SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported) June 29, 1994
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WEIRTON STEEL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-10244 06-1075442
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
400 Three Springs Drive, Weirton, WV 26062
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 304-797-2000
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Item 5. OTHER EVENTS
In 1992 and 1993, stockholders of the Company instituted
derivative actions against eighteen individuals who are directors
and/or officers, former directors and/or former officers of the
Company, as well as against one of the law firms which regularly
represented the Company. On June 29, 1994, a settlement was
reached between the plaintiffs and defendants in these actions.
The settlement, to be effective, must be approved by the Circuit
Court of Hancock County, West Virginia. A hearing on the
settlement has been set for August 9, 1994. Attached hereto as
Exhibit 1 is a copy of the notice sent to current stockholders of
the Company, which notice details the terms of the settlement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
WEIRTON STEEL CORPORATION
/s/ William R. Kiefer
William R. Kiefer
July 11, 1994
EXHIBIT 1.
IN THE CIRCUIT COURT OF HANCOCK COUNTY, WEST VIRGINIA
LARRY G. GODICH, JOHN L. BIRD, )
RAYMOND A. SACRIPANTI, SR., )
SHERIDAN BUFFINGTON, THOMAS M. )
RODGERS, MARTIN A. REITTER, )
JO ANN BRANLETT, EDWARD A. )
GODICH and BARBARA J. WILSON, )
)
Plaintiffs, )
)
v. ) CIVIL ACTION NO. 92-C-312-W
)
HERBERT ELISH, HARVEY L. )
SPERRY, WARREN E. BARTEL, )
DAVID M. GOULD, JAMES BRUHN, )
DAVID L. ROBERTSON, F. JAMES )
RECHIN, RICHARD F. SCHUBERT, )
GORDON C. HURLBERT, LAWRENCE )
M. ISAACS, IRVING BLUESTONE, )
PHILLIP H. SMITH, THOMAS R. )
STURGES, VIRGIL G. THOMPSON, )
ROBERT J. D'ANNIBALLE, JR., )
THOMAS W. EVANS, JOHN T. )
GILMORE, and WEIRTON STEEL )
CORPORATION, a Delaware )
corporation, )
)
Defendants. )
NOTICE OF
PROPOSED SETTLEMENT
OF DERIVATIVE ACTION, SETTLEMENT
HEARING AND RIGHT TO APPEAR
TO:ALL CURRENT OWNERS OF THE COMMON STOCK
OF WEIRTON STEEL CORPORATION (the "Company")
PLEASE READ THIS NOTICE CAREFULLY. IF THE COURT APPROVES THE
PROPOSED SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE
FAIRNESS, REASONABLENESS OR ADEQUACY OF THE PROPOSED SETTLEMENT, OR
FROM PURSUING THE SETTLED CLAIMS.
This Notice is sent to you pursuant to an Order of Judge
Ronald E. Wilson of the Circuit Court of Hancock County, West
Virginia (the "Court"), dated June 29, 1994 ("Scheduling Order")
entered in this lawsuit (the "Action"), to advise you of a proposed
settlement of the Action and of your rights, as more specifically
explained below, to, among other things, participate in a hearing
on, or to object to, the proposed settlement; and to give you
notice of a hearing to be held by the Court on August 9, 1994 (the
"Hearing") to determine whether the proposed settlement
("Settlement") should be approved as fair, reasonable and adequate
and in the best interests of the Company; to determine whether a
judgment should be entered in the Action pursuant to the Settlement
which will, among other things, dismiss the Action with prejudice;
and to rule on such other matters as the Court may deem
appropriate, including the application by plaintiffs' counsel for
attorneys' fees and expenses to be paid by the Company.
THIS NOTICE IS NOT AND SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION OF
ANY OPINION OF THE COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR
DEFENSES RAISED BY ANY OF THE PARTIES.
IF A PERSON OTHER THAN YOU IS THE BENEFICIAL HOLDER OF THE SHARES
OF THE COMPANY'S COMMON STOCK TO WHICH THIS NOTICE REFERS, YOU ARE
REQUESTED TO FORWARD THIS NOTICE TO THE BENEFICIAL OWNER.
ADDITIONAL COPIES OF THE NOTICE WILL BE MADE AVAILABLE TO YOU FOR
THIS PURPOSE UPON REQUEST DIRECTED TO RICHARD GARAN, WEIRTON STEEL
CORPORATION, 400 THREE SPRINGS DRIVE, WEIRTON, WV 26062.
I. BACKGROUND AND DESCRIPTION OF THE ACTION
Commencing on August 6, 1992 this shareholder derivative
action (the "Action") was filed with the Circuit Court of Hancock
County, West Virginia (the "Court") on behalf of Weirton Steel
Corporation ("Weirton" or the "Company"), naming as defendants
present and former directors of the Company ("individual
defendants") and Willkie Farr & Gallagher, a partnership ("Willkie
Farr"). Subsequently, on July 7, 1993, plaintiffs in the Action
commenced a separate derivative action in the Court ("Godich II")
naming as defendants Willkie Farr and William Kiefer.
Plaintiffs in the Action assert that the defendant
directors and officers breached fiduciary duties in the management
of construction of two walking beam reheat furnaces primarily
during the period 1989 through 1991. In their original Complaint,
plaintiffs allege, among other things, that:
(a) Defendant Herbert Elish breached fiduciary duties of
care and disclosure in the selection of Bricmont & Associates, P.A.
("Bricmont") and subcontractors in the construction of the reheat
furnaces, in the implementation of capital spending control
procedures, in failing to require that Bricmont provide a
"performance bond" in connection with construction of the reheat
furnaces, and generally in the management of Weirton's capital
improvement projects;
(b) Defendant Thomas W. Evans breached a fiduciary duty
of care in permitting payments to Bricmont without an executed
contract and a "performance bond";
(c) Defendant John T. Gilmore breached a fiduciary duty
of care in regard to the selection of Bricmont and construction
management of the reheat furnace project; and
(d) The remaining individual defendants breached
fiduciary duties of care in the selection of Bricmont and
subcontractors in the construction of the reheat furnaces, in the
implementation of capital spending control procedures, in failing
to require that Bricmont provide a "performance bond" in connection
with construction of the reheat furnaces, in dealing with "cost
overruns" on capital improvement projects including the reheat
furnaces, and in releasing Bricmont from liability in connection
with its handling of the reheat furnace project.
In their original Complaint, plaintiffs sought an award of
compensatory damages against defendants for the benefit of Weirton,
with prejudgment and postjudgment interest.
By letter opinion dated December 16, 1992, the Court
denied motions to dismiss the Action, which motions were based on
the grounds that under West Virginia Rule of Civil Procedure 23(b)
and applicable substantive law, a pre-suit demand upon the board of
directors of Weirton was required. (By order dated January 30,
1993, following a similar motion to dismiss, the Court granted
plaintiffs' motion for voluntary dismissal of Willkie Farr from the
Action.) Defendants in Godich II also moved to dismiss under Rule
23(b) and applicable substantive law for failure to make pre-suit
demand and for failure to plead adequately that refusal of a pre-
suit demand was wrongful. By letter opinion dated April 20, 1993,
the Court denied a further motion to dismiss the Action on the
grounds, inter alia, that plaintiffs (other than Thomas M. Rodgers)
were not stockholders of record and that plaintiffs therefore
collectively lacked standing to prosecute this action under West
Virginia Code 31-1-103. Defendants petitioned the West Virginia
Supreme Court of Appeals for a writ of prohibition based upon
Section 31-1-103, but by opinion and order of July 22, 1993, that
petition was denied.
By orders entered on April 1, 1994, the Court granted
motions for summary judgment, not opposed by plaintiffs, and
dismissed the claims against defendants Phillip H. Smith, Virgil
Thompson, Robert J. D'Anniballe, Jr., Warren E. Bartel and David M.
Gould. By order entered on May 20, 1994, the Court also granted
summary judgment, not opposed by plaintiffs, and dismissed the
claims against defendant James Bruhn. By letter opinion dated
April 18, 1994, the Court denied a motion for summary judgment by
the remaining individual defendants. That motion was based on the
grounds that Bricmont and Weirton had agreed upon a revised
approach to construction of the reheat furnaces that differed from
the approach specified in the formal written construction contract
they entered into dated February 23, 1990, that such revised
approach resulted in additional costs but substantially accelerated
completion and operation of the reheat furnaces, and that such
additional costs resulting from that revised, accelerated approach
to construction were properly paid by Weirton. In its April 18,
1994 letter opinion, the Court deferred ruling on a separate motion
by the remaining individual defendants (other than Herbert Elish,
Thomas W. Evans and John T. Gilmore) for summary judgment, which
motion was based upon the presumptions of validity afforded to them
under the business judgment rule of applicable Delaware substantive
law, and because summary judgments had been entered in favor of
defendants Phillip H. Smith, Virgil Thompson, Robert J.
D'Anniballe, Jr., Warren E. Bartel and David M. Gould.
At the time the parties to the Action reached agreement
in principle to enter into the Stipulation, trial of the Action was
scheduled to commence on July 11, 1994, and discovery was to be
concluded by June 15, 1994.
Concurrently with submission of the Stipulation,
plaintiffs filed an amended complaint in the Action (the "Amended
Complaint") specifying additional claims against defendants in the
Action, including claims of corporate waste and mismanagement in
connection with:
a. The IMIS and other or related information
system projects;
b. The B Lagoon project;
c. Phase I of the Hot Mill renovation;
d. The sizing press component of Phase II of the
Hot Mill renovation; and
e. Other capital investments during the period
1984 through the present.
II. DISCOVERY AND SETTLEMENT NEGOTIATIONS
Plaintiffs, through their counsel, have made a thorough
investigation of the facts and circumstances relevant to the
Action. In connection with the investigation, they engaged in
substantial discovery, including review of substantial production
of documents by defendants, depositions of all individual
defendants in the Action as well as several nondefendant employees
of the Company, and consultation with several expert witnesses in
matters pertinent to the Action and plaintiffs' claims therein. In
evaluating the settlement provided for herein (the "Settlement"),
plaintiffs and their counsel have considered the substantial
benefit provided by the Settlement to the Company; the expense and
length of time necessary to prosecute the Action through trial; the
defenses asserted by and available to defendants; the uncertainties
of the outcome of this litigation; and the fact that resolution of
the Action, if the Court found in plaintiffs' favor, would likely
be submitted for appellate review, as a consequence of which it
could be several years until there would be a final adjudication of
the Action. Based upon these considerations, plaintiffs and their
counsel have engaged in arm's-length negotiations in an attempt to
compromise the Action and have concluded that it is in the best
interests of plaintiffs and the Company to settle the Action on the
terms set forth herein.
III. SUMMARY OF SETTLEMENT TERMS
As a result of the filing of the Action and negotiations
among counsel for the plaintiffs and representatives of the various
parties, plaintiffs and defendants have entered into a Stipulation
and Agreement of Compromise, Settlement and Release ("Stipulation")
providing for a settlement of all claims asserted in the Action,
subject to approval of the Court, which Stipulation provides for
certain benefits to the Company which are summarized below, and for
dismissal of the Action with prejudice.
A. Settlement Terms
In full settlement and final dismissal of the Action, and
in accordance with this Stipulation of Settlement (the
"Stipulation"), within 10 business days after the Order and Final
Judgment described below is entered by the Court, the sum of $6.25
million will be paid to the Company on behalf of the individual
defendants. Such sum shall be held in escrow by an agent
designated by Weirton until the Order and Final Judgment approving
the Settlement becomes non-appealable or is affirmed on appeal.
B. Dismissal of the Action
If the Settlement, as provided for in the Stipulation, is
approved by the Court, final judgment will be entered in the
Action:
Approving the Settlement and adjudging its terms to
be fair, reasonable and adequate and in the best interests of the
Company, directing consummation of its terms and provisions, and
awarding to counsel for plaintiffs such fees and reimbursements of
expenses as the Court may deem reasonable in accordance with the
terms of the Stipulation; and
Dismissing on the merits and with prejudice all
Settled Claims, meaning all claims, rights, causes of action,
suits, demands, matters and issues, known or unknown, arising under
common law or statutory law, state or federal, including all
securities laws, that arise now or hereafter out of, or relate to,
directly or indirectly, or that are, were, or could have been
asserted in connection with, the subject matter of the Action, and
any agreements and disclosures related thereto, or any acts, facts,
matters, transactions, occurrences, conduct or representations
relating to or arising out of the subject matter referred to in the
original Complaint in the Action, the Amended Complaint, the
complaint in Godich II, or any complaints filed or hereafter filed
in the Action, or the fiduciary or disclosure obligations of any of
the defendants (or persons to be released), or any public state-
ments, announcements or other activities by or on behalf of any of
the Defendants or Defendants' Affiliates (as defined below) with
respect to any of the foregoing, by plaintiffs, the Company, the
shareholders of the Company, either directly, individually,
derivatively, representatively or in any other capacity against any
defendant (the Company, Herbert Elish, Harvey L. Sperry, David L.
Robertson, F. James Rechin, Richard F. Schubert, Gordon C.
Hurlbert, Lawrence M. Isaacs, Irving Bluestone, Thomas R. Sturges,
Thomas W. Evans and John T. Gilmore) (collectively hereinafter
referred to as "Defendants"), and the respective present or former
officers, directors, stockholders, employees, agents, attorneys,
representatives, advisors, financial advisors, consultants, invest-
ment bankers, commercial bankers, lenders, accountants, insurers,
trustees, affiliates, parents, subsidiaries (including the
directors and officers of such affiliates, parents and subsidiar-
ies), general and limited partners and partnerships, heirs,
executors, personal representatives, estates, administrators,
predecessors, successors and assigns of Defendants or of any
affiliate, parent or subsidiary of any and all Defendants
(collectively "Defendants' Affiliates"). Dismissal of the Settled
Claims with prejudice and on the merits will become effective
immediately upon the entry of the Order and Final Judgment attached
as Exhibit B to the Stipulation and without any further action by
the Court. It is the intent of the Settlement that upon entry of
the Order and Final Judgment, all claims arising from any of the
capital projects undertaken by Weirton since 1984 shall be
dismissed, settled and released.
C. Scope Of The Settlement
Final Court approval of this Stipulation and Settlement
will forever bar, under principles of res judicata, collateral
estoppel, good faith settlement, judgment, accord and satisfaction,
bar or reduction or any other theory of claim preclusion or issue
preclusion or similar defense or counterclaim, any and all claims
asserted or that can be asserted in Godich II against the
defendants named therein or against the Company, or any of the
Defendants or other Defendants' Affiliates.
D. Defendants' Denial of Liability
The individual defendants have denied, and continue to
deny, all liability with respect to the Action, deny that they
engaged in any wrongdoing, deny that they committed any violation
of law, deny that they breached any fiduciary duties, deny that
they acted improperly in any way and deny liability of any kind to
plaintiffs, the Company, and the shareholders of the Company, but
consider it desirable that the Action be settled and dismissed on
the merits and with prejudice in order to: (i) avoid further
expense, (ii) dispose of burdensome and protracted litigation, and
(iii) permit the continued operation of the Company's affairs
unhindered by expensive litigation and by distraction and diversion
of the personnel of the Company.
IV. ATTORNEYS' FEES AND COSTS
As part of the Settlement, plaintiffs' counsel will apply
to the Court for an award of attorneys' fees equalling one-third
(1/3) of the settlement and expenses in an amount not to exceed
$53,280.00. The Company has agreed to pay the fees and expenses
actually awarded by the Court, up to the amount applied for. The
Company shall not be obligated to pay any interest on court-awarded
fees and expenses, except that interest on amounts paid into escrow
shall be paid in accordance with the division of proceeds as
ordered by the Court. Except as expressly provided in the
Stipulation, neither the Company nor any of the defendants in the
Action or in Godich II shall be liable for any fees or expenses of
plaintiffs, or of any present or former shareholder of the Company,
in connection with the Action or with Godich II.
Defendants will seek, as part of the Settlement, a
determination by the Court that, if and to the extent that the
individual defendants' position that the expenses advanced on their
behalf and on behalf of the individual named as a defendant in
Godich II in defense of the Action and of Godich II shall be paid
in full by applicable directors' and officers' liability insurance
policies is unsuccessful, the individual defendants in the Action
and in Godich II are, in view of all the circumstances of the case,
fairly and reasonably entitled to be indemnified by Weirton for
such amounts advanced on their behalf by Weirton.
V. NOTICE OF HEARING ON THE SETTLEMENT AND
YOUR RIGHT TO OBJECT
A hearing shall be held on August 9, 1994 at 9:00 a.m.
(the "Hearing") in the third floor courtroom at the Hancock County
Courthouse, New Cumberland, West Virginia, to determine the
fairness, reasonableness and adequacy of the terms and conditions
of the Settlement and whether the Settlement should be approved by
the Court and judgment entered thereon. At the Hearing, or such
adjourned date as the Court deems appropriate, plaintiffs' counsel
and any interested person shall be heard on plaintiffs' counsels'
application for an award of attorneys' fees and reimbursement of
expenses.
The Court reserves the right to adjourn the Hearing or
any adjournment thereof, including consideration of the application
for attorneys' fees and expenses, without further notice other than
an oral announcement at the Hearing or any adjournment thereof.
The Court also reserves the right to approve the Settlement at or
after the Hearing with such modification as may be consented to by
the parties to the Stipulation.
Any current stockholder of the Company who objects to
the: (i) Settlement; (ii) dismissal; (iii) judgment to be entered
with respect thereto; (iv) plaintiffs' counsels' application for
fees and reimbursement of expenses in the Action; or (v) the
individual defendants' application for a determination of their
entitlement to indemnification for defense expenses advanced by
Weirton; or who otherwise wishes to be heard, may appear in person
or by their attorney at the Hearing and present evidence or
argument that may be proper and relevant; provided, however, that
no person other than counsel for the named plaintiffs and
defendants in the Action shall be heard and no papers, briefs,
pleadings or other documents submitted by any such person shall be
received and considered by the Court (unless the Court in its
discretion shall thereafter otherwise direct, upon application of
such person and for good cause shown), unless not later than five
(5) business days prior to the Hearing (i) a written notice of
intention to appear; (ii) a statement of such person's objections
to any matters before the Court; and (iii) the grounds therefor or
the reasons for such person's desiring to appear and be heard, as
well as all documents or writings such person desires the Court to
consider, shall be filed by such person with the Clerk of the Court
and, on or before the date of such filing, shall be served upon the
following counsel of record:
Edward A. Zagula
ZAGULA, HILL & DITTMAR
3334 Main Street
Weirton, WV 26062
(304)-748-2600
Attorneys for Plaintiffs
Carl N. Frankovitch
FRANKOVITCH & ANETAKIS
337 Penco Road
Weirton, WV 26062
(304)-723-4400
Attorneys for Weirton Steel Corporation
John H. Tinney
SPILMAN, THOMAS & BATTLE
P.O. Box 273
Charleston, WV 25321
(304)-340-3800
Attorneys for Herbert Elish, Thomas W. Evans and John T. Gilmore
Robert B. King
KING, ALLEN & ARNOLD
P.O. Box 3394
Charleston, WV 25333
(304)-345-7250
Attorneys for Harvey L. Sperry, David L. Robertson, F. James
Rechin, Richard F. Schubert, Gordon C. Hurlbert, Lawrence M.
Isaacs, Irving Bluestone and Thomas R. Sturges
Unless the Court otherwise directs, no person shall be
entitled to object to the approval of any of the Settlement, any
judgment entered thereon, any award of attorneys' fees and
reimbursement of expenses, or otherwise to be heard, except by
serving and filing a written objection and supporting papers and
documents as prescribed above. Any person who fails to object in
the manner and within the time prescribed above shall be deemed to
have waived the right to object (including the right to appeal) and
forever shall be barred, in this proceeding or in any other
proceeding, from raising such objection.
VI. SCOPE OF THIS NOTICE
This Notice is not all-inclusive. The references in this
Notice to the pleadings in the Action, the Stipulation and other
papers and proceedings are only summaries and do not purport to be
comprehensive. For the full details of the Action, the claims
which have been asserted by the parties and the terms and condi-
tions of the Settlement, including a complete copy of the Stipula-
tion, you may desire to review the Court files in the Action. You
may examine the file on any weekday during regular business hours
at the office of the Clerk of the Court, Hancock County Courthouse,
New Cumberland, West Virginia.
New Cumberland, West Virginia
June 29, 1994
/s/ Lois Wilkinson
Clerk of the Court
