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As Filed with the Securities and Exchange Commission on April 17, 1996
Registration No. 33-56637
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NS GROUP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0985936
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Ninth and Lowell Streets
Newport, Kentucky 41072
(606) 292-6809
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
John R. Parker
Vice President, Treasurer and
Chief Financial Officer
Ninth and Lowell Streets
Newport, Kentucky 41072
(606) 292-6809
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of all correspondence to:
William F. Seabaugh, Esq.
Bryan Cave LLP
One Metropolitan Square
St. Louis, Missouri 63102
(314) 259-2000
Approximate date of commencement of proposed sale to public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans,
please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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SUBJECT TO COMPLETION, DATED APRIL 17, 1996
PRELIMINARY PROSPECTUS
1,533,692 Shares
NS GROUP, INC.
Common Stock
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This Prospectus relates to 1,533,692 shares (the "Shares") of common stock,
no par value (the "Common Stock"), of NS Group, Inc., a Kentucky corporation
(the "Company"), which will be issued by the Company upon exercise of certain
Warrants. The Warrants were sold as part of the Company's offering (the
"Offering") of 131,096 Units consisting of $131,096,000 aggregate principal
amount of 13-1/2% Senior Secured Notes Due 2003 (the "Senior Secured Notes")
and 131,096 warrants to purchase the Shares (the "Warrants"). The Offering was
consummated on July 28, 1995. Each Warrant entitles the holder thereof the
right to purchase 11.699 shares of Common Stock at $4 per share, subject to
adjustment under certain circumstances. The Warrants are exercisable on or
after January 24, 1996, and will automatically expire at 5:00 p.m. Eastern Time
on July 15, 2003.
Assuming the Warrants are exercised in full at their initial exercise
price, the Company will receive estimated net proceeds of approximately
$6,120,000 after payment of related expenses. See "Use of Proceeds." The
Company will pay all expenses incurred with respect to this offering.
The Common Stock is traded on the New York Stock Exchange under the symbol
"NSS". On April 15, 1996, the last reported sale price of the Common Stock was
$2.75 per share.
See "Risk Factors" on page 5 for a discussion of certain risks associated
with investment in the Shares.
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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.
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The date of this Prospectus is ____________________.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and
other information filed by the Company with the Commission may be inspected and
copied at the public referenced facilities maintained by the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
following regional offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such materials can be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. In addition,
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the New York Stock Exchange, on which shares of the
Company's Common Stock are listed, at 20 Broad Street, New York, New York.
The Company has filed with the Commission a Post-Effective Amendment No. 1
on Form S-3 to a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Shares offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement. As permitted by the rules
and regulations of the Commission, this Prospectus omits certain information
which is contained in schedules and exhibits to the Registration Statement or
is incorporated by reference in the Registration Statement. Statements made in
this Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement
or incorporated by reference therein, reference is made to such exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement, including all exhibits thereto, may be inspected and copied in the
manner and at the sources described above.
THE COMPANY
Unless the context otherwise requires, all references to the "Company"
refer to NS Group, Inc. and its principal operating subsidiaries, Newport Steel
Corporation ("Newport"), Koppel Steel Corporation ("Koppel"), Erlanger Tubular
Corporation ("Erlanger") and Imperial Adhesives, Inc. ("Imperial"). All
references to a fiscal year are to the fiscal year of the Company which ends on
the last Saturday of September (for example, references to "fiscal 1995" mean
the fiscal year ended September 30, 1995). In October 1993, the Company sold
its subsidiary Kentucky Electric Steel Corporation ("KES"). Except as
otherwise noted herein, all information in this Prospectus relating to the
Company's operations for fiscal 1994 is presented excluding KES.
The Company produces a diverse group of specialty steel products consisting
of: (i) seamless and welded tubular goods primarily used in oil and natural
gas drilling and production operations ("oil country tubular goods" or "OCTG");
(ii) line pipe used in the transmission of oil, natural gas and other fluids;
(iii) special bar quality ("SBQ") products primarily used in the manufacture of
heavy industrial equipment, trucks and off-road vehicles; and (iv) hot rolled
coils which are sold to service centers and other manufacturers for further
processing. The Company manufactures and finishes these specialty steel
products at its three wholly-owned subsidiaries: Newport Steel Corporation, a
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mini-mill manufacturer of welded tubular steel products, located near Newport,
Kentucky; Erlanger Tubular Corporation, a pipe finishing operation, located
near Tulsa, Oklahoma, and Koppel Steel Corporation, a mini-mill manufacturer of
seamless tubular products, hot rolled bars and semi-finished steel products,
located in western Pennsylvania. In June 1994, the Company acquired a tubular
products processing facility located near Houston in Baytown, Texas. The
facility, which commenced operations in October 1994, finishes production
tubing, casing and drill pipe and provides a Company-owned stocking location in
the heart of the Southwest oil and natural gas drilling region. The Koppel
facilities include modern melting and tubemaking operations, and the Newport
facility is the only mini-mill with continuous casting capabilities
manufacturing welded tubular products in the United States.
A separate wholly-owned subsidiary of the Company, Imperial Adhesives,
Inc., manufactures industrial adhesive products.
The Company was incorporated in 1980 and completed an initial public
offering of its Common Stock in 1988. Current executive officers and directors
of the Company, as a group, currently beneficially own 36.4% of the Company's
Common Stock. The Company's Common Stock is traded on the New York Stock
Exchange under the symbol "NSS." The address of the Company's principal place
of business is Ninth & Lowell Streets, Newport, Kentucky 41072 and its
telephone number is (606) 292-6809.
RISK FACTORS
In addition to the other information set forth in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating the Company and its business before exercising the Warrants to
purchase the Shares.
Recent Losses
The Company incurred a net loss of $3.2 million, or a $.23 loss per share,
in the first quarter of fiscal 1996 compared to net income of $0.1 million, or
$.01 per share, in the first quarter of fiscal 1995. Gross profit for the
first quarter of fiscal 1996 decreased $4.6 million from the first quarter of
fiscal 1995 to $6.9 million, for a gross profit margin of 7.7% in the first
quarter of fiscal 1996 compared to 12.3% in the first quarter of fiscal 1995.
The specialty steel segment accounted for substantially all of the decline in
gross profit and margin and was attributable to a decline in shipments of
welded tubular products and SBQ products as well as lower operating
efficiencies at Newport due partially to reduced production volume.
During the fiscal 1995 fourth quarter ending September 30, 1995, the
Company experienced numerous unexpected operational problems, principally at
the Company's welded tubular facilities at Newport. Newport's melt shop
incurred an unusual number of unplanned outages during the quarter related to
equipment breakdowns, lightning strikes and power curtailments due to weather
conditions. As a result, steel production volume was significantly affected,
limiting availability of steel to Newport's hot strip mill and pipe mills. The
excessive downtime throughout all of Newport's operations resulted in low
operating efficiencies, increased maintenance costs and lost sales
opportunities during the quarter. Also impacting the quarter at Newport was a
write-down of scrap inventory resulting from year end physical inventory
counts. The fiscal 1995 fourth quarter was also affected by a decline in
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shipments of SBQ products from the Company's Koppel facilities, due to
softening in market demand.
Primarily as a result of the above factors, the Company recorded gross
profit of $1.9 million on sales of $86.0 million for the fiscal 1995 fourth
quarter, for a gross profit margin of 2.2%. The Company incurred a loss before
extraordinary charge of $6.1 million, or a $.44 loss per share for the quarter.
Gross profit for the full fiscal year of 1995 was $34.1 million on sales of
$371.4 million, for a gross profit margin of 9.2%. The Company incurred a loss
before extraordinary charge of $5.1 million, or a $.36 loss per share. The
Company incurred an extraordinary charge of $5.2 million net of applicable
income tax benefit of $2.8 million, or $.38 per share, in the fourth quarter of
fiscal 1995 as a result of prepayment penalties and the write-off of
unamortized debt issuance costs incurred in connection with the Offering. As a
result, the Company incurred a net loss of $10.3 million and $11.3 million for
the 1995 fiscal year and fourth quarter, respectively, or a $.74 and $.82 loss
per share, respectively.
For fiscal 1994, excluding the gain on the sale of and the results for KES,
the Company's pro forma net loss before the cumulative effect of a change in
accounting principle was $10.2 million. The Company incurred losses before
extraordinary items of $5.9 million, $13.4 million and $20.6 million for the
fiscal years ended 1993, 1992 and 1991, respectively. These losses include the
results of KES prior to its sale in October 1993. Primary factors contributing
to the Company's losses during fiscal 1994, 1993, 1992 and 1991 include the
decline in the demand for and the selling prices of the Company's products,
particularly its tubular products; the start-up of Koppel in the face of
declining markets; start-up costs associated with Newport's continuous slab
caster; and increases in the cost of steel scrap, the Company's principal raw
material.
Leverage; Deficiency of Earnings to Fixed Charges; Restrictive Covenants.
The Company has a substantial amount of long-term debt in relation to
common shareholders' equity. As of December 30, 1995, the Company had total
debt of $168.6 million. For the first quarter of fiscal 1996, the Company's
gross interest expense was $6.1 million and its earnings were insufficient to
cover fixed charges by $4.6 million. The Company's gross interest expense for
fiscal 1995, 1994, 1993, 1992 and 1991 was $20.8 million, $20.0 million, $21.1
million, $21.8 million and $16.1 million, respectively. For fiscal 1995, 1994
(excluding the gain on the sale of and the results for KES), 1993, 1992 and
1991, the Company's earnings were insufficient to cover fixed charges by $8.6
million, $16.6 million, $9.3 million, $19.4 million and $38.1 million,
respectively. These amounts were calculated including KES for the periods
prior to its sale in October 1993. The Company's ability to make interest
payments on and to repay the principal amounts of its indebtedness will depend
upon the Company's ability to generate cash sufficient to meet such required
payments or to refinance its debt.
The Company's level of indebtedness, together with the restrictive
covenants included in the Indenture related to the Senior Secured Notes and the
Company's credit facility, may have the effect of limiting the Company's
ability to incur additional indebtedness, sell assets or acquire other
entities, and may otherwise limit the operational and financial flexibility of
the Company. The effect of these restrictions may be to place the Company at a
competitive disadvantage in relation to less leveraged competitors. If
<PAGE> 7
applicable covenants are satisfied, the debt agreements of the Company or its
Subsidiaries do not limit the total debt that may be incurred.
Dependence on Oil Country Tubular Goods Market
OCTG products represent the Company's principal product lines and largest
source of net sales, representing 43% and 39% of the Company's net sales for
the first quarter of fiscal 1996 and for fiscal 1995, respectively. The market
for OCTG is primarily dependent upon domestic oil and natural gas drilling
activity, which is largely dependent on current and forecasted oil and gas
prices. The domestic drilling industry has been in a period of contraction
since 1986, with average rig count declining from a high of approximately 3,970
in 1981 to a low of approximately 718 in 1992, according to Baker Hughes, Inc.
For the first quarter of fiscal 1996 and for fiscal 1995, average rig count was
764 and 738, respectively. Any increase in rig count in the future may benefit
only welded or only seamless product sales depending on the type of wells being
drilled. The Company's OCTG sales and margins are also significantly
influenced by OCTG imports, inventory levels of welded and seamless products,
competitive conditions, steel scrap prices and other factors beyond the
Company's control. No assurance can be given as to the likelihood, timing and
extent of any increase in domestic oil and natural gas drilling or as to the
level of future demand for the Company's products.
Industry-wide inventory levels of OCTG can vary significantly from period
to period and have a direct effect on the demand for new production of such
products. As a result, the Company's OCTG sales and results of operations may
vary significantly from period to period. There can be no assurance that OCTG
inventories will not become excessive or that substantial draw downs of such
inventories will not occur, which could have a material adverse effect on price
levels and the quantity of OCTG products sold by the Company.
Cyclical Industry and Sensitivity to Economic Conditions
The demand for the Company's OCTG products is cyclical in nature, being
dependent on oil and natural gas drilling activity, industry-wide inventory
levels and general economic conditions. See "--Dependence on Oil Country
Tubular Goods Market." The demand for the Company's SBQ and hot rolled coil
products is also cyclical in nature and is sensitive to general economic
conditions. The demand for and the pricing of the Company's SBQ and hot rolled
coil products is also affected by economic trends in areas such as commercial
and residential construction, automobile production and industrial investment
in new plants and facilities. Future economic downturns may adversely affect
the Company.
Capital Intensive Industry
The Company operates in an industry which requires substantial capital
investment, and additional capital expenditures are required by the Company to
continue to upgrade its facilities. The Company believes that foreign and
domestic producers will continue to invest heavily to achieve increased
production efficiencies and improve product quality. During the past few
years, the Company has deferred certain discretionary capital expenditures due
to financial constraints. There can be no assurance that there will be
sufficient internally generated cash or available acceptable external financing
to make the necessary capital expenditures for a protracted period of time.
<PAGE> 8
Competition
The Company competes with foreign and domestic producers, including both
integrated and mini-mill producers, many of which have substantially greater
assets and larger sales organizations than the Company. The domestic mini-mill
steel industry, particularly with respect to OCTG products, is characterized by
vigorous competition with respect to price, quality and service, as well as
competition to achieve technological advancements that would allow a mini-mill
to lower its production costs. In addition, excess production capacity among
OCTG producers has resulted in competitive product pricing and continued
pressures on industry profit margins. The economics of operating a steel mini-
mill encourage mini-mill operators to maintain high levels of output, even in
times of low demand, which exacerbates the pressures on industry profit
margins.
In the welded OCTG and line pipe market, the Company competes against
certain manufacturers who purchase hot rolled coils for further processing into
welded OCTG and line pipe products. Since these tubular manufacturers acquire
their principal raw material from other producers, they avoid the substantial
investment required to build and operate a melt shop and hot strip mill. The
cost of finished tubular products for these manufacturers is largely dependent
on the market price of hot rolled coils. Depending on market demand for hot
rolled coil, these tubular manufacturers may purchase hot rolled coils at a
lower or higher cost than the Company's cost to manufacture hot rolled coils.
The barriers to entry to the welded tubular market with respect to capital
investment are low by steel industry standards.
Manufacturers with facilities utilizing thin slab casting are expected to
be increasingly strong competitors in the hot rolled coil market. The
principal advantages of thin slab casting over the Company's melting and hot
strip mill operations at the Newport facilities may include reduced capital
costs per unit, lower energy and labor costs per unit and increased economies
of scale. Certain steel facilities are currently utilizing thin slab casting
technology and additional thin slab casting facilities either have been
announced, are currently under construction or are currently commencing
operation. The anticipated increase in the use of thin slab casting technology
may result in lower prices to the Company's competitors for hot rolled coils
and closures of excess hot rolled capacity. As a result, particularly in times
of soft demand for hot rolled coil, the Company may be forced by competitive
pressures to lower prices for finished products. Alternatively, the Company
may be required to invest in new technologies not included in its present
capital expenditure program to offset the Newport facilities' potential cost
disadvantages when compared to a low cost thin slab casting operation.
The domestic steel industry has historically faced significant competition
from foreign steel producers. Many foreign steel producers are owned,
controlled or subsidized by their governments and their decisions with respect
to production and sales may be influenced more by political and economic policy
considerations than by prevailing market conditions. Foreign steel producers'
share of OCTG domestic consumption significantly increased from 1992 to 1995.
In the SBQ market, the reopening of a previously closed facility with
significant capacity and the expansion of existing competitor facilities could
result in an increase in competition for the Company's line of SBQ products.
<PAGE> 9
Unionized Labor Force
The United Steel Workers of America represents substantially all of the
Company's hourly 1,242-person workforce. In 1994, the Company negotiated
collective bargaining agreements with respect to its hourly workforces at
Newport and Koppel, both of which expire in 1999. Execution of the Newport
agreement followed rejection of an earlier proposal and a two-day strike. In
November 1995, the Company negotiated a new collective bargaining agreement
with respect to its hourly workforce at Imperial, which will expire in 1998.
There can be no assurance that work stoppages will not occur in the future.
Ownership Control of Management
Three of the Company's six directors are executive officers of the Company.
As of December 30, 1995, executive officers and directors of the Company, as a
group, beneficially owned 36.4% of the Company's Common Stock. As a result,
the executive officers have sufficient voting power to influence the election
of the Company's Board of Directors and the policies of the Company.
Volatility in Raw Material Costs
The market for steel scrap, the principal raw material used in the
Company's operations, is highly competitive and subject to price volatility
influenced by periodic shortages (due to increased demand by foreign and
domestic users), freight costs, speculation by scrap brokers and other market
conditions largely beyond the Company's control. Although the domestic mini-
mill industry attempts to maintain its profit margin by attempting to increase
the price of its finished products in response to increases in scrap costs,
increases in the prices of finished products often do not fully compensate for
such scrap price increases and generally lag several months behind increases in
steel scrap prices, thereby restricting the ability of mini-mill producers to
recover higher raw material costs. During periods of declining steel prices,
declines in scrap prices may not be as significant as declines in product
prices and, likewise, a decline in scrap prices may cause a decline in selling
prices for the Company's products. A number of companies have announced plans
to open new facilities, some of which will be located in the same geographic
region as the Company's facilities. Operation of these new mini-mills will
increase the demand for steel scrap and may result in an increase in steel
scrap costs to the Company. In addition, certain existing thin slab casting
mini-mills are expanding capacity which may also significantly increase the
cost of steel scrap to the Company. The Company's fiscal 1995 steel scrap
costs per ton increased by approximately 6% over fiscal 1994.
Cost of Compliance with Environmental Regulations
The Company's specialty steel and adhesives operations are subject to
various federal, state and local laws and regulations, including, among others,
the Clean Air Act, the 1990 amendments to the Clean Air Act (the "1990
Amendments"), the Resource Conservation and Recovery Act ("RCRA") and the Clean
Water Act and all regulations promulgated in connection therewith, including,
among others, those concerning the discharge of contaminants as air emissions
or waste water effluents and the disposal of solid and/or hazardous waste such
as electric arc furnace dust. Since its inception the Company has spent
substantial amounts to comply with these requirements, and the 1990 Amendments
may require additional expenditures for air pollution control. In addition,
<PAGE> 10
there can be no assurance that environmental requirements will not change in
the future or that the Company will not incur significant costs in the future
to comply with such requirements.
The Company's mini-mills are classified, in the same manner as similar
steel mills in the industry, as generating hazardous waste due to the
production in the melting operation of dust that contains lead, cadmium and
chromium. In the event of a release of a hazardous substance generated by the
Company, the Company could be responsible for the remediation of contamination
associated with such a release.
Newport's permit for operating a hazardous waste disposal facility on its
property requires that Newport investigate, test, and analyze for potential
releases of hazardous constituents from its closed loop water recirculating
system. Any contamination documented as a result of the investigation would
require certain cleanup measures; however, the Company believes that the cost
of any such cleanup measures would not be material.
In March 1995, Koppel entered into a Consent Order with the Environmental
Protection Agency ("EPA") relating to an April 1990 RCRA facility assessment
(the "Assessment") completed by the EPA and the Pennsylvania Department of
Environmental Resources. The Assessment was performed in connection with a
RCRA Part B permit pertaining to a landfill that is adjacent to the Koppel
facilities and owned by Babcock & Wilcox Company ("B&W"), the former owner of
the Koppel facilities. The Assessment identified potential releases of
hazardous constituents into the environment from numerous Solid Waste
Management Units ("SWMU's") and Areas of Concern ("AOC's"). The SWMU's and
AOC's identified during the Assessment and the EPA's follow-up investigation
are located at and adjacent to the Company's Koppel facilities. The Consent
Order establishes a schedule for investigating, monitoring, testing and
analyzing the potential releases. Contamination documented as a result of the
investigation will require cleanup measures and certain remediation has begun.
Pursuant to various agreements entered into among the Company, B&W and PMAC,
Ltd. ("PMAC") at the time of the Company's acquisition of the Koppel facilities
in fiscal 1991, B&W and PMAC agreed to indemnify the Company against various
known and unknown environmental matters. While reserving its rights against
B&W, PMAC has accepted full financial responsibility for the matters covered by
the Consent Order other than with respect to a 1987 release of hazardous
constituents (the "1987 Release") that the Company believes could represent the
most significant component of any potential cleanup, and other than with
respect to hazardous constituents generated by Koppel after its acquisition by
the Company, if any. B&W, PMAC and Koppel are in dispute as to whether the
indemnification provisions relating to the 1987 Release expired in October
1995. B&W has not acknowledged responsibility for any cleanup measures that
may be required as a result of any investigation. Koppel and PMAC have jointly
retained an environmental consultant to conduct the required investigation.
The Company believes that it is entitled to full indemnity for all of the
matters covered by the Consent Order from B&W and/or PMAC. However, in the
event the indemnifying parties default on their respective obligations under
the applicable agreements for any reason (including the inability to pay such
obligations), or to the extent any disputes regarding the application of the
indemnification provisions to the 1987 Release are determined adversely to the
Company, Koppel will be obligated to complete any cleanup required by the EPA.
Prior to the completion of the site analysis to be performed in connection with
the Consent Order, the Company cannot predict the expected cleanup cost for the
SWMU's and AOC's covered by the Consent Order.
<PAGE> 11
In two separate incidents occurring in fiscal 1993 and 1992, radioactive
substances were accidentally melted at Newport, resulting in the contamination
of the melt shop's electric arc furnace emission control facility, or "baghouse
facility". The Company is investigating and evaluating various issues
concerning storage, treatment and disposal of the radiation contaminated
baghouse dust; however, a final determination as to method of treatment and
disposal, cost and further regulatory requirements cannot be made at this time.
Depending on the ultimate timing and method of treatment and disposal, which
will require appropriate federal and state regulatory approval, the actual cost
of disposal could substantially exceed current reserves of $4.4 million. As of
December 30, 1995, claims recorded in connection with disposal costs exhaust
available insurance coverage.
As of December 30, 1995, the Company had environmental remediation reserves
of $4.5 million, of which $4.4 million pertain to accrued disposal costs for
radiation contaminated baghouse dust. The possible range of estimated losses
related to the environmental contingency matters discussed above in excess of
those accrued by the Company is $0 to $3.0 million; however, with respect to
the Consent Order, the Company cannot estimate the possible range of losses
should the Company ultimately not be indemnified.
Product Liability
Certain losses may result or be alleged to result from defects in the
Company's specialty steel products and adhesives products, thereby subjecting
the Company to claims for consequential damages. Drilling for oil and natural
gas, in particular, involves a variety of risks. The Company warrants certain
of its OCTG, line pipe and SBQ products to be free of certain defects. There
can be no assurance that product liability in excess of insurance coverage will
not be incurred or that the Company will be able to maintain insurance with
adequate coverage levels.
Certain Anti-Takeover Provisions
The Company's authorized stock includes 2,000,000 share of Class A
Preferred Stock, issuable in one or more series. The rights, preferences,
privileges and restrictions of any series of Class A Preferred Stock, the
number of shares constituting any such series and the designation thereof, are
subject to determination by the Board of Directors. The rights of the holders
of Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any Preferred Stock that may be issued in the future.
Four hundred thousand shares of Class A Preferred Stock has been designated
as Series A Junior Participating Preferred Stock, par value $10 per share, in
connection with the Shareholders Protection Rights Plan adopted in fiscal 1989.
The existence of the authorized and unissued Preferred Stock and the Rights
Plan have certain anti-takeover effects. See "Description of Capital Stock".
<PAGE> 12
USE OF PROCEEDS
Assuming the Warrants are exercised in full at their initial exercise
price, the Company will receive estimated net proceeds of approximately
$6,120,000 after payment of related expenses. The Company will use the net
proceeds from the sale of any Common Stock pursuant to the exercise of the
Warrants for general corporate purposes.
PLAN OF DISTRIBUTION
On July 28, 1995, the Company issued 131,096 Units consisting of the Senior
Secured Notes and the Warrants. The Shares offered hereby are being offered by
the Company to the holders of the Warrants. The Warrants were issued pursuant
to a Warrant Agreement, dated as of July 28, 1995, between the Company and The
Huntington National Bank, a national banking association, as warrant agent
("Warrant Agent"). The Company will reserve 1,533,692 shares of Common Stock
for issuance upon exercise of the Warrants.
Each Warrant entitles the holder thereof to purchase 11.699 shares of
Common Stock at $4 per share, subject to adjustment under certain
circumstances. The Warrants became exercisable on January 24, 1996, and will
automatically expire at 5:00 p.m. Eastern Time on July 15, 2003.
In order to exercise a Warrant, the holder thereof must surrender the
warrant certificate evidencing the Warrant (a "Warrant Certificate") to the
Warrant Agent, with one of the forms on the reverse of or attached to the
Warrant Certificate duly executed, and tender the purchase price payable by
certified or official bank check or wire transfer, payable in United States
currency to the order of the Company. The Warrant Agent will then notify the
Company and deliver or cause to be delivered, or upon written order of any
holder, appropriate evidence of ownership of Shares or other securities or
property (including any money) to which the holder is entitled, together with
Warrant Certificates evidencing any Warrants not exercised.
This description of the plan of distribution is subject to, and is
qualified in its entirety by reference to, the Warrants and the Warrant
Agreement.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, no par value, and 2,000,000 shares of Class A Preferred Stock,
par value $10 per share (the "Preferred Stock"). Four hundred thousand shares
of the Preferred Stock have been designated as Series A Junior Participating
Preferred Stock, par value $10 per share (the "Series A Preferred Stock") in
connection with the Company's Shareholder Protection Rights Plan (the "Rights
Plan") discussed below. The following statements are brief summaries of
certain provisions relating to the capital stock of the Company. Such
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the Company's Restated Articles of
Incorporation (the "Articles") and By-Laws and the Preferred Stock Purchase
Rights Agreement referred to herein, including the definition therein of
certain terms, a copy of each of which is filed with the Commission. See
"Available Information."
<PAGE> 13
Common Stock
Subject to the prior rights of any outstanding shares of the Company's
Preferred Stock or Series A Preferred Stock, the holders of the Common Stock
are entitled to receive dividends as and when declared by the Board of
Directors out of funds legally available for dividends, and, in the event of
liquidation, dissolution or winding up of the Company, to share ratably in all
assets remaining after payment of liabilities. The holders of the Common Stock
are entitled to vote cumulatively in the election of directors and are entitled
to one vote for each share of Common Stock held of record on all other matters
subject to a vote of the shareholders. The holders of Common Stock have no
pre-emptive rights or conversion rights and are not subject to further calls or
assessments by the Company. There are no redemption or sinking fund provisions
applicable to the Common Stock. The Common Stock currently outstanding is
fully paid and non-assessable.
Preferred Stock
The Company is authorized to issue the Preferred Stock in one or more
series. No shares of Preferred Stock are presently outstanding, and no shares
of Preferred Stock have been designated as a series except for the Series A
Preferred Stock. The Board of Directors is authorized, without any further
action by the shareholders, to determine the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption, liquidation
preferences, sinking fund terms and other rights, preferences, privileges and
restrictions of any additional series of Preferred Stock, the number of shares
constituting any such series, and the designation thereof. The Board of
Directors may, without shareholder approval, issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power of the
holders of Common Stock.
Certain Effects of Authorized but Unissued Stock
The authorized but unissued shares are available for future issuance
without stockholder approval. These additional shares may be utilized for a
variety of proper corporate purposes, including future public offerings to
raise additional capital, to facilitate corporate acquisitions and for employee
benefit plans.
One of the effects of the existence of unissued and unreserved Preferred
and Common Stock may be to enable the Board of Directors to issue shares to
persons friendly to current management which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
the Company's management. Issuance of Preferred Stock might, under certain
circumstances, deter the acquisition of the Company or its securities by a
person concerned about the terms or effect of such stock.
Shares Eligible for Future Sale
Future sale of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices. At December 30, 1995, the
Company had issued and outstanding 13,809,413 shares of Common Stock. Upon
exercise of currently exercisable options, warrants and convertible securities
(exclusive of the Warrants), there would be 17,076,701 shares outstanding as of
<PAGE> 14
such date. Of this total, 788,807 represent shares of Common Stock underlying
options, 772,481 represent shares of Common Stock underlying warrants
(exercisable at a price of $8 per share) and 1,706,000 represent shares of
Common Stock underlying the Company's 11% Subordinated Convertible Debentures
(convertible at a price of $17 per share). The warrants and the convertible
debentures contain anti-dilution provisions and the holders have been granted
certain registration rights. As of December 30, 1995, all directors and
officers of the Company, as a group, beneficially owned approximately 36.4% of
the Common Stock, and therefore these shares may be "restricted securities"
within the meaning of Rule 144 under the Securities Act.
Classified Board of Directors
The Articles provide at such time as there are nine or more directors, the
Board of Directors may by resolution divide the Board into three classes with
the terms of office of each class ending in successive years.
Limitations on Directors' Liability
The Articles provide that no director shall be personally liable to the
Company or its shareholders for monetary damages for breach of his duties as a
director; provided, however, that a director's liability shall not be
eliminated or limited for (i) for transaction in which the director's personal
financial interest is in conflict with the financial interest of the Company or
its shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or are known to the director to be a violation of law;
(iii) acts which violate Section 271B.8-330 of the Kentucky Business
Corporation Act (regarding unlawful distributions) or (iv) any transaction from
which the director derived an improper personal benefit.
Preferred Stock Purchase Rights Plan
In November 1988, the Board of Directors declared a dividend distribution
of one right (a "Right") for each outstanding share of Common Stock of the
Company. The dividend distribution was payable on November 30, 1988 to the
stockholders of record at the close of business on that date. In addition, the
Board of Directors authorized and directed the issuance of one Right (subject
to adjustment) with respect to each share of Common Stock that becomes
outstanding prior to the earlier of the Distribution Date, as defined below,
and the redemption, exchange or expiration of the Rights.
The Rights Plan provides that until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights) the Rights will be evidenced
only by certificates for, and will be transferred automatically with, the
Company's Common Stock. Each Right entitles the holder to purchase from the
Company under certain circumstances one one-hundredth of a share of the Series
A Preferred Stock at an exercise price of $40 per one one-hundredth of a share,
subject to anti-dilution adjustments. Each one one-hundredth of a share of the
Series A Preferred Stock is designed to approximate the value of one share of
Common Stock. The Rights will become exercisable, and will trade separately
from the Common Stock, on the earlier of (i) 10 days after public announcement,
or the Company has notice, that a person or a group (other than subsidiaries,
employee benefit plans or certain existing shareholders) (an "acquiring person
or group") has become the beneficial owner of 30% or more of the outstanding
Common Stock of the Company, or (ii) 10 days after the commencement of a tender
<PAGE> 15
or exchange offer for 30% or more of the outstanding Common Stock, in either
such case without the prior written consent of the Board of Directors
("Distribution Date"). After the Distribution Date, separate certificates for
Rights will be mailed to holders of Common Stock of record on the Distribution
Date.
If an acquiring person or group acquires 30% or more of the Common Stock,
holders of Rights (other than the acquiring person or group) may purchase from
the Company, at the Right's then exercise price, Common Stock of the Company
having a value at that time of twice such exercise price. Further, at any time
after an acquiring person or group acquires 30% or more (but less than 50%) of
the outstanding Common Stock, the Board may, at its option, exchange the Rights
(other than Rights held by the acquiring person or group), in whole or in part,
at an exchange ratio of one share of Common Stock (or one one-hundredth of a
share of the Preferred Stock) per Right, subject to anti-dilution adjustments.
In addition, in the event that the Company is acquired in a merger, sale of
assets or similar transaction after the Rights become exercisable, holders of
Rights may purchase, at the then exercise price, Common Stock of the acquiring
entity having a value equal to twice such exercise price.
Prior to the acquisition by an acquiring person or group of beneficial
ownership of 30% or more of the Company's Common Stock, the Rights are
redeemable for one cent per Right at the option of the Board of Directors.
The Board of Directors is authorized to reduce the 30% thresholds referred
to above to not less than 15% or the amount owned by an acquiring person or
group.
If not earlier redeemed or exchanged, the Rights will expire on
November 17, 1998.
The Rights have certain anti-takeover effects. The Rights could cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on redemption of the Rights or on substantially
all of the Rights also being acquired. The Rights should not, however,
interfere with any merger or other business combination approved by the Board
of Directors since the Rights may be redeemed by the Company as described
above.
INDEPENDENT AUDITORS
The audited financial statements and schedules of the Company incorporated
by reference in this Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto and are incorporated by
reference in reliance upon the authority of said firm as experts in accounting
and auditing in giving said reports. Reference is made to said report, which
includes an explanatory fourth paragraph with respect to the change in the
method of accounting for income taxes effective September 26, 1993, as
discussed in Note 11 to the Consolidated Financial Statements.
<PAGE> 16
LEGAL MATTERS
The validity of the Shares has been passed upon for the Company by Bryan
Cave LLP, St. Louis, Missouri. Certain other legal matters have been passed on
for the Company by Kepley, MacConnell & Eyrich, Cincinnati, Ohio.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company under the Exchange Act are
incorporated by reference herein:
1. Annual Report on Form 10-K for the fiscal year ended September 30, 1995;
2. Quarterly Report on Form 10-Q for the quarter ended December 30, 1995;
3. The description of the capital stock of the Company which is contained in
the Company's Registration Statement on Form 8-A dated November 17, 1988,
and which incorporates by reference the description contained in the
Company's prospectus dated March 4, 1988 (file no. 33-17952); and
4. The description of the Preferred Stock Purchase Rights which is also
contained in the Company's Registration Statement on Form 8-A dated
November 17, 1988.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed incorporated by
reference in this Prospectus and to be a part hereof from the date of the
filing of such documents. See "Available Information." Any statement
contained in a document incorporated or deemed to be incorporated herein by
reference 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.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon oral or written request of any such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such documents not specifically incorporated by
reference). Requests should be directed to Manager of Investor Relations, NS
Group, Inc., Ninth and Lowell Streets, Newport, Kentucky 41072 (telephone
(606) 292-6809).
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated (except for the Securities and
Exchange Commission registration fee) fees and expenses in connection with this
registration and the issuance of the Warrant Shares.
New York Stock Exchange listing fee and expenses . . . . . . . . . .$ 1,500
Blue sky filing and counsel fees and expenses. . . . . . . . . . . . 1,000
Accountants' fees and expenses . . . . . . . . . . . . . . . . . . . 5,000
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . . . . 4,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,268
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$14,768
Item 15. Indemnification of Directors and Officers
Sections 271B.8-500 to 271B.8-589 of the Kentucky Business Corporation Act
provides that, subject to restrictions contained in the statute, a corporation
may indemnify any person made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or employee benefit plan.
A person, who has been successful on the merits or otherwise in any suit or
matter covered by the indemnification statute, shall be indemnified against
expenses (including attorneys' fees) reasonably incurred by him in connection
therewith. Indemnification is authorized upon a determination that the person
to be indemnified has met the applicable standard of conduct required. Such
determination shall be made by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding; or if such a quorum cannot be obtained, by a majority vote of a
committee of the board, duly designated to so act by a majority of the full
board, consisting solely of two or more directors who are not parties to the
action; or by special legal counsel selected by the board or a committee
thereof; or by the shareholders who are not parties to such action, suit or
proceeding. Expenses incurred in defense may be paid in advance upon receipt
by the corporation of a written affirmation by the director of his good faith
belief that he has met the applicable standard of conduct required, a written
undertaking by or on behalf of the director to repay such advance if it is
ultimately determined that he did not meet the standard of conduct, and a
determination that the facts then known to those making the determination would
not preclude indemnification under the statute. The indemnification provided
by statute shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, which shall inure to the
benefit of the heirs, executors and administrators of such a person. Insurance
may be purchased on behalf of any person entitled to indemnification by the
corporation against any liability incurred in an official capacity regardless
of whether the person could be indemnified under the statute. References to
the corporation include all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving corporation and
anyone seeking indemnification by virtue of acting in some capacity with a
<PAGE> 18
constituent corporation would stand in the same position as if he had served
the resulting or surviving corporation in the same capacity.
The By-Laws of the Company provide for indemnification of directors and
officers of the Company to the maximum extent permitted by the Kentucky
Business Corporation Act.
The directors and officers of the Company are insured under a policy of
directors' and officers' liability insurance.
Item 16. Exhibits
See Exhibit Index.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
<PAGE> 19
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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.
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport, Commonwealth of Kentucky, on April 15,
1996.
NS GROUP, INC.
(Registrant)
By: /S/ JOHN R. PARKER
-----------------------------------------
John R. Parker
Vice President, Treasurer
and Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Clifford R. Borland and John R. Parker and any
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this registration statement and any other documents and
instruments incidental thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents and/or any of them,
or their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on April 15, 1996.
Signature Title
- -------------------------------------- --------------------------------------
/S/ CLIFFORD R. BORLAND
- -------------------------------------- Director and Chief Executive Officer
Clifford R. Borland
/S/ PAUL C. BORLAND
- -------------------------------------- Director, President and Chief
Paul C. Borland Operating Officer
/S/ PATRICK J. B. DONNELLY
- -------------------------------------- Director
Patrick J. B. Donnelly
/S/ JOHN B. LALLY
- -------------------------------------- Director
John B. Lally
<PAGE> 21
Signature Title
- -------------------------------------- --------------------------------------
/S/ R. GLEN MAYFIELD
- -------------------------------------- Director
R. Glen Mayfield
/S/ RONALD R. NOEL
- -------------------------------------- Director and Vice President
Ronald R. Noel
/S/ JOHN R. PARKER
- -------------------------------------- Vice President, Treasurer and
John R. Parker Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE> 22
NS GROUP, INC.
EXHIBIT INDEX
Exhibit Number
- --------------
4.1 Amendment No. 3 to Revolving Credit, Guaranty and Security
Agreement among Bank of New York Commercial Corporation, PNC
Bank Ohio, N.A., Newport, Koppel, Imperial, the Company,
Erlanger, Northern Kentucky Air, Inc., and Northern Kentucky
Management, Inc., filed herewith.
5.1 Opinion of Bryan Cave LLP (incorporated by reference to
Exhibit 5.1 of Amendment No. 7 to the Company's Registration
Statement on Form S-1 (File No. 33-56637).
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bryan Cave LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included in Signature Page)
<PAGE> 1
EXHIBIT 4.1
AMENDMENT NO. 3
TO
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
THIS AMENDMENT NO. 3 ("Amendment") is entered into as of February 14, 1996,
among NEWPORT STEEL CORPORATION, a corporation organized under the laws of the
State of Kentucky ("Newport"), KOPPEL STEEL CORPORATION, a corporation
organized under the laws of the State of Pennsylvania ("Koppel"), and IMPERIAL
ADHESIVES, INC. a corporation organized under the laws of the State of Ohio
("Imperial") (each of Newport, Koppel and Imperial a "Borrower" and, jointly
and severally, the "Borrowers"), NS GROUP, INC., a corporation organized under
the laws of the State of Kentucky ("Holdings"), ERLANGER TUBULAR CORPORATION, a
corporation organized under the laws of the State of Oklahoma ("Erlanger"),
NORTHERN KENTUCKY AIR, INC., a corporation organized under the laws of Kentucky
("Air"), NORTHERN KENTUCKY MANAGEMENT, INC., a corporation organized under the
laws of Kentucky ("Management") (each of Holdings, Erlanger, Air, and
Management, a "Guarantor" and, jointly and severally, the "Guarantors"), the
undersigned financial institutions and any financial institution that hereafter
becomes a lender under the loan Agreement (as hereinafter defined)
(collectively, the "Lenders"and individually a "Lender"), THE BANK OF NEW YORK
COMMERCIAL CORPORATION ("BNYCC"), a corporation organized under the laws of the
State of New York, PNC BANK, OHIO, NATIONAL ASSOCIATION ("PNC"), BNYCC, and PNC
as co-agents for Lenders (BNYCC and PNC in such capacity, the "Co-Agents") and
BNYCC as administrative and collateral monitoring agent for the Lenders (BNYCC,
in such capacity, the "ACM Agent").
BACKGROUND
Borrowers, Guarantors and Lenders are parties to a Revolving Credit,
Guaranty and Security Agreement dated as of July 28, 1995 (as the same has been
amended by Amendment No. 1 thereto, Amendment No. 2 thereto and as the same
may further be amended, supplemented or otherwise modified from time to time,
the "Loan Agreement") pursuant to which Lenders provided Borrowers with certain
financial accommodations.
Borrowers have requested that Lenders increase the Newport Individual
Maximum Revolving Advance Amount and increase the sublimit for Letters of
Credit and Lenders are willing to do so on the terms and conditions hereafter
set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrowers by Lenders, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is hereby
amended as follows:
2.1. Section 1.2 of the Loan Agreement is hereby amended as follows:
(a) the following defined term is hereby amended in its entirety
to provide as follows:
<PAGE> 2
"Individual Maximum Revolving Advance Amount" shall
mean, as of the Amendment No. 3 Effective Date, with
respect to Newport, $26,000,000, with respect to
Koppel, $20,250,000, and with respect to Imperial,
$4,500,000.
(b) the following defined terms are hereby added in the correct
alphabetical order:
"Amendment No.3" shall mean Amendment No. 3 to
Revolving Credit, Guaranty and Security Agreement.
"Amendment No. 3 Effective Date" shall mean the date
upon which all conditions of effectiveness in Section
3 of Amendment No. 3 are met.
2.2 Section 2.1(b) of the Loan Agreement is hereby amended by deleting
the first word and inserting in its place and stead "Subject to Section 2.1
(a), each".
2.3. Section 2.8 of the Loan Agreement is hereby amended by amending
the second and third sentences thereof in their entirety to provide as follows:
"The maximum amount of outstanding Letters of Credit
shall not exceed (1) $26,000,000 for the benefit of
Newport or (2) $2,000,000 for the benefit of Koppel in
the aggregate at any time. The maximum amount of all
outstanding Letters of Credit shall not exceed
$26,000,000 in the aggregate at any time."
3. Conditions of Effectiveness. This Amendment shall become
effective as of February 14, 1996, when and only when Agent shall have received
(i) six (6) copies of this Amendment executed by Borrowers and Guarantors and
(ii) such other certificates, instruments, documents, agreements and opinions
of counsel as may be required by ACM Agent or its counsel, each of which shall
be in form and substance satisfactory to ACM Agent and its counsel.
4. Representations and Warranties. Borrowers and Guarantors hereby
represent and warrant as follows:
(a) This Amendment and the Loan Agreement, amended hereby,
constitute legal, valid and binding obligations of Borrowers and Guarantors and
are enforceable against Borrowers and Guarantors in accordance with their
respective terms.
(b) Upon the effectiveness of this Amendment, Borrowers and
Guarantors hereby reaffirm all covenants, representations and warranties made
in the Loan Agreement and agree that all such covenants, representations and
warranties shall be deemed to have been remade as of the effective date of this
Amendment.
(c) No Event of Default or Default has occurred and is continuing
or would exist after giving effect to this Amendment.
(d) Neither any Borrower nor any Guarantor has any defense,
counterclaim or offset with respect to the Loan Agreement.
<PAGE> 3
5. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each reference in
the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan Agreement, and
all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of ACM Agent or
Lenders, nor constitute a waiver of any provision of the Loan Agreement, or any
other documents, instruments or agreements executed and/or delivered under or
in connection therewith.
6. Governing Law. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York.
7. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. Counterparts. This Amendment may be executed by the parties hereto in
one or more counterparts, each of which shall be deemed an original and all of
which taken together shall be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first written above.
NEWPORT STEEL CORPORATION
KOPPEL STEEL CORPORATION
IMPERIAL ADHESIVES, INC.
NS GROUP, INC.
ERLANGER TUBULAR CORPORATION
NORTHERN KENTUCKY AIR, INC.
NORTHERN KENTUCKY MANAGEMENT, INC.
By: /s/ John R. Parker
------------------------------------------------------
John R. Parker
Title: Treasurer of each of the foregoing Corporations
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Lender, as Co-Agent
and as ACM Agent
By: /s/ Daniel J. Murray
------------------------------------------------------
Name: Daniel J. Murray
Title: Vice President
<PAGE> 4
PNC BANK, OHIO, NATIONAL
ASSOCIATION, as Lender and as Co-Agent
By: /s/ David Melin
------------------------------------------------------
Name: David Melin
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our reports dated
November 6, 1995, included or incorporated by reference in NS Group, Inc.'s
Form 10-K for the year ended September 30, 1995, and to all references to our
Firm included in or made a part of this Registration Statement.
Cincinnati, Ohio ARTHUR ANDERSEN LLP
April 15, 1996
