Control Offer), or is necessary to enable
Holders to tender their Notes (or any portion thereof) and to have such
Notes repurchased pursuant to this Section 305.
At the Company's request, the Trustee shall give the notice required in this
clause (b) in the Company's name and at the Company's expense. In such
event, the Company shall provide the Trustee with the information required by
clauses (i) - (viii) above.
(c) On the Change of Control Payment Date, the Company shall (i)
accept for payment any Note (or portion thereof) tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the Repurchase Price of any Note so tendered and (iii) deliver to the
Trustee each Note so accepted together with an Officers' Certificate that
states the aggregate principal amount of Notes tendered to the Company. The
Paying Agent shall promptly mail to each Holder of Notes so accepted payment
in an amount equal to the Repurchase Price therefor. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 305, the Trustee shall act as the Paying Agent.
(d) Notwithstanding the foregoing, if any Note (or any portion
thereof) accepted for payment shall not be so paid pursuant to the provisions
of this Section 305, then, from the Change of Control Payment Date until the
principal of (and premium) and interest on such Note is paid, interest shall
be paid on the unpaid principal (and premium) and, to the extent permitted by
law, on any accrued but unpaid interest thereon, in each case at the rate
prescribed therefor by such Note.
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(e) Upon surrender pursuant to this Section 305 of any Note
tendered in part, the Company shall execute, and the Trustee shall
authenticate and deliver, a new Note of the same series, of any authorized
denomination, in an aggregate principal amount equal to the untendered
portion of the surrendered Note.
SECTION 306. Limitation on Sale and Leaseback Transactions.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into, assume,
Guarantee or otherwise become liable with respect to any Sale and Leaseback
Transaction, except for a Sale and Leaseback Transaction not exceeding 360
days unless:
(i) the Company or such Restricted Subsidiary is permitted to Incur
such Indebtedness under Section 303 or Section 304, respectively;
(ii) the Company or such Restricted Subsidiary would be permitted
to Incur a Lien to secure Indebtedness or enter into a Sale and Leaseback
Transaction pursuant to Section 307(b) or Incur a Lien on such Property
that is the subject of such Sale and Leaseback Transaction pursuant to
Section 307(a)(ii) without equally and ratably securing the Notes;
(iii) the Company or such Restricted Subsidiary receives
consideration at least equal to the Fair Market Value of the Property
transferred; and
(iv) if the Sale and Leaseback Transaction is, directly or
indirectly, entered into, or assumed or Guaranteed by, the Company or
such Restricted Subsidiary, or the Company or such Restricted Subsidiary
otherwise becomes liable with respect thereto, more than 360 days after
the Property subject to such Sale and Leaseback Transaction is acquired
or constructed by the Company or such Restricted Subsidiary, the Company
applies the proceeds of such Sale and Leaseback Transaction, net of all
reasonable out-of-pocket expenses Incurred by the Company or such
Restricted Subsidiary in connection therewith, which are customarily
Incurred in connection with the Sale and Leaseback Transactions of such
kind, in accordance with the provisions of Section 309 as if such Sale
and Leaseback Transaction were an Asset Sale.
SECTION 307. Limitation on Liens.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Lien on or with
respect to any Property of the Company or such Restricted Subsidiary, or any
interest therein or any income or profits therefrom, unless the Notes are
secured equally and ratably with (or prior to) any and all other Indebtedness
secured by such Lien, except for:
(i) any Lien securing Indebtedness permitted under Section
303(b)(i);
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(ii) any Lien (A) in respect of Capital Lease Obligations or
Capital Expenditure Indebtedness permitted to be Incurred by the terms of
Section 303(a), Section 303(b)(iiii), Section 304(a)(iii) or Section
304(a)(iv), (B) existing on any Property of a Person at the time such
Person is merged or consolidated with or into the Company or any
Restricted Subsidiary or becomes a Restricted Subsidiary (and not
Incurred in anticipation of such transaction) or (C) existing on any
Property at the time of the acquisition thereof (and not Incurred in
anticipation of such transaction) whether or not assumed by the Company
or any Restricted Subsidiary; provided that in any such case such Lien
may extend only to the Property so acquired or constructed and
improvements thereon, and, in the case of any such Lien in respect of
Capital Lease Obligations and Capital Expenditure Indebtedness, the real
property on which such Property is located;
(iii) any Lien Incurred to secure the performance of statutory
obligations, bids, trade contracts, leases, surety or appeal bonds,
performance or return-of-money bonds or other obligations of a like
nature Incurred in the ordinary course of business;
(iv) any Lien to secure industrial revenue or development or
pollution control bonds;
(v) any Lien to secure any Refinancing (or successive
Refinancings), in whole or in part, of any Indebtedness secured by Liens
referred to in clauses (i) through (iv) of this Section 307(a) so long as
such Lien does not extend to any other Property and the Indebtedness so
secured is not increased;
(vi) any Lien securing only the Notes;
(vii) any Lien in favor of the Company or a wholly owned Restricted
Subsidiary;
(viii) any Lien for taxes or assessments by other governmental
charges or levies;
(ix) any Lien to secure obligations under worker's compensation,
unemployment insurance or other social security legislation, including
Liens with respect to judgments which are not currently dischargeable;
(x) materialmen's, mechanics', worker's, warehousemen's, landlord's
and carriers' Liens or other like Liens created by law (or in a lease
agreement in the case of landlord's Liens) and arising in the ordinary
course of business;
(xi) any Lien existing on the Initial Issue Date;
(xii) easements, rights of way, zoning and other similar
restrictions or encumbrances Incurred in the ordinary course of business;
and
(xiii) attachment, judgment and other similar Liens arising in
connection with court proceedings, provided that the execution or other
enforcement of such Liens is
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effectively stayed and the claims secured thereby are currently being
contested in good faith by appropriate proceedings.
(b) In addition to the foregoing, the Company and its Restricted
Subsidiaries may Incur a Lien to secure Indebtedness or enter into a Sale and
Leaseback Transaction, without equally and ratably securing the Notes, if the
sum of (i) the amount of Indebtedness secured by all Liens entered into after
the Initial Issue Date and (ii) the Attributable Value of all Sale and
Leaseback Transactions or Capital Lease Obligations in respect thereof
entered into after the Initial Issue Date and otherwise prohibited by the
Base Indenture or this Supplemental Indenture No. 2 does not exceed 10% of
the Company's Consolidated Net Tangible Assets.
SECTION 308. Limitation Concerning Distributions or Transfers By
Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, cause to exist or become effective
or enter into any encumbrance or restriction (other than pursuant to law or
regulation) on the ability of any Restricted Subsidiary: (i) to pay dividends
or make any other distributions in respect of its Capital Stock or pay any
Indebtedness or other obligation owed to the Company or any other Restricted
Subsidiary of the Company; (ii) to make loans or advances to the Company or
any Restricted Subsidiary of the Company; or (iii) to transfer any of its
Property to the Company or any other Restricted Subsidiary, except for any
encumbrance or restrictions pursuant to any agreement in effect on the date
of the closing of the Offer made hereby or any Refinancing thereof containing
encumbrances or restrictions no greater than in the agreement so Refinanced.
SECTION 309. Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate any Asset Sale unless:
(i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at least equal to the Fair Market Value of the
Property disposed of; and
(ii) at least 75% of the consideration received by the Company or
such Restricted Subsidiary for such Property (other than Non-Core
Businesses enumerated in clauses (i) through (v) of the definition of
"Non-Core Businesses" set forth in Section 203) is in the form of cash,
cash equivalents, readily marketable securities or non-cash consideration
that is immediately converted to cash, or the assumption by the purchaser
of such Property of Senior Indebtedness (provided such Senior
Indebtedness was not Incurred in connection with or in anticipation of
such Asset Sale), provided that the Company must, at the Company's option.
(A) (1) commit, or cause such Restricted Subsidiary to commit (such
commitments to include amounts anticipated to be expended pursuant to the
Company's capital investment plan (x) as adopted by the Board of
Directors and (y) evidenced by the filing of an officer's certificate
with the Trustee stating that the total amount of the Net
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Cash Proceeds of such Asset Sale is less than the aggregate amount
contemplated to be expended pursuant to such capital investment plan
within 24 months of the consummation of such Asset Sale) within 270 days
of the consummation of such Asset Sale, to apply the Net Cash Proceeds of
such Asset Sale to reinvest in Additional Core Assets or, if the
applicable Asset Sale was a sale of a Non-Core Business, in Additional
Assets and (2) apply, or cause such Restricted Subsidiary to apply,
pursuant to such commitment (which includes amounts actually expended
under the capital investment plan authorized by the Board of Directors),
such Net Cash Proceeds of such Asset Sale within 24 months of the
consummation of such Asset Sale; provided that if any commitment under
this clause (A) is terminated or rescinded after the 225th day after the
consummation of such Asset Sale, the Company or such Restricted
Subsidiary, as the case may be, shall have 45 days after such termination
or rescission to (x) apply such Net Cash Proceeds pursuant to clause (B)
or (C) below, or (y) to commit, or cause such Restricted Subsidiary to
commit, to apply the Net Cash Proceeds of such Asset Sale to reinvest in
Additional Core Assets or in Additional Assets, as the case may be, and/or
(B) offer to apply an amount equal to such Net Cash Proceeds (or
remaining Net Cash Proceeds) to the repayment of any Senior Indebtedness,
or (to the extent of Net Cash Proceeds received from an Asset Sale by
such Restricted Subsidiary) debt of a Restricted Subsidiary, and repay
such Indebtedness of any lender or debt holder who accepts such offer or,
in the case of any Indebtedness under a revolving credit facility, repay
an amount outstanding thereunder equal to such Net Cash Proceeds and
concurrently therewith, effect a permanent reduction in the committed
availability thereunder, and/or
(C) offer to apply an amount equal to such Net Cash Proceeds (or
remaining Net Cash Proceeds) to the repayment of the Notes and repurchase
any Notes properly tendered in acceptance of such prepayment offer (the
"Prepayment Offer") on a pro rata basis at a purchase price at least
equal to 100% of their principal amount plus interest accrued to the date
of such repurchase; provided, that in the event the Net Cash Proceeds
resulting from any Asset Sale, after giving effect to the purchase of
Additional Core Assets or Additional Assets, as the case may be, and/or
the repayment of Senior Indebtedness, are less than $10,000,000, the
application of an amount equal to such Net Cash Proceeds to a pro rata
offer to repurchase the Notes may be deferred until such time as such Net
Cash Proceeds, together with Net Cash Proceeds from any prior or
subsequent Asset Sales not otherwise applied in accordance with this
Section 309(a), are at least equal to $10,000,000. To the extent that
any portion of the amount of Net Cash Proceeds remains after compliance
with the preceding sentence and provided that all Holders have been given
the opportunity to tender their Notes for repurchase as provided in
clause (C) of the immediately preceding sentence, the Company or such
Restricted Subsidiary may use such remaining amount for general corporate
purposes.
(b) Within 280 days from the date of an Asset Sale, the Company
shall, if it chooses (or is obligated) to apply an amount equal to any
remaining Net Cash Proceeds (or any portion thereof) to fund an offer to
repurchase the Notes, send a written Notice
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(a "Prepayment Offer Notice"), by first-class mail, to the Holders of the
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 the Prepayment Offer (including,
but not limited to, a description of the circumstances and relevant facts
regarding the events requiring the Company to make the Prepayment Offer).
The Prepayment Offer Notice will contain all instructions and materials
necessary to enable such Holder to tender pursuant to the Prepayment Offer.
The Prepayment Offer Notice will also state:
(i) that the Company is offering to purchase Notes pursuant to the
provisions of this Section 309;
(ii) that any Note (or any portion thereof) accepted for payment
(and duly paid on the Purchase Date) pursuant to the Prepayment Offer
will cease to accrue interest after the Purchase Date and that any Note
(or any portion thereof) not tendered or accepted for payment shall
continue to accrue interest at the rate prescribed therefor by such Note;
(iii) the expiration date (the "Expiration Date") of the Prepayment
Offer, which will be, subject to any contrary requirements of applicable
law, not less than 30 days nor more than 60 days after the date of such
Prepayment Offer;
(iv) a settlement date (the "Purchase Date") for the purchase of
Notes which shall be within five Business Days after the Expiration Date;
(v) the aggregate principal amount of Notes to be purchased and the
purchase price thereof; and
(vi) a description of the procedure that a Holder must follow and
any other information necessary to tender all or any portion of such
Holder's Notes.
At the Company's request, the Trustee shall give the Prepayment
Offer Notice required in this paragraph (b) in the Company's name and at the
Company's expense. In such event, the Company shall provide the Trustee with
the information required by this paragraph (b).
To tender any Note, a Holder must surrender such Note at the place
or places specified in the Prepayment Offer Notice prior to the close of
business on the Expiration Date (such securities being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing).
Holders will be entitled to withdraw all or any portion of Notes tendered if
the Company (or its Paying Agent) receives, not later than the close of
business on the Expiration Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes
the Holder tendered, the certificate numbers of the Notes tendered and a
statement that such Holder is withdrawing all or a portion of such tender.
Any portion of Notes so tendered must be tendered or withdrawn in an integral
multiple of $1,000 principal amount.
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(c) Notwithstanding the foregoing, if any Note (or any portion
thereof) accepted for payment shall not be so paid pursuant to the provisions
of Section 309(b), then, from the Purchase Date until the principal of (and
premium, if any) and interest on such Note is paid, interest shall be paid on
the unpaid principal (and premium, if any) and, to the extent permitted by
law, on any accrued but unpaid interest thereon, in each case, at the rate
prescribed therefor by such Note.
(d) Upon surrender pursuant to this Section 309 of any Note
tendered or accepted in part, the Company shall execute, and the Trustee
shall authenticate and deliver, a new Note of the same series, of any
authorized denomination, in an aggregate principal amount equal to the unpaid
portion of the surrendered Note.
SECTION 310. Company May Consolidate, Etc.
(a) The Company shall not merge or consolidate with any other
corporation (other than a merger of a Restricted Subsidiary into the Company
in which the Company is the continuing corporation) or sell, transfer or
convey its Property or assets as an entirety or substantially as an entirety
to any Person other than a wholly owned Restricted Subsidiary, unless:
(i) the entity formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, transfer or
conveyance is made shall be a corporation organized and existing under
the laws of the United States of America or a State or the District of
Columbia and such corporation expressly assumes, by supplemental
indenture satisfactory to the Trustee, executed and delivered to the
Trustee by such corporation, the due and punctual payment of the
principal of, premium, if any, and interest on all the Notes, according
to their tenor, and the due and punctual performance and observance of
all of the covenants and conditions of the Indenture to be performed by
the Company;
(ii) immediately before and after giving effect to such transaction
or series of transactions, no Default or Event of Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with
such transaction or series of transactions), the Company (or the
surviving entity if the Company is not continuing) would be able to Incur
at least $1.00 of additional Indebtedness pursuant to Section 303(a), or,
in the case of a merger or consolidation of the Company into or with a
wholly owned Restricted Subsidiary, the Consolidated Interest Coverage
Ratio of the surviving entity would be no less than the Consolidated
Interest Coverage Ratio of the Company immediately prior to such merger
or consolidation;
(iv) immediately after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with
such transaction or series of transactions) as
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if such transaction had occurred on the first day of the Determination
Period, the Company (or the surviving entity if the Company is not
continuing) shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to the
transaction or series of transactions;
(v) the Company has delivered to the Trustee an Officer's
Certificate stating that such consideration, merger, sale, conveyance or
transfer and such supplemental indenture comply with this Section 310 and
that all conditions precedent herein provided for relating to such
transaction have been complied with; and
(vi) the Trustee shall have received an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, conveyance
or acquisition, and any such assumption, complies with the provisions of
this Section 310.
(b) In case of any such consolidation or merger or such sale,
transfer or conveyance to a Person other than a Restricted Subsidiary in
accordance with Section 310(a) and upon any such assumption by the
successor corporation, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named
herein as the Company and the predecessor corporation shall thereupon be
released from all liability with respect to the Notes, the Indenture and
this Supplemental Indenture No. 2. Such successor corporation thereupon
may cause to be signed, and may issue either in its own name or in the
name of Armco Inc., any or all of the Notes which theretofore shall not
have been signed by the Company and delivered to the Trustee; and, upon
the order of such successor corporation, instead of the Company, and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any which
previously shall have been signed and delivered by the officers of the
Company to the Trustee for authentication, and any Notes which such
successor corporation thereafter shall cause to be signed and delivered
to the Trustee for that purpose. All the Notes so issued shall in all
respects have the same legal rank and benefit under the Indenture as the
Notes theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Notes had been issued at the date of
the execution hereof.
In case of any such consolidation, merger, sale, transfer or
conveyance such changes in phraseology and form (but not in substance)
may be made in the Notes thereafter to be issued as may be appropriate.
(c) If, upon any such consolidation, merger, sale, transfer or
conveyance or upon any acquisition by the Company by purchase or
otherwise of all or any part of the Property of any other corporation,
any Property of the Company owned immediately prior thereto would
thereupon become subject to any mortgage, lien, pledge, charge or
encumbrance, the Company, prior to such consolidation, merger, sale,
conveyance or acquisition, the Company, (or the surviving entity if the
Company is not continuing) shall secure the Notes (equally and ratably
with any other Indebtedness of the Company then
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entitled thereto) by a lien on all such Property of the Company prior to
all liens charges and encumbrances other than any theretofore existing
thereon;
(d) The provisions of Article 11 of the Base Indenture are
superseded and of no force or effect with respect to the Notes.
SECTION 311. Restricted and Unrestricted Subsidiaries.
(a) The Company may designate a Subsidiary (including a newly
formed or newly acquired Subsidiary) of the Company or any of its Restricted
Subsidiaries as an Unrestricted Subsidiary if (i) such Subsidiary has total
assets of $1,000 or less, or (ii) such designation is effective immediately
upon such Person becoming a Subsidiary of either the Company or any of its
Restricted Subsidiaries. Unless so designated as an Unrestricted Subsidiary,
any Person that becomes a Subsidiary of the Company or any of its Restricted
Subsidiaries shall be classified as a Restricted Subsidiary thereof. Except
as provided in clause (i) of the first sentence of this Section 311, no
Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.
Subject to Section 311(b), an Unrestricted Subsidiary may be redesignated as
a Restricted Subsidiary. The designation of an Unrestricted Subsidiary or
the removal of such designation in compliance with Section 311(b) shall be
made by the Board of Directors pursuant to a Certified Resolution delivered
to the Trustee and shall be effective as of the date specified in the
applicable Certified Resolution, which shall not be prior to the date such
Certified Resolution is delivered to the Trustee.
(b) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, take any action or enter into any transaction or
series of transactions that would result in a Person becoming a Restricted
Subsidiary (whether through an acquisition, the redesignation of an
Unrestricted Subsidiary or otherwise) unless, after giving effect to such
action, transaction or series of transactions:
(i) on a pro forma basis, the Company could Incur at least $1.00 of
additional Indebtedness pursuant to Section 303(a);
(ii) such Subsidiary could then Incur, pursuant to clauses (ii),
(iii) or (iv) of Section 304(a), all Indebtedness as to which it is
obligated at such time;
(iii) no Default or Event of Default would occur or be continuing;
and
(iv) there exist no Liens with respect to the Property of such
Subsidiary other than Liens permitted to be Incurred under Section 307.
(c) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, take any action or enter into any transaction or series
of transactions that would result in any such Restricted Subsidiary
ceasing to be a Subsidiary (other than a merger or consolidation with the
Company or another Restricted Subsidiary) unless, after giving effect to
such action, transaction or series of transactions, either:
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(i) (A) neither the Company nor any of its Affiliates (other than a
Person that is an Affiliate by virtue of its ownership of Capital Stock
or control of the Company) shall own any Capital Stock of such former
Restricted Subsidiary or any successor in interest to the business
thereof, and (B) there shall not exist any Indebtedness of the former
Restricted Subsidiary or any successor in interest to the business
thereof in favor of the Company or any of its Restricted Subsidiaries; or
(ii) the Company and its Restricted Subsidiaries would be permitted
to make a Restricted Payment in the amount of the aggregate Investment
(excluding (A) any Investment to the extent of cash or the Fair Market
Value of Property other than cash received by the Company or its
Restricted Subsidiary, as the case may be, in respect of or as a
repayment of such Investment, and (B) the amount of Indebtedness of the
former Restricted Subsidiary received by the Company or its Restricted
Subsidiaries as part of the consideration for the acquisition of the
Capital Stock or assets of such former Restricted Subsidiary), if any,
made in the former Restricted Subsidiary after the Initial Issue Date.
ARTICLE IV.
Redemption
SECTION 401. Redemption of the Notes. Except as provided in this
Article IV and in the Notes, the Notes are not subject to redemption by the
Company.
On or after September 15, 2002, the Notes may, from time to time, be
redeemed, in whole or in part, at the option of the Company upon not less
than 30 nor more than 60 days' prior notice to Holders, at the redemption
prices set forth below (expressed in percentages of the principal amount
thereof), plus accrued and unpaid interest thereon, to the Redemption Date.
Redemption Period Percentage
---------------------------------------- ----------
September 15, 2002 to September 14, 2003 104.50%
September 15, 2003 to September 14, 2004 103.00%
September 15, 2004 to September 14, 2005 101.50%
September 15, 2005 and thereafter 100.00%
At any time prior to September 15, 2000 the Company, at its option,
may redeem up to 33 1/3% of the aggregate principal amount of Initial Notes
originally issued and may redeem up to 33 1/3% of the aggregate principal
amount of Exchange Notes originally issued with the net proceeds of one or
more Equity Offerings of the Company at a redemption price equal to 109.00%
of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon to the date of redemption provided, however, that after any such
redemption at least 66 2/3% of the aggregate principal amount of the original
issue of Initial or Exchange Notes, respectively, remains outstanding. Any
such redemption must occur on or prior to 120 days after the receipt of such
net proceeds.
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In addition, upon the occurrence of a Change of Control prior to
September 15, 2002, the Company, at its option, may redeem all, but not less
than all, of the outstanding Notes at a redemption price equal to 100% of the
principal amount thereof plus the applicable Make-Whole Premium. The Company
shall give not less than 30 nor more than 60 days' prior notice to Holders of
such redemption within 30 days following the applicable Change of Control.
If less than all of the Notes are to be redeemed, the selection of
the Notes to be redeemed shall be made by the Trustee in accordance with
Section 403. Notice of redemption will be mailed to the Holders, by
first-class mail, at the addresses of such Holders as they appear on the Note
Register.
SECTION 402. Notice to Trustee.
In order to effect any redemption, the Company shall notify the
Trustee of the Redemption Date and the principal amount of Notes to be
redeemed and shall deliver to the Trustee an Officers' Certificate certifying
resolutions of the Board of Directors authorizing the redemption and an
Opinion of Counsel with respect to the due authorization of such redemption
and that such redemption is being made in accordance with the Indenture and
the Notes.
The Company shall give the notice provided for in this Section 402
at least 60 days but not more than 90 days before each Redemption Date
(unless a shorter notice period shall be satisfactory to the Trustee).
SECTION 403. Selection of Notes to be Redeemed.
If less than all the Notes are to be redeemed, the Trustee shall
allocate the total principal amount of Notes to be redeemed on a pro rata
basis, by lot or by such other method as the Trustee deems fair and
appropriate to the Holders.
The Trustee shall make the selection not more than 60 days but not
less than 30 days before each Redemption Date from outstanding Notes not
previously called for redemption or submitted for repurchase pursuant to
Section 305, 306, or 309.
The Trustee may select for redemption portions (equal to $1,000 or
any integral multiple thereof) of the principal of Notes that have
denominations larger than $1,000. Provisions of this Supplemental Indenture
No. 2 that apply to Notes called for redemption shall also apply to portions
of Notes called for redemption. The Trustee shall notify the Company
promptly of the Notes or portions of Notes to be called for redemption.
SECTION 404. Notice of Redemption.
At least 30 but not more than 60 days before a Redemption Date, the
Company shall give a notice of redemption by first-class mail to each Holder
whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
33
<PAGE>
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that the Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(5) that, unless the Company defaults in making the redemption
payment, interest on the Notes called for redemption ceases to accrue on
and after the specified Redemption Date and the only remaining right of
the Holders is to receive payment of the Redemption Price upon surrender
to the Trustee or the Paying Agent of the Notes; and
(6) if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of
such Note to be redeemed and that, on or after the Redemption Date, upon
surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such
event, the Company shall provide the Trustee with the information required by
clauses (1), (2) and (3) above.
SECTION 405. Effect of Notice of Redemption.
Once notice of redemption is mailed (after the Trustee has received
the notice provided for in Section 402), the Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price and
shall cease to bear interest from and after the Redemption Date (unless the
Company shall fail to make payment of the Redemption Price on the Redemption
Date). Upon surrender to the Paying Agent such Notes shall be paid at the
Redemption Price; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders registered as such at the close of business on the relevant Record
Dates therefor in accordance with the terms of the Notes and the provisions
of Section 2.04 of the Indenture.
SECTION 406. Deposit of Redemption Price.
On or prior to 10:00 a.m., New York City time, on each Redemption
Date, the Company shall deposit with the Trustee or Paying Agent (or if the
Company acts as its own Paying Agent, shall segregate and hold in a separate
trust fund for the sole benefit of the Holders) money, in federal or other
immediately available funds, sufficient to pay the Redemption Price of all
Notes to be redeemed on the Redemption Date other than Notes or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation.
34
<PAGE>
So long as the Company complies with the preceding paragraph and
the other provisions of this Article, interest on the Notes to be redeemed on
the applicable Redemption Date shall cease to accrue from and after such date
and such Notes or portions thereof shall be deemed not to be entitled to any
benefit under the Indenture except to receive payment of the Redemption Price
on the Redemption Date. If any Note called for redemption shall not be so
paid upon surrender for redemption, then, from the Redemption Date until such
principal is paid, interest shall be paid on the unpaid principal and, to the
extent permitted by law, on any accrued but unpaid interest thereon, in each
case at the rate prescribed therefor by such Notes.
The provisions of Section 12.06 of the Indenture shall apply to any
money held by the Trustee or any Paying Agent under this Article that remains
unclaimed for two years after the Redemption Date for any Notes called for
redemption pursuant to the provisions of this Article.
SECTION 407. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall execute, and the Trustee shall authenticate and deliver, at the expense
of the Company, a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
SECTION 408. Defeasance.
The defeasance provisions of Article XII of the Indenture shall be
applicable to the Notes.
ARTICLE V.
Additional Events of Default
SECTION 501. (a) In addition to the Events of Default specified
in clauses (a) - (f) of Section 6.01 of the Indenture, the following events
are Events of Default with respect to the Notes and shall be subject to the
procedures and other provisions applicable to the Events of Default contained
in clauses (a) - (f) of such Section 6.01:
(a) a default by the Company or any of its Significant Restricted
Subsidiaries under, any bonds, debentures, mortgages, indentures,
agreements or instruments, under which there may be issued, or by which
there may be secured or evidenced, any indebtedness for borrowed money of
the Company or any Significant Restricted Subsidiary, whether such
indebtedness now exists or shall hereafter be created, and such
indebtedness shall have been accelerated (or shall have matured) and such
indebtedness remains unpaid, provided that the principal amount of such
indebtedness with respect to which any such default and acceleration (or
maturity) has occurred and is continuing, together with the principal
amount of all other such indebtedness with respect to which such a
default and acceleration (or maturity) has occurred and is continuing,
aggregates $5,000,000 or more; or
35
<PAGE>
(b) the entry by a court of competent jurisdiction of one or more
judgments or orders against the Company or any of its Significant
Restricted Subsidiaries in an uninsured aggregate amount in excess of
$5,000,000 is not discharged, waived, stayed or satisfied for a period of
60 consecutive days.
ARTICLE VI.
Miscellaneous
SECTION 601. The recitals of fact herein and in the Notes shall be
taken as statements of the Company and shall not be construed as made by the
Trustee.
SECTION 602. THIS SUPPLEMENTAL INDENTURE NO. 2 AND THE NOTES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
SECTION 603. In case any one or more of the provisions contained
in this Supplemental Indenture No. 2 or in the Notes should be invalid,
illegal, or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected, impaired, prejudiced or disturbed thereby.
SECTION 604. Wherever in this Supplemental Indenture No. 2 any of
the parties hereto is named or referred to, such reference shall be deemed to
include the successors or assigns of such party, and all the covenants and
agreements in this Supplemental Indenture No. 2 contained by or on behalf of
the Company or the Trustee shall bind and inure to the benefit of the
respective successors and assigns of such parties, whether so expressed or
not.
SECTION 604a. For purposes of the Notes and this Supplemental
Indenture No. 2, Section 2.02(a) of the Indenture is amended to read as
follows:
"(a) a Certified Resolution, or a Certified Resolution and
Officers' Certificate, setting forth"
36
<PAGE>
SECTION 605. (a) This Supplemental Indenture No. 2 may be
simultaneously executed in several counterparts, and all such counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.
(b) The descriptive headings of the several Articles of this
Supplemental Indenture No. 2 were formulated, used and inserted in this
Supplemental Indenture No. 2 for convenience only and shall not be deemed to
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture No. 2 to be duly executed, all as of the day and year
first above written.
THE FIFTH THIRD BANK,
as Trustee
By
------------------------------
Name:
Title:
ARMCO INC.
By
------------------------------
Name:
Title:
37
<PAGE>
STATE OF _____________ )
: ss:
COUNTY OF ___________ )
On the ____ day of __________, 1997, before me personally came
_____________, to me known, who, being by me duly sworn, did depose and say
that he resides at ___________ ____________________; that he is a __________
of ___________, one of the parties described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the
seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the board of directors of said corporation; and that
he signed his name thereto by like authority.
[NOTARIAL SEAL]
----------------------------------
NOTARY PUBLIC
38
<PAGE>
STATE OF _____________ )
: ss:
COUNTY OF ___________ )
On the ____ day of __________, 1997, before me personally came
_____________, to me known, who, being by me duly sworn, did depose and say
that he resides at ___________ ____________________; that he is a __________
of ___________, one of the parties described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the
seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the board of directors of said corporation; and that
he signed his name thereto by like authority.
[NOTARIAL SEAL]
-------------------------------
NOTARY PUBLIC
39
<PAGE>
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A,
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A) (1), (2), (3)
OR (7)) AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON
REGULATION S.
PROVISIONS RELATING TO INITIAL NOTES AND EXCHANGE NOTES
1. DEFINITIONS
1.1 Definitions
Capitalized terms used but not defined herein that are defined in the
Supplemental Indenture to which this Appendix is attached shall have the
meaning ascribed therein to such terms. For the purposes of this Appendix A
the following terms shall have the meanings indicated below:
"Definitive Note" means a certificated Note.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Salomon Brothers Inc and Chase
Securities Inc.
"Purchase Agreement" means the Purchase Agreement dated
September 9, 1997, among the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Agreement, to certain Holders of Initial Notes,
to issue and deliver to such Holders, in exchange for the Initial Notes, a
like aggregate principal amount of Exchange Notes registered under the
Securities Act.
"Registration Agreement" means the Registration Agreement
dated September 9, 1997, among the Company and the Initial Purchasers.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Custodian" means the custodian with respect to a
Global Note (as appointed by the Depositary), or any successor person thereto
and shall initially be the Trustee.
A-1
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"Shelf Registration Statement" means the registration
statement issued by the Company in connection with the offer and sale of
Initial Notes pursuant to the Registration Agreement.
"Transfer Restricted Notes" means Definitive Notes and Notes
that bear or are required to bear the legend set forth in Section 2.3(d)
hereto. 1.2 Other Definitions
<TABLE>
<CAPTION>
Defined in
Term Section:
---- ----------
<S> <C>
"Agent Members"....................................................................................... 2.1(b)
"Cedel Bank".......................................................................................... 2.1(a)
"Euroclear"........................................................................................... 2.1(a)
"Global Note"......................................................................................... 2.1(a)
"Regulation S"........................................................................................ 2.1(a)
"Rule 144A"........................................................................................... 2.1(a)
</TABLE>
2. The Notes
2.1 Form and Dating
The Initial Notes are being offered and sold by the Company pursuant to
the Purchase Agreement.
(a) Global Notes. Initial Notes offered and sold to a QIB in reliance on
Rule 144A under the Securities Act ("Rule 144A") or in reliance on Regulation
S under the Securities Act ("Regulation S"), in each case as provided in the
Purchase Agreement, shall be issued initially in the form of one or more
permanent global notes in definitive, fully registered form without interest
coupons with the global securities legend and restricted notes legend set
forth in Exhibit 1 hereto (each, a "Global Note"), which shall be deposited
on behalf of the purchasers of the Initial Notes represented thereby with the
Trustee, as custodian for the Depositary (or with such other custodian as the
Depositary may direct)(and, in the case of Regulation S, for the accounts of
designated agents holding on behalf of the Euroclear System ("Euroclear") or
Cedel Bank, societe anonyme ("Cedel Bank")), and registered in the name of
the Depositary or a nominee of the Depositary, duly executed by the Company
and authenticated by the Trustee as provided in the Indenture. The aggregate
principal amount of the Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided.
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<PAGE>
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Note deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(b) and pursuant to an order of the Company, authenticate and
deliver initially one or more Global Notes that (i) shall be registered in
the name of the Depositary for such Global Note or Global Notes or the
nominee of such Depositary and (ii) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the
Trustee as custodian for the Depositary pursuant to a FAST Balance
Certificate Agreement between the Depositary and the Trustee.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Supplemental Indenture No. 2 with respect to any
Global Note held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Note, and the Depositary may
be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished
by the Depositary or impair, as between the Depositary and its Agent Members,
the operation of customary practices of such Depositary governing the
exercise of the rights of a holder of a beneficial interest in any Global
Note.
(c) Definitive Notes. Except as provided in this Section 2.1 or Sections
2.3 or 2.4, owners of beneficial interests in Global Notes will not be
entitled to receive physical delivery of certificated Notes. Upon transfer of
a Definitive Note to a QIB, such Definitive Note will, unless the Global Note
has previously been exchanged, be exchanged for an interest in a Global Note
pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver: (a)
Initial Notes for original issue in an aggregate principal amount of
$150,000,000 and (b) Exchange Notes for issue only in a Registered Exchange
Offer pursuant to the Registration Agreement, for a like principal amount of
Initial Notes, in either case, upon a written order of the Company. Such
order shall specify the amount of the Notes to be authenticated and the date
on which the original issue of Notes is to be authenticated and whether the
Notes are to be Initial Notes or Exchange Notes. The aggregate principal
amount of Notes outstanding at any time may not exceed $150,000,000, except
as provided in Section 2.08 of the Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Notes. When Definitive Notes are presented to the Debt Security Registrar
with a request to register the transfer of such Definitive Notes or to
exchange such Definitive Notes for an equal principal amount of Definitive
Notes of other authorized denominations, the Debt Security Registrar shall
register the transfer or make the exchange as requested if the requirements
set forth in the Indenture for such transaction are met; provided, however,
that the Definitive Notes presented or surrendered for registration of
transfer or exchange:
A-3
<PAGE>
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) in the case of Transfer Restricted Notes that are Definitive
Notes, such Notes shall be (A) transferred or exchanged pursuant to an
effective registration statement under the Securities Act or (B) shall be
accompanied by the following additional information and documents, as
applicable:
(1) if such Transfer Restricted Notes are being delivered to
the Debt Security Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification from such Holder
to that effect (in the form set forth on the reverse of the Notes),
(2) if such Transfer Restricted Notes are being transferred to the
Company, a certification to that effect (in the form set forth on
the reverse of the Notes), (3) if such Transfer Restricted Notes are
being transferred to an accredited investor, a certification to that
effect (in the form set forth on the reverse of the Notes) and a
letter in the form of Annex A hereto or (4) if such Transfer
Restricted Notes are being delivered to the Debt Security Registrar
by a Holder for transfer pursuant to an exemption from registration
in accordance with Rule 144 under the Securities Act, (x) a
certification to that effect (in the form set forth on the reverse
of the Notes) and (y) if the Company so requests, evidence
reasonably satisfactory to it as to the compliance therewith.
(b) Restrictions on Transfer of a Definitive Note for a Beneficial
Interest in a Global Note. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Note, duly endorsed or accompanied by appropriate instruments or transfer, in
form satisfactory to the Trustee, together with:
(i) in the case of Transfer Restricted Notes that are Definitive
Notes, certification, (in the form set forth on the reverse of the Note),
that such Definitive Note is being transferred (A) to a QIB in accordance
with Rule 144A, or (B) outside the United States in an offshore
transaction within the meaning of Regulation S and in compliance with
Rule 904 under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer Restricted
Security, written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the Global Note,
such instructions to contain information regarding the Depositary account
to be credited with such increase,
then the Trustee shall cancel such Definitive Note and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Securities Custodian,
the aggregate principal amount of Notes represented by the Global Note to be
increased by the aggregate principal amount of the Definitive Note to be
A-4
<PAGE>
exchanged and shall credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in the Global
Note equal to the principal amount of the Definitive Note so canceled. If no
Global Notes are then outstanding and the Global Note has not been previously
exchanged pursuant to Section 2.4, the Company shall issue and the Trustee
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. (i) The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with Supplemental Indenture No. 2 (including
applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary (and Euroclear or Cedel Bank, if applicable)
therefor. A transferor of a beneficial interest in a Global Note shall
deliver to the Debt Security Registrar a written order given in accordance
with the Depositary's procedures (and the procedures of Euroclear or Cedel
Bank, if applicable) containing information regarding the participant account
of the Depositary to be credited with a beneficial interest in the Global
Note. The Debt Security Registrar or Euroclear or Cedel Bank, if applicable,
shall, in accordance with such instructions instruct the Depositary to credit
to the account of the Person specified in such instructions a beneficial
interest in the Global Note and to debit the account of the Person making the
transfer the beneficial interest in the Global Note being transferred.
(ii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iii) In the event that a Global Note is exchanged for Notes in
definitive registered form pursuant to Section 2.4 prior to the
consummation of a Registered Exchange Offer or the effectiveness of a
Shelf Registration Statement with respect to such Notes, such Notes may
be exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial Notes
intended to ensure that such transfers comply with Rule 144A or
Regulation S, as the case may be) and such other procedures as may from
time to time be adopted by the Company.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security. Any person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a Definitive
Security. Upon receipt by the Trustee of written instructions from the
Depositary or its nominee, pursuant to instructions from its direct or
indirect participants or otherwise, and upon receipt by the Trustee of a
written order of the person designated by the Depositary as having such a
beneficial interest containing registration instructions and, in the case of
a beneficial interest in a Transfer Restricted Security only, the following
additional information and documents:
A-5
<PAGE>
(i) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in the form set forth on
the reverse of the Note); or
(ii) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A or pursuant to an exemption from registration
in accordance with Regulation S or pursuant to an effective registration
statement under the Securities Act, to an accredited investor, a
certification to that effect from the holder of such beneficial interest
(in the form set forth on the reverse of the Note); or
(iii) if such beneficial interest is being transferred pursuant to an
exemption from registration in accordance with Rule 144 under the Securities
Act, a certification to that effect (in the form set forth on the reverse of
the Note) and if the Company so requests, evidence reasonably satisfactory
to it as to compliance with such Rule,
then the Trustee will cause the aggregate principal amount of the Global
Security to be reduced, the Trustee shall promptly notify the Depositary of
such action and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers' Certificate,
the Trustee will authenticate and deliver to the transferee, a Definitive
Note.
(e) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Note certificate evidencing the Global Notes and the Notes in
certificated form (and all Notes issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY
MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE
SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY
HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY
TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN
EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY
IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S
UNDER
A-6
<PAGE>
THE SECURITIES ACT ("REGULATION S")(AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501 (A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AN
"ACCREDITED INVESTOR") (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR
ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS
ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION,
AND A CERTIFICATE, WHICH MAY BE OBTAINED FROM THE TRUSTEE AND WHICH SHALL
BE IN THE FORM OF ANNEX A TO THE INDENTURE, IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL
FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER
BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
ACCREDITED INVESTOR AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o) (2) OR RULE 902 UNDER) REGULATION S. THE
HOLDER HEREOF BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY THE
PROVISIONS OF THE REGISTRATION AGREEMENT, DATED SEPTEMBER 9, 1997
RELATING TO THE NOTES."
Each Definitive Note will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a Global Note)
pursuant to clause (3), (5) or (6) of the foregoing legend:
A-7
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(A) in the case of any Transfer Restricted Note that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Note for a Definitive Note that
does not bear the legend set forth above and rescind any restriction
on the transfer of such Transfer Restricted Note; and
(B) in the case of any Transfer Restricted Note that is
represented by a Global Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a Definitive
Note that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Note,
in either case, if the Holder certifies in writing to the Registrar that
its request for such exchange was made in reliance on Rule 144 or
Regulation S, if applicable (such certification to be in the form set
forth on the reverse of the Initial Note).
(iii) After a transfer of any Initial Notes during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Initial Notes, all requirements pertaining to legends on such Initial
Note will cease to apply, the requirements requiring any such Initial
Note issued to certain Holders be issued in global form will cease to
apply, and an Initial Note in certificated or global form without legends
will be available to the transferee of the Holder of such Initial Notes
upon exchange of such transferring Holder's certificated Initial Note.
Upon the occurrence of any of the circumstances described in this
paragraph, the Company will deliver an Officers' Certificate to the
Trustee instructing the Trustee to issue Notes without legends.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Notes pursuant to which certain Holders of such
Initial Notes are offered Exchange Notes in exchange for their Initial
Notes, all requirements pertaining to such Initial Notes that Initial
Notes issued to certain Holders be issued in global form will cease to
apply and certificated Initial Notes with the restricted notes legend set
forth in Exhibit 1 hereto will be available to Holders of such Initial
Notes that do not exchange their Initial Notes, and Exchange Notes in
certificated or global form will be available to Holders that exchange
such Initial Notes in such Registered Exchange Offer. Upon the occurrence
of any of the circumstances described in this paragraph, the Company will
deliver an Officers' Certificate to the Trustee instructing the Trustee
to issue Notes without legends.
(e) Cancellation or Adjustment of Global Note. At such time as all
beneficial interests in a Global Note have either been exchanged for
Certificated or Definitive Notes, redeemed, repurchased or canceled, such
Global Note shall be returned to the Trustee for cancellation or retained and
canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for Certificated or
Definitive Notes, repurchased or canceled, the principal amount of Notes
represented by such Global Note shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Note) with respect to such Global Note, by the
Trustee or the Securities Custodian, to reflect such reduction.
A-8
<PAGE>
(f) Obligations with Respect to Transfers and Exchanges of Notes.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Notes in certificated
form and Global Notes at the Debt Security Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge
payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon exchange or
transfer pursuant to Section 3.08).
(iii) The Debt Security Registrar shall not be required to register
the transfer of or exchange of any Note for a period beginning 15 days
before the mailing of a notice of an offer to repurchase Notes or 15 days
before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Note, the Company, the Trustee, the Paying Agent, the Debt Security
Registrar may deem and treat the person in whose name a Note is
registered as the absolute owner of such Note for the purpose of
receiving payment of principal of and interest on such Note and for all
other purposes whatsoever, whether or not such Note is overdue, and none
of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Notes issued upon any transfer or exchange pursuant to the
terms of this Supplemental Indenture No. 2 shall evidence the same debt
and shall be entitled to the same benefits under this Supplemental
Indenture No. 2 as the Notes surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Note, a member of, or a participant in the
Depositary or other Person with respect to the accuracy of the records of
the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Notes or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Notes. All notices and communications to be given to the Holders and all
payments to be made to Holders under the Notes shall be given or made
only to the registered Holders (which shall be the Depositary or its
nominee in the case of a Global Note). The rights of beneficial owners in
any Global Note shall be exercised only through the Depositary subject to
the applicable rules and procedures of the Depositary. The Trustee may
rely and shall be fully protected in relying upon information furnished
by the Depositary with respect to its members, participants and any
beneficial owners.
A-9
<PAGE>
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Supplemental Indenture No. 2 or under applicable law
with respect to any transfer of any interest in any Note (including any
transfers between or among Depositary participants, members or beneficial
owners in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms of
this Supplemental Indenture No. 2, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
2.4 Certificated Notes
(a) A Global Note deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of Notes in
certificated form in an aggregate principal amount equal to the principal
amount of such Global Note, in exchange for such Global Note, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for such
Global Note or if at any time such Depositary ceases to be a "clearing
agency" registered under the Exchange Act and a successor depositary is not
appointed by the Company within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing that it elects to cause the
issuance of Notes in certificated form under this Supplemental Indenture No.
2.
(b) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary
to the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Note, an equal aggregate principal
amount of certificated Initial Notes of authorized denominations. Any portion
of a Global Note transferred pursuant to this Section 2.4 shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Note delivered in exchange for an interest in the
Global Note shall, except as otherwise provided by Section 2.3(d), bear the
restricted notes legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Note may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Supplemental Indenture No. 2 or the Notes.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of Certificated Notes in
definitive, fully registered form without interest coupons.
A-10
<PAGE>
Exhibit 1 to Appendix A
FORM OF FACE OF INITIAL NOTE
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY
OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY
HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO
THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION
S UNDER THE SECURITIES ACT ("REGULATION S")(AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE
A-1-1
<PAGE>
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501 (A) (1),
(2), (3) OR (7) UNDER THE SECURITIES ACT (AN "ACCREDITED INVESTOR") (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER
ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE, WHICH MAY BE
OBTAINED FROM THE TRUSTEE, IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND
THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT,
OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. AN ACCREDITED INVESTOR HOLDING THIS SECURITY
AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND
OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER
BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF
THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A OR (2) AN INSTITUTION THAT IS AN ACCREDITED INVESTOR AND THAT IT
IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR
(3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN
ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o) (2) OR RULE 902 UNDER)
REGULATION S THE HOLDER HEREOF BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY
THE PROVISIONS OF THE REGISTRATION AGREEMENT, DATED SEPTEMBER 9, 1997
RELATING TO THE NOTES.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE DEBT
SECURITY REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.]1
- ------------------------
(1) Include if a Definitive Note to be held by an IAI.
A-1-2
<PAGE>
REGISTERED REGISTERED
ARMCO INC.
No CUSIP
-------------------- -------------
9% Senior Note Due 2007
ARMCO INC., a corporation duly organized and existing under the laws of
the State of Ohio (herein referred to as the "Company", which term includes
any successor corporation under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to or registered
assigns, the principal sum of [indicated on Schedule A hereof]*
[of Dollars]** on September 15, 2007, and to pay interest thereon in
arrears from the date of original issuance hereof or from the most recent
date to which interest has been paid or duly provided for, semiannually on
March 15 and September 15 (each hereinafter called an "Interest Payment
Date") in each year commencing March 15, 1998 at the rate of 9% per annum
until the principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Note is registered
at the close of business on the March 1 or September 1, as the case maybe,
next preceding such Interest Payment Date, unless the Company shall default
in the payment of interest due on such Interest Payment Date, in which case
such defaulted interest shall be paid to the person in whose name this Note
is registered at the close of business on a special record date for the
payment of such defaulted interest established by notice to the registered
holders of the Notes not less than ten days preceding such special record
date.
Payment of the principal of, premium, if any, and interest on this Note
will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, City and State of New York, in such coin
or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
at the option of the Company payment of interest may be made by check mailed
to the address of the person entitled thereto as such address shall appear in
the Debt Security Register related to the Notes and provided, further, that
at the option of any Holder of Notes, payment of interest to such Holder will
be made by wire transfer to an account designated
- ------------------------
* Applicable to Global Notes only.
** Applicable to certified notes only.
A-1-3
<PAGE>
by such Holder. So long as payments of interest are made by check or wire
transfer, the Company need not maintain an office or agency for the payment
of interest in the Borough of Manhattan, City and State of New York.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture referred to on the reverse hereof.
(IN) WITNESS WHEREOF, Armco Inc. has caused this Note to be signed
manually or by facsimile by its Chairman of the Board or its President or one
of its Corporate Vice Presidents and by its Treasurer or one of its Assistant
Treasurers or its Secretary or one of its Assistant Secretaries, and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated: September 12, 1997
ARMCO INC.
[SEAL]
Attest: By
------------------------------
Name:
Title:
By
Name:
Title:
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Note is one of the Debt Securities described in the within-mentioned
Indenture.
The Fifth Third Bank,
as Trustee
By
-------------------------------
Authorized Officer
A-1-4
<PAGE>
FORM OF REVERSE OF INITIAL NOTE
ARMCO INC.
(9)% Senior Note Due 2007
This Note is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (hereinafter called
the "Debt Securities"), of the series hereinafter specified, all issued or to
be issued under an indenture dated as of October 1, 1992, as supplemented by
Supplemental Indenture No. 1 dated as of October 1, 1992 and by Supplemental
Indenture No. 2 dated as of September 1, 1997 ("Supplemental Indenture No.
2") (together, as so supplemented, the "Indenture"), duly executed and
delivered by the Company to the Fifth Third Bank, as trustee (hereinafter
called the "Trustee"), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the respective rights
and duties thereunder of the Trustee, the Company and the Holders of the Debt
Securities. The Debt Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest at different rates (if any)
which interest may be payable at different times, may be subject to different
redemption, repurchase or purchase provisions (if any), may be subject to
different sinking or analogous funds, may be subject to different covenants
and Events of Default, may be subject to different defeasance provisions, and
may otherwise vary as in the Indenture provided. This Note is one of an issue
of Debt Securities designated as the "9% Senior Notes Due 2007" of the
Company (herein called the "Notes") issued under the Indenture, limited in
aggregate principal amount to $150,000,000. Pursuant to a Registration
Agreement dated September 9, 1997, the Company has agreed to use its best
efforts to exchange its 9% Senior Exchange Notes Due 2007 (the "Exchange
Notes") for a like principal amount of the Notes. The Notes and the Exchange
Notes will be treated for all purposes of the Indenture as one series of Debt
Securities.
On or after September 15, 2002, the Notes may, from time to time,
be redeemed, in whole or in part, at the option of the Company upon not less
than 30 nor more than 60 days' prior notice to Holders, at the redemption
prices set forth below (expressed in percentages of the principal amount
thereof), plus accrued and unpaid interest thereon, to the Redemption Date.
<TABLE>
<CAPTION>
Redemption Period Percentage
----------------- ----------
<S> <C>
September 15, 2002 to September 14, 2003.............................................................. 104.50%
September 15, 2003 to September 14, 2004.............................................................. 103.00%
September 15, 2004 to September 14, 2005.............................................................. 101.50%
September 15, 2005 and thereafter..................................................................... 100.00%
</TABLE>
At any time prior to September 15, 2000 the Company, at its option, may
redeem up to 33 1/3% of the aggregate principal amount of Notes originally
issued with the net proceeds from one or more Equity Offerings of the Company
at a redemption price equal to 109.00% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the date of redemption
provided, however, that after any such redemption at least 66 2/3% of the
aggregate
A-1-5
<PAGE>
principal amount of the original issue of the Notes remains outstanding. Any
such redemption must occur on or prior to 120 days after the receipt of such
net proceeds.
In addition, upon the occurrence of a Change of Control prior to
September 15, 2002, the Company, at its option, may redeem all, but not less
than all, of the outstanding Notes at a redemption price equal to 100% of the
principal amount thereof plus the applicable Make-Whole Premium. The Company
shall give not less than 30 nor more than 60 days' prior notice to Holders of
such redemption within 30 days following the applicable Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the Company to repurchase such Holder's Notes, in whole or
in part, in integral multiples of $1,000, pursuant to the Change of Control
Offer described in Section 305 of Supplemental Indenture No. 2 at the
Repurchase Price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Payment Date. The Holder's right of repurchase referred to in this
paragraph is as provided in and subject to the terms of the Indenture.
The Indenture contains certain covenants which restrict (among other
things) the ability of Armco and certain of its Subsidiaries to enter into or
permit certain transactions with Affiliates, make certain Investments, pay
dividends, or make other Restricted Payments, Incur Indebtedness, issue
preferred stock of Restricted Subsidiaries, enter into Sale and Leaseback
Transactions, enter into certain Asset Sales, Incur Liens, impose
restrictions on distributions from Restricted Subsidiaries and consummate
mergers or sell, transfer or convey all or substantially all of the Company's
assets.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal hereof may be declared, and upon
such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of Debt Securities at the time outstanding of each series to
be affected, evidenced as in the Indenture provided, from time to time and at
any time to enter into supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
Holders of the Debt Securities of such series to be affected; provided,
however, that no such supplemental indenture shall (i) extend the fixed
maturity of any Debt Security, or reduce the rate or extend the time of
payment of any interest thereon, or reduce the principal amount thereof or
any premium payable upon redemption thereof, or make the principal thereof or
any premium or interest thereon payable in any coin or currency other than
that initially provided for in such Debt Security, without the consent of the
Holder of each Debt Security so affected, or (ii) reduce the aforesaid
percentage of Debt Securities of a series, the Holders of which are required
to consent to any such supplemental indenture, without the consent of the
Holders of all Debt Securities of such series then outstanding.
A-1-6
<PAGE>
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the place, at the respective times, at the rate and
in the coin or currency herein prescribed.
The Notes are issuable in registered form without coupons in
denominations of $1,000 and any multiple of $1,000. Notes may be exchanged
for a like aggregate principal amount of Notes of other authorized
denominations at the office or agency of the Company in the Borough of
Manhattan, City and State of New York, and in the manner and subject to the
limitations provided in the Indenture, but without the payment of any service
charge.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, City and State
of New York, the Company shall execute and the Trustee shall authenticate and
deliver a new Note or Notes of like tenor and authorized denominations for an
equal aggregate principal amount in exchange herefor, subject to the
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.
The Company has initially appointed the Trustee as Debt Security
Registrar, paying agent and agent for notice of service and demand in respect
of the Notes. So long as the Trustee continues to serve as the Debt Security
Registrar or a paying agent, payment of principal, premium, if any, and
interest, exchanges and registrations of transfer and tender of Notes for
redemption may be made at the principal corporate trust office of the Trustee
in addition to any other office or agency that the Company is required to
maintain pursuant to the terms of the Indenture or this Note.
The Company, the Trustee, any paying agent and any Debt Security
Registrar in respect of the Notes may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Debt Security Registrar in
respect of the Notes), for the purpose of receiving payment as provided
herein, and for all other purposes neither the Company nor the Trustee nor
any paying agent nor any Debt Security Registrar in respect of the Notes
shall be affected by any notice to the contrary. All payments made to or upon
the order of such registered holder shall, to the extent of the sum or sums
paid, effectually satisfy and discharge the liability for moneys payable on
this Note.
No recourse for the payment of the principal of or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment
or penalty or otherwise, all such liability being, by the acceptance hereof
and as part of the consideration for the issue hereof, expressly waived and
released.
A-1-7
<PAGE>
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SAID STATE, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW.
All terms used in this Note (and not otherwise defined in this Note) that
are defined in the Indenture shall have the meanings assigned to them in the
Indenture.
----------------------------
CERTIFICATE OF TRANSFER
(To be executed by the registered holder
if such holder desires to transfer this Note)
- -------------------------
- -------------------------
New York, New York ______
FOR VALUE RECEIVED _____________________________________ hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________________________ Attorney
to transfer this Note on the Debt Security Register relating to this Note,
with full power of substitution.
Dated:
--------------------------- ---------------------------------
Signature
---------------------------------
Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name
as written upon the face of this Note in every particular, without alteration
or any change whatsoever.
A-1-8
<PAGE>
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 305 of Supplemental Indenture No. 2,
/ / the undersigned hereby elects to have the entire principal amount of
this Note repurchased by the Company.
/ / the undersigned hereby elects to have $ of this Note repurchased
by the Company (such specified amount must be in an integral multiple of
$1000).
2. The undersigned hereby directs the Trustee or Paying Agent to pay it
or an amount in cash equal to 101% of the principal amount specified in
paragraph 1 above plus accrued and unpaid interest hereon, if any, to the
Change of Control Payment Date and to deliver to it a new Note of this series
in an aggregate principal amount equal to the untendered portion, if any,
this Note.
Dated:
---------------------------- ---------------------------
Signature
---------------------------
Signature Guaranteed:
NOTICE: The signature to the foregoing Election must correspond to the Name
as written upon the face of this Note in every particular, without alteration
or any change whatsoever.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Notes and the last date, if any, on which such Notes were
owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Notes are being transferred in accordance with its terms:
[CHECK ONE BOX BELOW]
(1) / / to the Company; or
(2) / / pursuant to an effective registration statement under the
Securities Act of 1933 (the "Securities Act"); or
(3) / / inside the United States to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act
("Rule 144A")) ("QIB") that purchases for its own account or
for the account of a qualified institutional buyer to whom
notice is given that such transfer is being made in reliance
on Rule 144A, in each case pursuant to and in compliance with
Rule 144A; or
A-1-9
<PAGE>
(4) / / outside the United States in an offshore transaction within
the meaning of RegulationS under the Securities Act in
compliance with Rule 904 under the Securities Act; or
(5) / / to an institutional "accredited investor" (as defined in
Schedule 501 (a)(1), (2), (3) or (7) under the Securities
Act of 1933) that has furnished to the Trustee a signed
letter containing certain representations and agreements
(the form of which appears as Annex A to Supplemental
Indenture No.2); or
(6) / / pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act ("Rule 144").
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Notes evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (6) is
checked, the Trustee may require, prior to registering any such transfer of
the Notes, such certifications and other information as the Company has
reasonably requested to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
-------------------------------
SIGNATURE
Signature Guarantee:
- -------------------------------- -------------------------------
SIGNATURE MUST BE GUARANTEED SIGNATURE
- ------------------------------------------------------------------------------
A-1-10
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933 ("Rule 144A"), and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:
------------------------------ ----------------------------------
NOTICE: To be executed by an
executive officer
A-1-11
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount at maturity of this Global Note shall be $
. The following increases or decreases in this Global Note have been
made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF SIGNATURE OF
AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN THIS AUTHORIZED
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF GLOBAL NOTE FOLLOWING SIGNATORY OF TRUSTEE
DATE OF THIS THIS SUCH DECREASE OR OR
EXCHANGE GLOBAL NOTE GLOBAL NOTE INCREASE SECURITIES CUSTODIAN
- ---------------- ---------------------- ---------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
A-1-12
<PAGE>
EXHIBIT 2 TO APPENDIX A
FORM OF FACE OF EXCHANGE NOTE
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
REGISTERED REGISTERED
ARMCO INC.
No _____ $ _______
9% Senior Exchange Note Due 2007
ARMCO INC., a corporation duly organized and existing under the laws of
the State of Ohio (herein referred to as the "Company", which term includes
any successor corporation under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to or registered assigns,
the principal sum of [indicated on Schedule A hereof]* [of Dollars]**
on September 15, 2007, and to pay interest thereon in arrears from the date
of original issuance hereof or from the most
- ---------------------------
* Applicable to Global Notes only.
** Applicable to certificated notes only.
A-2-1
<PAGE>
recent date to which interest has been paid or duly provided for,
semiannually on March 15 and September 15 (each hereinafter called an
"Interest Payment Date") in each year commencing March 15, 1998 at the rate
of 9% per annum until the principal hereof is paid or made available for
payment.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Note is registered
at the close of business on the March 1 or September 1, as the case maybe,
next preceding such Interest Payment Date, unless the Company shall default
in the payment of interest due on such Interest Payment Date, in which case
such defaulted interest shall be paid to the person in whose name this Note
is registered at the close of business on a special record date for the
payment of such defaulted interest established by notice to the registered
holders of the Notes not less than ten days preceding such special record
date.
Payment of the principal of, premium, if any, and interest on this Note
will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, City and State of New York, in such coin
or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
at the option of the Company payment of interest may be made by check mailed
to the address of the person entitled thereto as such address shall appear in
the Debt Security Register related to the Notes and provided, further, that
at the option of any Holder of Notes, payment of interest to such Holder will
be made by wire transfer to an account designated by such Holder. So long as
payments of interest are made by check or wire transfer, the Company need not
maintain an office or agency for the payment of interest in the Borough of
Manhattan, City and State of New York.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, Armco Inc. has caused this Note to be signed manually
or by facsimile by its Chairman of the Board or its President or one of its
Corporate Vice Presidents and by its Treasurer or one of its Assistant
Treasurers or its Secretary or one of its Assistant Secretaries, and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
DATED
ARMCO INC.
[SEAL]
A-2-2
<PAGE>
Attest: By
-------------------------------
Name:
Title: [Chairman of the Board]
By
Name:
Title: [Treasurer]
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Note is one of the Debt Securities described in the within-mentioned
Indenture.
The Fifth Third Bank,
as Trustee
By
--------------------------------
Authorized Officer
A-2-3
<PAGE>
FORM OF REVERSE OF EXCHANGE NOTE
ARMCO INC.
9% Senior Exchange Note Due 2007
This Note is one of a duly authorized issue of debentures, notes, bonds
or other evidences of indebtedness of the Company (hereinafter called the
"Debt Securities"), of the series hereinafter specified, all issued or to be
issued under an indenture dated as of October 1, 1992, as supplemented by
Supplemental Indenture No. 1 dated as of October 1, 1992 and by Supplemental
Indenture No. 2 dated as of September 1, 1997 ("Supplemental Indenture No.
2") (together, as so supplemented, the "Indenture"), duly executed and
delivered by the Company to the Fifth Third Bank, as trustee (hereinafter
called the "Trustee"), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the respective rights
and duties thereunder of the Trustee, the Company and the Holders of the Debt
Securities. The Debt Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest at different rates (if any)
which interest may be payable at different times, may be subject to different
redemption, repurchase or purchase provisions (if any), may be subject to
different sinking or analogous funds, may be subject to different covenants
and Events of Default, may be subject to different defeasance provisions, and
may otherwise vary as in the Indenture provided. This Note is one of an issue
of Debt Securities designated as the "9% Senior Exchange Notes Due 2007" of
the Company (herein called the "Notes") issued under the Indenture, limited
in aggregate principal amount to $150,000,000. The Notes were originally
issued pursuant to an exchange offer for the Company's 9% Senior Notes Due
2007 (the "Initial Notes"). The Notes and the Initial Notes will be treated
for all purposes of the Indenture as one series of Debt Securities.
On or after September 15, 2002, the Notes may, from time to time, be
redeemed, in whole or in part, at the option of the Company upon not less
than 30 nor more than 60 days' prior notice to Holders, at the redemption
prices set forth below (expressed in percentages of the principal amount
thereof), plus accrued and unpaid interest thereon, to the Redemption Date.
<TABLE>
<CAPTION>
REDEMPTION PERIOD PERCENTAGE
----------------- ----------
<S> <C>
September 15, 2002 to September 14, 2003.............................................................. 104.50%
September 15, 2003 to September 14, 2004.............................................................. 103.00%
September 15, 2004 to September 14, 2005.............................................................. 101.50%
September 15, 2005 and thereafter..................................................................... 100.00%
</TABLE>
At any time prior to September 15, 2000 the Company, at its option, may
redeem up to 33 1/3% of the aggregate principal amount of Notes originally
issued with the net proceeds from one or more Equity Offerings of the Company
at a redemption price equal to 109.00% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the date of redemption
provided, however, that after any such redemption at least 66 2/3% of the
aggregate
A-2-4
<PAGE>
principal amount of the original issue of the Notes remains outstanding. Any
such redemption must occur on or prior to 120 days after the receipt of such
net proceeds.
In addition, upon the occurrence of a Change of Control prior to
September 15, 2002, the Company, at its option, may redeem all, but not less
than all, of the outstanding Notes at a redemption price equal to 100% of the
principal amount thereof plus the applicable Make-Whole Premium. The Company
shall give not less than 30 nor more than 60 days' prior notice to Holders of
such redemption within 30 days following the applicable Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the Company to repurchase such Holder's Notes, in whole or
in part, in integral multiples of $1,000, pursuant to the Change of Control
Offer described in Section 305 of Supplemental Indenture No. 2 at the
Repurchase Price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Payment Date. The Holder's right of repurchase referred to in this
paragraph is as provided in and subject to the terms of the Indenture.
The Indenture contains certain covenants which restrict (among other
things) the ability of Armco and certain of its Subsidiaries to enter into or
permit certain transactions with Affiliates, make certain Investments, pay
dividends, or make other Restricted Payments, Incur Indebtedness, issue
preferred stock of Restricted Subsidiaries, enter into Sale and Leaseback
Transactions, enter into certain Asset Sales, Incur Liens, impose
restrictions on distributions from Restricted Subsidiaries and consummate
mergers or sell, transfer or convey all or substantially all of the Company's
assets.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal hereof may be declared, and upon
such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of Debt Securities at the time Outstanding of each series to
be affected, evidenced as in the Indenture provided, from time to time and at
any time to enter into supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
Holders of the Debt Securities of such series to be affected; provided,
however, that no such supplemental indenture shall (i) extend the fixed
maturity of any Debt Security, or reduce the rate or extend the time of
payment of any interest thereon, or reduce the principal amount thereof or
any premium payable upon redemption thereof, or make the principal thereof or
any premium or interest thereon payable in any coin or currency other than
that initially provided for in such Debt Security, without the consent of the
Holder of each Debt Security so affected, or (ii) reduce the aforesaid
percentage of Debt Securities of a series, the Holders of which are required
to consent to any such supplemental indenture, without the consent of the
Holders of all Debt Securities of such series then outstanding.
A-2-5
<PAGE>
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the place, at the respective times, at the rate and
in the coin or currency herein prescribed.
The Notes are issuable in registered form without coupons in
denominations of $1,000 and any multiple of $1,000. Notes may be exchanged
for a like aggregate principal amount of Notes of other authorized
denominations at the office or agency of the Company in the Borough of
Manhattan, City and State of New York, and in the manner and subject to the
limitations provided in the Indenture, but without the payment of any service
charge.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, City and State
of New York, the Company shall execute and the Trustee shall authenticate and
deliver a new Note or Notes of like tenor and authorized denominations for an
equal aggregate principal amount in exchange herefor, subject to the
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.
The Company has initially appointed the Trustee as Debt Security
Registrar, paying agent and agent for notice of service and demand in respect
of the Notes. So long as the Trustee continues to serve as the Debt Security
Registrar or a paying agent, payment of principal, premium, if any, and
interest, exchanges and registrations of transfer and tender of Notes for
redemption may be made at the principal corporate trust office of the Trustee
in addition to any other office or agency that the Company is required to
maintain pursuant to the terms of the Indenture or this Note.
The Company, the Trustee, any paying agent and any Debt Security
Registrar in respect of the Notes may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Debt Security Registrar in
respect of the Notes), for the purpose of receiving payment as provided
herein, and for all other purposes neither the Company nor the Trustee nor
any paying agent nor any Debt Security Registrar in respect of the Notes
shall be affected by any notice to the contrary. All payments made to or upon
the order of such registered holder shall, to the extent of the sum or sums
paid, effectually satisfy and discharge the liability for moneys payable on
this Note.
No recourse for the payment of the principal of or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment
or penalty or otherwise, all such liability being, by the acceptance hereof
and as part of the consideration for the issue hereof, expressly waived and
released.
A-2-6
<PAGE>
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SAID STATE, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW.
All terms used in this Note (and not otherwise defined in this Note) that
are defined in the Indenture shall have the meanings assigned to them in the
Indenture.
------------------------
CERTIFICATE OF TRANSFER
(To be executed by the registered holder
if such holder desires to transfer this Note)
- -----------------------
- -----------------------
New York, New York ____
FOR VALUE RECEIVED ______________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does
hereby irrevocably constitute and appoint Attorney to transfer this
Note on the Debt Security Register relating to this Note, with full power of
substitution.
Dated:
--------------------------- -----------------------------------
Signature
-----------------------------------
Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name
as written upon the face of this Note in every particular, without alteration
or any change whatsoever.
A-2-7
<PAGE>
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 305 of Supplemental Indenture No. 2,
/ / the undersigned hereby elects to have the entire principal amount of
this Note repurchased by the Company.
/ / the undersigned hereby elects to have $ of this Note
repurchased by the Company (such specified amount must be in an integral
multiple of $1000).
2. The undersigned hereby directs the Trustee or Paying Agent to pay it
or an amount in cash equal to 101% of the principal amount specified in
paragraph 1 above plus accrued and unpaid interest hereon, if any, to the
Change of Control Payment Date and to deliver to it a new Note of this series
in an aggregate principal amount equal to the untendered portion, if any,
this Note.
Dated:
-------------------------- ----------------------------------
Signature
----------------------------------
Signature Guaranteed:
NOTICE: The signature to the foregoing Election must correspond to the Name
as written upon the face of this Note in every particular, without alteration
or any change whatsoever.
A-2-8
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount at maturity of this Global Note shall be $
. The following increases or decreases in this Global Note have been
made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF SIGNATURE OF AUTHO-
AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN THIS RIZED
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF GLOBAL NOTE FOLLOWING SIGNATORY OF TRUSTEE
DATE OF THIS THIS SUCH DECREASE OR OR
EXCHANGE GLOBAL NOTE GLOBAL NOTE INCREASE SECURITIES CUSTODIAN
- ---------------- ---------------------- ---------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-9
<PAGE>
ANNEX A
Form of Non-Distribution Letter for U.S. Purchasers
__________________ , 199_
Armco Inc.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1415
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Re: Purchase of 9% Senior Notes Due 2007 of Armco Inc. (the "Company")
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of 9% Senior Notes Due 2007 (the "Senior Notes") of Armco Inc., an
Ohio corporation (the "Company"), we confirm that:
1. We understand that the Senior Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We understand and agree,
on our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, (i) that such Senior Notes are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, (ii) that if within two years after the date of the original
issuance of the Senior Notes or if within three months after we cease to be
an affiliate (within the meaning of Rule 144 under the Securities Act ("Rule
144")) of the Company we decide to resell, pledge or otherwise transfer such
Senior Notes, such Senior Notes may be resold, pledged or transferred only
(A) to the Company, (B) so long as the Senior Notes are eligible for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person
whom we reasonably believe is a "qualified institutional buyer" (as defined
in Rule 144A) (a "QIB") that purchases for its own account or for the account
of a QIB to whom notice is given that the resale, pledge or transfer is being
made in reliance on Rule 144A (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the certificate
for the Senior Notes), (C) in an offshore transaction in accordance with
Regulation S under the Securities Act (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the certificate
for the Senior Notes), (D) to an institution that is an "accredited investor"
as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act (as
indicated by the box checked by the transferor on the Certificate of Transfer
on the reverse of the certificate for the Senior Notes) which has certified
to the Company and the Trustee that it is such an accredited investor and is
acquiring the Senior Notes
Annex A-1
<PAGE>
for investment purposes and not for distribution, (E) pursuant to an
exemption from registration under the Securities Act provided by Rule 144 (if
applicable), or (F) pursuant to an effective registration statement under the
Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States, and we will notify any purchaser of
the Senior Notes from us of the above resale restriction, if then applicable.
We further understand that in connection with any transfer of the Senior
Notes by us that the Company and the Trustee may request, and if so requested
we will furnish, such certificates, legal opinions and other information as
they may reasonably require to confirm that any such transfer complies with
the foregoing restrictions.
2. We acknowledge that (i) neither the Company, nor the Initial
Purchasers (as defined in the Offering Memorandum dated September 9, 1997
relating to the Senior Notes (the "Offering Memorandum")) nor any person
acting on behalf of the Company or the Initial Purchasers has made any
representation to us with respect to the Company or the offer or sale of any
Senior Notes and (ii) any information we desire concerning the Company and
the Senior Notes or any other matter relevant to our decision to purchase the
Senior Notes (including a copy of the Offering Memorandum) is or has been
made available to us.
3. We are able to fend for ourselves in the transactions contemplated by
the Offering Memorandum, we have knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Senior Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment and
can afford the complete loss of such investment.
4. We understand that the minimum principal amount of Senior Notes that
may be purchased by an institutional accredited investor is $250,000.
5. We understand that the Company, each of the Initial Purchasers and
others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements, and we agree that if any of
the acknowledgments, representations and warranties deemed to have been made
by us by our purchase of Senior Notes, for our own account or of one or more
accounts as to each of which we exercise sole investment discretion, are no
longer accurate, we shall promptly notify the Company and the Initial
Purchasers. If we are acquiring the Senior Notes as a fiduciary or agent for
one or more investor accounts, we represent that we have sole investment
discretion with respect to each such account and we have full power to make
the foregoing acknowledgments, representations and agreements on behalf of
such account.
6. We understand that (a) the Senior Notes will be in registered form
only and that any certificates delivered to us will bear a legend
substantially to the effect set forth in the Offering Memorandum and (b) the
Company has agreed to reissue such certificates without the foregoing legend
only in the event of a disposition of the Senior Notes pursuant to an
exemption from registration under the Securities Act provided by Rule 144 or
pursuant to an effective registration statement.
7. We are acquiring the Senior Notes purchased by us for investment
purposes and not for distribution, for our own account or for one or more
accounts as to which
Annex A-2
<PAGE>
we exercise sole investment discretion and we are or such account is an
institutional accredited investor.
8. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.
VERY TRULY YOURS,
-----------------------------------
NAME OF PURCHASER
By:
---------------------------------
Date:
------------------------------
Annex A-3
<PAGE>
Exhibit 4.6
Armco Inc.
$150,000,000
9% Senior Notes Due 2007
REGISTRATION AGREEMENT
New York, New York
September 9, 1997
Salomon Brothers Inc
Chase Securities Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Armco Inc., an Ohio corporation (the "Company"), proposes to
issue and sell to certain purchasers (the "Initial Purchasers"), upon the
terms set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), its 9% Senior Notes Due 2007 (the "Senior Notes") (the "Initial
Placement"). As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and purchase the Notes and in satisfaction of a condition
to your obligations under the Purchase Agreement, the Company agrees with
you, (i) for your benefit and the benefit of the other Initial Purchasers and
(ii) for the benefit of the holders from time to time of the Senior Notes
(including the Initial Purchasers) (each of the foregoing a "Holder" and
together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause
the direction of the management and policies of such person whether by
contract or otherwise; and the terms "controlling" and "controlled" have
1
<PAGE>
meanings correlative thereto.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exchange Notes" means debt securities of the Company issued
pursuant to a Registered Exchange Offer containing terms identical in all
material respects to the terms of the Senior Notes (except that the interest
rate step-up provisions and the transfer restrictions pertaining to the
Senior Notes will be modified or eliminated, as appropriate), to be issued
under the Indenture or the Exchange Notes Indenture.
"Exchange Notes Indenture" means an indenture, if any, between the
Company and the Exchange Notes Trustee, identical in all material respects
with the Indenture (except that the interest rate step-up provisions and the
transfer restrictions will be modified or eliminated, as appropriate).
"Exchange Notes Trustee" means a bank or trust company reasonably
satisfactory to the Purchaser, as trustee with respect to the Exchange Notes
under the Exchange Notes Indenture.
"Exchange Offer Registration Period" means the one year period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the Initial
Purchasers) which is a broker-dealer, electing to exchange Senior Notes
acquired for its own account as a result of market-making activities or other
trading activities, for Exchange Notes.
2
<PAGE>
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Senior Notes dated
as of October 1, 1992, between the Company and The Fifth Third Bank as
trustee, as the same may be amended to the date hereof and as further amended
by Supplemental Indenture No. 2.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Initial Purchasers" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of Senior Notes registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act),
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Senior Notes or the Exchange
Notes, covered by such Registration Statement, and all amendments and
supplements to the Prospectus, including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Registered Exchange Offer" means an offer to the Holders to issue
and deliver to such Holders, in exchange for the Senior Notes, a like
principal amount of the Exchange Notes.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Senior Notes
or the Exchange Notes pursuant to the provisions of this Agreement,
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Senior Notes" has the meaning set forth in the preamble hereto.
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"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in Section
3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Senior Notes or Exchange Notes, as applicable, on
an appropriate form under Rule 415 under the Act, or any similar rule that
may be adopted by the Commission, amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Supplemental Indenture No. 2" means the second supplement to the
Indenture dated as of September 1, 1997.
"Trustee" means the trustee with respect to the Senior Notes or the
Exchange Notes, as applicable under the Indenture.
"underwriter" means any underwriter of Senior Notes in connection
with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of Exchange Notes by
Exchanging Dealers; Private Exchange. (a) The Company shall prepare and
shall use its best efforts to file with the Commission, not later than 60
days following the Closing Date, the Exchange Offer Registration Statement
with respect to the Registered Exchange Offer. The Company shall use its
best efforts to (i) cause the Exchange Offer Registration Statement to be
declared effective under the Act within 150 days after the Closing Date and
(ii) consummate the Registered Exchange Offer within 180 days after the
Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer,
it being the objective of such Registered Exchange Offer to enable each
Holder electing to exchange Senior Notes for Exchange Notes (assuming that
such Holder (i) is not an affiliate of the Company within the meaning of the
Act, (ii) is not a broker-dealer that acquired the Senior Notes in a
transaction other than as a part of its market-making or other trading
activities and (iii) if such Holder is not a broker-dealer, it acquires the
Exchange Notes in the ordinary course of such Holder's business, is not
participating in the distribution of the Exchange Notes and has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Notes) to resell such Exchange Notes from and
after their receipt without any limitations or restrictions under the Act and
without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
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(ii) keep the Registered Exchange Offer open for acceptance for
not less than 30 days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Senior Notes validly tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Senior Notes so
accepted for exchange; and
(iii) cause the Trustee or the Exchange Notes Trustee, as the case
may be, promptly to authenticate and deliver to each Holder of Senior Notes
Exchange Notes equal in principal amount to the Senior Notes of such Holder
so accepted for exchange and canceled pursuant to the Registered Exchange
Offer.
(e) The Initial Purchasers and the Company acknowledge that,
pursuant to interpretations by the staff of the Commission of Section 5 of
the Act, and in the absence of an applicable exemption therefrom, each
Exchanging Dealer is required to deliver a Prospectus in connection with a
sale of any Exchange Notes received by such Exchanging Dealer pursuant to the
Registered Exchange Offer in exchange for Senior Notes acquired for its own
account as a result of market-making activities or other trading activities.
Accordingly, the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section setting
forth details of the Exchange Offer, and in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus forming a part
of the Exchange Offer Registration Statement, and in Annex D hereto in the
letter of transmittal delivered pursuant to the Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective and generally usable for resales under the
Act during the Exchange Offer Registration Period for delivery by Exchanging
Dealers in connection with sales of Exchange Notes received pursuant to the
Registered Exchange Offer, as contemplated by Section 4(h) below.
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Senior Notes constituting any portion of an unsold allotment, at
the request of such Purchaser, the Company shall issue and deliver to such
Purchaser or to the party purchasing Exchange Notes registered under a Shelf
Registration Statement as contemplated by Section 3, hereof from such
Purchaser, in exchange for such Senior Notes, a like principal amount of
Exchange Notes. The Company shall seek to cause the CUSIP Service Bureau to
issue the same CUSIP number for such Exchange Notes as for Exchange Notes
issued pursuant to the Registered Exchange Offer; provided, that if such
CUSIP number is obtained at a time when resales of such Exchange Securities
by such Initial Purchaser are not covered by a Shelf Registration such CUSIP
number may vary from the CUSIP number for the Exchange Securities issued
pursuant to the Registered Exchange Offer by the inclusion of a designation
indicating such securities are "restricted securities"; provided, further
that on the first business day following the effective date of any Shelf
Registration Statement hereunder or as soon as possible thereafter, the
Company shall use its best efforts to cause
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the Depository Trust Company ("DTC"), as depositary, to remove (1) from any
existing CUSIP number assigned to the Senior Notes any such designation,
which efforts shall include delivery to DTC of a letter executed by the
Company substantially in the form of Exhibit A hereto and (2) any other stop
or restriction on DTC's system with respect to the Senior Notes.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to
effect the Registered Exchange Offer as contemplated by Section 2 hereof, or
(ii) if for any reason the Exchange Offer Registration Statement is not
declared effective within 150 days following the date of original issuance of
the Senior Notes, or (iii) if for any other reason the Registered Exchange
Offer is not consummated within 180 days following the date original issuance
of the Senior Notes, or (iv) if any Purchaser so requests with respect to
Senior Notes held by it following consummation of the Registered Exchange
Offer, or (v) if any Holder (other than a Purchaser) is not eligible to
participate in the Registered Exchange Offer or (vi) in the case of any
Purchaser that participates in the Registered Exchange Offer or acquires
Exchange Notes pursuant to Section 2(f) hereof, such Purchaser does not
receive freely tradeable Exchange Notes in exchange for Senior Notes
constituting any portion of an unsold allotment (it being understood that,
for purposes of this Section 3, (x) the requirement that a Purchaser deliver
a Prospectus containing the information required by Items 507 and/or 508 of
Regulation S-K under the Act in connection with sales of Exchange Notes
acquired in exchange for such Senior Notes shall result in such Exchange
Notes being not "freely tradeable" but (y) the requirement that an Exchanging
Dealer deliver a Prospectus in connection with sales of Exchange Notes
acquired in the Registered Exchange Offer in exchange for Senior Notes
acquired as a result of market-making activities or other trading activities
shall not result in such Exchange Notes being not "freely tradeable"), the
following provisions shall apply:
(a) The Company shall use its best efforts to (i) as promptly as
practicable (but in no event more than 30 days after so required or requested
pursuant to this Section 3) file with the Commission a shelf registration
relating to the offer and sale of the Senior Notes or the Exchange Notes (the
"Shelf Registration Statement"), as applicable, by the Holders from time to
time in accordance with the methods of distribution elected by such Holders
as set forth in such Shelf Registration Statement and in accordance with Rule
415 under the Act; provided, that with respect to Exchange Notes received by
a Purchaser in exchange for Senior Notes constituting any portion of an
unsold allotment, the Company may, if permitted by current interpretations by
the Commission's staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation S-K
Items 507 and/or 508, as applicable, in satisfaction of its obligations under
this paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration
Statement and (ii) cause the Shelf Registration Statement to be declared
effective under the Act by the 180th day after the original issuance of the
Senior Notes (or promptly
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<PAGE>
in the event of a request by an Initial Purchaser); and
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective and generally usable for
resales in order to permit the Prospectus contained therein to be usable by
Holders for a period of two years from the date the Shelf Registration
Statement is declared effective by the Commission (or until one year after
its effective date if such Shelf Registration Statement is filed at the
request of the Initial Purchaser) or such shorter period that will terminate
when all the Senior Notes or Exchange Notes, as applicable, covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in
Holders of securities covered thereby not being able to offer and sell such
securities during that period, unless (i) such action is required by
applicable law, or (ii) such action is taken by the Company in good faith and
for valid business reasons (not including avoidance of the Company's
obligations hereunder), including the acquisition or divestiture of assets,
so long as the Company promptly thereafter complies with the requirements of
Section 4(k) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing thereof
with the Commission, a copy of any Registration Statement, and each amendment
thereof and each amendment or supplement, if any, to the Prospectus included
therein and shall use its best efforts to reflect in each such document, when
so filed with the Commission, such comments as you reasonably may propose.
(b) The Company shall ensure that (i) any Registration Statement
and any amendment thereto and any Prospectus contained therein and any
amendment or supplement thereto (and any documents incorporated therein by
reference) complies in all material respects with the Act and the Exchange
Act and the respective rules and regulations thereunder, (ii) any
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming part of
any Registration Statement, including any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(c) (1) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders of securities covered thereby, and, if
requested by you or any such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included therein
or for additional information.
(2) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders of securities covered thereby, and, in
the case of an Exchange Offer Registration Statement, any Exchanging Dealer
that has provided in writing to the Company a telephone or facsimile number
and address for notices, and, if requested by you or any such Holder or
Exchanging Dealer, confirm such advice in writing:
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<PAGE>
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(iii) of the happening of any event that requires the making
of any changes in the Registration Statement or the Prospectus so that, as of
such date, the Registration Statement or the Prospectus does not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein (in the case
of the Prospectus, in light of the circumstances under which they were made)
not misleading (which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been made).
(d) The Company shall use its best efforts to prevent the issuance,
and if issued to obtain the withdrawal, of any order suspending the
effectiveness of any Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of securities covered
by any Shelf Registration Statement, without charge, at least one copy of
such Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests
in writing, all exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of securities covered by any Shelf Registration
Statement, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Shelf Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request; and
the Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of such Holder of securities in connection with
the offering and sale of the securities covered by the Prospectus or any
amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein, and, if the Exchanging Dealer so requests in writing, all exhibits
thereto (including those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as many
copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging Dealer
may reasonably request for delivery by such Exchanging Dealer in connection
with a sale of Exchange Notes received by it pursuant to the Registered
Exchange Offer; and the Company consents to the use of the Prospectus or any
amendment or supplement thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other offering of
securities pursuant to any Registration Statement, the Company shall register
or qualify or cooperate with the Holders of securities included therein and
their respective counsel in connection with the registration or qualification
of such securities for offer and sale under the securities or blue sky laws
of such jurisdictions as any such Holders reasonably request in writing and
do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the securities covered by such
Registration Statement; provided, however, that the Company will not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not
then so subject.
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(j) The Company shall cooperate with the Holders of Senior Notes to
facilitate the timely preparation and delivery of certificates representing
Senior Notes to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
Holders may request prior to sales of securities pursuant to such
Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph (c)
(2) (iii) of this Section 4, the Company shall promptly prepare and file a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to purchasers of the securities included
therein, the Prospectus will not include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(l) (A) Not later than the effective date of an Exchange Offer
Registration Statement filed hereunder, the Company shall provide a CUSIP
number for the Exchange Notes registered under such Exchange Offer
Registration Statement, and provide the Trustee with printed certificates for
such Exchange Notes, in a form eligible for deposit with The Depository Trust
Company ("DTC") and (B) on the first business day following the effective
date of any Shelf Registration Statement hereunder or as soon as possible
thereafter, the Company shall use its best efforts to cause DTC to remove (1)
from any existing CUSIP number assigned to the Senior Notes any designation
indicating that the Senior Notes are "restricted securities", which efforts
shall include delivery to DTC of a letter executed by the Company
substantially in the form of Exhibit A hereto and (2) any other stop or
restriction on DTC's system with respect to the Senior Notes. In the event
the Company is unable to cause DTC to take the actions described in the
immediately preceding sentence, the Company shall take such actions as the
Initial Purchasers may reasonably request to provide, as soon as practicable,
a CUSIP number for the Senior Notes registered under the Shelf Registration
Statement and to cause the CUSIP number to be assigned to the Senior Notes
(or to the maximum aggregate principal amount of the Senior Notes to which
such number may be assigned). Upon compliance with the foregoing
requirements of this Section 4(l), the Company shall provide the Trustee with
printed certificates for such Senior Notes in a form eligible for deposit
with DTC.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Act.
(n) The Company shall cause the Indenture or the Exchange Notes
Indenture to be qualified under the Trust Indenture Act of 1939, as amended,
in a timely manner.
(o) The Company may require each Holder of securities to be sold
pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding the holder and the distribution of such securities as
the Company may from time to time reasonably require for inclusion in such
Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement (i) such information as the Managing Underwriters and Majority
Holders, as the case may be, reasonably agree should be included therein and
(ii) such information as a Holder may reasonably provide from time to time to
the Company in writing for inclusion in a Prospectus or any Shelf
Registration Statement concerning such Holder and the distribution of such
Holder's securities and, in either case, shall make all required filings of
such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including underwriting agreements) and take
all other appropriate actions in order to expedite or facilitate the
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registration or the disposition of any securities included therein, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification provisions and procedures no less favorable
than those set forth in Section 6 (or such other provisions and procedures
acceptable to the Majority Holders and the Managing Underwriters, if any)
with respect to all parties to be indemnified pursuant to Section 6.
(r) In the case of any Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by the Holders of
securities to be registered thereunder, any underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and any attorney,
accountant or other agent retained by the Holders or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries as may be reasonably
requested; (ii) cause the Company's officers, directors and employees to
supply all relevant information reasonably requested by the Holders or any
such underwriter, attorney, accountant or agent in connection with any such
Shelf Registration Statement as is customary for similar due diligence
examinations and make such representatives of the Company as shall be
reasonably requested by the Initial Purchasers available for discussion of
any such Registration Statement; provided, however, that any information that
is designated in writing by the Company, in good faith, as confidential at
the time of delivery of such information shall be kept confidential by the
Holders or any such underwriter, attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required by law,
or such information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality other than
as a result of a disclosure of such information by any such Holder,
underwriter, attorney, accountant or agent; (iii) make such representations
and warranties to the Holders of securities registered thereunder and the
underwriters, if any, in form, substance and scope as are customarily made by
issuers to underwriters in primary underwritten offerings and covering
matters including, but not limited to, those set forth in the Purchase
Agreement; (iv) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in primary underwritten
offerings and such other matters as may be reasonably requested by such
Holders and underwriters; (v) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Shelf Registration Statement), addressed to each selling
Holder of securities registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with primary underwritten offerings; and (vi)
deliver such documents and certificates as may be reasonably requested by the
Majority Holders and the Managing Underwriters, if any, including those to
evidence compliance with Section 4(k) and with any customary conditions to
underwriting agreements for primary underwritten offerings. The foregoing
actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(r)
shall be performed at (A) the effectiveness of such Shelf Registration
Statement and each post-effective amendment thereto and (B) each closing
under any underwriting or similar agreement as and to the extent required
thereunder.
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(s) In the case of any Exchange Offer Registration Statement, the
Company shall (i) make reasonably available for inspection by such Purchaser,
and any attorney, accountant or other agent retained by such Purchaser, all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries as may be reasonably
requested; (ii) cause the Company's officers, directors and employees to
supply all relevant information reasonably requested by such Purchaser or any
such attorney, accountant or agent in connection with any such Exchange Offer
Registration Statement as is customary for similar due diligence examinations
and make such representatives of the Company as shall be reasonably requested
by the Initial Purchasers available for discussion of any such Registration
Statement; provided, however, that any information that is designated in
writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by such Purchaser or
any such attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such information
becomes available to the public generally or through a third party without an
accompanying obligation of confidentiality other than as a result of a
disclosure of such information by any such Initial Purchaser, attorney,
accountant or agent; (iii) make such representations and warranties to such
Purchaser, in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to such Purchaser and its counsel, addressed to such Purchaser,
covering such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested
by such Purchaser or its counsel; (v) obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to such
Purchaser, in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with primary underwritten
offerings, or if requested by such Purchaser or its counsel in lieu of a
"cold comfort" letter, an agreed-upon procedures letter under Statement on
Auditing Standards No. 35, covering matters requested by such Purchaser or
its counsel; and (vi) deliver such documents and certificates as may be
reasonably requested by such Purchaser or its counsel, including those to
evidence compliance with Section 4(k) and with conditions customarily
contained in underwriting agreements for primary underwritten offerings. The
foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of this
Section 4(s) shall be performed at the close of the Registered Exchange Offer
and the effective date of any post-effective amendment to the Exchange Offer
Registration Statement.
5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections
2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm
or counsel designated by the Majority Holders to act as
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counsel for the Holders in connection therewith, and, in the case of any
Exchange Offer Registration Statement, will reimburse the Initial Purchasers
for the reasonable fees and disbursements of counsel acting in connection
therewith.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless
each Holder of securities covered thereby (including the Initial Purchasers
and, with respect to any Prospectus delivery as contemplated in Section 4(h)
hereof, each Exchanging Dealer), the directors, officers, employees and
agents of each such Holder and each person who controls any such Holder
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement
as originally filed or in any amendment thereof, or in any preliminary
Prospectus or Prospectus, or in any amendment thereof or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof); provided, however, that the Company will not be liable in any case
to the extent that any such loss, claim, damage or liability arises out of or
is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any such
Holder specifically for inclusion therein. This indemnity agreement will be
in addition to any liability that the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 6(d) hereof, any selling Holders and any underwriters of
Senior Notes registered under a Shelf Registration Statement, their
employees, officers, directors and agents and each person who controls such
selling Holders or underwriters on the same basis as that of the
indemnification of the Initial Purchasers provided in this Section 6(a) and
shall, if requested by any Holder, enter into an underwriting agreement
reflecting such agreement, as provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus
delivery as contemplated by Sections 2(e) and 4(h) hereof, each Exchanging
Dealer) severally agrees to indemnify and hold harmless (i) the Company, (ii)
each of its directors, (iii) each of its officers who signs such
Registration Statement and (iv) each person who controls the Company within
the meaning of either the Act or the Exchange Act to the same extent as the
foregoing indemnity from the Company to each such Holder, but only with
respect to written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement
will be in addition to any liability that any such Holder may otherwise have.
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(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action
and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees
and expenses of any separate counsel retained by the indemnified party or
parties except as set forth below); provided, however, that such counsel
shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel (and
local counsel) if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such
claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from
the Initial Placement and the Registration Statement that resulted in such
Losses; provided, however, that in no case shall any Initial Purchaser or any
subsequent Holder of any Senior Note or Exchange Note be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Senior Note, or in the case of an Exchange Note,
applicable to the Senior Note which was exchangeable into such Exchange Note,
as set forth on the cover page of the Final Memorandum, nor shall any
13
<PAGE>
underwriter be responsible for any amount in excess of the underwriting
discount or commission applicable to the securities purchased by such
underwriter under the Registration Statement that resulted in such Losses.
If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of such indemnifying
party, on the one hand, and such indemnified party, on the other hand, in
connection with the statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. Benefits received by
the Company shall be deemed to be equal to the sum of (x) the total net
proceeds from the Initial Placement (before deducting expenses) as set forth
on the cover page of the Final Memorandum and (y) the total amount of
additional interest that the Company was not required to pay as a result of
registering the securities covered by the Registration Statement that
resulted in such Losses. Benefits received by the Initial Purchasers shall
be deemed to be equal to the total purchase discounts and commissions as set
forth on the cover page of the Final Memorandum, and benefits received by any
other Holders shall be deemed to be equal to the value of receiving Senior
Notes or Exchange Notes, as applicable, registered under the Act. Benefits
received by any underwriter shall be deemed to be equal to the total
underwriting discounts and commissions, as set forth on the cover page of the
Prospectus forming a part of the Registration Statement that resulted in such
Losses. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
indemnifying party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 6, each person who controls a Holder within the meaning of either the
Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and
each person who controls the Company within the meaning of either the Act or
the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the officers, directors or controlling persons referred
to in Section 6 hereof, and will survive the sale by a Holder of securities
covered by a Registration Statement.
14
<PAGE>
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement that conflicts with the rights granted to the Holders
herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the
written consent of the Holders of at least a majority of the then outstanding
aggregate principal amount of Senior Notes (or, after the consummation of any
Exchange Offer in accordance with Section 2 hereof, of Exchange Notes);
provided that, with respect to any matter that directly or indirectly affects
the rights of any Initial Purchaser hereunder, the Company shall obtain the
written consent of each such Initial Purchaser against which such amendment,
qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by the Majority Holders,
determined on the basis of securities being sold rather than registered under
such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
holder to the Company in accordance with the provisions of this Section 7(c),
which address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture, with a copy in like
manner to Salomon Brothers Inc;
(2) if to you, initially at the respective addresses set forth
in the Purchase Agreement; and
(3) if to the Company, initially at its address set forth in
the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
You or the Company by notice to the other may designate additional or
different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders of
15
<PAGE>
Senior Notes and/or Exchange Notes. The Company hereby agrees to extend the
benefits of this Agreement to any Holder of Senior Notes and/or Exchange
Notes and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired or affected thereby, it being intended that all of the rights and
privileges of the parties shall be enforceable to the fullest extent
permitted by law.
(i) Senior Notes Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Senior
Notes or Exchange Notes is required hereunder, Senior Notes or Exchange
Notes, as applicable, held by the Company or its Affiliates (other than
subsequent Holders of Senior Notes or Exchange Notes if such subsequent
Holders are deemed to be Affiliates solely by reason of their holdings of
such Senior Notes or Exchange Notes) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
ARMCO INC.
By:
------------------------------
Name:
16
<PAGE>
Title:
Accepted in New York, New York
September 9, 1997
SALOMON BROTHERS INC
CHASE SECURITIES INC.
By: SALOMON BROTHERS INC
By:
Title:
17
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in
exchange for Senior Notes where such Senior Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date (as
defined herein) and ending on the close of business one year after the
Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
1
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Senior Notes, where such Senior Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
A-1
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Senior Notes where such Senior Notes were acquired
as a result of market-making activities or other trading activities. The
Company has agreed that, starting on the Expiration Date and ending on the
close of business one year after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers
of any such Exchange Notes. Any broker-dealer that resells Exchange Notes
that were received by it for its own account pursuant to the Exchange Offer
and any broker or dealer that participates in a distribution of such Exchange
Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of one year 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 to pay all
expenses incident to the Registered Exchange Offer (including the expenses of
one counsel for the Holders of the Notes) other than commissions or
concessions of any brokers or dealers and will indemnify the Holders of the
Senior Notes (including any broker-dealers) against certain liabilities,
including liabilities under the
A-1
<PAGE>
Securities Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER
AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE
PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
The undersigned represents that it is not an affiliate of the
Company, that any Exchange Notes to be received by it will be acquired in the
ordinary course of business and that at the time of the commencement of the
Registered Exchange Offer it had no arrangement with any person to
participate in a distribution of the Exchange Notes.
If the undersigned is not a broker-dealer, the undersigned
represents that it acquired the Exchange Notes in the ordinary course of its
business, it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes and it has no arrangements or understandings
with any person to participate in a distribution of the Exchange Notes. If
the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Senior Notes, it represents that the Senior Notes
to be exchanged for Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
<PAGE>
EXHIBIT A
FORM OF LETTER TO BE PROVIDED BY ISSUER TO
THE DEPOSITORY TRUST COMPANY
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004
Re: 9% Senior Notes Due 2007 (the "Securities") of Armco Inc. (the
"Issuer")
Ladies and Gentlemen:
Please be advised that the Securities and Exchange Commission has
declared effective a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended, with regard to all of the Securities referenced
above. Accordingly, there is no longer any restriction as to whom such
Securities may be sold and any restrictions on the CUSIP designation are no
longer appropriate and may be removed. I understand that upon receipt of
this letter, DTC will remove any stop or restriction on its system with
respect to this issue.
As always, please do not hesitate to call if we can be of further
assistance.
Very truly yours,
Authorized Officer
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration
Statement of Armco Inc. on Form S-4 of our reports dated February 5, 1997,
incorporated by reference in the Annual Report on Form 10-K of Armco Inc. for
the year ended December 31, 1996 and to the reference to us under the heading
"Experts" in the Prospectus, which is a part of this Registration Statement.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
September 30, 1997
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ James F. Will
------------------------
James F. Will
Chairman, President and
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ Jerry W. Albright
-----------------------------
Jerry W. Albright
Vice President and
Chief Financial Officer
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ John N. Davis
---------------------------
John N. Davis
Vice President and Controller
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ Paula H.J. Cholmondeley
---------------------------------
Paula H.J. Cholmondeley
Director
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ David A. Duke
------------------------
David A. Duke
Director
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ Dorothea C. Gilliam
-----------------------------
Dorothea C. Gilliam
Director
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ John C. Haley
--------------------------
John C. Haley
Director
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ Bruce E. Robbins
------------------------------
Bruce E. Robbins
Director
<PAGE>
POWER OF ATTORNEY
ARMCO INC.
The undersigned, in each of my capacities with Armco Inc., an Ohio
corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, one or more Registration Statements on Form S-4 relating to
the exchange of its 9% Senior Notes due 2007 for registered notes of like tenor,
hereby constitutes and appoints Gary R. Hildreth and James L. Bertsch, and each
of them individually, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in my name said Registration
Statements and any and all amendments thereto (including post-effective
amendments), and to file with the Securities and Exchange Commission the same,
with all exhibits thereto, and any and all applications or other documents to be
filed with the Securities and Exchange Commission pertaining thereto, with full
power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and
purposes as the undersigned could do if personally present, hereby ratifying and
approving the acts of said attorneys and any of them and of any such substitute.
Executed this 26th day of September, 1997.
/s/ John D. Turner
----------------------------
John D. Turner
Director
