<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1996
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
---------------
WEIRTON STEEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
3312
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
DELAWARE 06-1075442
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
---------------
400 THREE SPRINGS DRIVE
WEIRTON, WEST VIRGINIA 26062-4989
(304) 797-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
WILLIAM R. KIEFER, ESQ.
400 THREE SPRINGS DRIVE
WEIRTON, WEST VIRGINIA 26062-4989
(304) 797-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
HARVEY L. SPERRY, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE
WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [_]
---------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE OFFERING OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PRICE PER UNIT PRICE FEE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Notes Due
2004.................. $125,000,000 100% $125,000,000 $43,103.45
</TABLE>
================================================================================
---------------
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER LOCATION IN PROSPECTUS
-------------------- ----------------------
<S> <C>
1. Forepart of the Registration State ment and Outside
Front Cover Page of Prospectus............................... Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information............................................ Summary; Selected Historical Financial and
Operating Data; Risk Factors
4. Terms of the Transaction....................................... Summary; The Exchange Offer; Capitalization;
Description of Notes
5. Pro Forma Financial Information................................ Not Applicable
6. Material Contracts with the Company Being
Acquired..................................................... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters................ Not Applicable
8. Interests of Named Experts and Counsel......................... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities............... Not Applicable
10. Information with Respect to S-3 Registrants................... Summary; Available Information;
Incorporation of Documents by Reference;
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations; Business; Management
11. Incorporation of Certain Information by Reference............. Incorporation of Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants............ Not Applicable
13. Incorporation of Certain Information by Reference............. Not Applicable
14. Information with Respect to Registrants Other than
S-3 or S-2 Registrants...................................... Not Applicable
15. Information with Respect to S-3 Companies..................... Not Applicable
16. Information with Respect to S-2 or S-3 Companies.............. Not Applicable
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies........................................ Not Applicable
18. Information if Proxies, Consents or Authorizations
are to be Solicited......................................... Not Applicable
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer................. Incorporation of Documents by Reference;
Summary
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 10, 1996
PROSPECTUS
WEIRTON STEEL CORPORATION
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 11 3/8% SENIOR NOTES
DUE 2004 FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 11
3/8% SENIOR NOTES DUE 2004 THAT WERE ISSUED AND SOLD IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
---------------
Weirton Steel Corporation, a Delaware corporation (the "Company"), hereby
offers to exchange (the "Exchange Offer") $125,000,000 in aggregate principal
amount of its 11 3/8% Senior Notes Due 2004 (the "Exchange Notes") for
$125,000,000 in aggregate principal amount of its outstanding 11 3/8% Senior
Notes Due 2004 that were issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Senior Notes"
and, together with the Exchange Notes, the "Notes").
The terms of the Exchange Notes are substantially similar (including
principal amount, interest rate, maturity and ranking) to the terms of the
Senior Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided below) and are issued without any covenant regarding their
registration. The Exchange Notes will be issued under the indenture governing
the Senior Notes. The Exchange Notes will be, and the Senior Notes are,
unsecured obligations of the Company and will be senior to all subordinated
indebtedness and pari passu with all existing and future senior unsecured
indebtedness of the Company. As of June 30, 1996, after giving effect to the
offering of the Senior Notes, the Company had $433.2 million of outstanding
senior unsecured indebtedness. The Company and its subsidiary have no senior
secured indebtedness. For a complete description of the terms of the Exchange
Notes, including provisions relating to the ability of the Company to create
indebtedness that is senior or pari passu to the Exchange Notes, see
"Description of the Notes." There will be no cash proceeds to the Company from
the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Senior Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance
of the Exchange Notes, such interest to be payable with the first interest
payment on the Exchange Notes, but will not receive any payment in respect of
interest on the Senior Notes accrued after the issuance of the Exchange Notes.
The Senior Notes were originally issued and sold on July 3, 1996 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Section 4(2) of
the Securities Act and Rule 144A of the Securities Act (the "Initial
Offering"). Accordingly, the Senior Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration
requirements of the Securities Act is available. Based upon its view of
interpretations provided to third parties by the Staff (the "Staff") of the
Securities and Exchange Commission (the "Commission"), the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange for
the Senior Notes may be offered for resale, resold and otherwise transferred
by holders thereof (other than any holder or any such other person which is
(i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act (an "Affiliate"), (ii) a broker-dealer who acquired Senior
Notes directly from the Company or (iii) a broker-dealer who acquired Senior
Notes as a result of market making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of business of such holder and any beneficial owner, and such holders
are not engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such
Exchange Notes. Each broker-dealer who acquired Senior Notes directly from the
Company and is participating in the Exchange Offer must comply with the
registration and prospectus delivery provisions of the Securities Act. Broker-
dealers who acquired Senior Notes as a result of market making or other
trading activities may use this Prospectus, as supplemented or amended, in
connection with resales of the Exchange Notes. The Company has agreed that,
for a period of 120 days after this Registration Statement is declared
effective by the Commission, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. Each broker-dealer
who receives Exchange Notes pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal that is filed as an exhibit to the
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal") states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Any holder that cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
The Senior Notes and the Exchange Notes constitute new issues of securities
with no established public trading market. Any Senior Notes not tendered and
accepted in the Exchange Offer will remain outstanding. To the extent that
Senior Notes are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered, and tendered but unaccepted, Senior Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders
of Senior Notes will continue to be subject to the existing restrictions on
transfer thereof and the Company will have no further obligation to such
holders to provide for the registration under the Securities Act of the Senior
Notes except under certain limited circumstances. (See "Senior Notes
Registration Rights.") No assurance can be given as to the liquidity of the
trading market for either the Senior Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered or accepted for exchange. The Exchange
Offer will expire at 5:00 p.m., New York City time, on , 1996,
unless extended (the "Expiration Date"). The date of acceptance for exchange
of the Senior Notes (the "Exchange Date") will be the first business day
following the Expiration Date, upon surrender of the Senior Notes. Senior
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date; otherwise such tenders are irrevocable.
---------------
SEE "RISK FACTORS" ON PAGE 10 HEREOF FOR A DESCRIPTION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
The date of this Prospectus is , 1996
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and
the rules and regulations promulgated thereunder, covering the Exchange Notes
being offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to in the Registration Statement are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
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 Company is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Periodic reports, proxy statements and other information filed by the
Company with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at its regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained from the Company upon request.
The Company's Common Stock is listed on the New York Stock Exchange. Periodic
reports, proxy statements and other information filed by the Company can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005, or on the Internet at http://www.sec.gov.
The Company is required by the terms of the indenture dated as of July 3,
1996 between the Company and Bankers Trust Company, as trustee (the
"Trustee"), under which the Senior Notes were issued, and under which the
Exchange Notes are to be issued (the "Indenture"), to furnish the Trustee with
annual reports containing consolidated financial statements audited by its
independent certified public accountants and with quarterly reports containing
unaudited condensed consolidated financial statements for each of the first
three quarters of each fiscal year.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
i
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference: (1) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995; (2)
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996; (3) the Company's Current Report on Form 8-K, filed May 29, 1996; and
(4) the Company's Current Report on Form 8-K, dated June 27, 1996.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
and prior to the termination of the exchange offer made herein shall be deemed
to be incorporated herein by reference and to be a part hereof from the date
of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein, or in any other subsequently filed document
that also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
HEREIN) ARE AVAILABLE UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, FROM THE
COMPANY. WRITTEN OR TELEPHONE REQUESTS SHOULD BE DIRECTED TO WEIRTON STEEL
CORPORATION, 400 THREE SPRINGS DRIVE, WEIRTON, WEST VIRGINIA 26062-4989,
ATTENTION: WILLIAM R. KIEFER, VICE PRESIDENT-LAW AND SECRETARY (TELEPHONE 304-
797-2000). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS
SHOULD BE MADE BY .
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ ii
SUMMARY.................................................................... 1
THE COMPANY................................................................ 1
THE EXCHANGE OFFER......................................................... 4
TERMS OF THE NOTES......................................................... 6
RISK FACTORS............................................................... 10
Consequences Of Failure To Exchange...................................... 10
Factors Relating To The Company.......................................... 10
Financial Results/Recent Developments.................................. 10
Deficiency of Earnings to Fixed Charges................................ 11
Collective Bargaining Agreements....................................... 11
Environmental Compliance Expenditures.................................. 11
Leverage............................................................... 12
Limitations on Raising Equity.......................................... 12
Voting Power........................................................... 13
No Prior Market........................................................ 13
Change of Control...................................................... 13
Factors Relating To The Steel Industry................................... 13
Cyclicality............................................................ 13
Capacity Utilization and Price Sensitivity............................. 13
Competition............................................................ 14
USE OF PROCEEDS............................................................ 14
THE EXCHANGE OFFER......................................................... 15
Purpose of the Exchange Offer............................................ 15
Terms of the Exchange.................................................... 15
Expiration Date; Extensions; Termination; Amendments..................... 16
How to Tender............................................................ 17
Terms and Conditions of the Letter of Transmittal........................ 19
Withdrawal Rights........................................................ 19
Acceptance of Senior Notes for Exchange; Delivery of Exchange Notes...... 20
Conditions to the Exchange Offer......................................... 20
Exchange Agent........................................................... 21
Solicitation of Tenders; Express......................................... 21
Appraisal Rights......................................................... 21
Federal Income Tax Consequences.......................................... 21
Other.................................................................... 22
CAPITALIZATION............................................................. 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................... 27
BUSINESS................................................................... 35
MANAGEMENT................................................................. 50
DESCRIPTION OF THE NOTES................................................... 53
General.................................................................. 53
Redemption............................................................... 53
Optional Redemption.................................................... 53
Selection and Notice of Redemption..................................... 53
Sinking Fund........................................................... 54
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Covenants....................................................... 54
Limitations on Indebtedness........................................... 54
Limitations on Restricted Payments.................................... 54
Limitations on Mergers, Consolidations and Sales of Assets............ 55
Limitations on Transactions with Affiliates........................... 55
Restrictions on Disposition of Assets of the Company.................. 56
Limitations on Liens.................................................. 56
Limitations on Sale and Leaseback Transactions........................ 56
Limitations on Dividend and Other Payment Restrictions Affecting Sub-
sidiaries............................................................ 57
Change of Control Option.............................................. 57
Reports to Holders of the Notes....................................... 59
Certain Definitions..................................................... 59
Events of Default and Notice Thereof.................................... 65
Modification and Waiver................................................. 66
Satisfaction and Discharge of Indenture................................. 66
Concerning the Trustee.................................................. 66
Book-entry; Delivery and Form........................................... 67
Global Note........................................................... 67
Certificated Securities............................................... 68
Governing Law........................................................... 68
SENIOR NOTES REGISTRATION RIGHTS.......................................... 68
PLAN OF DISTRIBUTION...................................................... 70
LEGAL MATTERS............................................................. 71
EXPERTS................................................................... 71
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
iv
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and consolidated financial statements included elsewhere
or incorporated by reference into this Prospectus. Unless the context otherwise
requires, the term "Company" refers to Weirton Steel Corporation and its sole
subsidiary, Weirton Receivables, Inc. ("WRI").
THE COMPANY
GENERAL
The Company is a major integrated producer of flat rolled carbon steel which
has been in the steelmaking and finishing business for more than 80 years. The
Company focuses on higher value-added products with demanding specifications,
such as tin mill products ("TMP") and coated sheet. TMP are sold primarily to
manufacturing and packaging companies for use as food, non-carbonated beverage
and general line cans; coated sheet is sold primarily to the construction
industry for use in a broad variety of building products and to service
centers. For the three months ended March 31, 1996, these value-added product
lines accounted for approximately 68% of the Company's revenues and 55% of its
shipments. Over the last five years, these value-added product lines have
accounted for approximately 71% of the Company's revenues and 59% of its
shipments. The remainder of the Company's revenues is derived from the sale of
hot and cold rolled sheet, which is used primarily for machinery, construction
products and other durable goods. The Company believes that its percentage of
value-added products to total production is among the highest of integrated
steel producers in the United States and provides it with a competitive
advantage against both domestic and foreign commodity steel producers.
Since 1988, the Company has made capital improvements in excess of $730
million, reduced its workforce by 31% and implemented a number of additional
cost reduction initiatives, all of which have contributed to increased
productivity. In particular, from 1988 to the first quarter of 1996, the
Company increased its overall yields from liquid steel to finished product from
approximately 74% to approximately 81% and reduced its employee hours per ton
from 6.41 to 4.31.
Incorporated in Delaware in November 1982, the Company acquired the principal
assets of National Steel Corporation's former Weirton Steel Division in January
1984 through an employee stock ownership plan (the "1984 ESOP"). Substantially
all the Company's employees participate in the 1984 ESOP and another stock
ownership plan formed in 1989 (the "1989 ESOP," and together with the 1984
ESOP, the "ESOPs"), which collectively owned common stock and preferred stock
accounting for approximately 48% of the total voting power of the Company's
capital stock as of March 31, 1996.
BUSINESS
TMP. The Company believes it is one of the largest domestic producers of TMP
and that it is considered to be a leading innovator of TMP in the United
States. TMP comprise a wide variety of light gauge coated steels, including tin
plate and black plate products, as well as electrolytic chromium coated steel.
The market for TMP is characterized by a relative balance between supply and
demand, a comparatively high cost of entry, a limited number of suppliers, and
major customers who traditionally have committed to a significant portion of
their annual purchase requirements in advance. As a result, TMP have enjoyed
more stable pricing, a greater resistance to recession and a higher level of
revenue predictability from year to year than the steel industry as a whole. In
the first quarter of 1996, the Company regained its TMP market share of 22%
that it held in 1993, prior to a fire in April 1994 which extensively damaged
the Company's No. 9 tandem mill (the "No. 9 Tandem Mill"). The No. 9 Tandem
Mill, which processes 70% to 80% of the coils required to manufacture TMP, was
out of operation until October 1994, and as a result, the Company's market
share for TMP dropped to 15% in 1994. TMP represented 41% of the Company's
total revenues in the first quarter of 1996 and 43% for the five years ended
December 31, 1995.
1
<PAGE>
Sheet Products. The Company's sheet products include hot rolled, cold rolled
and galvanized steel, which are used in a variety of industrial applications,
including construction and consumer durables. Less than 3% of the Company's
sales during the five year period ended December 31, 1995 were made directly to
auto manufacturers, and the Company does not produce bars, rods, wire or
structural products. The Company has sought to emphasize its higher value-added
galvanized and coated product lines by developing new products and by offering
a wide range of gauges, finishes and performance specifications. The Company
emphasizes clean steel quality and produces sheets in narrow and medium widths.
These factors have helped the Company achieve a higher degree of uniformity in
its sheet products and have allowed it to specialize in orders with demanding
specifications. Although demand for the Company's sheet products remained
strong during 1995 and into the first quarter of 1996, selling prices in the
steel industry (including those for the Company's products) steadily declined
during 1995. During the first quarter of 1996, the Company and the industry in
general announced price increases. In the second quarter of 1996, the Company
began to realize a portion of these price increases in sales to certain of its
customers. However, there can be no assurance that the Company will continue to
realize such price increases, or that prices will not decline in the future.
Sheet product sales represented 59% of the Company's total revenues for the
three months ended March 31, 1996 and 57% for the five years ended December 31,
1995.
BUSINESS STRATEGY
The Company's strategic objective is to be a first tier global provider, in
terms of cost, quality and customer service, of tin plate and other specialty
coated/plated products. The Company's strategy is to (i) continue to make cost
and productivity improvements, (ii) continue to improve its product mix toward
higher value-added products such as TMP and coated sheet and (iii) maximize the
utilization of its assets.
Cost and Productivity Improvements. The Company has identified several
capital expenditure projects that are anticipated to reduce production costs
and increase productivity, including a blast furnace reline and rebuild
scheduled for the fourth quarter of 1996 and the upgrade of the turbo blower on
its blast furnaces. Additionally, the Company is currently in the feasibility
study stage for the installation of a Pulverized Coal Injection facility
("PCI") which would reduce the Company's dependence on coke. Further,
management has recently initiated a new supply management program to coordinate
the acquisition of goods and services, and a new scrap management program which
is expected to allow for the use of lower cost scrap in the basic oxygen
process.
Improve Product Mix. The Company's strategy emphasizes the development,
production and shipment of higher value-added products which have generally
allowed the Company to realize higher margins. In particular, the Company is
seeking to further increase its market share in TMP through increased sales to
existing customers, the extension of its customer base and international
expansion.
Maximize Utilization of Assets. The Company is focusing on maximizing the
utilization of certain key operating assets by (i) increasing blast furnace hot
metal production, (ii) improving throughput at its caster and cold rolling
facilities, and (iii) fully utilizing excess capacity at its hot strip mill.
RECENT DEVELOPMENTS
On April 1, 1996, the Company announced that it shut down its No. 3 blast
furnace (the "No. 3 Blast Furnace") for an unscheduled 10-day outage to install
a new bell, a device which distributes the burden of raw materials into the
furnace for smelting. The adverse impact of this outage on second quarter
income from operations is expected to be between $5 million and $7 million.
On May 29, 1996, the Company announced that it was reducing its supervisory
and managerial workforce by approximately 200 employees, or approximately 20%,
as part of its ongoing broad-based effort to improve its cost position. The
restructuring charge associated with the workforce reduction is approximately
$17 million and will be recorded in the second quarter of 1996. The Company
expects the cash cost associated with the workforce
2
<PAGE>
reduction to be approximately $7.5 million over the next twelve months, with
the remainder extending beyond that period. The Company does not believe the
costs associated with the workforce reduction will have a significant impact on
the Company's liquidity. While the Company has no specific plan to further
reduce its workforce, it is currently evaluating further workforce reductions
and, to the extent the Company pursues such alternatives, it may be required to
record additional significant restructuring charges. The additional costs
associated with the No. 3 Blast Furnace outage, coupled with the restructuring
charge as well as any extraordinary loss associated with the repurchase of the
10 7/8% Notes and the 11 1/2% Notes, will likely cause the Company to report a
net loss for the year ending December 31, 1996.
THE REFINANCING
On May 29, 1996, the Company commenced a tender offer pursuant to which it
offered to purchase up to $65 million aggregate principal amount of its
outstanding 10 7/8% Senior Notes due October 15, 1999 (the "10 7/8% Notes") and
up to $35 million aggregate principal amount of its outstanding 11 1/2% Senior
Notes due March 1, 1998 (the "11 1/2% Notes") at an aggregate principal price
of approximately $106.0 million (the "Tender Offer"). The consideration for 10
7/8% Notes tendered pursuant to the Tender Offer was $1,053.77 per $1,000
principal amount and the consideration for 11 1/2% Notes tendered pursuant to
the Tender Offer was $1,048.06 per $1,000 principal amount, in each case plus
accrued interest up to, but not including, the payment date. The purpose of the
Tender Offer was to extend the maturities of the Company's outstanding
indebtedness by refinancing the 10 7/8% Notes and 11 1/2% Notes purchased
pursuant to the Tender Offer with the proceeds from the issuance and sale of
the Senior Notes.
The Tender Offer expired at 5:00 p.m., New York City Time on June 27, 1996.
On July 3, 1996, the Company issued and sold (the "Initial Offering")
$125,000,000 aggregate amount of 11 3/8% Senior Notes due 2004 (the "Senior
Notes"). The Senior Notes were sold at a discount of 98.088% to par. The net
proceeds to the Company, after underwriting commissions of $3.4 million and
approximately $0.5 million of other fees and expenses of the Initial Offering,
were approximately $118.7 million. The Company used a portion of the proceeds
from the Initial Offering to repurchase, concurrently with the consummation of
the sale of the Notes, $35 million aggregate principal amount of 11 1/2% Notes
and $65 million aggregate principal amount of 10 7/8% Notes tendered pursuant
to the Tender Offer, for an aggregate purchase price, inclusive of related
tender fees and expenses, of approximately $106.0 million. See "Use of
Proceeds."
The Company's principal executive offices are located at 400 Three Springs
Drive, Weirton, West Virginia, 26062-4989 (telephone (304) 797-2000).
3
<PAGE>
THE EXCHANGE OFFER
THE EXCHANGE OFFER.......... The Company is offering to exchange (the
"Exchange Offer") $125,000,000 aggregate
principal amount of 11 3/8% Senior Notes due 2004
(the "Exchange Notes") for $125,000,000 aggregate
principal amount of its outstanding 11 3/8%
Senior Notes due 2004 (the "Senior Notes"). The
Senior Notes were issued and sold by the Company
on July 3, 1996 in a transaction exempt from
registration under Section 4(2) of, and Rule 144A
under, the Securities Act. See "The Exchange
Offer--Purpose of the Exchange Offer." The form
and terms of the Exchange Notes are substantially
similar (including principal amount, interest
rate, maturity and ranking) to the form and terms
of the Senior Notes for which they may be
exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferable
by holders thereof except as provided herein (see
"The Exchange Offer--Terms of the Exchange" and
"--Terms and Conditions of the Letter of
Transmittal") and are not subject to any covenant
regarding registration under the Securities Act.
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Senior Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an Affiliate of the Company,
(ii) a broker-dealer who acquired Senior Notes
directly from the Company or (iii) a broker-
dealer who acquired Senior Notes as a result of
market making or other trading activities),
without compliance with the registration and
prospectus delivery provisions of the Securities
Act provided that such Exchange Notes are
acquired in the ordinary course of such holders'
business and such holders are not engaged in, and
do not intend to engage in, and have no
arrangement or understanding with any person to
participate in, a distribution of such Exchange
Notes. Each broker-dealer who acquired Senior
Notes directly from the Company and is
participating in the Exchange Offer must comply
with the registration and prospectus delivery
provisions of the Securities Act. Each broker-
dealer who receives Exchange Notes pursuant to
the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging, and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act.
MINIMUM CONDITION........... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Senior
Notes being tendered or accepted for exchange.
EXPIRATION DATE............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996 unless extended
(the "Expiration Date").
4
<PAGE>
Letters of Transmittal must be received no later
EXCHANGE DATE............... than the Expiration Date to effect an exchange of
Senior Notes for Exchange Notes on the Exchange
Date. The first date of acceptance for exchange
for the Senior Notes will be the first business
day following the Expiration Date.
CONDITIONS TO THE EXCHANGE
OFFER...................... The obligation of the Company to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer--Conditions to the
Exchange Offer." The Company reserves the right
to terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the
occurrence of any such condition.
WITHDRAWAL RIGHTS........... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Senior Notes not accepted
for any reason will be returned without expense
to the tendering holders thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
PROCEDURES FOR TENDERING
SENIOR NOTES............... See "The Exchange Offer--How to Tender."
FEDERAL INCOME TAX
CONSEQUENCES............... The exchange for Exchange Notes by holders of
Senior Notes will not be a taxable exchange for
federal income tax purposes, and such holders
should not recognize any taxable gain or loss or
any interest income as a result of such exchange.
EFFECT ON HOLDERS OF
SENIOR NOTES................ As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Senior Notes pursuant to the terms of
this Exchange Offer, the Company will have
fulfilled a covenant contained in the terms of
the Senior Notes and the Registration Rights
Agreement (the "Registration Rights Agreement")
dated as of July 3, 1996 among the Company,
Lehman Brothers Inc. and Salomon Brothers Inc as
initial purchasers (collectively, the "Initial
Purchasers"), and, accordingly, the holders of
the Senior Notes will have no further
registration or other rights under the
Registration Rights Agreement, except under
certain limited circumstances. See "Senior Notes
Registration Rights." Holders of the Senior Notes
who do not tender their Senior Notes in the
Exchange Offer will continue to hold such Senior
Notes and will be entitled to all the rights and
limitations applicable thereto under the
Indenture. All untendered, and tendered but
unaccepted, Senior Notes will continue to be
subject to the restrictions on transfer provided
for in the Senior Notes and the Indenture. To the
extent that Senior Notes are tendered and
accepted in the Exchange Offer, the trading
market, if any, for the Senior Notes could be
adversely affected. See "Risk Factors--
Consequences of Failure to Exchange."
5
<PAGE>
TERMS OF THE NOTES
The Exchange Offer applies to $125,000,000 aggregate principal amount of
Senior Notes. The form and terms of the Exchange Notes are substantially
similar to the form and terms of the Senior Notes except that the Exchange
Notes have been registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof. The Exchange Notes will evidence
the same debt as the Senior Notes and will be entitled to the benefits of the
Indenture. See "Description of the Notes."
NOTES OFFERED............... $125,000,000 principal amount of 11 3/8% Senior
Notes Due 2004.
MATURITY.................... July 1, 2004.
INTEREST PAYMENT DATES...... Interest on the Notes will be payable in cash
semiannually on July 1 and January 1 of each
year, commencing January 1, 1997.
RANKING..................... The Notes will be unsecured obligations of the
Company and will be senior to all subordinated
indebtedness of the Company and pari passu with
all existing and future senior unsecured
indebtedness of the Company.
OPTIONAL REDEMPTION......... The Notes are not redeemable prior to July 1,
2000. On and after July 1, 2000, the Notes are
redeemable at the option of the Company, in whole
or in part, at the redemption prices set forth
herein, together with accrued interest thereon to
the redemption date. See "Description of the
Notes--Redemption--Optional Redemption."
MANDATORY REDEMPTION........ There are no mandatory redemption provisions for
the Notes.
CHANGE OF CONTROL........... Upon a Change of Control (as defined herein),
each holder of Notes will have the right to
require the Company to repurchase all or any part
of such holder's outstanding Notes at 101% of the
principal amount thereof, together with accrued
interest thereon to the repurchase date. See
"Description of the Notes--Certain Covenants--
Change of Control Option."
CERTAIN COVENANTS........... The Indenture contains covenants including, but
not limited to, covenants with respect to the
following matters: (i) limitations on
indebtedness; (ii) limitations on restricted
payments; (iii) limitations on mergers,
consolidations and sales of assets; (iv)
limitations on transactions with affiliates; (v)
restrictions on disposition of assets of the
Company; (vi) limitations on liens; (vii)
limitations on sale and leaseback transactions;
and (viii) limitations on dividend and other
payments restrictions affecting subsidiaries. The
protections afforded holders of Notes in the
event of a highly-leveraged transaction,
reorganization, restructuring, merger or similar
transaction involving the Company that may
adversely affect the holders are set forth in the
foregoing covenants and fully discussed in
"Description of the Notes--Certain Covenants."
Holders of Notes should carefully review these
covenants prior to making a decision with respect
to the Exchange Offer.
RISK FACTORS................ Holders of Senior Notes should carefully consider
the matters set forth under the caption "Risk
Factors" prior to making a decision with respect
to the Exchange Offer. See "Risk Factors."
6
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth summary historical financial and operating
data for the Company for the three months ended March 31, 1996 and March 31,
1995 and for each fiscal year in the five-year period ended December 31, 1995.
The summary historical financial data for the Company for each fiscal year in
the five-year period ended December 31, 1995 have been derived from the audited
consolidated financial statements of the Company. The historical financial data
for the three months ended March 31, 1996 and March 31, 1995 have been derived
from the Company's unaudited financial statements which, in the opinion of
management of the Company, contain all adjustments necessary for a fair
presentation of this information. The historical data with respect to the
results of operations for the three months ended March 31, 1996 should not be
regarded as necessarily indicative of the results that may be expected for the
entire year. This historical data should be read in conjunction with the
consolidated financial statements and notes thereto of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. See "Incorporation of
Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS EXCEPT TON DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $340.9 $354.7 $1,351.7 $1,260.9 $1,201.1 $1,078.7 $1,036.3
Operating costs:
Cost of sales.......... 310.8 299.2 1,180.1 1,136.9 1,105.6 1,010.0 1,019.3
Selling, general and
administrative ex-
penses................ 9.5 8.2 34.4 31.5 32.5 30.5 29.1
Depreciation........... 14.5 15.1 54.7 46.3 49.1 38.6 34.3
Provision for profit
sharing(1)............ -- 16.1 24.2 17.6 -- -- --
Special items(2)....... -- (34.0) (41.5) (20.0) 17.3 -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from op-
erations.............. 6.1 50.1 99.8 48.6 (3.4) (0.4) (46.4)
Unusual gain(3)........ -- -- 9.0 44.7 -- -- --
Net interest ex-
pense(4).............. 8.9 9.6 37.9 44.1 50.2 37.9 29.7
ESOP contributions(5).. 0.7 0.7 2.6 2.6 2.6 2.6 2.6
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes.......... (3.5) 39.8 68.3 46.6 (56.2) (40.9) (78.7)
Income tax (provision)
benefit............... 0.7 (7.7) (13.2) (7.5) 13.3 4.8 4.0
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item and
cumulative effect of
changes in accounting
principles............ (2.8) 32.1 55.1 39.1 (42.9) (36.1) (74.7)
Extraordinary item(6).. -- -- (6.7) (3.9) (6.5) -- --
Cumulative effect of
changes in accounting
principles(7)......... -- -- -- -- (179.8) 4.3 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... (2.8) 32.1 48.4 35.2 (229.2) (31.8) (74.7)
Less: Preferred stock
dividend requirement.. -- -- -- (2.4) (3.1) (3.1) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) ap-
plicable to common
shares................ $ (2.8) $ 32.1 $ 48.4 $ 32.8 $ (232.3) $ (34.9) $ (74.7)
======== ======== ======== ======== ======== ======== ========
PER COMMON SHARE DATA:
Income (loss) per com-
mon share before ex-
traordinary item...... $ (0.07) $ .73 $ 1.26 $ 1.06 $ (1.74) $ (1.57) $ (3.49)
Income (loss) per com-
mon share before cumu-
lative effect of ac-
counting changes...... (0.07) .73 1.10 0.95 (1.99) (1.57) (3.49)
Net income (loss) per
common share.......... (0.07) .73 1.10 0.95 (8.78) (1.40) (3.49)
Cash dividends paid.... -- -- -- -- -- -- --
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and equivalents... $ 104.4 $ 82.3 $ 131.8 $ 62.9 $ 89.0 $ 61.2 $ 84.2
Working capital........ 346.5 321.2 340.3 256.5 262.2 237.7 273.5
Total assets........... 1,277.5 1,233.7 1,314.0 1,230.9 1,240.7 1,005.4 1,038.0
Long-term debt
(including current
portion)(8)........... 407.9 394.5 407.9 394.5 495.3 503.2 505.3
Redeemable preferred
stock, net............ 16.6 15.1 15.9 14.5 36.7 34.2 31.0
Stockholders' equity
(deficit)............. $ 195.8 $ 181.3 $ 198.6 $ 149.2 $ (1.4) $ 231.3 $ 257.3
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- -----------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------- ------- ------ ------ -------
(DOLLARS IN MILLIONS EXCEPT TON DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA (FOR THE
PERIOD, EXCEPT WHERE
NOTED):
EBITDA(9).............. $ 22.2 $ 41.7 $ 129.4 $ 90.5 $ 47.7 $ 39.9 $ (9.5)
Capital
expenditures(10)...... $ 13.4 $ 7.1 $ 52.4 $ 112.1 $ 13.3 $ 44.6 $ 113.9
Ratio of EBITDA to
interest expense...... 2.07 3.97 3.04 1.81 0.90 0.97 --
Ratio of net debt to
EBITDA(11)............ 3.41 1.87 2.13 3.67 8.51 11.08 --
Net debt to net
capitalization(12).... 59% 61% 56% 67% 92% 62% 59%
Ratio of earnings to
fixed charges(13)..... -- 4.46 2.48 1.85 -- -- --
Tons shipped (in
thousands)............ 712 705 2,718 2,606 2,431 2,102 1,939
Net sales per ton
shipped............... $ 479 $ 503 $ 497 $ 484 $ 494 $ 513 $ 534
Cost of sales per ton
shipped............... $ 437 $ 424 $ 434 $ 436 $ 455 $ 480 $ 526
Gross profit per ton
shipped............... $ 42 $ 79 $ 63 $ 48 $ 39 $ 33 $ 8
Operating income (loss)
per ton shipped,
excluding special
items(14)............. $ 9 $ 37 $ 26 $ 15 $ 6 $ 0 $ (24)
Active employees (at
end of period)........ 5,615 5,552 5,655 5,565 6,026 6,542 6,979
Employee hours per ton
of hot band produced.. 1.75 1.76 1.76 1.83 1.95 2.07 2.38
Employee hours per ton
shipped............... 4.31 4.38 4.44 4.89 5.31 6.53 7.55
Capacity utilization... 94% 99% 95% 91% 91% 83% 68%
Percentage of raw steel
continuously cast..... 100% 100% 100% 100% 100% 100% 97%
Yield (raw steel to
finished production).. 80.8% 80.8% 80.7% 83.0% 77.9% 72.3% 72.3%
</TABLE>
- --------
(1) The provision for employee profit sharing is calculated in accordance
with the profit sharing plan agreement. The provision is currently based
upon 33 1/3% of net income, subject to a minimum net worth provision of
$100.0 million.
(2) During the three months ended March 31, 1995 and the years ended December
31, 1995 and 1994, the Company's results of operations included the
recognition of $34.0 million, $34.0 million and $20.0 million,
respectively, of insurance recoveries relating to a business interruption
claim arising out of the fire which damaged the No. 9 Tandem Mill in April
1994. In addition, the year ended December 31, 1995 includes a $7.5
million settlement of a 1991 business interruption claim from an outage at
the Company's hot strip mill. The Company recognized a restructuring
charge of $17.3 million in the year ended December 31, 1993 associated
with an enhanced early retirement package as part of a Company cost
reduction program.
(3) The Company was required to recognize a new cost basis for property damage
insurance recoveries related to the No. 9 Tandem Mill which resulted in
the recognition of a pretax gain for the years 1995 and 1994 in the
amounts of $9.0 million and $44.7 million, respectively.
(4) Net interest expense does not include capitalized interest of $0.3
million, $0.2 million, $1.1 million , $2.3 million, $0.8 million, $6.1
million and $12.8 million for the three months ended March 31, 1996 and
1995, and for the years ended December 31, 1995, 1994, 1993, 1992 and
1991, respectively.
(5) Does not involve a net outflow of cash as these contributions are returned
to the Company in the form of payments on loans from the Company to the
ESOPs.
(6) Reflects certain costs incurred in connection with the early
extinguishment of debt.
(7) Effective January 1, 1992, the Company changed its method of accounting
for the depreciation of its steelmaking facilities from a straight-line to
a production-variable method. Effective January 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," and SFAS No. 109, "Accounting for Income Taxes." The cumulative
effect of the 1993 accounting changes reflects the collective
implementation of the following accounting changes. The change in
accounting under SFAS No. 106 required the Company to recognize a pretax
charge of $303.9 million to account for the prior service cost of retiree
health care and life insurance benefits as well as an additional noncash
expense each quarter which began in the first quarter of 1993. The Company
also recorded a pretax charge of $4.0 million relating to the
implementation of SFAS No. 112, and a net income tax benefit of $128.1
million, representing the cumulative effect of the accounting change for
income taxes in accordance with SFAS No. 109.
(8) See "Capitalization" for information regarding certain adjustments made to
give effect to the Initial Offering and the Tender Offer.
(9) EBITDA represents the earnings of the Company before income taxes,
interest expense, depreciation and amortization, and for the three months
ended March 31, 1995 and the years 1995 and 1994, excludes the business
interruption and property damage insurance recoveries and the related
impact on the provision for profit sharing. EBITDA differs from the
definition of Consolidated EBITDA
8
<PAGE>
under the Indenture. See "Description of Notes." EBITDA is not a measure of
financial performance under generally accepted accounting principles
("GAAP"). Accordingly, it does not represent net income or cash flows from
operations as defined by GAAP and does not necessarily indicate that cash
flows will be sufficient to fund cash needs. As a result, EBITDA should not
be considered as an alternative to net income, as an indicator of operating
performance or to cash flows as a measure of liquidity.
(10) Capital expenditures in 1995 and 1994 included $2.9 million and $74.6
million, respectively, for rebuilding the No. 9 Tandem Mill due to fire
damage. The Company received cash insurance recoveries for property damage
of $9.0 million and $45.0 million in 1995 and 1994, respectively, related
to the 1994 outage at the No. 9 Tandem Mill.
(11) For purposes of this ratio, EBITDA for the three months ended March 31,
1996 and March 31, 1995 have been annualized. Net debt represents long-
term debt minus cash and equivalents.
(12) Net debt represents long-term debt minus cash and equivalents, and net
capitalization represents total capitalization minus cash and equivalents.
(13) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before taxes plus fixed charges and (ii) fixed
charges consist of interest expense incurred, amortization of debt expense
and one-third of rental payments under operating leases (an amount
estimated by management to be the interest portion of such rentals).
Earnings did not cover fixed charges by $3.5 million, $56.2 million, $40.9
million and $78.7 million for the three months ended March 31, 1996 and
the years ended December 31, 1993, 1992 and 1991, respectively. The ratio
of earnings to fixed charges is not expected to be materially affected by
this Offering.
(14) Represents income (loss) from operations, excluding insurance recoveries
and the related effect on the provision for profit sharing, for the three
months ended March 31, 1995 and for the years ended December 31, 1995 and
1994, and the restructuring charge for the year ended December 31, 1993
divided by tons shipped. Including the special items, operating income per
ton was $71, $37 and $19 for the three months ended March 31, 1995 and the
years ended December 31, 1995 and 1994, respectively.
9
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Senior Notes for the Exchange Notes offered hereby, holders of
Senior Notes should consider carefully the following factors, which may be
generally applicable to the Senior Notes as well as the Exchange Notes:
This Prospectus contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of the
Company, its directors or its officers primarily with respect to the future
operating performance of the Company. Holders of Senior Notes are cautioned
that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward looking statements as a result of
various factors. The accompanying information contained in this Prospectus,
including without limitation the information set forth below and the
information under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations," identifies important factors
that could cause such differences.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Senior Notes who do not exchange their Senior Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Senior Notes as set forth in the legend
thereon as a consequence of the issuance of the Senior Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Senior Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Company
does not intend to register the Senior Notes under the Securities Act. In
addition, any holder of Senior Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. To the extent Senior Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for
the Senior Notes could be adversely affected. See "The Exchange Offer" and
"Senior Notes Registration Rights."
FACTORS RELATING TO THE COMPANY
Financial Results/Recent Developments. The Company reported a net loss of
$2.8 million for the first quarter of 1996 and net income of $48.4 million and
$35.2 million for the years ended December 31, 1995 and 1994, respectively.
The 1995 and 1994 results included favorable adjustments of $9.0 million and
$44.7 million, respectively, for property damage insurance recoveries and
$34.0 million and $20.0 million, respectively, for business interruption
insurance recoveries related to the 1994 outage at the No. 9 Tandem Mill. The
1995 and 1994 results also included extraordinary losses on the early
extinguishment of debt of $6.7 million and $3.9 million, respectively. The
1995 results also included a favorable adjustment of $7.5 million associated
with the settlement of a business interruption claim stemming from an outage
at its hot strip mill in 1991. Excluding the effect of these items, including
the impact on the provisions for profit sharing and income taxes, the Company
would have had net income of $24.2 million in 1995 and a net loss of $5.3
million in 1994.
In April 1996, the No. 3 Blast Furnace was shut down for an unscheduled 10-
day outage to install a new bell. The adverse impact of this outage on income
from operations for the second quarter of 1996 is expected to be between $5
million and $7 million. In May 1996, the Company announced it was reducing its
supervisory and managerial workforce by approximately 200 employees, or
approximately 20%, as part of its ongoing broad-based effort to improve the
Company's cost position. The Company will record a restructuring charge of
approximately $17 million in the second quarter of 1996 related to termination
benefits. The additional costs associated with the No. 3 Blast Furnace outage
coupled with the restructuring charge, as well as any extraordinary loss
associated with the repurchase of the 10 7/8% Notes and the 11 1/2% Notes,
will likely cause the
10
<PAGE>
Company to report a net loss for the year ending December 31, 1996. While the
Company has no specific plan to further reduce its workforce, the Company is
currently evaluating further workforce reductions and, to the extent the
Company pursues such alternatives, the Company may be required to record
additional significant restructuring charges.
The Company's ability to return to profitability is dependent upon a number
of factors, including the continued successful implementation of its cost
reduction and productivity improvement efforts, as well as factors beyond the
Company's control, including the level of steel and raw materials prices,
energy costs, domestic demand for steel products and the level of steel
imports. As a result of these and other factors, there can be no assurance
that the Company will be profitable in the future.
Deficiency of Earnings to Fixed Charges. For the three months ended March
31, 1996 and the years ended December 31, 1993, 1992 and 1991, the Company's
earnings were insufficient to cover fixed charges by approximately $3.5
million, $56.2 million, $40.9 million and $78.7 million, respectively. For the
three months ended March 31, 1995 and the years ended December 31, 1995 and
1994, the ratios of earnings to fixed charges were 4.46, 2.48 and 1.85,
respectively.
Collective Bargaining Agreements. The Company has collective bargaining
agreements effective through September 25, 1996 with the Independent
Steelworkers Union, which, as of March 31, 1996, represented approximately
4,581 employees in bargaining units covering production and maintenance
workers, clerical workers and nurses, and the Independent Guard Union, which,
as of March 31, 1996, represented approximately 48 employees. The Company
believes that its compensation structure places a heavier emphasis on profit
sharing compared to other major integrated steel producers. This emphasis
tends to cause the wage portion of the Company's employment costs to be
relatively higher during periods of profitability and relatively lower during
periods of low earnings or losses. The Company has not experienced work
stoppages in the course of prior labor negotiations, although there can be no
assurance that work stoppages will not occur in the future in connection with
negotiations or otherwise. There can be no assurance that the Company will be
able to enter into new collective bargaining agreements on terms acceptable to
it, or that any such agreements will not contain terms that are less favorable
than the terms of the existing collective bargaining agreements.
Environmental Compliance Expenditures. The facilities and operations of
domestic steelmakers are subject to a number of federal, state and local laws,
regulations and permits relating to environmental protection. The costs for
environmental compliance may serve to put domestic steelmakers at a relative
competitive disadvantage compared to foreign producers not subject to
similarly extensive regulation or producers of competitive materials which may
not be required to undergo equivalent compliance costs.
The Company has made, and expects to continue to make, substantial
expenditures to comply with federal, state and local environmental laws and
regulations. The Company has planned environmental capital expenditures for
1996 and 1997 of approximately $11.7 million and $5.0 million, respectively.
Unlike many of its domestic integrated competitors, the Company does not
operate coke making facilities and, as such, will not be required to comply
with federal Clean Air Act amendment standards applicable to those types of
facilities. Nevertheless, since environmental regulations are becoming
increasingly more stringent, the Company's environmental capital expenditures
and costs for compliance may increase in the future. Furthermore, due to the
possibility of unanticipated regulatory developments, the amount and timing of
future environmental expenditures may vary from those currently anticipated.
The West Virginia Division of Environmental Protection has recently issued a
wastewater discharge permit to the Company containing substantially more
stringent effluent standards than the Company's previous permit. The Company
has appealed the limitations contained in the permit. Additionally, in March
1996, the West Virginia Legislature enacted certain changes in a certain
regulation that the Company believes will result in recalculated effluent
standards. However, if the appeal is unsuccessful and/or the new regulation
does not result in recalculated effluent standards, the Company believes it
will not be able to ensure consistent compliance with certain provisions
contained in the permit without significant treatment technology and/or
process changes, if necessary. The Company cannot estimate the cost of
installing such technology or effecting such changes, if necessary, but
believes that such costs could be material. See "Business--Environmental
Control."
11
<PAGE>
The sites at which the Company and its predecessors have conducted
operations have been in use for many years and, over such time, the Company
and its predecessors have released various substances, some of which may be
classified as hazardous. Consequently, the Company may be required to
remediate contamination at some of these sites. The Company has conducted
investigation or remediation activities at some of these sites. In addition,
the Company has been named as a potentially responsible party at certain third
party owned waste disposal sites. Although the Company is indemnified by
National Steel Corporation ("National"), the seller of the steelmaking
division (the "Division") acquired by the Company in 1984, against certain
environmental liabilities arising from activities prior to the acquisition,
there can be no assurance that National will pay or continue to pay under its
indemnity obligations. The ability of the Company to collect on claims for
indemnification covering environmental matters is related to National's
continued financial viability (including National's ability to collect certain
insurance proceeds with respect to environmental claims), the nature of future
claims made by the Company, certain limitations on National's liability,
whether the parties can settle certain differences which have arisen in their
respective interpretations of indemnification rights and the outcome of any
necessary litigation between the Company and National regarding such issues.
The Company does not carry insurance of the type that provides coverage
similar to the indemnification rights provided by National. See "Business--
Environmental Control."
The Company is continuing negotiations with the Environmental Protection
Agency ("EPA") regarding issues related to air, water and waste disposal.
Although at this time it is not possible to determine the eventual outcome of
these negotiations, the Company will likely be required to pay fines and
penalties, commit to environmental related capital expenditure projects and
incur higher operating costs related to its environmental compliance programs.
The Company may also be required to conduct remediation activities at various
sites located on its property. At this time, it is not possible to determine
if any remediation activities would be subject to indemnification by National.
The time period relating to the EPA negotiations extends until September
15, 1996. If a negotiated settlement is not reached by that date, the EPA has
indicated that it would likely commence a civil action in federal court. Based
on its review of the matters involved and discussions to date with
representatives of the EPA, while no assurance can be given, the Company does
not believe that any fines, penalties or costs to remediate would have a
material effect on the Company's financial position or results of operations.
However, it is expected that related capital expenditure projects and required
changes in operating practices will increase future operating costs, which may
have a significant effect on future results of operations. See "Business--
Environmental Control."
Leverage. Beginning in 1989, the Company incurred substantially increased
levels of indebtedness as one of the funding sources for its capital
improvement program. At March 31, 1996, the Company's indebtedness comprised
66% of its total capitalization. The Company has no immediate plans to incur
additional debt. From time to time, however, the Company may be required to
utilize outside financing for working capital purposes. Such financing may
involve the incurrence of debt. The Company will be permitted to incur
additional debt only if, at the time, it is able to comply with restrictions
under the Notes and any other applicable debt instruments. See "Description of
Notes--Certain Covenants."
Limitations on Raising Equity. The Company's Restated Certificate of
Incorporation (the "Restated Certificate") imposes restrictions on the
Company's ability to raise additional equity. The authorization of shares of
capital stock under the Restated Certificate (beyond the 50 million shares of
common stock and 7.5 million shares of preferred stock presently authorized)
generally requires the approval of a majority of the voting power if such
shares are to be used only for bona fide public offerings or in connection
with certain employee benefit plans. However, if shares are to be used for any
other purpose, their authorization must be approved by the vote of the holders
of 80% of the Company's capital stock. Limitations on the future use of
shares, if applicable, would deny the Company access to private markets for
its shares and could deprive the Company of needed capital at times when the
permitted types of issuance are not feasible or have less favorable terms. As
a result of such limitations and the Company's significant leverage, the
Company may not be able to make necessary capital or other expenditures on a
timely basis and may not be able to take advantage of certain business
opportunities which might arise in the future, all of which could affect the
Company's ability to compete effectively. In
12
<PAGE>
addition, the Restated Certificate provides that the specific terms and
conditions of each issuance of capital stock by the Company, with limited
exceptions, must be approved by the vote of at least 90% of the Company's
directors. The Company's Board of Directors is required to be composed of 14
members. A dissent by more than one director could prevent the Company from
issuing capital stock, even though the authorization of shares for such
issuance was approved by the Company's stockholders.
Voting Power. As of March 31, 1996, the ESOPs owned approximately 27% of the
Company's outstanding common stock and over 98% of the Company's preferred
stock, which account for approximately 48% of the total voting power of the
Company's capital stock. Employee voting power could increase 4% if the 4.7
million shares of common stock reserved for an employee purchase program over
the next four years are acquired by employees and assuming there is no further
dilution of employee ownership. At the end of each quarter, participants in
the 1984 ESOP may elect to receive distributions of common stock from the
ESOP, which, to the extent such distributed shares are then sold, reduces
employee voting power. The participants in the ESOPs, all of whom are present
or former employees of the Company, could, if they were to act collectively in
the voting of their shares, elect a majority of the Company's directors.
However, management does not believe it is likely that any such collective
voting would occur. The interests of ESOP participants may differ from those
of public stockholders and holders of the Company's indebtedness. Under the
terms of the Notes, a Change of Control (as defined) would require the Company
to offer to repurchase the Notes. See "Description of Notes--Certain
Covenants--Change of Control Option."
No Prior Market. There is no existing market for the Exchange Notes, and
there can be no assurance as to (i) the liquidity of any such market that may
develop, (ii) the ability of holders of Exchange Notes to sell their Exchange
Notes, or (iii) the price at which the holders of Exchange Notes would be able
to sell their Exchange Notes. If such a market were to exist, the Exchange
Notes could trade at prices that may be higher or lower than their principal
amount or purchase price, depending on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
debt securities.
Change of Control. The Company's ability to repurchase Notes following a
Change of Control may be limited by the factors descried under "Description of
the Notes--Certain Covenants--Change of Control Option."
FACTORS RELATING TO THE STEEL INDUSTRY
Cyclicality. The domestic steel industry is a cyclical industry
characterized by periods of excess capacity and intense competition. In the
latter half of 1989, steel prices and demand began to decline, and a number of
U.S. steel producers reported losses in 1990, 1991 and 1992 in a sluggish U.S.
economic environment. Factors such as production overcapacity, increased U.S.
and international competition, high labor costs, inefficient plants and
reduced levels of steel demand contributed to these losses. With stronger
demand in 1993 and 1994, the industry demonstrated improved performance. In
the second half of 1995, domestic demand began to soften, and the industry
experienced a trend of steadily declining selling prices. During the first
quarter of 1996, many steel producers announced price increases which have
begun to take effect in the second quarter of 1996. There can be no assurance
that the current price increases will continue to be realized or that prices
will not decline throughout the industry in the future.
Capacity Utilization and Price Sensitivity. According to the American Iron
and Steel Institute (the "AISI"), annual U.S. raw steel production capacity
has been reduced from approximately 151 million tons in 1983 to approximately
110 million tons in 1995. The reduction in domestic capacity generally
resulted in higher utilization rates, although overcapacity remains a problem
in certain product lines and may become a problem in other product lines,
particularly coated steels. The average utilization of domestic industry
capacity was 64% from 1983 through 1986 compared to 83% from 1987 through
1994, and 93% for 1995. From 1996 through 1998, an additional 10 million to 14
million tons of sheet capacity is expected to be brought into operation
primarily by mini-mills. Competitive pressures in the industry limit the
ability of producers to obtain price increases and can lead to declines in
prices, both of which may have a material adverse effect on the industry
13
<PAGE>
generally and on the Company specifically. There can be no assurance that
these and other factors will not have an adverse effect on the Company's
business, financial condition or results of operations.
Competition. Competition among domestic steelmakers is intense with respect
to price, service and quality. Domestic integrated steel producers have lost
market share to domestic mini-mills in recent years as these mills have
expanded their product lines from commodity type items to include larger-size
structural products and flat-rolled products. Mini-mills have enjoyed certain
cost advantages compared to integrated producers because of lower costs in
converting scrap to raw steel, lower employment and environmental costs and
the targeting of regional markets. In the past few years, mini-mills also have
substantially improved the quality of their products, particularly thin cast
steel, through the use of new technology which has allowed them to retain
overall conversion cost advantages. In recent years, competitive pressures
among domestic producers, including mini-mills, have extended to higher value-
added products, putting further pressure on prices and margins. In addition,
certain domestic integrated steelmakers have gone through reorganizations
under Chapter 11 of the U.S. Bankruptcy Code. Following their reorganizations,
these companies generally have reduced costs and become more effective
competitors. In addition, domestic steel producers have invested heavily in
new plant and equipment that, when combined with the implementation of manning
and other work rule changes, have enabled many domestic companies to improve
efficiency and increase productivity. Also, demand for certain of the
industry's products continues to be under pressure from products made with
aluminum, plastics, cardboard, glass, wood, concrete and ceramics, which may
offer substitutes for steel in certain applications.
Domestic producers face competition from foreign producers over a broad
range of products. Many foreign steel producers are owned, controlled or
subsidized by their governments, making these producers subject to influence
by political and economic policy considerations as well as the prevailing
market conditions. From 1991 to 1995, imported steel represented 20% of all
steel sold in the United States. Factors such as attractive world export
prices, a lower U.S. dollar exchange rate and improved international
competitiveness of the domestic steel industry have recently contributed to
reduced import levels. The reversal of any one of these factors, or the
failure otherwise to control steel imports, may cause foreign competition to
increase.
Environmental Concerns. The facilities and operations of domestic
steelmakers are subject to a number of federal, state and local laws,
regulations and permits relating to environmental protection. The costs of
environmental compliance may serve to put domestic steelmakers at a relative
competitive disadvantage compared to foreign producers not subject to
similarly extensive regulation or producers of competitive materials which may
not be required to undergo equivalent compliance costs.
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange pursuant to the
Exchange Offer. The net proceeds to the Company from the issuance of the
Senior Notes were approximately $119.2 million. The Company used a portion of
these net proceeds to repurchase, concurrently with the consummation of the
sale of the Senior Notes, $35 million aggregate principal amount of 11 1/2%
Notes and $65 million aggregate principal amount of 10 7/8% Notes that were
tendered pursuant to the Tender Offer, for an aggregate purchase price,
inclusive of related tender fees and expenses, of approximately $106.0
million. The Company used the remaining net proceeds for general corporate
purposes. Until used, the net proceeds of the Initial Offering have been
invested in short-term investment grade marketable securities or money market
funds.
14
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the registration of the Senior Notes.
The Senior Notes were originally issued and sold on July 3, 1996 (the "Issue
Date"). Such sales were not registered under the Securities Act in reliance
upon the exemption provided by Section 4(2) of the Securities Act and Rule
144A under the Securities Act. The net proceeds from the sale of the Senior
Notes (approximately $119.2 million) were used in part to repurchase $35
million aggregate principal amount of 11 1/2% Notes and $65 million aggregate
principal amount of 10 7/8% Notes that were tendered pursuant to the Tender
Offer. In connection with the sale of the Senior Notes, the Company agreed to
file with the Commission a registration statement relating to an exchange
offer (the "Exchange Offer Registration Statement") pursuant to which the
Exchange Notes, another series of senior notes of the Company covered by such
registration statement and containing substantially similar terms as the
Senior Notes, except as set forth in this Prospectus, would be offered in
exchange for Senior Notes tendered at the option of the holders thereof. If
(i) the Company determines in reasonably good faith that (x) any changes in
the law or the applicable interpretations of the Staff of the Commission do
not permit the Company to effect the Exchange Offer, or (y) that the Exchange
Notes would not be tradeable upon receipt by the holders of Senior Notes that
participate in the Exchange Offer without restriction under state and federal
securities laws (other than due solely to the status of a holder of Senior
Notes as an Affiliate of the Company), (ii) the Exchange Offer is not
consummated within 165 days of the Issue Date, (iii) in certain circumstances,
certain holders of unregistered Exchange Notes so request within 135 days
after the consummation of the Exchange Offer or (iv) in the case of any holder
of Senior Notes that participates in the Exchange Offer, such holder of Senior
Notes does not receive Exchange Notes on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than
due solely to the status of such holder of Senior Notes as an Affiliate of the
Company) and so notifies the Company within 60 days after such holder of
Senior Notes first becomes aware of such restriction and provides the Company
with a reasonable basis for its conclusion, in the case of each of clauses
(i)-(iv) of this sentence, the Company will file with the Commission a
registration statement (the "Shelf Registration Statement") to cover resales
of the Senior Notes by the holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. In the event that (i) the Company fails to file the
Exchange Offer Registration Statement, (ii) the Exchange Offer Registration
Statement or, if applicable, the Shelf Registration Statement, is not declared
effective by the Commission, or (iii) the Exchange Offer is not consummated or
the Shelf Registration Statement ceases to be effective, in each case within
specified time periods, the Company shall pay liquidated damages to the
holders of the Senior Notes. See "Senior Notes Registration Rights."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Senior Notes. The terms of the Exchange Notes are
substantially similar to the terms of the Senior Notes for which they may be
exchanged pursuant to this Exchange Offer, except that the Exchange Notes will
generally be freely transferable by holders thereof, and the holders of the
Exchange Notes (as well as remaining holders of any Senior Notes) will not be
entitled to registration rights under the Registration Rights Agreement. The
Exchange Notes will evidence the same debt as the Senior Notes and will be
entitled to the benefits of the Indenture. See "Description of the Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered or accepted for exchange.
Based on its view of interpretations set forth in no-action letters issued
by the Staff to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for the Senior Notes
15
<PAGE>
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any holder or any such other person which is (i) an Affiliate of
the Company, (ii) a broker-dealer who acquired Senior Notes directly from the
Company or (iii) a broker-dealer who acquired Senior Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of business of
such holder and any beneficial owner, and such holders are not engaged in, and
do not intend to engage in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Notes. Each broker-
dealer who acquired Senior Notes directly from the Company and is
participating in the Exchange Offer must comply with the registration and
prospectus delivery provisions of the Securities Act. Broker-dealers who
acquired Senior Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with
resales of the Exchange Notes. The Company has agreed that, for a period of
120 days after this Registration Statement is declared effective, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. Each broker-dealer who receives Exchange Notes pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging, and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Any holder that cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
Tendering holders of Senior Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Senior Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Senior Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance
of the Exchange Notes, such interest to be payable with the first interest
payment on the Exchange Notes, but will not receive any payment in respect of
interest on the Senior Notes accrued after the issuance of the Exchange Notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1996 unless the Company
in its sole discretion extends the period during which the Exchange Offer is
open, in which event the term "Expiration Date" means the latest time and date
on which the Exchange Offer, as so extended by the Company, expires. The
Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to Bankers
Trust Company (the "Exchange Agent") and by timely public announcement
communicated by no later than 5:00 p.m. on the next business day following the
Expiration Date, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service. During any extension of the
Exchange Offer, all Senior Notes previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Senior Notes for any reason,
including if any of the events set forth below under "--Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Senior Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent in writing and
will either issue a press release or give written notice to the holders of the
Senior Notes as promptly as practicable. Unless the Company terminates the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Company will exchange the Exchange Notes for the Senior Notes on the
Exchange Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time
that notice of such waiver or amendment is first published, sent or given
16
<PAGE>
to holders of Senior Notes in the manner specified above, the Exchange Offer
is scheduled to expire at any time earlier than the expiration of a period
ending on the fifth business day from, and including, the date that such
notice is first so published, sent or given, then the Exchange Offer will be
extended until the expiration of such period of five business days. If there
is an increase or decrease in the consideration offered for the Senior Notes,
or a decrease in the percentage of Exchange Notes offered by the Company in
exchange for Senior Notes, notice of such increase or decrease shall be
published, sent or given to all holders of Senior Notes in the manner
specified above and the Exchange Offer will be extended at least ten business
days from when such notice is first published, sent or given to the holders of
Senior Notes.
The Company will file a post-effective amendment to the Registration
Statement of which this Prospectus is a part, and mail or otherwise deliver
copies of such amendment to holders of the Senior Notes, if any one of the
following events arises after the Registration Statement of which this
Prospectus is a part has been declared effective by the Commission: (a) the
Company materially amends the Exchange Offer; or (b) any facts or events arise
which individually, or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement, or the information set
forth under the caption "Plan of Distribution" therein.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Senior Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Senior Notes.
HOW TO TENDER
The tender to the Company of Senior Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
General Procedures. A holder of a Senior Note may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall
be deemed to include a facsimile thereof) and delivering the same, together
with the certificate or certificates representing the Senior Notes being
tendered and any required signature guarantees (or a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") pursuant to the procedure
described below), to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date or (ii) complying
with the guaranteed delivery procedures described below.
If tendered Senior Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Senior Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Senior Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other
institution (each an "Eligible Institution") that is a member of a recognized
signature guarantee medallion program within the meaning of Rule 17Ad-15 under
the Exchange Act. If the Exchange Notes and/or Senior Notes not exchanged are
to be delivered to an address other than that of the registered holder
appearing on the note register for the Senior Notes, the signature on the
Letter of Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Senior Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Senior Notes should contact such holder promptly and instruct such
holder to tender Senior Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Senior Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Senior Notes, either make appropriate arrangements to register
ownership of the Senior Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
17
<PAGE>
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Senior Notes at The Depository Trust Company (the
"Depositary") for purposes of the Exchange Offer within two business days
after receipt of this Prospectus, and any financial institution that is a
participant in the Depositary systems may make book-entry delivery of Senior
Notes by causing the Depositary to transfer such Senior Notes into the
Exchange Agent's account at the Depositary in accordance with the Depositary's
procedures for transfer. However, although delivery of Senior Notes may be
effected through book-entry transfer at the Depositary, the Letter of
Transmittal, with any required signature guarantees or an Agent's Message (as
defined below) in connection with a book-entry transfer and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address specified on the back cover page of this Prospectus on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
A noteholder may tender Senior Notes that are held through the Depositary by
transmitting their acceptance through the Depositary Automatic Tender Offer
Program ("ATOP"), for which the transaction will be eligible, and then the
Depositary will then edit and verify the acceptance and send an Agent's
Message to the Exchange Agent for its acceptance. The term "Agent's Message"
means a message transmitted by the Depositary to, and received by, the
Exchange Agent and forming part of the Book-Entry Confirmation, which states
that the Depositary has received an express acknowledgment from each
participant in the Depositary tendering the Senior Notes and that such
participant has received the Letter of Transmittal and agrees to be bound by
the terms of the Letter of Transmittal and the Company may enforce such
agreement against such participant.
THE METHOD OF DELIVERY OF SENIOR NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION
DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide his taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Company and the Exchange Agent.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Senior Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected
if the Exchange Agent has received at its office listed on the back cover
hereof on or prior to the Expiration Date a letter, telegram or facsimile
transmission from an Eligible Institution setting forth the name and address
of the tendering holder, the principal amount of the Senior Notes being
tendered, the names in which the Senior Notes are registered and, if possible,
and if applicable, the certificate numbers of the Senior Notes to be tendered,
and stating that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange trading days after the date of execution of such
letter, telegram or facsimile transmission by the Eligible Institution, the
Senior Notes, in proper form for transfer, will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Senior Notes being
tendered by the above-described method (or a timely Book-Entry Confirmation)
are deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal (or
facsimile thereof) and any other required documents), or a properly completed
Agent's Message is received by the Exchange Agent within the time period set
forth above, the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for
the purposes described in this paragraph are available from the Exchange
Agent.
18
<PAGE>
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Notes (or a timely Book-Entry Confirmation) or
properly completed Agent's Message, is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Senior Notes tendered pursuant to
a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission
to similar effect (as provided above) by an Eligible Institution will be made
only against deposit of the Letter of Transmittal (and any other required
documents) and the tendered Senior Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Senior Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel
to the Company, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or
irregularities in tenders of any particular holder whether or not similar
defects or irregularities are waived in the case of other holders. Neither the
Company, the Exchange Agent nor any other person will be under any duty to
give notification of any defects or irregularities in tenders or shall incur
any liability for failure to give any such notification. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Senior Notes for exchange (the "Transferor") thereby
exchanges, assigns and transfers the Senior Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Senior Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Senior
Notes and to acquire Exchange Notes issuable upon the exchange of such
tendered Senior Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Senior Notes,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The Transferor also warrants that it will, upon
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Senior Notes. The Transferor further agrees that acceptance of any
tendered Senior Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder (except in certain
limited circumstances). All authority conferred by the Transferor will survive
the death or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of such Transferor.
By tendering Senior Notes and executing the Letter of Transmittal, the
Transferor certifies (a) that it is not an Affiliate of the Company, that it
is not a broker-dealer that owns Senior Notes acquired directly from the
Company or an affiliate of the Company, that it is acquiring the Exchange
Notes offered hereby in the ordinary course of such Transferor's business and
that such Transferor has no arrangement with any person to participate in the
distribution of such Exchange Notes; (b) that it is an Affiliate of the
Company or of the Initial Purchasers of the Senior Notes in the Initial
Offering and that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable to it; or (c) that
it is a participating broker-dealer and that it will deliver a prospectus in
connection with any resale of the Exchange Notes.
WITHDRAWAL RIGHTS
Senior Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as
19
<PAGE>
having tendered Senior Notes to be withdrawn, the certificate numbers of
Senior Notes to be withdrawn, the principal amount of Senior Notes to be
withdrawn, a statement that such holder is withdrawing his election to have
such Senior Notes exchanged, and the name of the registered holder of such
Senior Notes, and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Senior Notes being withdrawn. The Exchange Agent will return
the properly withdrawn Senior Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Company, and such
determination will be final and binding on all parties.
ACCEPTANCE OF SENIOR NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Senior Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted
for exchange validly tendered Senior Notes when, as and if the Company has
given written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Senior
Notes for the purposes of receiving Exchange Notes from the Company and
causing the Senior Notes to be assigned, transferred and exchanged. Upon the
terms and subject to the conditions of the Exchange Offer, delivery of
Exchange Notes to be issued in exchange for accepted Senior Notes will be made
by the Exchange Agent promptly after acceptance of the tendered Senior Notes.
Senior Notes not accepted for exchange by the Company will be returned without
expense to the tendering holders (or in the case of Senior Notes tendered by
book-entry transfer into the Exchange Agent's account at the Depositary
pursuant to the procedures described above, such non-exchanged Senior Notes
will be credited to an account maintained with such Depositary) promptly
following the Expiration Date or, if the Company terminates the Exchange Offer
prior to the Expiration Date, promptly after the Exchange Offer is so
terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange
Notes in respect of any properly tendered Senior Notes not previously accepted
and may terminate the Exchange Offer (by oral or written notice to the
Exchange Agent and by timely public announcement communicated by no later than
9:00 a.m. on the next business day following the Expiration Date, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News Service) or, at its option, modify or otherwise amend the
Exchange Offer, if (a) there shall be threatened, instituted or pending any
action or proceeding before, or any injunction, order or decree shall have
been issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain or
prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, (ii) assessing or seeking any
damages as a result thereof, or (iii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of the
Senior Notes pursuant to the Exchange Offer; (b) any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgment of the
Company might directly or indirectly result in any of the consequences
referred to in clauses (a)(i) or (ii) above or, in the reasonable judgment of
the Company, might result in the holders of Exchange Notes having obligations
with respect to resales and transfers of Exchange Notes which are greater than
those described in the interpretations of the Commission referred to on the
cover page of this Prospectus, or would otherwise make it inadvisable to
proceed with the Exchange Offer; or (c) a material adverse change shall have
occurred in the business, condition (financial or otherwise), operations, or
prospects of the Company.
20
<PAGE>
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in
whole or in part at any time or from time to time in their sole discretion.
The failure by the Company at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, and each right will be deemed
an ongoing right which may be asserted at any time or from time to time. In
addition, the Company has reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or non-
fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Senior Notes
tendered and no Exchange Notes will be issued in exchange for any such Senior
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
EXCHANGE AGENT
Bankers Trust Company has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at its address set forth on the back cover page of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Company will, however, pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and
expenses of the Exchange Agent and printing, accounting and legal fees, will
be paid by the Company and are estimated at approximately $ .
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Senior Notes in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
However, the Company may, at its discretion, take such action as it may deem
necessary to make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Senior Notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the
Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer
is being made on behalf of the Company by one or more registered brokers or
dealers which are licensed under the laws of such jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF SENIOR NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS
IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange for Exchange Notes by holders of Senior Notes will not be a
taxable exchange for federal income tax purposes, and such holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange.
21
<PAGE>
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Senior Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Notes pursuant to the terms of this Exchange Offer,
the Company will have fulfilled a covenant contained in the terms of the
Senior Notes and the Registration Rights Agreement. Holders of the Senior
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such
rights under the Registration Rights Agreement, which by their terms terminate
or cease to have further effect as a result of the making of this Exchange
Offer. See "Description of the Notes." All untendered Senior Notes will
continue to be subject to the restriction on transfer set forth in the
Indenture. To the extent that Senior Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the Senior Notes could be
adversely affected. See "Risk Factors--Consequences of Failure to Exchange."
The Company may in the future seek to acquire untendered Senior Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Senior
Notes which are not tendered in the Exchange Offer.
22
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 and as adjusted to give effect to the Initial Offering and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds," assuming the repurchase of $65 million in aggregate principal
amount of 10 7/8% Notes and $35 million in aggregate principal amount of 11
1/2% Notes for an aggregate purchase price, inclusive of related tender fees
and expenses, of $106.0 million. Consummation of the Exchange Offer will not
affect the Company's principal amount of outstanding indebtedness.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN MILLIONS)
<S> <C> <C>
Cash and equivalents............................ $ 104.4 $ 117.1
========= ==========
Current portion of long-term debt............... $ -- $ --
Long-term debt:
11 3/8% Notes due 2004........................ -- 125.0
11 1/2% Notes due 1998........................ 77.2 42.2
10 7/8% Notes due 1999........................ 149.7 84.7
10 3/4% Notes due 2005........................ 125.0 125.0
8 5/8% Pollution Control Bonds due 2014....... 56.3 56.3
Unamortized debt discount..................... (0.3) (2.6)(1)
--------- ----------
Total long-term debt.......................... 407.9 430.6
Redeemable preferred stock, net................. 16.6 16.6
Stockholders' equity............................ 195.8 190.7 (2)
--------- ----------
Total capitalization.......................... $ 620.3 $ 637.9
========= ==========
</TABLE>
- --------
(1) Reflects the $2.4 million difference between the aggregate principal
amount of the Notes and the price to investors for the Notes and the $0.1
million reduction of unamortized debt discount resulting from the
repurchase of the 10 7/8% Notes and the 11 1/2% Notes purchased pursuant
to the Tender Offer.
(2) Reflects an extraordinary after-tax charge of $5.1 million for the
recognition of premiums and previously deferred financing charges
resulting from the repurchase of the 10 7/8% Notes and the 11 1/2% Notes
purchased pursuant to the Tender Offer, but does not reflect the after-tax
charges to be recognized by the Company during the second quarter of 1996
related to the No. 3 Blast Furnace outage or the restructuring charge
associated with recent workforce reductions. See "Recent Developments."
23
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth selected historical financial and operating
data for the Company for the three months ended March 31, 1996 and March 31,
1995 and for each fiscal year in the five-year period ended December 31, 1995.
The selected historical financial data for the Company for each fiscal year in
the five-year period ended December 31, 1995 have been derived from the
audited consolidated financial statements of the Company. The historical
financial data for the three months ended March 31, 1996 and March 31, 1995
have been derived from the Company's unaudited financial statements which, in
the opinion of management of the Company, contain all adjustments necessary
for a fair presentation of this information. The historical data with respect
to the results of operations for the three months ended March 31, 1996 should
not be regarded as necessarily indicative of the results that may be expected
for the entire year. This historical data should be read in conjunction with
the consolidated financial statements and notes thereto of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. See "Incorporation of
Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS EXCEPT TON DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $340.9 $354.7 $1,351.7 $1,260.9 $1,201.1 $1,078.7 $1,036.3
Operating costs:
Cost of sales......................... 310.8 299.2 1,180.1 1,136.9 1,105.6 1,010.0 1,019.3
Selling, general and administrative
expenses............................. 9.5 8.2 34.4 31.5 32.5 30.5 29.1
Depreciation.......................... 14.5 15.1 54.7 46.3 49.1 38.6 34.3
Provision for profit sharing(1)....... -- 16.1 24.2 17.6 -- -- --
Special items(2)...................... -- (34.0) (41.5) (20.0) 17.3 -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations......... 6.1 50.1 99.8 48.6 (3.4) (0.4) (46.4)
Unusual gain(3)....................... -- -- 9.0 44.7 -- -- --
Net interest expense(4)............... 8.9 9.6 37.9 44.1 50.2 37.9 29.7
ESOP contributions(5)................. 0.7 0.7 2.6 2.6 2.6 2.6 2.6
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes..... (3.5) 39.8 68.3 46.6 (56.2) (40.9) (78.7)
Income tax (provision) benefit........ 0.7 (7.7) (13.2) (7.5) 13.3 4.8 4.0
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item and cumulative effect of changes
in accounting principles............. (2.8) 32.1 55.1 39.1 (42.9) (36.1) (74.7)
Extraordinary item(6)................. -- -- (6.7) (3.9) (6.5) -- --
Cumulative effect of
changes in accounting principles(7).. -- -- -- -- (179.8) 4.3 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... (2.8) 32.1 48.4 35.2 (229.2) (31.8) (74.7)
Less: Preferred stock dividend re-
quirement............................ -- -- -- (2.4) (3.1) (3.1) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable to common
shares............................... $ (2.8) $ 32.1 $ 48.4 $ 32.8 $ (232.3) $ (34.9) $ (74.7)
======== ======== ======== ======== ======== ======== ========
PER COMMON SHARE DATA:
Income (loss) per common share before
extraordinary item................... $ (0.07) $ .73 $ 1.26 $ 1.06 $ (1.74) $ (1.57) $ (3.49)
Income (loss) per common share before
cumulative effect of accounting
changes.............................. (0.07) .73 1.10 0.95 (1.99) (1.57) (3.49)
Net income (loss) per common share.... (0.07) .73 1.10 0.95 (8.78) (1.40) (3.49)
Cash dividends paid................... -- -- -- -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and equivalents.................. $ 104.4 $ 82.3 $ 131.8 $ 62.9 $ 89.0 $ 61.2 $ 84.2
Working capital....................... 346.5 321.2 340.3 256.5 262.2 237.7 273.5
Total assets.......................... 1,277.5 1,233.7 1,314.0 1,230.9 1,240.7 1,005.4 1,038.0
Long-term debt (including current
portion)(8).......................... 407.9 394.5 407.9 394.5 495.3 503.2 505.3
Redeemable preferred stock, net....... 16.6 15.1 15.9 14.5 36.7 34.2 31.0
Stockholders' equity (deficit)........ $ 195.8 $ 181.3 $ 198.6 $ 149.2 $ (1.4) $ 231.3 $ 257.3
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- -----------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------- ------- ------ ------ -------
(DOLLARS IN MILLIONS EXCEPT TON DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA (FOR THE
PERIOD, EXCEPT WHERE
NOTED):
EBITDA(9).............. $ 22.2 $ 41.7 $ 129.4 $ 90.5 $ 47.7 $ 39.9 $ (9.5)
Capital
expenditures(10)...... $ 13.4 $ 7.1 $ 52.4 $ 112.1 $ 13.3 $ 44.6 $ 113.9
Ratio of EBITDA to
interest expense...... 2.07 3.97 3.04 1.81 0.90 0.97 --
Ratio of net debt to
EBITDA(11)............ 3.41 1.87 2.13 3.67 8.51 11.08 --
Net debt to net
capitalization(12).... 59% 61% 56% 67% 92% 62% 59%
Ratio of earnings to
fixed charges(13)..... -- 4.46 2.48 1.85 -- -- --
Tons shipped (in
thousands)............ 712 705 2,718 2,606 2,431 2,102 1,939
Net sales per ton
shipped............... $ 479 $ 503 $ 497 $ 484 $ 494 $ 513 $ 534
Cost of sales per ton
shipped............... $ 437 $ 424 $ 434 $ 436 $ 455 $ 480 $ 526
Gross profit per ton
shipped............... $ 42 $ 79 $ 63 $ 48 $ 39 $ 33 $ 8
Operating income (loss)
per ton shipped,
excluding special
items(14)............. $ 9 $ 37 $ 26 $ 15 $ 6 $ 0 $ (24)
Active employees (at
end of period)........ 5,615 5,552 5,655 5,565 6,026 6,542 6,979
Employee hours per ton
of hot band produced.. 1.75 1.76 1.76 1.83 1.95 2.07 2.38
Employee hours per ton
shipped............... 4.31 4.38 4.44 4.89 5.31 6.53 7.55
Capacity utilization... 94% 99% 95% 91% 91% 83% 68%
Percentage of raw steel
continuously cast..... 100% 100% 100% 100% 100% 100% 97%
Yield (raw steel to
finished production).. 80.8% 80.8% 80.7% 83.0% 77.9% 72.3% 72.3%
</TABLE>
- --------
(1) The provision for employee profit sharing is calculated in accordance
with the profit sharing plan agreement. The provision is currently based
upon 33 1/3% of net income, subject to a minimum net worth provision of
$100.0 million.
(2) During the three months ended March 31, 1995 and the years ended December
31, 1995 and 1994, the Company's results of operations included the
recognition of $34.0 million , $34.0 million and $20.0 million,
respectively, of insurance recoveries relating to a business interruption
claim arising out of the fire which damaged the No. 9 Tandem Mill in
April 1994. In addition, the year ended December 31, 1995 includes a $7.5
million settlement of a 1991 business interruption claim from an outage
at the Company's hot strip mill. The Company recognized a restructuring
charge of $17.3 million in the year ended December 31, 1993 associated
with an enhanced early retirement package as part of a Company cost
reduction program.
(3) The Company was required to recognize a new cost basis for property
damage insurance recoveries related to the No. 9 Tandem Mill which
resulted in the recognition of a pretax gain for the years 1995 and 1994
in the amounts of $9.0 million and $44.7 million, respectively.
(4) Net interest expense does not include capitalized interest of $0.3
million, $0.2 million, $1.1 million , $2.3 million, $0.8 million, $6.1
million and $12.8 million for the three months ended March 31, 1996 and
1995, and for the years ended December 31, 1995, 1994, 1993, 1992 and
1991, respectively.
(5) Does not involve a net outflow of cash as these contributions are
returned to the Company in the form of payments on loans from the Company
to the ESOPs.
(6) Reflects certain costs incurred in connection with the early
extinguishment of debt.
(7) Effective January 1, 1992, the Company changed its method of accounting
for the depreciation of its steelmaking facilities from a straight-line
to a production-variable method. Effective January 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," and SFAS No. 109, "Accounting for Income
Taxes." The cumulative effect of the 1993 accounting changes reflects the
collective implementation of the following accounting changes. The change
in accounting under SFAS No. 106 required the Company to recognize a
pretax charge of $303.9 million to account for the prior service cost of
retiree health care and life insurance benefits as well as an additional
noncash expense each quarter which began in the first quarter of 1993.
The Company also recorded a pretax charge of $4.0 million relating to the
implementation of SFAS No. 112, and a net income tax benefit of $128.1
million, representing the cumulative effect of the accounting change for
income taxes in accordance with SFAS No. 109.
(8) See "Capitalization" for information regarding certain adjustments made
to give effect to the Initial Offering and the Tender Offer.
(9) EBITDA represents the earnings of the Company before income taxes,
interest expense, depreciation and amortization and for the three months
ended March 31, 1995 and the years 1995 and 1994, excludes the business
interruption and property damage insurance recoveries and the related
impact on the provision for profit sharing. EBITDA differs from the
definition of Consolidated EBITDA under the Indenture. See "Description
of Notes." EBITDA is not a measure of financial performance under
generally accepted
25
<PAGE>
accounting principles ("GAAP"). Accordingly, it does not represent net
income or cash flows from operations as defined by GAAP and does not
necessarily indicate that cash flows will be sufficient to fund cash needs.
As a result, EBITDA should not be considered as an alternative to net
income, as an indicator of operating performance or to cash flows as a
measure of liquidity.
(10) Capital expenditures in 1995 and 1994 included $2.9 million and $74.6
million, respectively, for rebuilding the No. 9 Tandem Mill due to fire
damage. The Company received cash insurance recoveries for property
damage of $9.0 million and $45.0 million in 1995 and 1994, respectively,
related to the 1994 outage at the No. 9 Tandem Mill.
(11) For purposes of this ratio, EBITDA for the three months ended March 31,
1996 and March 31, 1995 have been annualized. Net debt represents long-
term debt minus cash and equivalents.
(12) Net debt represents long-term debt minus cash and equivalents, and net
capitalization represents total capitalization minus cash and
equivalents.
(13) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before taxes plus fixed charges and (ii) fixed
charges consist of interest expense incurred, amortization of debt
expense and one-third of rental payments under operating leases (an
amount estimated by management to be the interest portion of such
rentals). Earnings did not cover fixed charges by $3.5 million, $56.2
million, $40.9 million and $78.7 million for the three months ended March
31, 1996 and the years ended December 31, 1993, 1992 and 1991,
respectively. The ratio of earnings to fixed charges is not expected to
be materially affected by this Offering.
(14) Represents income (loss) from operations, excluding insurance recoveries
and the related effect on the provision for profit sharing, for the three
months ended March 31, 1995 and for the years ended December 31, 1995 and
1994, and the restructuring charge for the year ended December 31, 1993
divided by tons shipped. Including the special items, operating income
per ton was $71, $37 and $19 for the three months ended March 31, 1995
and the years ended December 31, 1995 and 1994, respectively.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company, as a major integrated producer of flat rolled carbon steel,
competes in a cyclical market where product demand is generally influenced by
several factors, including: the strength of the economies of the U.S. and
other major steel consuming countries; restrictions on imports by foreign
producers; fluctuating exchange rates; and worldwide production capacity. The
Company's major product lines are TMP and sheet products. Although the Company
is generally influenced by the cyclical nature of the industry and competitive
pressures, management believes the Company's major product lines and the
attributes of its particular operating facilities differentiate the Company
favorably in certain respects from other producers.
The market for TMP is generally characterized by a relatively limited number
of competitors, and customers who make annual commitments at prices which have
been relatively stable compared to prices of other steel products. The Company
believes its TMP customers are less sensitive to fluctuations in the general
business cycle than users of other steel products, such as automobile and
appliance manufacturers. Stability of TMP prices has also been due in part to
the fact that imports have historically represented a small percentage of the
domestic TMP market.
In contrast with TMP, selling prices for the Company's sheet products are
more sensitive to changes in demand due to the wide variety of end use, broad
customer base and the large number of producers. The majority of the Company's
sheet products are sold in the spot market or under quarter-to-quarter pricing
arrangements primarily to steel service centers and other steel and strip
converters. Although demand for the Company's sheet products remained strong
during 1995 and into the first quarter of 1996, selling prices in the steel
industry (including those for the Company's products) steadily declined during
1995. During the first quarter of 1996, the Company and the industry in
general announced price increases. In the second quarter of 1996, the Company
began to realize a portion of these price increases in sales to certain of its
customers. However, there can be no assurance that the Company will continue
to realize such price increases, or that prices will not decline in the
future.
In April 1994, the Company's No. 9 Tandem Mill sustained extensive damage
from a fire which occurred while the unit was undergoing maintenance. This
cold rolling facility had traditionally supplied approximately 70% to 80% of
the coils required by the Company's tin and chrome plating operations. The
Company compensated for the reduction in cold rolling capacity by increasing
its sales of hot rolled products in 1994. The shift from TMP to sheet products
resulted in the realization of lower average selling prices during the period
in which the No. 9 Tandem Mill was not in service. Sheet products such as hot
rolled products generally provide lower profit margins than more highly
processed products such as tin and chrome plate. Although the No. 9 Tandem
Mill returned to full operations in the first quarter of 1995, severe weather
conditions caused the late planting of major food crops and, consequently,
softened the demand for TMP in 1995. As a result, the pace at which the
Company's share of TMP recovered was slower than expected. Throughout 1995,
the Company gradually achieved a more traditional product mix and by the first
quarter of 1996 had acquired a share of the TMP market comparable to that
prior to the fire.
RECENT DEVELOPMENTS
On April 1, 1996, the Company announced that it shut down the No. 3 Blast
Furnace for an unscheduled 10-day outage to install a new bell, a device which
distributes the burden of raw materials into the furnace for smelting. The
estimated adverse impact of this outage on second quarter income from
operations is expected to be between $5 million and $7 million.
On May 29, 1996, the Company announced that it was reducing its supervisory
and managerial workforce by approximately 200 employees, or approximately 20%,
as part of its ongoing broad-based effort to improve the Company's cost
position. The restructuring charge associated with this reduction is
approximately $17 million and will be recorded in the second quarter of 1996.
The Company expects the cash costs over the next twelve months to be
approximately $7.5 million, with the remainder extending beyond that period.
The Company does not believe the costs associated with the restructuring will
have a significant impact on the Company's near term liquidity. While the
Company has no specific plan to further reduce its workforce, the Company is
currently
27
<PAGE>
evaluating further workforce reductions and, to the extent the Company pursues
such alternatives, the Company may be required to record additional
significant restructuring charges. The additional costs associated with the
No. 3 Blast Furnace outage coupled with the restructuring charge, as well as
any extraordinary loss associated with the refinancing of the 10 7/8% Notes
and the 11 1/2% Notes, will likely cause the Company to report a net loss for
the year ending December 31, 1996.
THE REFINANCING
On May 29, 1996, the Company commenced the Tender Offer, pursuant to which
it offered to purchase up to $65 million aggregate principal amount of its
outstanding 10 7/8% Notes and up to $35 million aggregate principal amount of
its outstanding 11 1/2% Notes at an aggregate principal price of approximately
$106.0 million. The consideration for 10 7/8% Notes tendered pursuant to the
Tender Offer was $1,053.77 per $1,000 principal amount and the consideration
for 11 1/2% Notes tendered pursuant to the Tender Offer was $1,048.06 per
$1,000 principal amount, in each case plus accrued interest up to, but not
including, the payment date. The purpose of the Tender Offer was to extend the
maturities of the Company's outstanding indebtedness by refinancing the 10
7/8% Notes and 11 1/2% Notes purchased pursuant to the Tender Offer with the
proceeds from the issuance and sale of the Senior Notes.
The Tender Offer expired at 5:00 p.m., New York City Time on June 27, 1996.
On July 3, 1996, the Company issued and sold the $125 million aggregate amount
of Senior Notes. The Senior Notes were sold at a discount of 98.088% to par.
The net proceeds to the Company after underwriting commissions of $3.4 million
and approximately $0.5 million of other fees and expenses of the Initial
Offering, were approximately 118.7 million. The Company used a portion of the
proceeds from the Initial Offering to repurchase, concurrently with the
consummation of the sale of the Notes, $35 million aggregate principal amount
of 11 1/2% Notes and $65 million aggregate principal amount of 10 7/8% Notes
tendered pursuant to the Tender Offer, for an aggregate purchase price,
inclusive of related tender fees and expenses, of approximately $106.0
million. See "Use of Proceeds."
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- -------------------------
1996 1995 1995 1994 1993
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Shipments:(1)
TMP............................... 222 180 763 615 895
Sheet products:
Hot rolled sheet................. 259 282 1,112 1,070 687
Cold rolled sheet................ 59 59 188 198 181
Galvanized sheet................. 172 184 655 723 668
------ ------ ------- ------- -------
Total sheet products............ 490 525 1,955 1,991 1,536
------ ------ ------- ------- -------
Total shipments............... 712 705 2,718 2,606 2,431
Results per ton shipped:
Net sales per ton shipped......... $ 479 $ 503 $ 497 $ 484 $ 494
Cost of sales per ton shipped..... (437) (424) (434) (436) (455)
------ ------ ------- ------- -------
Gross profit per ton shipped...... $ 42 $ 79 $ 63 $ 48 $ 39
Operating income per ton shipped,
excluding special items(2)....... $ 9 $ 37 $ 26 $ 15 $ 6
Profit margin percentages:
Gross profit margin............... 8.8% 15.7% 12.7% 9.9% 7.9%
Operating income margin, excluding
special items(2)................. 1.9% 7.4% 5.2% 3.1% 1.2%
</TABLE>
- --------
(1) In thousands of tons.
(2) Represents income from operations excluding insurance recoveries and the
related effect on the provision for profit sharing, for the three months
ended March 31, 1995 and years ended December 31, 1995 and 1994, and the
restructuring charge for the year ended December 31, 1993 divided by tons
shipped. Including the special items, operating income per ton was $71,
$37 and $19, for the three months ended March 31, 1995 and the years
ended December 31, 1995 and 1994, respectively.
28
<PAGE>
Three Months Ended March 31, 1996 Compared To Three Months Ended March 31,
1995
In the first quarter of 1996, the Company recognized a net loss of $2.8
million or $0.07 per common share, compared to net income of $32.1 million or
$0.73 per common share for the same period in 1995. The first quarter 1995
results included a favorable pretax adjustment of $34.0 million for business
interruption insurance recovery relating to the No. 9 Tandem Mill and a pretax
provision for employee profit sharing of $16.1 million. Excluding the effect
of the insurance recovery, and its resulting effects on the provision for
profit sharing and income taxes, net income for the first quarter of 1995
would have been $12.6 million or $0.29 per share.
Net sales in the first quarter of 1996 were $340.9 million, a decrease of
$13.8 million or 3.9% from the first quarter of 1995. Total shipments in the
first quarter of 1996 were 712 thousand tons compared to first quarter of 1995
shipments of 705 thousand tons.
While demand for the Company's products continued to be strong in the first
quarter of 1996, selling prices, particularly with respect to sheet products,
were lower than in the first quarter of 1995, following an industry-wide
trend. The Company announced price increases during the first quarter of 1996.
In the second quarter of 1996, the Company began to realize a portion of these
price increases in sales to certain of its customers. However, there can be no
assurance that the Company will continue to realize such price increases, or
that prices will not decline in the future.
Sheet product sales for the first quarter of 1996 declined $41.7 million to
$200.1 million. Shipments of sheet products in the first quarter of 1996 were
490 thousand tons compared to 525 thousand tons in the first quarter of 1995.
As described above, during the periods immediately following the outage of the
No. 9 Tandem Mill, the Company's product mix was shifted more heavily to sheet
product from TMP. The resumption of a more traditional product mix along with
lower selling prices resulted in lower sheet product sales during the first
quarter of 1996 compared to 1995.
TMP sales in the first quarter of 1996 were $140.8 million on shipments of
222 thousand tons compared to $112.8 million on 180 thousand tons for the same
period in 1995 reflecting the recovery of the Company's TMP market share. The
product mix for the first quarter of 1996 reflects a level of TMP shipments
comparable to that experienced prior to the No. 9 Tandem Mill outage.
Cost of sales per ton for the first quarter of 1996 was $437 per ton
compared to $424 per ton for the first quarter of 1995. This increase was
primarily attributable to the shift in product mix from sheet products to the
higher cost TMP. Additionally, the Company experienced higher operating costs
related to the severe weather conditions in the first quarter of 1996, as well
as higher energy and raw material costs.
Operating income was $9 per ton for the first quarter of 1996 compared to
$71 per ton for the same period in 1995. The decrease was due to the absence
of insurance recoveries, lower selling prices and higher operating costs.
These negative factors were partially offset by an improved product mix and no
provision for profit sharing in the current period.
Selling, general and administrative expenses were $9.5 million for the first
quarter of 1996, an increase of $1.3 million compared to the first quarter of
1995. The increase was primarily due to higher benefit costs and increased
purchased services.
During the first quarter of 1996, the Company recognized interest income of
$1.8 million compared to $0.9 million in the first quarter of 1995. This
increase in interest income was primarily due to a higher level of invested
funds during the first quarter of 1996 compared to the same period in 1995.
1995 Compared To 1994
Net income in 1995 was $48.4 million or $1.10 per common share compared to
$35.2 million or $0.95 per common share in 1994. The 1995 and 1994 results
included a pretax provision for employee profit sharing of $24.2 million and
$17.6 million, respectively.
29
<PAGE>
The 1995 and 1994 results included favorable adjustments for business
interruption and property damage insurance recoveries. The Company received
$44.7 million for property damage and $20.0 million for business interruption
in 1994 related to the No. 9 Tandem Mill. The Company settled its claims
related to the No. 9 Tandem Mill in 1995 and received additional proceeds of
$9.0 million for property damage and $34.0 million for business interruption.
In addition, the Company's business interruption claim stemming from an outage
at its hot strip mill in March 1991 was settled for $7.5 million in 1995. Net
income for 1995 also included a $6.7 million extraordinary loss on the early
extinguishment of debt while 1994 results included a similar loss of $3.9
million. Excluding these nonrecurring items, and the resulting effect on the
provision for employee profit sharing, net income for 1995 would have been
$24.2 million or, $0.55 per common share, compared with a loss of $5.3
million, or $0.22 per common share for 1994.
The resumption of production at the No. 9 Tandem Mill had a significant
effect on the Company's volume of shipments in 1995, as well as its product
mix compared to 1994. Total shipments in 1995 were 2,718 thousand tons
compared to 2,606 thousand tons in 1994.
Sheet product shipments decreased 36 thousand tons from 1994 to 1,955
thousand tons in 1995. Sales generated by sheet products in 1995 were $864.8
million, a decline of $15.7 million from 1994 primarily related to the
decreased shipments. In 1995, the Company expanded its marketing efforts in
response to demand for its sheet products internationally. As a result,
approximately 12% of the Company's sheet product shipments in 1995 were
exported compared to nominal amounts in prior years.
In the second quarter of 1994, in spite of the No. 9 Tandem Mill outage, the
Company was able to fill a majority of its orders for its TMP customers from
inventory on hand. However, during the second half of 1994, the No. 9 Tandem
Mill remained out of service and the Company lost a portion of its share of
the TMP market. Sales from TMP increased $106.5 million in 1995 over 1994, of
which $89.8 million was attributable to the higher level of shipments and a
more favorable product mix. Although demand in 1995 reflected periods of
softness, previously negotiated annual selling prices were higher and
contributed $16.7 million to the increase in sales in 1995 compared to 1994.
As a result of the increase in TMP shipments and selling prices, offset by
lowered sheet product shipments caused by the resumption of production at the
No. 9 Tandem Mill, total sales in 1995 increased 7.2% to $1,351.7 million from
$1,260.9 million in 1994.
Cost of sales as a percentage of net sales was 87.3% in 1995 compared to
90.2% in 1994. This improvement resulted from the shift in product mix from
sheet products to higher margin TMP.
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
(IN THOUSANDS, EXCEPT PER TON AMOUNTS)
<S> <C> <C>
Cost of sales...................... $ 1,180,053 $ 1,136,936
Shipments in tons.................. 2,718 2,606
------------------- -------------------
Cost of sales per ton.............. $ 434 $ 436
=================== ===================
</TABLE>
Depreciation expense increased $8.4 million to $54.7 million in 1995. This
increase was the result of increased production, greater overall capital
spending and the recognition of a new cost basis for the rebuilt No. 9 Tandem
Mill. Capitalized spending for the No. 9 Tandem Mill in 1995 and 1994 was $2.9
million and $74.6 million, respectively.
Interest expense was $42.5 million in 1995, a decrease of $7.5 million from
1994. The decrease resulted from a reduction of approximately $101.1 million
in outstanding debt obligations during the fourth quarter of 1994 using
available cash and a significant portion of the proceeds of a public offering
of the Company's common stock in August 1994.
30
<PAGE>
In June 1995, the Company sold $125.0 million of its 10 3/4% Senior Notes
due 2005 (the "10 3/4% Notes"). The net proceeds of the offering were $121.0
million, of which $118.8 million was used to purchase $30.0 million principal
amount of its 11 1/2% Notes and $82.0 million principal amount of its 10 7/8%
Notes. As a result, the Company recognized an after-tax extraordinary loss of
$6.7 million related to premiums paid to repurchase the notes and the
immediate recognition of previously deferred financing costs related to the
purchase of the notes. This compares to a similar extraordinary loss of $3.9
million recognized in 1994 resulting from the early repayment of approximately
$101.1 million of senior debt.
The Company elected for federal income tax purposes not to recognize a new
basis for the costs associated with the rebuilt No. 9 Tandem Mill. As such,
the 1995 income tax provision reflected principally the reduction of net
deductible temporary differences. The 1994 income tax provision included the
utilization of regular federal net operating loss carry forwards, a reduction
of net deferred deductible temporary differences and a current provision for
alternative minimum tax. The 1995 and 1994 provisions were offset by favorable
adjustments to the carrying value of the Company's net deferred tax assets.
1994 Compared To 1993
In 1994, the Company recognized net income of $35.2 million, or $0.95 per
common share, compared to a net loss of $229.2 million, or $8.78 per common
share in 1993. The net results for 1994 included a pretax favorable adjustment
to the carrying value of the damaged No. 9 Tandem Mill of $44.7 million and a
pretax provision for employee profit sharing of $17.6 million. The net results
for 1993 were reduced by a pretax restructuring charge of $17.3 million and
the after-tax cumulative effect on prior years of accounting changes of $179.8
million. The 1994 and 1993 results included after-tax extraordinary losses of
$3.9 million and $6.5 million, respectively, related to costs associated with
the early extinguishment of debt.
Operating and net results for 1994 were adversely affected by the fire that
extensively damaged the No. 9 Tandem Mill. Notwithstanding the disruption to
the Company's operations caused by the fire, sales in 1994 of $1,260.9 million
for all products combined were $59.8 million, or 5.0%, higher than in 1993.
The Company's operating profit of $48.5 million in 1994, which included $20.0
million of insurance recoveries received through the end of 1994 under the
Company's business interruption coverage, reflected higher operating costs
caused by the No. 9 Tandem Mill outage. Nevertheless, the Company's operating
performance in 1994 exceeded that for 1993 when the Company recognized an
operating loss of $3.4 million.
The demand for the Company's hot rolled and coated sheet products was strong
in 1994. Market conditions and the adjustment by the Company of its product
mix after the fire resulted in a record 1,991 thousand tons of sheet product
shipments in 1994, an increase of 455 thousand tons, or 29.6%, compared to
1993. Shipments of hot rolled products increased 58% from 1993 levels and,
together with a 9% shipping volume increase for coated sheet products,
primarily galvanized, contributed $158.0 million in higher revenues in 1994.
Average selling prices for sheet products were higher in 1994 than in 1993,
adding $52.6 million to sales. Product mix changes added $17.9 million,
bringing the increase in total sheet product sales to $228.5 million for 1994
over 1993.
In 1994, the Company shipped 615 thousand tons of TMP, a decrease of 279
thousand tons, or 31.2%, compared to 1993, reflecting the impact of the outage
of the No. 9 Tandem Mill. This decline in TMP shipments caused total TMP sales
to decline by $168.7 million in 1994 from 1993. Volume decreases accounted for
$175.3 million of the decline, while selling price increases offset the volume
decrease to the extent of $9.0 million. Product mix changes also decreased
1994 sales by $2.4 million from 1993.
Cost of sales in 1994 as a percentage of net sales was 90.2% compared to
92.0% for 1993 and reflected an improvement of $19 per ton in direct
production costs over 1993.
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
(IN THOUSANDS, EXCEPT PER TON AMOUNTS)
<S> <C> <C>
Cost of sales...................... $ 1,136,936 $ 1,105,558
Shipments in tons.................. 2,606 2,431
------------------- -------------------
Cost of sales per ton.............. $ 436 $ 455
=================== ===================
</TABLE>
31
<PAGE>
Depreciation expense decreased $2.8 million to $46.3 million in 1994 from
$49.1 million in 1993. This change reflected a reduction in blast furnace
depreciation on the variable units of production method due to the extended
life (before relining) of the existing furnaces, which had been fully reserved
through early 1994. The Company's accounting policy recognizes depreciation on
production equipment on a production-variable method which adjusts straight-
line depreciation to reflect actual production levels.
Interest expense decreased to $50.0 million in 1994 from $52.8 million in
1993 when, in the fourth quarter of 1994, the Company purchased $101.1 million
in outstanding senior notes using available cash and a significant portion of
the proceeds from the August 1994 public offering of common stock. The
purchases included the payment of certain premiums and required the
recognition of previously deferred financing costs. As a result, the Company
had an after-tax extraordinary loss of $3.9 million in 1994. The Company had
an after-tax extraordinary loss of $6.5 million in 1993 related to premiums
and the immediate recognition of previously deferred financing costs related
to indebtedness refinanced with the proceeds from the public sale of its 11
1/2% Notes.
The income tax provision recognized in 1994 resulted from the utilization of
regular federal net operating loss carryforwards, a reduction of net deferred
deductible temporary differences and a current provision for alternative
minimum tax. The 1994 provision was offset by favorable adjustments to the
carrying value of the Company's net deferred tax assets. The income tax
benefit recognized in 1993 reflected principally the net realizable value of
additional net operating losses generated during 1993 and net deferred tax
asset carrying value adjustments related primarily to a change in the federal
statutory rate.
In 1993, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Benefits Other Than Pensions";
SFAS No. 112, "Employers' Accounting for Postemployment Benefits"; and SFAS
No. 109, "Accounting for Income Taxes." The change in accounting under SFAS
No. 106 required the Company to recognize a pretax charge of $303.9 million to
account for the prior service costs of retiree healthcare and life insurance
benefits. The Company also recorded a pretax charge of $4.0 million related to
the implementation of SFAS No. 112 and a net income tax benefit of $128.1
million, representing the cumulative effect of the accounting change for
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The table below sets forth selected measures of liquidity and capital
resources of the Company for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------
1996 1995 1995 1994 1993
--------- --------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash and equivalents....... $ 104.4 $ 82.3 $ 131.8 $ 62.9 $ 89.0
Working capital............ 346.5 321.2 340.3 256.5 262.2
Net cash (used) provided by
operating activities...... (12.0) 24.3 121.1 45.6 69.5
Net cash (used) provided by
financing activities...... (1.9) 2.2 (8.8) (4.6) (28.3)
Capital expenditures....... 13.4 7.1 52.4 112.1 13.3
Total assets............... 1,277.5 1,233.7 1,314.0 1,230.9 1,240.7
Long-term debt (including
current portion).......... 407.9 394.5 407.9 394.5 495.3
Redeemable preferred stock,
net....................... 16.6 15.1 15.9 14.5 36.7
Stockholders' equity
(deficit)................. $ 195.8 $ 181.3 $ 198.6 $ 149.2 $ (1.4)
</TABLE>
As of March 31, 1996, the Company had cash and equivalents of $104.4 million
compared to $131.8 million as of December 31, 1995 and $62.9 million as of
December 31, 1994. This decrease in cash and equivalents between December 31,
1995 and March 31, 1996 was due primarily to the payment during the first
quarter of 1996 of approximately $24.2 million of profit sharing. During 1995,
the Company completed a private sale of
32
<PAGE>
$125.0 million principal amount of 10 3/4% Notes. The net proceeds of the
offering were approximately $121.0 million, of which $118.8 million was used
to purchase approximately $30.0 million principal amount of 11 1/2% Notes and
$82.0 million principal amount of 10 7/8% Notes. The Company exchanged these
notes for substantially identical notes which were registered under the
Securities Act. In addition, during 1995, the Company received approximately
$53.0 million related to the settlement of insurance claims.
The Company's net deferred tax assets were $136.1 million as of March 31,
1996, which consisted primarily of the carrying value of net operating loss
carryforwards and other tax credits and net deductible temporary differences
available to reduce the Company's cash requirements for the payment of future
federal income tax. The Company was required in 1995 and 1994, and may be
required in future periods, to make cash payments for income taxes under
federal alternative minimum tax regulations.
The Company has in place, through WRI, a receivable participation agreement
with a group of four banks (the "WRI Receivable Participation Agreement"). The
facility, which is AAA rated by Standard & Poor's Ratings Services, provides
for a total commitment by the banks of up to $85.0 million, including a letter
of credit subfacility of up to $25.0 million. The WRI Receivable Participation
Agreement, as amended, makes the facility available to WRI through April 2000.
As of March 31, 1996, $4.0 million in letters of credit under the subfacility
were outstanding. Based upon the Company's available cash on hand as of March
31, 1996, and the amount of cash it anticipates will be provided from
operating activities in the near term, the Company expects to have sufficient
cash to meet its near-term requirements. As such, it does not expect WRI to
sell participation interests to the banks in the near term. As of March 31,
1996, after reductions from amounts in place under the letter of credit
subfacility, the base amount of participation interests available for cash
sales was approximately $81.0 million. Additionally, the Company has no
scheduled debt repayment until 1998 when its 11 1/2% Notes become due.
INVESTMENT IN FACILITIES
Excluding the cost to rebuild the No. 9 Tandem Mill, capital spending was
approximately $49.5 million in 1995 compared to $37.5 million in 1994. The
Company spent approximately $2.9 million and $74.6 million in 1995 and 1994,
respectively, to rebuild the No. 9 Tandem Mill. Expenditures for property,
plant and equipment for the first three months of 1996 totaled $13.4 million.
The Company's planned capital expenditures for 1996 and 1997 are
approximately $85 million and $47 million, respectively, and include spending
for a major reline and rebuild of the Company's No. 1 Blast Furnace, expected
to begin in the latter half of 1996, and improvements on the Company's No. 4
Blast Furnace. Other planned capital improvement expenditures for 1996 and
1997 include approximately $6.9 million to install gauge and additional
looping capacity on the No. 9 Tandem Mill, $6.0 million to install fire
protection systems and $4.5 million to install in-line side trimming on the
No. 2 Plater. Also included in the Company's planned capital expenditures for
1996 and 1997 are approximately $11.7 million and $5.0 million, respectively,
for environmental control projects. At present, cash provided from operating
activities, together with cash on hand, is expected to be sufficient to fund
the capital budget and to meet any near term working capital requirements. To
the extent that near term operating activities do not generate an adequate
amount of cash, the Company expects that any cash requirements for capital
improvements would be financed through the WRI Receivable Participation
Agreement.
ENVIRONMENTAL MATTERS
The Company is continuing negotiations with the EPA regarding alleged
violations of environmental laws and regulations, as well as compliance issues
related to air, water and waste disposal. Although at this time it is not
possible to determine the eventual outcome of these negotiations, the Company
will likely be required to pay fines and penalties, commit to environmental
related capital expenditure projects and incur higher operating costs related
to its environmental compliance programs. The Company may also be required to
conduct remediation activities at certain waste disposal sites. At this time,
it is not possible to determine if any remediation activities
33
<PAGE>
would be subject to indemnification by National. The time period related to
the EPA negotiations extends to September 15, 1996. Based on its review of the
matters involved and discussions to date with representatives of the EPA,
while no assurance can be given, the Company does not believe that any fines,
penalties or costs to remediate would have a material effect on the Company's
financial position or results of operations. However, it is expected that
related capital expenditure projects and required changes in operating
practices will increase future operating costs, which may have a significant
effect on future results of operations. See "Business--Environmental Control."
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." SFAS No. 121 requires that the carrying value
of long-lived operating assets, when determined to be impaired, be adjusted so
as not to exceed the estimated undiscounted cash flows provided by such
assets. SFAS No. 121 also addresses the accounting for long-lived assets that
are to be disposed of in future periods. The Company adopted the provisions of
SFAS No. 121 in the first quarter of 1996. The adoption of SFAS No. 121 did
not have any effect on the Company's financial position or results of
operations for the quarter ended March 31, 1996.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 recommends, but does not require, that companies
change their method of accounting for stock-based compensation plans to one
that attributes compensation costs equal to the fair value of a stock-based
compensation arrangement over the periods in which service is rendered.
Companies not electing to change their method of accounting are required,
among other things, to provide additional disclosure which in effect restates
a company's results for comparative periods as if the new method of accounting
had been adopted. The Company intends to continue its present accounting
policy relating to stock-based compensation and will provide the required
disclosures, as permitted by SFAS No. 123.
34
<PAGE>
BUSINESS
GENERAL
The Company is a major integrated producer of flat rolled carbon steel which
has been in the steelmaking and finishing business for more than 80 years. The
Company focuses on higher value-added products with demanding specifications,
such as TMP and coated sheet. TMP are sold primarily to manufacturing and
packaging companies for use as food, non-carbonated beverage and general line
cans; coated sheet is sold primarily to the construction industry for use in a
broad variety of building products and to service centers. For the three
months ended March 31, 1996, these value-added product lines accounted for
approximately 68% of the Company's revenues and 55% of its shipments. Over the
last five years, these value-added product lines have accounted for
approximately 71% of the Company's revenues and 59% of its shipments. The
remainder of the Company's revenues is derived from the sale of hot and cold
rolled sheet, which is used primarily for machinery, construction products and
other durable goods. The Company believes that its percentage of value-added
products to total production is among the highest of integrated steel
producers in the United States and provides it with a competitive advantage
against both domestic and foreign commodity steel producers.
Since 1988, the Company has made capital improvements in excess of $730
million, reduced its workforce by 31% and implemented a number of additional
cost reduction initiatives, all of which have contributed to increased
productivity. As a result of these achievements, the Company believes its
operating costs per ton of hot band are below the industry average among North
American steel producers. The Company's capital improvements have included
enhancing the Company's capacity to make clean steel, rebuilding its multi-
strand continuous caster and upgrading its hot strip rolling mill to be one of
the most modern in the world. Specifically, the Company has achieved the
following:
. Reduced its employee hours per ton from 6.41 hours per ton shipped in
1988 to 4.31 hours per ton shipped in the first quarter of 1996.
. Increased its overall yields from liquid steel to finished product from
74% in 1988 to approximately 81% in the first quarter of 1996.
. Raised average hot metal production per furnace from 2,409 tons per day
in 1988 (utilizing three furnaces) to 3,299 tons per furnace per day in
the first quarter of 1996 (utilizing two furnaces) and lowered
conversion costs.
. Increased operating rates at the hot strip mill by 4% per turn of
production in the first quarter of 1996 compared to 1988. Moreover,
through improved production scheduling, average operating delays for the
hot strip mill have been reduced by more than 20% from 1988 levels.
. Increased its productivity (defined as tons rolled per hour operated) at
the No. 9 Tandem Mill 14% from 1993, the year prior to the fire and
subsequent rebuild of the No. 9 Tandem Mill, to the first quarter of
1996.
BUSINESS STRATEGY
The Company's strategic objective is to be a first tier global provider, in
terms of cost, quality and customer service, of tin plate and other specialty
coated and plated products. The Company's strategy is to (i) continue to make
cost and productivity improvements, (ii) continue to improve its product mix
towards higher value-added products such as TMP and coated sheet and (iii)
maximize the utilization of its assets.
Cost and Productivity Improvements. The Company's strategy is to continue to
make cost and productivity improvements through, among other things, the
following plans or programs:
. The Company's current capital improvement plan includes approximately
$80 million for a major reline and rebuild of the No. 1 Blast Furnace,
and an upgrade of the related computer systems, as well as additional
automation and other improvements. The reline and rebuild of the No. 1
Blast Furnace is expected to increase the Company's iron producing
capacity, provide energy cost savings, and reduce manpower requirements
and raw material costs. This project is expected to be completed in the
first quarter of 1997.
35
<PAGE>
. In May 1996, the Company announced that as part of its ongoing broad-
based effort to improve its cost position, the Company was reducing its
supervisory and managerial workforce by approximately 200 employees, or
approximately 20%. While the Company currently has no specific plan to
further reduce its workforce, the Company continues to evaluate other
workforce reductions.
. The Company is planning further capital improvements of approximately
$6.9 million to the No. 9 Tandem Mill aimed at increasing capacity by an
additional 15% per year. These improvements are expected to be completed
in the first half of 1997.
. Beginning in the first quarter of 1996, the Company initiated a new
supply management program to coordinate the acquisition of goods and
services, from rolling oils to raw materials. This program seeks to
achieve cost savings by consolidating suppliers, introducing new lower
cost suppliers, using alternative negotiating approaches, purchasing a
greater percentage of goods at bulk rates and redesigning material and
process requirements. To date, the Company has implemented the initial
phase of this program with respect to the sourcing of lubricants, oils
and machine shop and fabricating services.
. The Company has undertaken several projects that are anticipated to
reduce costs of production, including an upgrade of the turbo blowers on
its blast furnaces, which will reduce the Company's energy requirements.
The Company also has implemented a new scrap management program which is
expected to allow for the use of lower cost scrap in the basic oxygen
process.
. The Company is currently conducting feasibility studies regarding the
installation of PCI. PCI is designed to inject coal into the blast
furnace, thereby reducing the Company's coke consumption.
Improve Product Mix. The Company's strategy emphasizes the development,
production and shipment of higher value-added products which have generally
allowed the Company to realize higher margins. In 1995, high value-added
products (TMP, galvanized and other coated sheet) represented 52% of the
Company's total shipments compared to an average (weighted by tons) of
approximately 36% among the Company's integrated competitors.
The Company is seeking to further increase its market share in TMP through
increased sales to existing customers, the extension of its customer base and
international expansion. The Company has targeted markets in China, India and
South America which have a low per capita rate of can consumption compared to
the United States. As these markets continue to develop, the rate of can
consumption is expected to increase significantly. The Company is attempting
to establish relationships that will permit penetration of these markets and
plans to ship products to international markets when favorable economic and
business conditions exist.
The Company's strategy for development of its sheet business is focused on
increasing its percentage of coated products, such as galvanized products, by
capitalizing on developing specialty markets such as construction where the
Company believes that its GALFAN products have potential use in roofing and
framing applications. As part of this strategy, the Company is also making
efforts to enhance high quality end use of its products, as well as developing
the hot rolled market for heavier gauge and higher carbon applications for all
markets.
WEIRTEC, the Company's research and development center specializing in the
advancement of steel can making technology, is an integral part of the
Company's ability to expand its value-added products. WEIRTEC has been
instrumental in the development of technology for thin-walled food and
beverage containers and lids and continues to focus its efforts on the
development of technology that features the use of light gauge, high tensile
steel.
Maximize Utilization of Assets. The Company is focusing on maximizing the
utilization of certain key operating assets by (i) increasing blast furnace
hot metal production, (ii) improving throughput at its caster and cold rolling
facilities and (iii) fully utilizing excess capacity at its hot strip mill.
The Company has planned capital improvements for its blast furnaces and cold
rolling facilities that are expected to increase both quality and capacity
over current levels. The increased production at the blast furnaces will
provide for larger quantities
36
<PAGE>
of hot metal for steel making operations, while improvements, primarily at the
No. 9 Tandem Mill, will increase throughput, thus providing the ability to
produce more value-added products.
The Company's hot strip mill has excess capacity relative to the Company's
slab production. The Company has one of the few hot strip mills that is
capable of rolling both carbon and stainless steels, while meeting exacting
customer specifications. The Company currently, or has in the past, utilized
the excess capacity by purchasing slabs to meet its order book and providing
conversion services for carbon and stainless steel producers. The Company
plans to continue the development of these alternatives to provide additional
utilization of its enhanced rolling facility.
PRINCIPAL PRODUCTS AND MARKETS
The Company offers a wide range of rolled carbon steel products including
hot and cold rolled sheet steel and both hot-dipped and electrolytic
galvanized products as well as a broad line of coated steels, including tin
plate, chrome coated, and black plate, which comprise TMP. The Company's
products emphasize the narrow to medium widths, up to 48^ wide, reflective of
its rolling and finishing equipment, and cover a broad range of gauges,
finishes and performance specifications. The Company has developed significant
expertise in filling orders with demanding specifications.
The percentages of the Company's total revenues derived from the sale of
sheet products, and TMP for the three months ended March 31, 1996 and for each
fiscal year in the five-year period ended December 31, 1995 are shown in the
following table. Total revenues include the sale of secondary products,
principally those products not meeting prime specifications. Revenues from the
sale of semifinished products have been combined with sheet products.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------ ------------------------------
1996 1995 1994(1) 1993 1992 1991
------------ ---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sheet products.................... 59% 64% 70% 54% 48% 46%
TMP............................... 41 36 30 46 52 54
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
=== === === === === ===
- --------
(1) The percentage increase during 1994 in Sheet Product revenues versus TMP
revenues compared to the trend in prior years resulted from strong market
demand for the Company's Sheet Products and the outage of the No. 9
Tandem Mill from April 1994 to October 1994. See "--Production and
Shipments" herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The following table shows the percentage of total net tons of steel products
shipped by the Company to each of its principal markets for the three months
ended March 31, 1996 and for each fiscal year in the five-year period ended
December 31, 1995.
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------ ------------------------------
1996 1995 1994 1993 1992 1991
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service Centers and Sheet and
Strip Converters................. 49% 43% 45% 30% 24% 21%
Food and Beverage................. 28 25 25 37 41 44
Pipe and Tube..................... 5 7 6 12 11 9
Construction...................... 8 9 13 9 8 7
Consumer Durables................. 4 3 4 4 6 8
Exports........................... 2 9 -- 1 3 1
Other............................. 4 4 7 7 7 10
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
=== === === === === ===
</TABLE>
37
<PAGE>
A substantial portion of the Company's revenues are derived from long-time
customers, although the Company actively seeks new customers and new markets
for its products. A large share of the Company's sheet and TMP products are
shipped to customers located in the Eastern and Midwestern portion of the
United States. The Company plans to ship products to international markets
when favorable economic and business conditions exist. The Company's products
are sold through salaried Company employees who operate from 7 district sales
offices.
Trade orders on hand for the Company's products at March 31, 1996 and
December 31, 1995, 1994 and 1993 amounted to approximately 697, 418, 494 and
449 thousand tons, respectively. Substantially all orders on hand at any time
are expected to be filled within a 12 month period. Since the Company produces
steel in response to orders primarily of established grades and
specifications, resulting in short order processing time and relatively rapid
inventory turnover, it does not believe that order backlog is material to its
business.
Sheet Products. Hot rolled products are sold directly from the hot strip
mill as "hot bands," or are further processed using hydrochloric acid to
remove surface scale and are sold as "hot rolled pickled." Hot rolled sheet is
used for unexposed parts in machinery, construction products and other durable
goods. Most of the Company's sales of hot rolled products have been to steel
service centers, pipe and tube manufacturers and converters. In 1995, the
Company shipped 1,112 thousand tons of hot rolled products, which accounted
for 28.9% of its total revenues.
Cold rolled sheet requires further processing including additional rolling,
annealing and tempering to enhance ductility and surface characteristics. Cold
rolled sheet is used by the construction, steel service center, commercial
equipment and container industries, primarily for exposed parts where
appearance and surface quality are important considerations. In 1995, the
Company shipped 188 thousand tons of cold rolled sheet, which accounted for
6.8% of its total revenues.
Galvanized hot-dipped and electrolytic sheet is coated primarily with zinc
compounds to provide extended anti-corrosive properties. Galvanized products
are sold to the electrical, construction, automotive, container, appliance and
steel service center markets. In 1995, the Company shipped 655 thousand tons
of galvanized products, which accounted for 28.3% of total revenues.
The Company generally obtains higher profit margins on its sheet products
that require more extensive processing.
The following table, based on information from the AISI, shows the Company's
historical share of the domestic sheet products market for the three months
ended March 31, 1996 and for each fiscal year in the five-year period ended
December 31, 1995.
SHEET PRODUCTS
HISTORICAL MARKET SHARE
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------ --------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------ ------ ------ ------ ------
(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C> <C>
Industry shipments......... 12,429 47,845 47,217 41,616 38,099 35,590
Shipments(1)............... 490 1,955 1,991 1,536 1,212 1,082
Market share............... 3.9% 4.1% 4.2% 3.7% 3.2% 3.0%
</TABLE>
- --------
(1) Includes secondary products.
While the Company's presence in the overall sheet products market is
limited, the Company has concentrated on developing offerings of more highly
processed products and production capability to provide the coil sizes favored
by most of its customers. The Company's strategy for development of its sheet
business is focused on increasing its percentage of coated products, such as
galvanized, while capitalizing on developing specialty markets such as
construction where the Company believes that its GALFAN products have
potential in
38
<PAGE>
roofing and framing applications. As part of this strategy, the Company is
also making efforts to enhance high quality end use of its products marketed
through steel service centers, as well as developing the hot rolled market for
heavier gauge and higher carbon applications for all markets.
TMP. The Company has enjoyed substantial market share and a widely held
reputation as a high quality producer of TMP, which comprise a wide variety of
light gauge coated steels. Tin plate and black plate products are sold under
the Company name and under such registered trademarks as WEIRITE and WEIRLITE.
In addition to tin plate and black plate, the Company produces electrolytic
chromium coated steel under the registered trademark WEIRCHROME.
The Company is one of the largest domestic producers of TMP. During the
first quarter of 1996, the Company's market share of TMP was approximately
22%, an increase from the 19% and 15% market share held in 1995 and 1994,
respectively. Prior to 1994, the Company's market share of TMP was
consistently greater than 20%. However, the outage of the No. 9 Tandem Mill in
April 1994 reduced the Company's TMP shipments significantly in the second
half of 1994. During 1995, the Company began to regain its TMP market share
and achieved a more traditional product mix, as it resumed normal operations
following the rebuild of the No. 9 Tandem Mill in the first quarter of 1995.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "--Production and Shipments." TMP shipments on an industry-
wide basis have remained relatively steady in recent years even as plastic,
aluminum, composites and other materials have competed for potential growth in
some applications. The TMP market is now primarily directed at food, juices
and general line cans. The majority of the Company's TMP sales have been to
can manufacturing and packaging companies, a substantial amount of whose
annual requirements are established in advance. This market is characterized
by a relatively low number of manufacturers. During 1995, shipments to ten
major can manufacturers accounted for approximately 74% of the Company's TMP
sales and its five largest TMP customers accounted for 19% of total revenues.
The balance of the TMP is sold to other can manufacturers, manufacturers of
caps and closures and specialty products ranging from film cartridges,
lighting fixtures and battery jackets to cookie sheets and curtain rods. As a
result of more predictable sales patterns for TMP, the Company is able to
determine in advance a significant portion of its production requirements,
allowing it to operate its production facilities more efficiently and adjust
its marketing and production efforts for other products. Historically, the
greater predictability of the TMP market and its relative pricing stability
have served to cushion the Company against greater price volatility in the
sheet product market.
The following table, based on information from the AISI, shows the Company's
historical share of the domestic TMP market for the three months ended March
31, 1996 and for each fiscal year in the five-year period ended December 31,
1995.
TMP
HISTORICAL MARKET SHARE
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ---------------------------------
1996 1995 1994 1993 1992 1991
------------ ----- ----- ----- ----- -----
(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C> <C>
Industry shipments.............. 996 3,942 4,137 4,123 3,927 4,040
Shipments(l).................... 222 763 615 895 890 857
Market share.................... 22% 19% 15% 22% 23% 21%
</TABLE>
- --------
(1) Includes secondary products
The Company has the capacity to produce sufficient quantities of "clean"
steel (steel with fewer impurities) to fill anticipated TMP orders for the
near term. The Company's facilities and expertise also allow it to produce the
lightest gauges of tin plate, enhancing the manufacturing efficiencies of the
Company's customers and promoting the use of its steel in leading edge
technology products such as thin-walled containers.
39
<PAGE>
The Company has been a leading innovator in the development of can making
technology through its WEIRTEC research and development center. The Company
engages in end product research and development and provides support services
to its customers. The Company believes these services have been of significant
assistance, particularly to its TMP customers, and promote the consumption of
the Company's products. See "--Research and Development."
A Company-owned 1.1 million square foot finished products warehouse with
storage and staging areas for TMP is located near the Company's mill to
facilitate "just in time" production and delivery to eight of the Company's
major customers which are located in attached, or nearby, manufacturing
facilities. As steel coils are needed by customers' operations, they are moved
from the adjoining central storage areas and loaded directly on to customers'
production lines. This arrangement provides reductions in transportation costs
for the Company and its customers.
PRODUCTION AND SHIPMENTS
In 1991, after three years of approximately 100 million tons of raw steel
production per year, the domestic steel industry's raw steel production fell
to 87.3 million tons and shipments declined to 78.9 million tons. However,
starting in December 1991 and continuing through 1995, the steel industry
experienced a rebound in both production and shipments. Similarly, capacity
utilization, which was 74% in 1991, increased to 93% in 1995. Industry raw
steel production for 1995 was up approximately 5% to 102.7 million tons
compared to 1994, while shipments increased by approximately 2% to 97.5
million tons. The high levels of production have continued through the first
quarter of 1996 for both the Company and the domestic steel industry.
In 1995, the Company produced 2.8 million tons of raw steel and shipped 2.7
million tons of finished and semi-finished steel products. Although production
and shipment levels were slightly higher for 1995 as compared to 1994, the
Company's finished product mix in 1995 included higher levels of TMP, as the
rebuilt No. 9 Tandem Mill was brought on line. The following table sets forth
annual production capability, utilization rates and shipment information for
the Company and the domestic steel industry (as reported by the AISI) for the
three months ended March 31, 1996 and for each fiscal year in the five-year
period ended December 31, 1995.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------------
1996 1995 1994 1993 1992 1991
------------ ----- ----- ----- ----- -----
(IN MILLIONS OF TONS)
<S> <C> <C> <C> <C> <C> <C>
Company:
Raw steel production....... 0.7 2.8 2.7 2.7 2.5 2.3
Capacity................... 0.8 3.0 3.0 3.0 3.0(1) 3.4
Utilization................ 94% 95% 91% 91% 83% 68%
Shipments.................. 0.7 2.7 2.6 2.4 2.1 1.9
Shipments as a percentage
of industry total......... 2.8% 2.8% 2.7% 2.7% 2.6% 2.4%
Industry:
Raw steel production....... 26.0 102.7 97.9 96.1 91.6 87.9
Capacity................... 28.0 110.4 108.2 109.9 113.1 117.6
Utilization................ 93% 93% 91% 87% 81% 74%
Shipments.................. 24.9 97.5 95.3 88.4 82.3 78.9
</TABLE>
- --------
(1) The reduction in 1992 reflects the discontinuation of teemed slab
production.
STEELMAKING PROCESS
In primary steelmaking, iron ore pellets, iron ore, coke, limestone and
other raw materials are consumed in blast furnaces to produce molten iron or
"hot metal." The Company then converts the hot metal into raw or liquid steel
through its basic oxygen furnaces where impurities are removed, recyclable
scrap is added and metallurgy for end use is determined on a batch by batch
basis. The Company's basic oxygen process shop
40
<PAGE>
("BOP") is one of the largest in North America, employing two vessels, each
with a steelmaking capacity of 360 tons per heat. Liquid steel from the BOP is
then formed into slabs through the process of continuous casting. The Company
operates a multi-strand continuous caster, rebuilt in 1990, which allows the
Company to cast 100% of the steel it produces. The slabs are then reheated,
reduced and finished by extensive rolling, shaping, tempering and, in many
cases, by the application of plating or coating. Finished products are
normally shipped to customers in the form of coils. The Company believes that
its hot rolling mill, with two walking beam reheat furnaces, reversing rougher
and millstand drive and control improvements, is a world-class facility that
greatly enhances the Company's competitive capabilities. In addition, the
Company has linked its steelmaking and rolling equipment with computer-control
systems and is in the process of installing an integrated manufacturing
control system to coordinate production and sales activities.
The following chart shows the configuration of the Company's major
production facilities:
[Description for EDGAR: chart showing the Company's major production facilities]
RAW MATERIALS
Unlike many of its larger competitors, the Company does not own or
participate in the ownership of raw material mining reserves from which it can
draw its production requirements. As a result, the Company must buy these
materials on the open market.
In October 1991, the Company entered into a contract with a subsidiary of
Cleveland-Cliffs Inc. ("Cliffs") to purchase a substantial part of the
Company's standard and flux grade iron ore pellet requirements through 2005.
The contract provides for a minimum tonnage of pellets to be supplied based on
the production capacity
41
<PAGE>
of the mining source during the contract periods, and for additional tonnages
of pellets in specified circumstances. Purchase prices under the contract
generally depend upon the product costs of one of the mines.
The Company obtains the balance of its iron ore pellets and limestone
requirements, in most cases, from multiple sources with the variable factors
being price and quality rather than availability of supply.
The Company, unlike a number of its larger integrated competitors, does not
have its own coke making facilities. In July 1993, the Company entered into an
agreement with USX Corporation to purchase blast furnace coke. The agreement,
which expires in September 1996, provides for tonnages of 750,000 per calendar
year through 1996, or the actual annual requirements of the Company if less
than the stated amount. The price is to be the prevailing market price
(subject to a ceiling and floor) for blast furnace coke determined each
October prior to the delivery year. As a secondary coke supply, the Company
also entered into an agreement with another coke producer which runs through
December 1996. The Company, like other steelmakers, has utilized or is
planning to install technologies calculated to achieve some reduction in the
consumption of coke in blast furnace operations. The Company is actively
pursuing future long term sources of coke, both domestically and abroad, and
believes that it will be successful in obtaining coke necessary for its
anticipated operations. However, if coke making capacity available to the
industry continues to decline, future coke prices may be subject to
significant escalation. The Company is engaged in negotiations with USX
Corporation to extend its current contract; however, there can be no assurance
that the Company will be able to extend the contract or that alternative
sources of supply will be available to the Company at all or on as favorable
terms.
The Company utilizes scrap in its steelmaking process. Scrap steel is
available from a number of sources at prevailing market prices.
The Company's requirements for slabs have from time to time exceeded the
production capacity of the Company's caster and the Company has purchased and
may continue to purchase slabs from other sources in order to meet the demand
for its products and to maximize the overall production efficiency of its
entire operations. At the present time, the Company expects to be able to
purchase slabs as and when needed.
The primary sources of energy used by the Company in its steel manufacturing
process are natural gas, oil, oxygen and electricity. In recent years, the
Company has entered into natural gas purchase contracts with gas suppliers and
transportation contracts with transmission companies to reduce prices paid for
natural gas. The Company generates a significant amount of electricity and
steam for processing operations from a mixture of excess blast furnace gas and
natural fuels. The Company recently entered into a 15 year contract for the
supply of oxygen to its steelmaking facilities. This new agreement
significantly reduces the Company's oxygen supply costs. The Company
continually attempts to conserve and reduce the consumption of energy in its
steelmaking operations. A number of the Company's facilities have alternate
fuel burning capability. A substantial increase in the Company's energy costs
or a shortage in the availability of its sources could have an adverse effect
on the Company.
Management believes that the Company's long-term raw materials contracts are
generally on competitive terms.
COMPETITION AND OTHER INDUSTRY FACTORS
The domestic steel industry is a cyclical industry with intense competition
among producers. Manufacturers of products other than steel, including
plastics, aluminum, cardboard, ceramics and glass, have made substantial
competitive inroads into traditional steel markets. During recessionary
periods, the industry's high level of production capacity relative to demand
levels has resulted in the reduction of selling prices across a broad range of
products.
42
<PAGE>
Integrated steelmakers also face increased competition from mini-mills.
Mini-mills are efficient, low-cost producers that generally produce steel by
melting scrap in electric furnaces, utilize new technologies, have lower
employment costs and target regional markets. Mini-mills historically have
produced lower profit margin products, such as bars, rods, wire and other
commodity-type steel products not produced by the Company. Recently developed
thin cast technology has allowed mini-mills to enter certain of the sheet
markets supplied by integrated producers. Two such facilities have been placed
in operation and are competing in the hot rolled, cold rolled and galvanized
marketplace, and other entities have announced plans or are in the process of
starting similar facilities. In other instances, mini-mills seeking to capture
segments of the flat rolled market have located facilities where they are
geographically advantaged compared to their integrated competition. In
general, prices for scrap, on which mini-mills are more dependent than
integrated steel producers, have increased the operating costs of mini-mills.
In response, some mini-mills have begun to develop scrap substitution iron-
making technologies. Mini-mills generally continue to have a cost advantage
over integrated steel producers.
In response to increased competition, domestic steel producers have invested
heavily in new plant and equipment, which has improved efficiency and
increased productivity and quality. Many of these improvements are in active
service and, together with the achievement of other production efficiencies,
such as manning and other work rule changes, have tended to lower costs. In
addition, it is estimated that approximately 10 to 14 million tons of new
steelmaking capacity (primarily mini-mills) will be in place within the next
three years, further threatening the viability of less efficient facilities.
Domestic producers face competition from foreign producers over a broad
range of products. Many foreign steel producers are owned, controlled or
subsidized by their governments, making these producers subject to influence
by political and economic policy considerations as well as the prevailing
market conditions. Voluntary restraint arrangements covering 17 steel
exporting nations and the European Community, which limited steel imports into
the United States market, expired on March 31, 1992. A replacement structure
to reduce subsidies and other unfair trade practices by foreign producers has
not emerged. In 1992, a number of domestic steel producers filed extensive
unfair trade cases covering imports of flat rolled carbon steel products.
These cases sought the imposition of antidumping and countervailing duties on
products alleged to have caused injury to domestic producers. In July 1993,
the U.S. International Trade Commission (the "ITC") ruled antidumping and/or
countervailing duties should be imposed on imports of galvanized sheet and
plate from a number of countries representing the majority of imports, and on
cold-rolled sheet from three countries accounting for approximately one-third
of total imports. No duties were imposed on hot-rolled sheet imports. A number
of these cases were appealed and the rulings made thus far by the Court of
International Trade have upheld the ITC decisions. However, the Company
believes that the decisions have not significantly increased the duties for
those imports to levels where they have served as effective competitive
barriers. As a percentage of domestic consumption, steel imports excluding
semifinished products (primarily slabs), were at approximately 21%, 24% and
17% in 1995, 1994 and 1993, respectively.
The Company's primary competitors in sheet products consist of most domestic
and international integrated steel producers and mini-mills. The Company's
primary TMP competitors in recent years have been USX Corporation, LTV
Corporation, Bethlehem Steel Corporation, National Steel Corporation and USS-
POSCO Industries. The Company experiences strong competition in all its
principal markets with respect to price, service and quality.
RESEARCH AND DEVELOPMENT
The Company engages in research and development for the improvement of
existing products and processes, and the development of new products and
product applications. During 1995, 1994 and 1993, the Company spent
approximately $3.2 million, $6.3 million and $5.4 million, respectively, for
research and development activities. WEIRTEC, the Company's research and
development center specializing in the advancement of steel can making
technology, maintains research and prototype steel packaging manufacturing
facilities, analytical laboratory facilities and computer simulation systems
in Weirton, West Virginia. In recent years, WEIRTEC has played a central role
in the development of thin-wall, two piece beverage can technology and other
products seeking to
43
<PAGE>
capitalize on the Company's production expertise, particularly in coated
products. WEIRTEC is currently conducting research projects on clean steel
production techniques, polymer to steel lamination and the application of
galvanized steel products in the residential and commercial construction
industry. See "--Principal Products and Markets." WEIRTEC assists customers in
the development of new products and collaborates with the AISI in the
development of new product lines and production techniques that will increase
the use and quality of steel products. The Company believes that the
scientists, engineers, technicians and the facilities of WEIRTEC enhance the
Company's technical excellence, product quality and customer service.
The Company owns a number of patents that relate to a wide variety of
products and applications and steel manufacturing processes, has pending a
number of patent applications, and has access to other technology through
agreements with other companies. The Company believes that none of its patents
or licenses, which expire from time to time, or any group of patents or
licenses relating to a particular product or process, is of material
importance in its overall business. The Company also owns a number of
registered trademarks for its products.
ENVIRONMENTAL CONTROL
Compliance. The Company is subject to extensive federal, state and local
environmental laws and regulations, including those governing discharges into
the air and water, as well as the handling and disposal of solid and hazardous
wastes. The Company is also subject to federal and state requirements
governing the remediation of environmental contamination associated with past
releases of hazardous substances. In recent years, environmental control
regulations have been marked by increasingly strict compliance standards.
Governmental authorities have the power to enforce compliance with these
requirements, and violators may be subject to civil or criminal penalties,
injunctions or both. Third parties also may have the right to sue to enforce
compliance.
Capital expenditures for environmental control facilities were approximately
$3.9 million in 1995, $3.2 million in 1994 and $1.0 million in 1993. For 1996
and 1997, the Company has budgeted approximately $11.7 million and $5.0
million, respectively, in capital expenditures for environmental control
facilities. Given the nature of the steelmaking industry, it can be expected
that substantial additional expenditures will be required from time to time to
permit the Company to remain in compliance with environmental regulations. In
addition, new or expanded environmental requirements could increase the
Company's environmental costs in the future. Since the effects of future
requirements are not presently determinable, it is not possible to predict the
ultimate future cost of compliance. The Company, like its competitors, does
not expect to be able to pass on to customers cost increases specifically
resulting from compliance with environmental regulations.
In the past, the Company has resolved environmental compliance issues
through consent decrees with certain environmental authorities, pursuant to
which the Company has implemented corrective actions and paid fines and
penalties relating to violations, or alleged violations, of environmental laws
and regulations. The Company's near-term focus for environmental compliance
centers on procedures to achieve ambient air quality and water pollution
control standards. In addition to improving its monitoring and study programs,
the Company anticipates taking affirmative action to reduce sulfur dioxide and
particulate emissions primarily by changing operating policies and by
improving the quality of maintenance procedures. In an effort to improve its
water pollution discharge compliance performance, the Company initiated in
1993 an around-the-clock environmental control supervisory function and is
seeking to create a mobile maintenance group dedicated to environmentally safe
operation.
Waste Sites and Proceedings. Under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), and similar
state statutes, the EPA and state regulators may seek to impose joint and
several liability on waste generators, owners, operators and others with
respect to contaminated sites as potentially responsible parties ("PRPs"),
regardless of fault or the legality of the original disposal activity. The
Company is entitled to indemnification from National for certain environmental
liabilities, including those relating to CERCLA and similar statutes, as more
fully described below. The Company believes
44
<PAGE>
that National has provided notices to the EPA regarding a number of sites as
required by CERCLA, some of which had been used by the Division prior to its
sale to the Company or the Company, and two of which are located on property
owned by the Company. The Company understands that National has been involved,
at the request of the EPA or state agencies, in voluntary remedial activities
with respect to a number of such sites. Insofar as any of those sites involve
liabilities under CERCLA or other environmental laws or regulations for prior
Division activities, the Company believes it is indemnified by National.
The Company and/or its predecessors have been conducting steel manufacturing
and related operations at various locations, including the Company's current
plant site, for over eighty years. Although the Company and its predecessors
utilized operating practices that were standard in the industry at the time,
hazardous substances may have been released on or under these sites. In
addition, the Company and its predecessors have disposed of solid and
hazardous wastes at various off-site waste disposal sites, some at which
hazardous substances may have been released. Pursuant to CERCLA and similar
state laws, the Company (although to the best of its knowledge it has not
disposed of hazardous substances at such sites) may be required to remediate
contamination at some of these sites or participate in the sharing of such
costs as deemed necessary. The Company does not have sufficient information to
estimate its potential liability in connection with any potential future
remediation. However, the Company believes that if any such remediation is
required, it will occur over an extended period of time. In addition, the
Company believes that many of these sites may also be subject to indemnity
obligations by National to the Company.
In March 1988 and September 1989, respectively, the Pennsylvania Department
of Environmental Resources ("PADER") and/or the EPA notified the Company that
it was considered to be among a number of PRPs for the dumping of wastes at
the Municipal and Industrial Disposal Company site near Elizabeth,
Pennsylvania and at the Tex Tin site near Texas City, Texas, and requested the
Company's voluntary participation in certain remedial actions. The Company's
records do not indicate any involvement with either site by the Company. The
Company believes that National would be responsible for any remedial actions
if there had been prior involvement by the Division. The Company has given all
required notices to National for the purpose of facilitating its response to
this matter.
During February 1991, the Company received notification under CERCLA that it
may incur or may have incurred a liability as a PRP with respect to a drum
site located near Avenue H in Weirton, West Virginia. According to Company
records, the drum site is on property owned, but never used, by the Company.
Following consultation with appropriate agencies, the Company initiated a
voluntary remediation program at the site, which program, consisted primarily
of the disposal of the drums. The drum remediation proceeded pursuant to an
EPA approved work plan. On December 14, 1993, the Company received written
approval from the EPA that all of the requirements of the work plan had been
satisfactorily completed. There can be no assurance that the EPA will not
require additional monitoring or remediation of the site. The Company believes
that National, under its indemnity agreements with the Company, is responsible
for any environmental liabilities involving the site, including reimbursement
for the total cost of the remediation program. National has reimbursed the
Company for the $761,000 spent by the Company to date on the remediation
program at this site. However, in June 1994, the Company received an invoice
from the EPA seeking payment for oversight and response costs incurred by the
EPA with regard to this site in the approximate amount of $12,000. The Company
believes that this sum represents the final expenditure related to this
remediation program and expects to be reimbursed by National for this sum.
In May 1992, the Company received notice from the PADER that it was
considering a closure plan and post-closure plan for a solid waste landfill
facility in Hanover Township, Pennsylvania (the "Hanover Site") operated by
Starvaggi Industries Inc. From at least the 1960's through mid-1983, National
and, after mid-1983, the Division and the Company disposed of solid wastes at
the facility. The Company believes that although it disposed of various
materials which were residual to the steelmaking industry, such materials were
not classified as hazardous substances under applicable law. At this time,
definitive closure plans and post-closure care plans have not been adopted.
National's contractually assumed reimbursement obligation to the Company with
respect
45
<PAGE>
to the closure of this facility is limited to $1.0 million. Although there can
be no assurances, the Company does not anticipate that the costs for site
closure will exceed the limitation on National's liability.
West Virginia Division of Environmental Protection. In January 1993, the
Company received a notification from the West Virginia Division of
Environmental Protection (the "DEP") that four ground water monitoring wells
situated at the Division's former coke making facilities on Brown's Island in
Hancock County, West Virginia, currently owned but never operated by the
Company, tested in excess of maximum levels established by the EPA and DEP for
certain contaminants. The DEP requested the Company to supply it with
additional data regarding the site and stated that additional investigation,
and possible remediation would be required. The Company and the DEP are
discussing the implementation of an enhanced ground water monitoring program
for the area. The Company expects that any additional monitoring or
remediation which may be required will be discussed in the multimedia
enforcement process described below. The Company has given notice to National
of the DEP communication. Although the Company believes that National will be
responsible for any required remediation National has not yet reimbursed the
Company for approximately $210,000 spent to date by the Company for
remediation activities to remediate certain sediments.
In October 1992, the Company entered into a consent order with the DEP that
provided for administrative fines and penalties to be assessed against the
Company for asserted spills of various substances under provisions of the
federal Clean Water Act administered by the DEP. The consent order required
the payment of an administrative settlement in the amount of $99,000 as well
as the application of $40,000 to a "best management practices" plan to reduce
or eliminate the frequency of spills at the tin mill, which plan is being
implemented. The consent order also provides for stipulated penalties upon the
occurrence of future spills. The Company is working to improve its operating
practices to minimize the occurrence of spills.
Potential Multimedia Enforcement. In December 1993, the Company was informed
by the DEP that the EPA was considering initiating a "multimedia" enforcement
action against the Company. Multimedia actions involve coordinated enforcement
proceedings related to water, air and waste-related issues stemming from a
number of federal and state statutes and rules. In recent years, such actions
have resulted in penalties and other commitments being obtained from many of
the Company's competitors.
In March 1996, the EPA advised the Company that it had identified a number
of enforcement issues pertaining to waste water discharges, air emissions and
waste handling operations by the Company. The EPA proposed that the parties
attempt to resolve these issues during a six-month negotiation period. The EPA
indicated that it would expect a negotiated settlement to include necessary
corrective steps to address noncompliance issues, remediation programs to
address contamination at solid waste management units and a civil penalty.
However, the EPA also indicated that consideration would be given to
offsetting any cash penalty through the Company's performance of supplemental
environmental projects. If a negotiated settlement could not be reached by
September 15, 1996, the EPA indicated that it would commence a civil
enforcement action in federal court. The Company agreed to proceed with the
negotiation process, which began on March 14, 1996. The Company cannot predict
the results of its negotiations with the EPA, including whether an agreement
can be reached, the cost of any required compliance, or the extent of any
penalty. Likewise, the Company cannot predict whether the EPA will initiate
enforcement proceedings or their outcome. Based on its review of the matters
involved and discussions to date with representatives of the EPA, while no
assurance can be given, the Company does not believe that any fines, penalties
or costs to remediate would have a material effect on the Company's financial
position or results of operations. However, it is expected that related
capital expenditure projects and required changes in operating practices will
increase future operating costs, which may have a significant effect on future
results of operations.
Ambient Air Violations. In October 1995, the Company received a Notice of
Violation from the EPA alleging violations of certain West Virginia
regulations relating to air emissions at four of the Company's facilities,
which may result in fines and penalties. The alleged violations are being
discussed in the multimedia negotiation process. The Company has undertaken
certain capital projects and anticipates implementing operational changes
designed to enhance air emission control at these facilities.
46
<PAGE>
Water Discharge Permitting. In June 1994, the DEP issued a renewal National
Pollutant Discharge Elimination System ("NPDES") permit to the Company for its
water discharges. The renewal NPDES permit contained a number of new
requirements, including stringent "water quality-based" effluent limitations
based on West Virginia regulation (the "Regulation"). The DEP has given the
Company until June 30, 1998 to comply with the renewal permit. The Company
appealed the renewal permit to the West Virginia Water Resources Board and is
currently conducting settlement discussions with state and EPA regulators
relating to the limitations contained in the renewal permit. The Company
cannot predict the outcome of these negotiations. However, the Company
believes that it will not be able to ensure consistent compliance with certain
limitations contained in the permit as issued without significant treatment
technology and/or process changes. The Company cannot estimate the cost of
installing such technology or effecting such changes, if necessary.
Additionally, in March 1996, the West Virginia Legislature enacted certain
changes in the West Virginia regulations that served as a basis for portions
of the renewal permit and as a result of these changes, the Company believes
certain effluent limitations contained in the renewal permit will be
recalculated. Although there can be no assurances, the Company believes that
it can meet these limitations using its existing wastewater treatment
facilities. However, if the appeal is unsuccessful and/or the new regulation
does not result in recalculated effluent standards, the Company believes it
will not be able to ensure consistent compliance with certain provisions
contained in the permit without significant treatment technology and/or
process changes, if necessary. The Company cannot estimate the cost of
installing such technology or effecting such changes, if necessary, but
believes that such costs could be material.
To date, the Company has paid stipulated penalties to the DEP totaling
$184,000 pursuant to the terms of the 1992 consent order between the Company
and the DEP.
Waste Handling and Underground Storage Tank Notice of Violation. In July
1994, the DEP issued notices of violation and a draft consent order wherein it
alleged various violations under the Resource Conservation and Recovery Act
("RCRA") and violations of underground storage tank requirements with proposed
penalties aggregating approximately $250,000. In connection with the
underground storage tank issues, the Company entered into a consent order with
the DEP, in December 1994, pursuant to which the Company paid an
administrative settlement of $40,000 and conducted a site investigation for
leaking underground storage tanks. The Company has substantially completed
remediation activities at the areas contaminated by leaking underground
storage tanks and is currently continuing groundwater monitoring and recovery
of any free phase product. The balance of the alleged RCRA violations are
being discussed in connection with the multimedia negotiation process.
Indemnification. According to the agreements by which the Company acquired
the assets of the Division from National, the Company is entitled to
indemnification from National for liabilities, including governmental and
third-party claims, arising from violations prior to the acquisition, and
National is entitled to indemnification from the Company for such matters
after the acquisition. In addition, the Company, subject to the $1.0 million
limitation applicable to the Hanover Site described above, is entitled to
reimbursement for clean-up costs related to facilities, equipment or areas
involved in the management of solid or hazardous wastes of the Division
("Waste Sites") , as long as the Waste Sites were not used by the Company
after the acquisition. Third-party liability claims relating to Waste Sites
are likewise covered by the respective indemnifications. The previously
described Hanover site is specifically subject to a $1.0 million limitation of
National's contractually assumed reimbursement obligation to the Company.
There can be no assurance that National will pay or continue to pay under
its indemnity obligations. The Company's ability to obtain future
reimbursement or indemnification relating to environmental claims from
National depends, in addition to National's continued financial viability
(including National's ability to collect
47
<PAGE>
certain insurance proceeds with respect to environmental claims), on the
nature of future claims made by the Company, certain limitations on National's
liability, whether the parties can settle outstanding differences relating to
indemnification rights and the outcome of any necessary litigation between the
Company and National regarding such issues.
EMPLOYEES
At March 31, 1996, the Company had 5,615 employees, of whom 4,337 were
engaged in the manufacture of steel products, 590 in support services, 190 in
sales and marketing activities and 498 in management and administration. In
1992, the Company implemented a program, as part of its business strategy,
that was designed to reduce its workforce primarily through retirement and
attrition. After giving effect to the most recent workforce reduction
announced in May 1996, the Company has reduced its workforce by approximately
33% since 1988.
The Company has collective bargaining agreements with the Independent
Steelworkers Union, which represents approximately 4,581 employees as of March
31, 1996 in bargaining units covering production and maintenance workers,
clerical workers, nurses; and the Independent Guard Union, which represents 48
employees. The agreements terminate on September 25, 1996. Historically, the
Company's compensation structure has placed a heavier emphasis on profit
sharing compared to other major integrated steel producers. This structure
tends to cause the wage portion of the Company's employment costs to be
relatively higher during periods of profitability and relatively lower during
periods of low earnings or losses. See "Risk Factors--Collective Bargaining
Agreements."
The Company's current labor agreements provide for the payment of bonuses in
the gross amount of $3,500 per employee, to be paid in installments over the
three year term of the contracts, but do not provide for wage increases.
During the terms of the agreements, the Company's profit sharing plan, which
covers substantially all employees, provides for participants to share in the
Company's profits each year at a rate equal to 1/3 of the Company's "adjusted
net earnings" for that year as defined under the plan, provided its net worth
exceeds $100 million. If, however, payment of the full profit sharing amount
would reduce the Company's net worth below $100 million, payments are reduced
to an amount necessary to maintain the $100 million threshold. If the
Company's net worth is in excess of $250 million, the profit sharing rate
increases to 35%. However, if payment of the full profit sharing amount would
reduce the Company's net worth below $250 million, payments at this rate would
be limited as necessary to maintain the $250 million threshold and the
remainder of the payment would be made at the 1/3 rate. For 1995, the Company
accrued profit sharing of $24.2 million, which was paid in March 1996. The
labor agreements limit the Company's exposure to increased costs of health
care while providing increased medical coverages through a managed health care
"point of service" program and a ceiling on the Company's cash basis cost of
health care for future retirees. The agreements also contain limitations on
the Company's ability to reduce its represented workforce by layoffs, with
exceptions for adverse financial, operational, and business circumstances. In
addition, the agreements provide for certain improvements in the Company's
defined benefit plan.
The Company and its unions are commencing negotiations on new collective
bargaining agreements. The Company cannot predict whether it will reach new
contracts with its represented employees prior to the expiration of the
current agreements, or the terms of such new contracts. The Company believes
that its new labor contracts should continue to emphasize cost control
features to sustain the Company's ability to withstand industry downcycles.
In March 1995, the Company filed an action in the United States District
Court for the Northern District of West Virginia entitled Weirton Steel
Corporation v. Independent Steelworkers Union under Section 301 of the Labor-
Management Relations Act of 1947, as amended. The suit alleges that the
defendant Independent Steelworkers Union and certain of its members conducted
an illegal work stoppage at the Company's tin mill in February 1995 in
violation of the collective bargaining agreement between the union and the
Company. The action seeks a court order directing the parties to utilize the
grievance resolution provisions of the bargaining
48
<PAGE>
agreement as the exclusive, proper procedure for settling differences and also
seeks compensatory damages for the Company's loss of the use of its facility
during the stoppage in such amount as the court finds proper. The action is
pending trial.
From January 1984 until June 1989, the Company was owned in its entirety by
its employees through the 1984 ESOP, in which substantially all employees were
participants. In June 1989, the 1984 ESOP completed a public offering of
common stock, resulting in the common stock being listed and traded on the New
York Stock Exchange.
Substantially all of the Company's employees participate in its two ESOPs
which owned approximately 27% of the outstanding common and approximately 98%
of the outstanding preferred shares of the Company at March 31, 1996. As of
March 31, 1996, the two ESOPs represented approximately 48% of the Company's
voting power.
PROPERTIES AND FACILITIES
The Company owns approximately 2,500 acres in the Weirton, West Virginia,
area which are devoted to the production and finishing of steel products,
research and development, storage, support services and administration. The
Company owns trackage and railroad rolling stock for materials movement, water
craft for barge docking, power generation facilities and numerous items of
heavy industrial equipment. The Company has no material leases for real
property. The Company's mill and related facilities are accessible by water,
rail and road transportation. The Company believes that its facilities are
suitable to its needs and are adequately maintained.
The Company's operating facilities include a sinter plant and four blast
furnaces; however, its current operating strategy employs a two blast furnace
configuration with an annual hot metal capacity of approximately 2.5 million
tons. One currently idled furnace is being refurbished and will replace an
operating furnace that is nearing the end of its campaign, anticipated to be
in the fourth quarter of 1996, at which time the Company will undertake a
major reline and rebuild of that furnace. Although the Company does not
anticipate operating a three blast furnace configuration in the near term,
under that operating scenario, its annual hot metal capacity could be
increased to 3.6 million tons. The Company's primary steelmaking facilities
include a two vessel BOP shop with an annual capacity of 3.0 million tons of
raw steel based on a two blast furnace operation. Primary steelmaking
facilities also include a CAS-OB facility, two RH degassers, and a four strand
continuous caster with an annual slab production capacity of up to 3.0 million
tons. The Company's downstream operations include a hot strip mill with a
design capacity of 3.8 million tons, two continuous picklers, three tandem
cold reduction mills, three hot dip galvanize lines, one electro-galvanize
line, two tin platers, one chrome plater, one bimetallic chrome/tin plating
line and various annealing, temper rolling, shearing, cleaning and edge
slitting lines, together with packaging, storage and shipping and receiving
facilities.
LEGAL PROCEEDINGS
The Company is involved as a defendant or plaintiff in various legal
proceedings relating to claims arising out of its operations in the normal
course of business. Such claims involving the Company as a defendant are
generally covered by insurance. It is management's opinion that any liability
resulting from existing litigation would not have a material effect on the
Company's business, financial position or results of operations.
49
<PAGE>
MANAGEMENT
The directors and executive officers of the Company as of March 15, 1996
were as follows:
<TABLE>
<CAPTION>
AGE AT
NAME MARCH 15, 1996 OFFICE
- ---- -------------- ------
<S> <C> <C>
Richard K. Riederer(1).. 52 President, Chief Executive Officer and
Chief Operating Officer; Director
James B. Bruhn(1)....... 55 Executive Vice President--Commercial;
Director
Craig T. Costello(1).... 48 Executive Vice President--Manufacturing;
Director
David L. Robertson...... 52 Executive Vice President--Human Resources
and Corporate Law
Earl E. Davis, Jr. ..... 47 Vice President--Finance and Chief Financial
Officer
Thomas W. Evans......... 59 Vice President--Materials Management
David M. Gould.......... 57 Vice President--Economic Development
William R. Kiefer....... 46 Vice President--Law and Secretary
Narendra M. Pathipati... 38 Vice President--Corporate Development and
Strategy
John H. Walker.......... 38 Vice President--Operations
Mac S. White, Jr. ...... 63 Vice President--Engineering
Mark E. Kaplan.......... 34 Controller
Richard E. Burt(2)...... 49 Chairman of the Board of Directors
Robert J. 39
D'Anniballe(3)......... Director
Michael Bozic(2)........ 55 Director
Mark G. Glyptis(3)...... 44 Director
Phillip A. Karber(3).... 49 Director
Joseph J. Nowak(4)...... 64 Director
Robert S. Reitman(2).... 62 Director
Richard F. Schubert(2).. 59 Director
David I.J. Wang(2)...... 63 Director
Ronald C. Whitaker(2)... 48 Director
Thomas R. Sturges(2).... 51 Director
</TABLE>
- --------
(1) Management Director
(2) Independent Director
(3) Union Director
(4) ESOP Director
Unless otherwise indicated below, the directors and executive officers of
the Company have held their respective positions as officers and/or directors
of the Company for at least the last five years.
Richard K. Riederer has been President and Chief Operating Officer since
January 1995 and Chief Executive Officer since November 1995. From September
1994 to January 1995, he was Executive Vice President--Finance and Chief
Financial Officer. Prior to that, he served as Vice President and Chief
Financial Officer beginning in January 1989. He has been a director of the
Company since October 1993.
50
<PAGE>
James B. Bruhn has been Executive Vice President--Commercial since September
1994. He joined the Company as Vice President--Sales and Marketing--Tin Mill
Products in July 1987, and was named Vice President--Tin Mill Products
Business in November 1992. He has been a director of the Company since May
1990.
Craig T. Costello has been Executive Vice President--Manufacturing since
September 1994. From October 1993 to September 1994, he served as Vice
President--Operations. Mr. Costello served as General Manager--Operations from
1988 to 1993. Mr. Costello has been a director of the Company since 1996.
David L. Robertson has served as Executive Vice President--Human Resources
and Corporate Law since March 15, 1996. Prior to that, Mr. Robertson was a
senior partner in the law firm of Volk, Robertson & Hellerstedt.
Earl E. Davis, Jr. has served as Vice President--Finance and Chief Financial
Officer since July 1995. From May 1994 to July 1995, he served as Controller.
From August 1991 to April 1994, he served as Assistant Controller. Prior to
August 1991, Mr. Davis was Director of Internal Audit.
Thomas W. Evans has been Vice President--Materials Management since February
1988.
David M. Gould was named Vice President--Economic Development in September
1994. Mr. Gould previously was Vice President--Sales and Marketing--Sheet
Products from 1983 until September 1994.
William R. Kiefer has been Vice President--Law and Secretary since May 1990.
From March 1988 to May 1990, he served as Director--Legal Affairs and
Secretary.
Narendra M. Pathipati has served as Vice President--Corporate Development
and Strategy since July 1995. Mr. Pathipati served as Treasurer of the Company
from August 1991 to July 1995. From February 1990 to July 1991, he served as
Director of Financial Planning and Analysis.
John H. Walker has been Vice President--Operations since July 1995. From
April 1994 to July 1995, Mr. Walker was General Manager--Operations. Mr.
Walker was Director--Operations Planning from March 1990 to April 1994.
Mac S. White, Jr. has been Vice President--Engineering of the Company since
May 1992. From April 1989 to April 1992, Mr. White was Director of Engineering
for the Company.
Mark E. Kaplan has served as Controller since September 1995. Prior to that,
Mr. Kaplan was employed by Arthur Andersen LLP, where he held a number of
positions, most recently as Senior Manager in the Audit Department.
Richard R. Burt has been Chairman of the Board of the Company since April 1,
1996. He has also been Chairman of International Equity Partners, LLP, an
international financial services firm since 1994. Mr. Burt has also held the
following positions: Partner, McKinsey and Company from 1991 to 1994; Chief
Negotiator for the United States in the Strategic Arms Reduction Talks (START)
from 1989 to 1991; Director of the Lauder Institute of the Wharton School of
Business, Hollinger International Inc. and The Mitchell Hutchins Funds managed
by PaineWebber, Inc.; Chairman of the Board of Video Lottery Technologies,
Inc.; and a Member of the International Advisory Council of the Bank of
Montreal.
Robert J. D'Anniballe, Jr. is a partner in the law firm of Alpert,
D'Anniballe & Visnic, which serves as general counsel to the ISU.
Michael Bozic has been Chairman, Chief Executive Officer and Director of
Levitz Furniture Corporation since 1995. He was former President and Chief
Executive Officer and director of Hills Stores Company from 1991 to 1995. Mr.
Bozic is also a director of EagleMark Financial Services, Inc., Dean Witter
InterCapital, Inc. and the United Negro College Fund. He has been a director
of the Company since 1994.
51
<PAGE>
Mark G. Glyptis has been President of the ISU since August 1991. He has been
an employee of the Company since 1973.
Phillip A. Karber has been a corporate Vice President of BDM International,
Inc., a firm that provides information technology services to both the public
and private sector in the United States and abroad, since 1989. He joined BDM
in 1971. During a leave of absence from BDM, Mr. Karber served as an advisor
on strategy development to the Secretary of Defense from 1981 to 1983. His
other affiliations include: director of the German American Business
Association; Washington, D.C. Metropolitan Area Y.M.C.A.; Advisory Board,
Mosher Institute; and Texas A&M University. He has been a director of the
Company since 1992.
Joseph J. Nowak is currently a director of Penn Power Company. He served as
Vice-President of Armco, Inc., a specialty steel producer, from 1992 to 1993
and as Executive Vice President of Cyclops Corporation, a specialty steel
producer, from 1988 to 1992. Mr. Novak has been a director of the Company
since 1995.
Robert S. Reitman is Chairman, President, Chief Executive Officer and
Director of the Tranzonic Companies, a manufacturer of paper and plastic
products principally for industrial use. He is also a director of Society
National Bank. Mr. Reitman has been a director of the Company since 1995.
Richard F. Schubert served as the President and Chief Executive Officer of
the Points of Light Foundation from 1990 to 1995. Mr. Schubert has been the
Chairman of the Peter F. Drucker Foundation since 1995 and also holds the
position of Chairman of BioRelease, Inc., a biotechnology firm. He is a
Director of National Alliance Business and Management Training Corporation.
David I.J. Wang is a director of U.G.I. Corporation and Americas, Inc., as
well as several privately held companies. He is a member of the Advisory
Boards at Georgia Institute of Technology and Hampton University. Mr. Wang
served as Executive Vice President and Director of International Paper Co.
from 1987 to 1991. He has been a director of the Company since 1992.
Ronald C. Whitaker has been the President and Chief Executive Officer of
EWI, Inc., a supplier of metal fabrications and prototype products for
automotive/truck/bus industries since 1995. He served as the Chairman,
President and Chief Executive Officer of Colt's Manufacturing Company from
1992 to 1995 and as President of Wheelabrator Corporation, from 1988 to 1992.
Mr. Whitaker has been a director of the Company since 1995. In 1996, EWI filed
a petition under Chapter 11 of the United States Bankruptcy Code.
Thomas R. Sturges has been Executive Vice President of The Harding Group
Inc., an investment firm, since February 1990.
The Restated Certificate provides for a Board of Directors of 14 members
divided into three classes, designated as Class I, Class II and Class III,
respectively. Each class serves a three-year term, and the terms are staggered
so that the term of one class expires at each year's annual meeting of
stockholders. At each annual meeting of stockholders, therefore, a different
class of directors is elected.
The Restated Certificate also provides for certain qualifications among the
Company's directors. Specifically, at least three members of the Board of
Directors (the "Union Directors") must be designated by the Company's primary
recognized collective bargaining agent (the "Union"), currently the ISU,
provided the Union meets certain requirements. One of the Union Directors must
be the president of the Union and the other two are designated by
certification of the executive committee of the Union. The Restated
Certificate further provides that three members of the Board of Directors (the
"Management Directors") must consist of the Chief Executive Officer of the
Company and two of the Company's employees designated by the Chief Executive
Officer. Seven directors must not be, nor ever have been, employees of the
Company or its predecessor, or the Union, and may not be affiliated with
persons having certain substantial business relationships with the Company.
One director is the "ESOP Director" who is required to be nominated by the
Board of Directors pursuant to a certification by a nominating committee
elected by the 1984 and 1989 ESOP participants.
52
<PAGE>
DESCRIPTION OF NOTES
The Exchange Notes will be issued, and the Senior Notes were issued, under
the Indenture dated July 3, 1996, between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act, as in effect on the
date of the Indenture. The Notes are subject to all such terms, and
prospective investors are referred to the Indenture and the Trust Indenture
Act for a statement of such terms.
The following statements are summaries of the material terms of the Notes
and the Indenture and do not purport to be complete. Such summaries make use
of certain terms defined in the Indenture and are qualified in their entirety
by express reference to the Indenture, a copy of which is available upon
request from the Company or the Trustee and has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part. Certain of such
defined terms are set forth below under "--Certain Definitions."
GENERAL
The Exchange Notes will bear 11 3/8% interest from and including the date
such Exchange Notes are first issued under the Indenture, payable semiannually
on July 1 and January 1 of each year, commencing January 1, 1997, to holders
of record ("Holders") at the close of business on June 15 or December 15
immediately preceding each such interest payment date. Holders whose Senior
Notes are accepted for exchange will receive accrued interest thereon to, but
not including, the date of issuance of the Exchange Notes. The Notes will be
due on July 1, 2004, and will be issued only in registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
The holders of the Notes may be entitled to liquidated damages in certain
circumstances if the Company does not meet its registration requirements with
respect to the Notes. See "Senior Notes Registration Rights."
The Notes are unsecured obligations of the Company limited to an aggregate
amount of $125 million. The Notes are senior to all subordinated indebtedness
of the Company and pari passu with all existing and future senior unsecured
indebtedness of the Company.
REDEMPTION
Optional Redemption. The Notes may not be redeemed at the option of the
Company prior to July 1, 2000. The Notes will be subject to redemption at any
time on or after July 1, 2000, at the option of the Company, in whole or in
part, at the following redemption prices (expressed as percentages of the
principal amount), plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date, if redeemed during the 12-month period beginning
July 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000........................ 105.6875%
2001........................ 102.8438%
2002 and thereafter......... 100.0000%
</TABLE>
Selection and Notice of Redemption. In the event that less than all of the
Notes are to be redeemed at any time, selection of Notes for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not listed on a national securities exchange, on a pro rata basis,
provided, however, that the Notes will be redeemed only in the amount of
$1,000 or integral multiples thereof. Notice of redemption to the Holders of
Notes to be redeemed as a whole or in part shall be given by mailing notice of
such redemption by first-class mail, postage prepaid, at least 30 days and not
more than 60 days prior to the date fixed for redemption to such Holders of
Notes at their last addresses as they shall appear upon the registry books. On
and after the redemption date, interest and Liquidated Damages (as defined
herein), if any, cease to accrue on Notes or portions thereof called for
redemption.
53
<PAGE>
Sinking Fund. There will be no sinking fund for the Notes.
CERTAIN COVENANTS
The following is a summary of certain covenants that are contained in the
Indenture. Such covenants will be applicable (unless waived or amended as
permitted by the Indenture) so long as any of the Notes are outstanding.
Limitations on Indebtedness. The Company will not, and will not permit any
Subsidiary to, create, incur, assume, become liable for or guarantee the
payment of (collectively, an "incurrence") any Indebtedness (including
Acquired Indebtedness), other than Permitted Indebtedness, or permit any
Subsidiary to issue any Preferred Stock other than Preferred Stock that is
issued to and held by the Company or a wholly owned Subsidiary of the Company
(so long as the Company or a wholly owned Subsidiary owns such Preferred
Stock); provided the Company may incur, and may permit any Subsidiary to
incur, Indebtedness (including Acquired Indebtedness) if (a) at the time of
such event and after giving effect thereto, on a pro forma basis, the ratio of
Consolidated EBITDA to Consolidated Fixed Charges for the four fiscal quarters
immediately preceding such event for which financial information is available
consistent with the Company's prior practice, taken as one period and
calculated on the assumption that such Indebtedness had been incurred on the
first day of such four-quarter period and, in the case of Acquired
Indebtedness, on the assumption that the related acquisition (whether by means
of purchase, merger or otherwise) also had occurred on such date with the
appropriate adjustments with respect to such acquisition being included in
such pro forma calculation, would have been greater than 1.75 to 1, and (b) no
Default or Event of Default shall have occurred and be continuing at the time
or as a consequence of the incurrence of such Indebtedness.
Notwithstanding the foregoing, the Company will not permit any Subsidiary to
incur Indebtedness (including Acquired Indebtedness) unless, at the time of
the incurrence of such Indebtedness and after giving effect thereto, on a pro
forma basis, without duplication, the sum of (i) the aggregate amount of
Indebtedness (including Acquired Indebtedness and Permitted Indebtedness) of
all Subsidiaries of the Company plus (ii) the aggregate amount of all
outstanding Indebtedness secured by Liens issued, assumed or guaranteed by the
Company or any Subsidiary (excluding Indebtedness secured by Permitted Liens)
plus (iii) the aggregate amount of Attributable Debt incurred by the Company
or any Subsidiary in respect of sale and leaseback transactions does not at
such time exceed 10% of Consolidated Net Tangible Assets.
Limitations on Restricted Payments. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment unless:
(a) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments (the fair market value of any such
Restricted Payment, if other than cash, as determined in good faith by the
Company's Board of Directors and evidenced by a resolution of such Board)
declared or made after the Issue Date does not exceed the greater of (i) $5
million or (ii) the sum of (A) 50% of the Consolidated Net Income of the
Company on a cumulative basis during the period (taken as one accounting
period) from April 1, 1993 and ending on the last day of the Company's last
fiscal quarter ending prior to the date of such Restricted Payment (or in
the event such Consolidated Net Income shall be a deficit, minus 100% of
such deficit), plus (B) 100% of the aggregate net cash proceeds of, and the
fair market value of marketable securities (as determined in good faith by
the Company's Board of Directors and evidenced by a resolution of such
Board) received by the Company from, the issue or sale after April 1, 1993
of Capital Stock of the Company (other than the issue or sale of (x)
Disqualified Stock, (y) Capital Stock of the Company to any Subsidiary of
the Company or (z) Capital Stock convertible (whether at the option of the
Company or the holder thereof or upon the happening of any event) into any
security other than its Capital Stock) and any Indebtedness or other
securities of the Company convertible into or exercisable for Capital Stock
(other than Disqualified Stock) of the Company which has been so converted
or exercised, as the case may be, minus (C) $25 million in respect of the
redemption of the Company's Preferred Stock, Series B, in September 1994
plus (D) $5 million;
54
<PAGE>
provided that, notwithstanding the foregoing,
(I) the Company shall be permitted to make Permitted Payments, and
(II) the Company and any Subsidiary shall be permitted to make
Investments in Permitted Joint Ventures if at the time of such Investment
and after giving effect thereto, on a pro forma basis, (X) the Company
could incur at least $1.00 of Indebtedness (other than Permitted
Indebtedness) pursuant to clause (a) of the "Limitations on Indebtedness"
covenant (assuming for purposes of such calculation, if such Investment is
made other than with borrowed funds or funds obtained by the issuance of
Capital Stock specifically for the purpose of such Investment, that the
Company incurred Indebtedness in an amount equal to such Investment bearing
interest at the weighted average rate of interest paid by the Company on
its outstanding Indebtedness during the four fiscal quarters most recently
ended), (Y) the aggregate amount of Investments made pursuant to this
clause (II), less the aggregate amount of dividends, other distributions of
earnings and returns of capital received by the Company from such Permitted
Joint Ventures in cash, does not exceed $50 million and (Z) no Default or
Event of Default shall have occurred and be continuing; and
provided further that the foregoing clause (b) shall not prevent (i) the
payment of any dividend within 60 days of its declaration if such dividend
could have been made on the date of its declaration without violation of the
provisions of this covenant or (ii) the redemption, repurchase, retirement or
other acquisition of any Capital Stock of the Company in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Capital Stock of the Company (other than
any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (b) (ii) (B) of the preceding
paragraph; or (iii) the defeasance, redemption or repurchase of Indebtedness
which is subordinated in right of payment to the Notes with the net cash
proceeds from an incurrence of Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Capital
Stock of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (b) (ii) (B) of the preceding paragraph.
Limitations on Mergers, Consolidations and Sales of Assets. The Company will
not consolidate or merge with or into, or sell, lease, convey or otherwise
dispose of all or substantially all of its assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions) to any Person (other than a merger with or into a Wholly Owned
Subsidiary; provided that such Wholly Owned Subsidiary is not organized in a
foreign jurisdiction), unless: (a) the entity formed by or surviving any such
consolidation or merger (if other than the Company), or to which sale, lease,
conveyance or other disposition shall have been made (the "Surviving Entity"),
is a corporation organized and existing under the laws of the United States,
any state thereof or the District of Columbia; (b) the Surviving Entity
assumes by supplemental indenture all of the obligations of the Company on the
Notes and the Indenture; (c) immediately after the transaction, no Default or
Event of Default shall have occurred and be continuing; (d) immediately after
giving effect to such transaction, the Consolidated Net Worth of the Surviving
Entity would be at least equal to the Consolidated Net Worth of the Company
immediately prior to such transaction; and (e) immediately after giving effect
to such transaction on a pro forma basis, the Surviving Entity could incur at
least $1.00 of Indebtedness (other than Permitted Indebtedness) pursuant to
clause (a) of the "Limitations on Indebtedness" covenant.
Limitations on Transactions with Affiliates. So long as any of the Notes
remain outstanding, neither the Company nor any of its Subsidiaries will
directly or indirectly enter into any transaction or series of related
transactions involving aggregate consideration in excess of $1 million in any
fiscal year with any Affiliate or holder of 5% or more of any class of Capital
Stock of the Company (including any Affiliates of such holders) except for any
transaction (including any loans or advances by or to any Affiliate) (i) the
terms of which are fair and reasonable to the Company or such Subsidiary, as
the case may be, and are at least as favorable as the terms which could be
obtained by the Company or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis with Persons who are not
such a holder, an Affiliate of such holder or Affiliate of the Company and
(ii) which has been approved by a majority of the Company's directors
(including a majority
55
<PAGE>
of the Company's independent directors, if any) in the exercise of their
fiduciary duties; provided that any transaction shall be conclusively deemed
to be on terms which are fair and reasonable to the Company or any of its
Subsidiaries and on terms which are at least as favorable as the terms which
could be obtained on an arm's-length basis with Persons who are not such a
holder, an Affiliate of such a holder or Affiliate of the Company, if such
transaction is approved by the Board of Directors (including a majority of the
Company's independent directors, if any). This covenant does not apply to (a)
any transaction between the Company and any of its Wholly Owned Subsidiaries
or between any of its Wholly Owned Subsidiaries, (b) any Restricted Payment
not otherwise prohibited by the "Limitations on Restricted Payments" covenant
or (c) any transaction pursuant to an agreement in existence on the date of
the Indenture and included as an exhibit to the Exchange Act Reports.
Restrictions on Disposition of Assets of the Company. Subject to the
provisions of Section 8.1 of the Indenture entitled "Covenant not to Merge,
Consolidate Sell or Convey Property Except Under Certain Conditions," the
Company will not, and will not permit any of its Subsidiaries to, make any
Asset Disposition unless (i) the Company (or the Subsidiary, as the case may
be) receives consideration at the time of such sale or other disposition at
least equal to the fair market value thereof (as determined in good faith by
the Company's management if the consideration is less than $200,000 or if the
consideration is greater than $200,000 in good faith by the Company's Board of
Directors and evidenced by a resolution of such Board provided that no
resolution of the Board shall be required in connection with the disposition
of approximately 200 contiguous acres adjacent to the Company's headquarters
at 400 Three Springs Drive, Weirton, West Virginia), (ii) not less than 75% of
the consideration received by the Company (or the Subsidiary, as the case may
be) is in the form of cash or Cash Equivalents and (iii) the Net Cash Proceeds
of the Asset Disposition are within 270 days, at the Company's election,
invested in the business or businesses of the Company as of the Issue Date or
any related business, or, to the extent not so invested, are applied to make
an Asset Disposition Offer (as defined in the Indenture) to purchase the Notes
(on a pro rata basis if the amount available for such repurchase is less than
the outstanding principal amount of the Notes) or any other Indebtedness which
is pari passu with the Notes, at a purchase price of 100% of the principal
amount thereof plus accrued interest to the date of repayment. Notwithstanding
the foregoing, the Company and its Subsidiaries will not be required to apply
any Net Cash Proceeds in accordance with this provision except to the extent
that the aggregate gross proceeds from all Asset Dispositions which are not
applied in accordance with this provision exceed $25 million.
Limitations on Liens. The Company will not, and will not permit any
Subsidiaries to, issue, assume or guarantee any Indebtedness secured by a Lien
(other than a Permitted Lien) of or upon any Property (including any income or
profits therefrom or assignment or conveyance of any right to receive income
therefrom) of the Company or any Subsidiary or any shares of stock or debt of
any Subsidiary which owns Property, whether such Property is owned at the date
of the Indenture or thereafter acquired, without making effective provision
whereby the Notes (together with, if the Company shall so determine, any other
debt of the Company ranking equally with the Notes and then existing or
thereafter created) shall be secured by such Lien equally and ratably with
such Indebtedness, so long as such Indebtedness shall be so secured; provided
that the foregoing prohibition shall not apply to liens with respect to sale
and leaseback transactions regarding the No. 9 Tandem Mill or the Foster
Wheeler Steam Generating Facility.
Notwithstanding the foregoing, and subject to the provisions of the
"Limitations on Indebtedness" covenant, the Company or any Subsidiary may
issue, assume or guarantee Indebtedness secured by Liens without equally and
ratably securing the Notes, provided that, after giving effect thereto,
without duplication, the sum of (i) the aggregate amount of all outstanding
Indebtedness secured by Liens so issued, assumed or guaranteed (excluding
Indebtedness secured by Permitted Liens) plus (ii) the aggregate amount of
Attributable Debt incurred by the Company or any Subsidiary in respect of sale
and leaseback transactions plus (iii) the aggregate amount of Indebtedness
(including Acquired Indebtedness and Permitted Indebtedness) of all
Subsidiaries of the Company does not at such time exceed 10% of Consolidated
Net Tangible Assets.
Limitations on Sale and Leaseback Transactions. The Company will not and
will not permit any Subsidiary to enter into any sale and leaseback
transaction with respect to any Property (whether now owned or hereafter
acquired) unless the net proceeds of the sale or transfer of the property to
be leased are at least equal to
56
<PAGE>
the fair market value (as determined by the Board of Directors of the Company)
of such Property and unless the Company or such Subsidiary would be entitled
under the "Limitations on Indebtedness" and "Limitations on Liens" covenants,
without equally and ratably securing the Notes, to issue, assume or guarantee
debt secured by a mortgage on such property in an amount at least equal to the
Attributable Debt in respect of such sale and leaseback transaction; provided,
however, that the foregoing prohibition does not apply to (i) leases between
the Company and a Subsidiary or between Subsidiaries or (ii) sales and
leasebacks with respect to the No. 9 Tandem Mill or the Foster Wheeler Steam
Generating Facility; provided that the Company must be able to incur, in
respect of such sale and leaseback transactions, debt in an amount at least
equal to the present value (discounted at the rate of interest implicit in the
terms of the lease) of the obligation of the lessee for the net rental
payments during the remaining term of the lease (including any period for
which such lease has been extended or may, at the option of the lessor, be
extended) under the "Limitations on Indebtedness" covenant.
Limitations on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary of the Company to (a)(i) pay dividends or make any
other distributions on its Capital Stock, or any other interest or
participation in or measured by its profits, owned by the Company or a
Subsidiary of the Company, or (ii) pay any Indebtedness owed to the Company or
a Subsidiary of the Company, (b) make loans or advances to the Company or a
Subsidiary of the Company or (c) transfer any of its properties or assets to
the Company or a Subsidiary of the Company, except for Permitted Liens and
Liens permitted under the second paragraph of "Limitations on Liens" and such
other encumbrances or restrictions existing under or by reason of (i) any
restrictions, with respect to a Subsidiary that is not a Subsidiary on the
date of the Indenture, under any agreement in existence at the time such
Subsidiary becomes a Subsidiary (unless such agreement was entered into in
connection with, or in contemplation of, such entity becoming a Subsidiary on
or after the date of the Indenture), (ii) any restrictions under any agreement
evidencing any Acquired Indebtedness of a Subsidiary of the Company incurred
pursuant to the provisions described under the "Limitations on Indebtedness"
covenant; provided that such restrictions shall not restrict or encumber any
assets of the Company or its Subsidiaries other than such Subsidiary, (iii)
terms relating to the nonassignability of any operating lease, (iv) any
encumbrance or restriction existing under any agreement that refinances or
replaces the agreements containing restrictions described in clauses (i)-
(iii), provided that the terms and conditions of any such restrictions are no
less favorable to the holders of the Notes than those under the agreement so
refinanced or replaced or (v) any encumbrance or restriction due to applicable
law.
Change of Control Option. In the event that there shall occur a Change of
Control, each Holder of the Notes shall have the right, at the Holder's
option, to require the Company to purchase all or any part of such Holder's
Notes, on the date (the "Repurchase Date") that is 90 days after notice of the
Change of Control, at 101% of the principal amount thereof, plus accrued
interest and Liquidated Damages, if any, to the Repurchase Date.
On or before the thirtieth day after the Change of Control, the Company is
obligated to mail, or cause to be mailed, to all Holders of record of such
Notes a notice regarding the Change of Control and the repurchase right.
Substantially simultaneously with mailing of the notice, the Company shall
cause a copy of such notice to be published in a newspaper of general
circulation in the Borough of Manhattan, the City of New York. To exercise a
repurchase right, the holder of such Notes must deliver, at least two Business
Days prior to the Repurchase Date, written notice to the Company (or an agent
designated by the Company for such purpose) of the Holder's exercise of such
right, together with the Note with respect to which the right is being
exercised, duly endorsed for transfer. Such written notice from the Holder
shall be irrevocable unless the rescission thereof is duly approved by the
Continuing Directors (as defined herein).
The Company will comply with all applicable tender offer rules and
regulations, including Section 14(e) of the Exchange Act and the rules
thereunder, if the Company is required to give a notice of right of repurchase
as a result of a Change of Control.
57
<PAGE>
If a Change of Control occurred, the Company likely would not have
sufficient cash resources to purchase Notes that may be tendered by Holders
exercising the rights described above. In such case, the Company would have to
seek additional debt or equity financing in amounts sufficient to permit such
repurchase. There can be no assurance that any such financing would be
available when required. Although the Company is not subject to any
contractual restriction limiting its ability to repurchase Notes following a
Change of Control, there can be no assurance that any such restriction will
not arise in the future. The Company's outstanding indebtedness consists of
the Notes, the 11 1/2% Notes, the 10 7/8% Notes, the 10 3/4% Notes and the
City of Weirton, West Virginia 8 5/8% Pollution Control Bonds due 2014 (the
"Pollution Control Bonds"). This outstanding debt may limit the Company's
ability to incur additional indebtedness in amounts sufficient to fulfill the
Company's obligation to repurchase Notes tendered by Holders in the event that
a Change of Control occurs. Generally, the covenants applicable to the 11 1/2%
Notes and the 10 3/4% Notes provide limitations substantially similar to those
contained in the Indenture applicable to the Notes and discussed herein in
"Description of the Notes--Certain Covenants." The covenants applicable to the
10 7/8% Notes and the Pollution Control Bonds are less restrictive on the
Company's ability to incur additional indebtedness than the covenants
described herein. Moreover, the Company is subject to certain restrictions on
its ability to raise additional equity. See "Risk Factors--Factors Relating to
the Company--Limitation on Raising Equity." The Company's failure to
repurchase a Holder's Notes, in the event of a Change of Control, for a period
of 60 days after the date on which the Company received written notice
specifying such failure, shall create an Event of Default. Such notice is a
"Notice of Default" under the Indenture and must demand that the Company
remedy its failure to repurchase. The "Notice of Default" must be given by
registered or certified mail, return receipt requested, to the Company by the
Trustee, or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding.
"Change of Control" means (i) any sale, lease or other transfer (in one
transaction or a series of transactions) of more than 75% of the assets of the
Company to any Person (other than a Wholly Owned Subsidiary of the Company);
(ii) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Exchange Act (other than the 1984 ESOP, the 1989 ESOP or any other
employee benefit plan of the Company)) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Capital Stock of the Company
representing more than 50% of the voting power of such Capital Stock; (iii)
Continuing Directors cease to constitute at least a majority of the Board of
Directors of the Company; or (iv) the stockholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company.
"Continuing Director" means a director who either was a member of the Board
of Directors of the Company on the date of the Indenture, or who became a
director of the Company subsequent to such date and whose election, or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors then on the Board of Directors of the
Company.
Because the events described above could be expected to occur in connection
with certain forms of takeover attempts, these provisions could deter hostile
or friendly acquisitions of the Company where the person attempting the
acquisition views itself as unable to finance the purchase of the principal
amount of Notes which may be tendered to the Company upon occurrence of a
Change of Control.
The Company's 11 1/2% Notes, 10 7/8% Notes and 10 3/4% Notes, which rank
pari passu with the Notes and of which approximately $433.2 million aggregate
principal amount was outstanding as of March 31, 1996, on a pro forma basis
after giving effect to the Initial Offering and the Tender Offer, contain
substantially similar provisions relating to the definition of Change of
Control. The 10 7/8% Notes, however, also require a Change of Control to be
accompanied by a downgrading of the Company's credit rating for the holder
repurchase option to be exercised. Nevertheless, the exercise of the
repurchase option by holders of the Notes, to the extent that it causes or
leads to a downgrading of the Company's credit rating under the 11 1/2% Notes,
10 7/8% Notes and 10 3/4% Notes, could effectively trigger the repurchase
option by the holders of those notes. In either event, the ability of Holders
to have their Notes repurchased pursuant to the Change of Control provision
effectively may be limited by the Company's financial ability to make any
required repurchases at such time.
58
<PAGE>
Reports to Holders of the Notes. So long as the Company is subject to the
periodic reporting requirements of the Exchange Act, it will continue to
furnish the information required thereby to the Commission and to the Trustee.
The Indenture provides that even if the Company is entitled under the Exchange
Act not to furnish such information to the Commission, it will nonetheless
continue to furnish information under Section 13 of the Exchange Act to the
Trustee as if it were subject to such periodic reporting requirements so long
as at least 10% of the Notes remain outstanding. In addition, whether or not
required by the rules and regulations of the Commission, the Company will file
a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request. In addition, at all times prior to the date of effectiveness of
a Registration Statement, upon the request of any Holder or any prospective
purchaser of the Notes designated by a Holder, the Company shall supply to
such Holder or such prospective purchaser the information required by Rule
144A under the Securities Act, unless the Company is then subject to Section
13 or 15(d) of the Exchange Act and reports filed thereunder satisfy the
information requirements of Rule 144A(d), as then in effect.
The foregoing covenants set forth in full the protections offered holders of
Notes in the event of a highly-leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect the holders. See "--Modification and Waiver" for provisions
relating to the waiveability of the foregoing covenants.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness or Preferred Stock of any Person
existing at the time such Person became a Subsidiary of the Company (or such
Person is merged into the Company or one of the Company's Subsidiaries), or
assumed in connection with the acquisition of assets from any such Person
(other than assets acquired in the ordinary course of business), excluding
Indebtedness or Preferred Stock incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of the Company.
"Affiliate" means, when used with reference to a specified Person, any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Person specified. For the purposes of this
definition, "control," when used with respect to any Person, means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"Asset Disposition" means, with respect to any Person, any sale, transfer,
conveyance, lease or other disposition (including, without limitation, by way
of merger, consolidation or sale and leaseback or sale of shares of Capital
Stock in any Subsidiary) by such Person or any of its Subsidiaries to any
Person (other than to such Person or a Wholly Owned Subsidiary of such Person
and other than in the ordinary course of business) of any Property. For
purposes of this definition, the term "Asset Disposition" shall not include
any sale, transfer, conveyance, lease or other disposition of assets and
properties of the Company that is governed by the provision relating to
"Limitation on Mergers, Consolidations and Sales of Assets."
"Attributable Debt" means, with respect to any sale and leaseback
transaction, at the date of determination, the present value (discounted at
the rate of interest implicit in the terms of the lease) of the obligation of
the lessee for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended); provided, however, there shall not be
deemed to be any Attributable Debt in respect of any sale and leaseback
transaction if the Company or a Subsidiary would be entitled pursuant to the
provisions of clauses (a) through (f) under the definition "Permitted Liens"
to issue, assume or guarantee debt secured by a mortgage upon the property
involved in such transaction without
59
<PAGE>
equally and ratably securing the Notes. "Net rental payments" under any lease
for any period means the sum of such rental and other payments required to be
paid in such period by the lessee thereunder, not including, however, any
amount required to be paid by such lessee (whether or not designated as rent
or additional rent) on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges required to be paid by such lessee
thereunder or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges.
"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof or
obligations issued by any agency or instrumentality thereof and backed by the
full faith and credit of the United States of America, (ii) commercial paper
with a maturity of 180 days or less issued by a corporation organized under
the laws of any state of the United States of America or the District of
Columbia and rated at least A-2 by Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc., or at least P-2 by Moody's
Investors Service, Inc., (iii) time deposits with, and certificates of
deposits and banker's acceptances issued by, any bank having capital surplus
and undivided profits of not less than $100 million and maturing not more than
180 days from the date of creation thereof, (iv) repurchase agreements that
are secured by a perfected security interest in an obligation described in
clause (i) and are with any bank described in clause (iii), and (v) readily
marketable direct obligations issued by any state of the United States of
America or any political subdivision thereof having one of the two highest
rating categories obtainable from either Moody's Investors Service, Inc. or
Standard & Poor's Ratings Services.
"Commodity Agreement" means any option or futures contract or similar
agreement or arrangement designed to protect the Company against fluctuations
in commodity prices.
"Consolidated EBITDA" means, for any period, on a consolidated basis for the
Company and its Subsidiaries, the sum for such period (without duplication) of
(a) Consolidated Net Income, (b) income taxes (other than income taxes
positive or negative attributable to extraordinary and non-recurring gains or
losses on asset sales) with respect to such period determined in accordance
with GAAP, (c) net interest expense for such period determined in accordance
with GAAP, (d) depreciation and amortization expenses (including, without
duplication, amortization of debt discount and debt issue costs), determined
in accordance with GAAP and (e) other non-cash items reducing Net Income,
minus non-cash items increasing Net Income, determined in accordance with
GAAP, less any cash payments made in such period with respect to any accruals
for non-cash items subsequent to the Issue Date which are included in the
foregoing clause (e) for any period.
"Consolidated Fixed Charges" means, for any period, the sum of (a) the net
interest expense of the Company and its Subsidiaries for such period whether
paid or accrued (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
capital lease obligations and imputed interest with respect to attributable
Debt), (b) interest incurred during the period and capitalized by the Company,
(c) any interest expense on Indebtedness of another Person that is guaranteed
by the Company or one of its Subsidiaries or secured by a Lien on assets of
the Company or one of its Subsidiaries (whether or not such guarantee or Lien
is called upon) and (d) the product of (i) all cash dividend payments on any
series of Preferred Stock of any Subsidiary or Disqualified Stock of the
Company or any of its Subsidiaries, times (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of the Company and its
Subsidiaries, expressed as a decimal, in each case, on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" of the Company for any period means (i) the Net
Income (or loss) of the Company and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP; provided that
there shall be excluded from this clause (i): (a) the Net Income of any Person
other than a Consolidated Subsidiary in which the Company or any of its
Consolidated Subsidiaries has a joint interest with a third party except to
the extent of the amount of dividends or distributions actually paid in cash
to the Company or a Consolidated Subsidiary during such period, (b) the Net
Income of any other Person accrued prior to the date it becomes a Subsidiary
with respect to which Consolidated Net Income is calculated, or is merged into
or
60
<PAGE>
consolidated with such Person or any of its Subsidiaries or that Person's
assets are acquired by such Person or any of its Subsidiaries, (c) the Net
Income (but only if positive) of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by that
Subsidiary to such Person or to any other Subsidiary of such Net Income is not
at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (d) without duplication, any gains
or losses attributable to the sale, lease, conveyance or other disposition of
assets (including without limitation Capital Stock of any Subsidiary of such
Person), whether owned on the date of issuance of the Notes or thereafter
acquired, in one or more related transactions outside the ordinary course of
business, (e) any non-cash charge reducing Net Income resulting from the
adoption by the Company of SFAS No. 106 and (f) any non-cash charge reducing
Net Income required by Statement 5 of the Financial Accounting Standards Board
which relates to increased pension or retirement costs resulting from the
implementation of the Company's Efficiency Program less (ii) the aggregate
amount of net cash payments made during the period by the Company or any
Subsidiary not reflected in Net Income during such period which relate to the
increased pension and retirement costs of the Company resulting from the
implementation of the Company's Efficiency Program.
"Consolidated Net Tangible Assets" means, as of any particular time, the
total assets of the Company and its Consolidated Subsidiaries, as shown on the
audited consolidated balance sheet contained in the latest annual report to
stockholders of the Company after deducting therefrom:
(a) all current liabilities excluding any thereof which are by their
terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is
being computed and excluding current maturities of long-term indebtedness;
(b) deferred income taxes and deferred pension liabilities to the extent
the related intangible asset, if any, is not otherwise deducted in
calculating Consolidated Net Tangible Assets, deferred income taxes
resulting from the adoption by the Company of SFAS No. 106 and deferred
income taxes resulting from the implementation of the Company's Efficiency
Program;
(c) all reserves, including, without limitation, reserves for
liabilities, fixed or contingent, depreciation, amortization, obsolescence,
deletion, insurance and inventory valuation (but excluding contingency
reserves not allocated for any particular purpose) carried by such
corporation or other person and not deducted in computing such total
assets;
(d) any prepaid expenses, deferred charges or unamortized debt discount
and expense;
(e) minority interests in Subsidiaries, if any;
(f) any write-up in the book value of any asset resulting from a
revaluation thereof subsequent to December 31, 1995 (other than a write-up
of any assets constituting part of the assets and business of another
corporation made in connection with the acquisition, direct or indirect, of
the assets and business of such other corporation);
(g) the amount, if any, at which any stock of the Company appears upon
the asset side of such balance sheet; and
(h) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangible assets, all as shown in such
consolidated balance sheet;
plus an amount equal to Attributable Debt in respect of any sale and leaseback
transactions not capitalized on such balance sheet.
"Consolidated Net Worth" means, with respect to any Person engaged in a
merger, consolidation or sale of assets, the consolidated stockholder's equity
of such Person and its Subsidiaries, as determined in accordance with GAAP but
excluding the effect of the adoption by such Person of SFAS No. 106 and
excluding any restructuring charges taken by such Person in connection with
such merger, consolidation or sale of assets.
61
<PAGE>
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company against fluctuations in currency values.
"Disqualified Stock" means any Capital Stock (i) that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final maturity date of the Notes or (ii) upon which the Company
or any of its Subsidiaries has a contractual obligation to compensate the
holder thereof for losses incurred upon the sale or other disposition thereof;
provided that any portion or series of such Capital Stock which by its terms,
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund or otherwise, no earlier than the day following the
maturity date of the Notes shall not constitute Disqualified Stock; and
provided further that any Capital Stock which would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require the Company to repurchase or redeem such Capital Stock upon the
occurrence of a change in control occurring on or prior to the maturity date
of the Notes shall not constitute Disqualified Stock if (i) the change in
control provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions of the "Change in
Control Option" and (ii) such Capital Stock specifically provides that the
Company will not repurchase or redeem any such stock pursuant to such
provisions prior to the Company's repurchase of such Notes as are required to
be repurchased pursuant to the provisions of the "Change in Control Option."
"Efficiency Program" means the program announced by the Company in July 1992
involving manpower reductions to be achieved over a five-year period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"Indebtedness" means, without duplication, (i) any liability of any entity
(A) for borrowed money, or under any reimbursement obligation relating to a
letter of credit, (B) evidenced by a bond, note, debenture or similar
instrument (including a purchase money obligation) given in connection with
the acquisition of any businesses, properties or assets of any kind or with
services incurred in connection with capital expenditures, or (C) in respect
of capitalized lease obligations, (ii) any liability of others described in
the preceding clause (i) that the entity has guaranteed or that is otherwise
its legal liability, (iii) to the extent not otherwise included, obligations
under Currency Agreements, Commodity Agreements or Interest Protection
Agreements, (iv) all Disqualified Stock valued at the greatest amount payable
in respect thereof on a liquidation (whether voluntary or involuntary) plus
accrued and unpaid dividends, and (v) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types
referred to in clauses (i)-(iv) above, provided that Indebtedness shall not
include accounts payable (including, without limitation, accounts payable to
the Company by any Subsidiary or to any such Subsidiary by the Company or any
other Subsidiary, in each case, in accordance with customary industry
practice) or liabilities to trade creditors of any entity arising in the
ordinary course of business.
"Interest Protection Agreement" of any Person means any interest rate swap
agreement, interest rate collar agreement, option or future contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
"Investments" of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions, (ii) all
guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person
and (iv) all other items that would be
62
<PAGE>
classified as investments (including, without limitation, purchases of assets
outside the ordinary course of business) on a balance sheet of such Person
prepared in accordance with GAAP.
"Issue Date" means the date on which the Notes are originally issued under
the Indenture.
"Lien" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, the Company shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Net Cash Proceeds" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise (including any cash
received upon sale or disposition of such note or receivable), but only as and
when received), excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations
relating to the Property disposed of in such Asset Disposition or received in
any other non-cash form unless and until such non-cash consideration is
converted into cash therefrom, in each case, net of all legal, title and
recording tax expenses, commissions and other fees and expenses incurred, and
all federal, state, provincial, foreign and local taxes required to be accrued
as a liability under GAAP as a consequence of such Asset Disposition and, in
each case net of a reasonable reserve for the after-tax cost of any
indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by the Company or any of its
Subsidiaries in connection with such Asset Disposition (but excluding any
payments, which by the terms of the indemnities will not, under any
circumstances, be made during the term of the Notes), and net of all payments
made on any Indebtedness which is secured by such Property, in accordance with
the terms of any Lien upon or with respect to such Property or which must by
its terms or by applicable law be repaid out of the proceeds from such Asset
Disposition, and net of all distributions and other payment made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition.
"Net Income" of any Person for any period means the consolidated net income
or loss, as the case may be, of such Person and its Subsidiaries for such
period determined in accordance with GAAP; provided that there shall be
excluded all extraordinary gains or losses net of respective tax effects
(less, without duplication, all fees and expenses relating thereto).
"Permitted Indebtedness" means (i) Indebtedness of the Company and its
Subsidiaries outstanding immediately following the issuance of the Notes and
the application of the proceeds of the Senior Notes in the manner set forth
under "Use of Proceeds," herein including Indebtedness of the Company's 1989
ESOP guaranteed by the Company even if acquired by the Company; (ii) the
Notes; (iii) Indebtedness in respect of obligations of the Company to the
Trustee under the Indenture; (iv) indebtedness of the Company or any of its
Subsidiaries pursuant to a credit facility, the principal amount outstanding
under which shall not exceed, on the date such indebtedness is incurred, 80%
of the accounts receivable as reflected on the consolidated financial
statements of the Company and 50% of the inventory as reflected on the
consolidated financial statements of the Company, and which indebtedness is
secured by such accounts receivable or inventory ("Permitted Working Capital
Indebtedness"); (v) intercompany obligations (including intercompany debt or
Disqualified Stock of a Subsidiary which is held by the Company or a
Subsidiary of the Company) of the Company and each of its Subsidiaries;
provided, however, that the obligations of the Company to any of its
Subsidiaries with respect to such Indebtedness shall be subject to a
subordination agreement between the Company and its Subsidiaries providing for
the subordination of such obligations in right of payment from and after such
time as all Notes issued and outstanding shall become due and payable (whether
at stated maturity, by acceleration or otherwise) to the payment and
performance of the Company's obligations under the Indenture and the Notes;
provided further that any Indebtedness or Disqualified Stock of the Company or
any Subsidiary owed to any other Subsidiary that ceases to be a Subsidiary
shall be deemed to be incurred and shall be treated as an incurrence for
purposes of the covenant described under "Limitations on Indebtedness" at the
time the Subsidiary in question ceased to be a Subsidiary; (vi) Indebtedness
of the Company under any Currency Agreements, Commodity
63
<PAGE>
Agreements or Interest Protection Agreements; (vii) additional Indebtedness of
the Company or its Subsidiaries the aggregate principal amount of which does
not exceed $100 million and (viii) any Refinancing Indebtedness, provided that
(A) the original issue amount of the Refinancing Indebtedness shall not exceed
the maximum principal amount (following the date of the Indenture and the
application of the net proceeds of the Notes in accordance with "Use of
Proceeds") herein and accrued interest of the Indebtedness to be repaid (or if
such Indebtedness was issued at an original issue discount, the original issue
price plus amortization of the original issue discount at the time of the
incurrence of the Refinancing Indebtedness less the amount of any prepayments
on or prior to the date of the Indenture and any prepayments made applying the
net proceeds of the Notes), plus the reasonable fees and expenses directly
incurred in connection with such Refinancing Indebtedness, (B) Refinancing
Indebtedness incurred by any Subsidiary shall not be used to repay or refund
outstanding Indebtedness of the Company or any other Subsidiary, and (C) with
respect to any Refinancing Indebtedness that refinances Indebtedness ranking
junior in right of payment to the Notes, (1) the Refinancing Indebtedness does
not require any principal payments prior to the maturity of the Notes and has
an average weighted life that is equal to or greater than the average weighted
life of the Notes and (2) the Refinancing Indebtedness is subordinated to the
Notes to the same or greater extent and on substantially the same terms or
terms more favorable to the holder of the Notes.
"Permitted Joint Venture" means the interest of the Company in any
corporation, association or other business entity of which 50% or less, but
not less than 10%, of the total voting stock or other interest is at the time
owned or controlled, directly or indirectly, by the Company or one of more of
its Subsidiaries or a combination thereof, provided that such corporation,
association or entity is engaged in the business or businesses of the Company
or any related business.
"Permitted Liens" means (a) Liens on Property of, or any shares of stock of
or debt of, any corporation existing at the time such corporation becomes a
Subsidiary or at the time such corporation is merged into the Company or a
Subsidiary, (b) Liens in favor of the Company or any Subsidiary, (c) Liens in
favor of governmental bodies to secure progress or advance payments, (d) Liens
securing industrial revenue or pollution control bonds, (e) Liens upon
accounts receivable and related intangibles and inventory of the Company or
any Subsidiary securing Permitted Working Capital Indebtedness, (f) statutory
Liens or landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course
of business and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have
been made therefor or (g) any extensions, renewals or replacements of Liens
referred to in clauses (a) through (f) above.
"Permitted Payments" means, with respect to the Company or any of its
Subsidiaries, (i) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock); (ii) any dividend or other distribution with respect to Capital Stock
payable to the Company by any of its Subsidiaries or by a Subsidiary to
another Subsidiary; and (iii) payments made by the Company in satisfaction of
any put obligation imposed on the Company by Section 409 of the Internal
Revenue Code of 1986, and any successor provision, relating to shares of the
Company's Preferred Stock, Series A, authorized and issued on or before the
Issue Date and held in the Company's 1989 ESOP.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or any other entity or organization or government or any agency
of political subdivision thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person which
has a preference in liquidation or a preference with respect to the payment of
dividends.
"Prohibited Investment" means, with respect to any Person, any Investment by
such Person that is not a Subsidiary of such Person, other than (i) an
Investment in Cash Equivalents, (ii) to the extent not included in
64
<PAGE>
clause (i), (a) negotiable instruments held for collection, (b) outstanding
travel, moving or other similar advances to officers, employees and
consultants of such Person, (c) lease or utility deposits or other similar
deposits or (d) Capital Stock, debt obligations or similar securities received
in settlement of debts owed to such Person or its Subsidiaries as a result of
the foreclosure, perfection or enforcement of any Liens by such Person or any
of its Subsidiaries, but, in each case, only to the extent such Investments
are made in the ordinary course of business, and (iii) sales of goods on trade
credit terms consistent with the past practices of such Person or otherwise
consistent with trade credit terms in common use in the industry.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Refinancing Indebtedness" means any renewals, extensions, substitutions,
refundings, refinancings or replacements of the Indebtedness referred to in
clauses (i) through (vii) of the definition of Permitted Indebtedness.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (x) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) and (y) in the
case of Subsidiaries of the Company, dividends or distributions payable to the
Company or to a Subsidiary of the Company); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock, or any option,
warrant, or other right to acquire shares of Capital Stock, of the Company or
any of its Subsidiaries; (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Notes; (iv) the making of any Prohibited Investment or
guarantee of any Prohibited Investment in any Person and (v) the making of any
payment to a holder of Capital Stock of the Company to reimburse such holder
for losses incurred by such holder upon the disposition of such Capital Stock
by such holder.
"Subsidiary" means, with respect of any Person, any corporation or other
entity of which a majority of the Capital Stock or other ownership interests
having ordinary voting power to elect a majority of the Board of Directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Wholly Owned Subsidiary" means, at any time, a Subsidiary all of the
Capital Stock of which (except directors' qualifying shares) are at the time
owned directly or indirectly by the Company.
EVENTS OF DEFAULT AND NOTICE THEREOF
The term "Event of Default" when used in the Indenture means any one of the
following: (i) failure of the Company to pay interest and Liquidated Damages,
if any, for 30 days or principal when due; (ii) failure of the Company to
perform any other covenant in the Indenture for 60 days after notice from the
Trustee or the Holders of 25% in principal amount of the Notes outstanding;
(iii) acceleration of the maturity of other indebtedness of the Company in
excess of $25 million which acceleration is not rescinded or annulled, or
which indebtedness is not discharged, within 10 days after notice; and (iv)
certain events of bankruptcy, insolvency or reorganization of the Company.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of any Default (the term "Default" to include the events specified
above without grace or notice) known to it, give to the Holders of Notes
notice of such Default; provided that, except in the case of a Default in the
payment of principal of, interest or Liquidated Damages, if any, on any of the
Notes, the Trustee shall be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
Holders of Notes. The Indenture requires the Company to certify to the Trustee
annually as to whether any default occurred during such year.
65
<PAGE>
In case an Event of Default shall occur and be continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice in writing to the Company (and to the Trustee if given
by the Holders of Notes), may declare all unpaid principal and accrued
interest on the Notes then outstanding to be due and payable immediately. Such
acceleration may be annulled and past Defaults (except, unless theretofore
cured, a Default in payment of principal of or interest on the Notes) may be
waived by the Holders of a majority in principal amount of the Notes then
outstanding, upon the conditions provided in the Indenture.
The Indenture provides that no Holder of a Note may institute any action or
proceeding at law or equity or in bankruptcy or otherwise in pursuit of any
remedy under the Indenture unless the Trustee shall have failed to act within
60 days after notice of an Event of Default and request by Holders of at least
25% in principal amount of the Notes and the offer to the Trustee of indemnity
satisfactory to it; provided, however, that such provision does not affect the
right to sue for enforcement of any overdue payment on the Notes.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
principal amount of the outstanding Notes, provided that no such modification
or amendment may, without the consent of the Holder of each Note affected
thereby, (i) reduce the rate, or change the time or place for payment, of
interest and Liquidated Damages, if any, on any Note, or reduce any amount
payable on the redemption hereof, (ii) reduce the principal, or change the
fixed maturity or place of payment, of any Note, (iii) change the currency of
payment of principal of or interest and Liquidated Damages, if any, on any
Note, (iv) reduce the principal amount of outstanding Notes necessary to
modify or amend the Indenture, (v) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note or (vi) modify any
of the foregoing provisions or reduce the principal amount of outstanding
Notes necessary to waive any covenant or past Default. Holders of not less
than a majority in principal amount of the outstanding Notes may waive certain
past Defaults. See "Events of Default and Notice Thereof."
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged upon payment in full of all the Notes
outstanding thereunder, or upon the deposit with the Trustee, in trust, of
cash and/or direct obligations of the United States of America backed by its
full faith and credit which, through the payment of interest and Liquidated
Damages, if any, and principal in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay principal of, and
each installment of interest and Liquidated Damages, if any, on the Notes, on
the stated maturity of such payments in accordance with the terms of the
Indenture and the Notes. In the case of any such deposit, certain of the
Company's obligations under the Indenture, including the obligation to pay the
principal of and any interest and Liquidated Damages, if any, on such Notes,
shall continue until the Notes are paid in full. The Company will be entitled
to make such deposit if the Company has delivered to the Trustee (i)(A) a
ruling directed to the Trustee from the Internal Revenue Service to the effect
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance of the
Indenture and will be subject to federal income tax on the same amount and in
the same manner and at the same times, as would have been the case if such
deposit and defeasance had not occurred, or (B) an opinion of counsel (who may
be an employee of or counsel for the Company), reasonably satisfactory to the
Trustee, to the same effect as clause (i)(A) above accompanied by a ruling to
the same effect published by the Internal Revenue Service, and (ii) an opinion
of counsel (who may be an employee of or counsel for the Company), reasonably
satisfactory to the Trustee, to the effect that, after the passage of 90 days
following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of
66
<PAGE>
any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; provided, however, if it acquires any
conflicting interest (as defined in Section 310(b) of the Trust Indenture
Act), it must eliminate such conflict or resign.
The Holders of a majority in principal amount of all outstanding Notes will
have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy or power available to the Trustee,
provided that such direction does not conflict with any rule of law or with
the Indenture.
In case an Event of Default shall occur (and shall not be cured or waived),
the Trustee will be required to exercise its powers with the degree of care
and skill of a prudent person in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any of the Holders
of Notes, unless they shall have offered to the Trustee security and indemnity
satisfactory to it.
DELIVERY AND FORM; BOOK-ENTRY PROCEDURES
Book-entry; Delivery and Form
The certificates representing the Exchange Notes will be issued in fully
registered form and may, if agreed by the Company and the Holder, be issued in
the form of a permanent global certificate in fully registered form (the
"Global Note") and will be deposited with the Trustee as custodian for The
Depository Trust Company ("the Depositary") and registered in the name of Cede
& Co., as nominee of the Depositary.
So long as the Depositary, or its nominee, is the registered owner or holder
of the Global Note, the Depositary or such nominee, as the case may be, will
be considered the sole owner or holder of the Exchange Notes represented by
such Global Note for all purposes under the Indenture and the Exchange Notes.
No beneficial owner of an interest in the Global Note will be able to transfer
that interest except in accordance with the Depositary's applicable
procedures, in addition to those provided for under the Indenture.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic computerized book-entry changes in accounts of
its Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants
may beneficially own securities held by or on behalf of the Depositary only
through the Depositary's Participants or the Depositary's Indirect
Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants with portions of the principal amount of the Global
Note and (ii) ownership of the Exchange Notes evidenced by the Global Note
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests
of the Depositary's Participants), the Depositary's Participants and the
Depositary's Indirect Participants. The Depositary's records reflect only the
identity of the Participants to whose accounts portions of the principal
amount of the Global Note are credited, which may or may not be the beneficial
owners of such interests in the Global Note. Prospective purchasers are
advised that the laws of some states require that certain persons take
physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer Exchange Notes evidenced by the Global
Note will be limited to such extent.
Except as described below, owners of interests in the Global Note will not
have Notes registered in their names, will not receive physical delivery of
Exchange Notes in definitive form and will not be considered the registered
owners or holders thereof under the Indenture for any purpose. The deposit of
the Global Note with the Depositary and its registration in the name of Cede &
Co. effects no change in the beneficial owners of interests in the Global
Note.
67
<PAGE>
Payments of the principal of, premium (if any) and interest on, the Global
Note will be made to the Depositary or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee nor any Paying
Agent will have any responsibility or liability for any aspect of the record
relating to or payments made on account of beneficial ownership interests in
the Global Note or for maintaining, supervising or reviewing any record
relating to such beneficial ownership interest. The Company believes, however,
that it is currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interest in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Exchange Notes (including the
presentation of Exchange Notes for exchange as described below) only at the
direction of one or more Participants to whose account the Depositary interest
in the Global Note is credited and only in respect of such portion of the
aggregate principal amount of Exchange Notes as to which such participant or
participants has or have given such direction. However, if there is an Event
of Default under the Exchange Notes or the Indenture, the Depositary will
exchange the Global Note for Exchange Notes in definitive form, which it will
distribute to its Participants.
Although the Depositary customarily agrees to the foregoing procedures in
order to facilitate transfers of interests in global notes among participants
of the Depositary, it is under no obligation to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by the Depositary or
its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
Certificated Securities. If the Depositary is at any time unwilling or
unable to continue as a depository for the Global Note and a successor
depository is not appointed by the Company within 90 days, Exchange Notes in
definitive form will be issued in exchange for the Global Note.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance with
the laws of the State of New York.
SENIOR NOTES REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into the Registration Rights
Agreement dated as of July 3, 1996 pursuant to which the Company agreed, for
the benefit of the holders of the Senior Notes, at the Company's cost, (i)
within 45 days after the Issue Date, to file this Exchange Offer Registration
Statement pursuant to which the Senior Notes will be exchanged for the
Exchange Notes, which will have the terms substantially similar to the Senior
Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions), and (ii) to cause this Exchange Offer Registration
Statement to be declared effective under the Securities Act within 135 days
after the Issue Date. Upon this Exchange Offer Registration Statement being
declared effective, the Company will offer the Exchange Notes in exchange for
surrender of the Senior Notes. The Company agreed to keep the Exchange Offer
open for 20 business days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to the holders of the Senior
Notes. For each Senior Note surrendered to the Company pursuant to the
Exchange Offer, the holder of such Senior Note will receive an Exchange Note
having a principal amount equal to that of the surrendered Senior Note.
Interest on each Exchange Note will accrue from (A) the later of (i) the last
interest payment date on which interest was paid on the Senior Note
surrendered in exchange therefor, or (ii) if the Senior Note is surrendered
for exchange on a date in a period which includes the record date for an
interest payment date to occur on or after the date of such exchange and as to
which interest will be paid, the date of such interest payment date or (B) if
no interest has been paid on the Senior Note, from the date of original
issuance. See "The Exchange Offer."
68
<PAGE>
In the event that (i) the Company determines in reasonably good faith that
(x) any changes in the law or the applicable interpretations of the Staff of
the Commission do not permit the Company to effect the Exchange Offer, or (y)
that the Exchange Notes would not be tradeable upon receipt by the Holders
that participate in the Exchange Offer without restriction under state and
federal securities laws (other than due solely to the status of a Holder as an
Affiliate of the Company), (ii) the Exchange Offer is not consummated within
165 days of the Issue Date, (iii) in certain circumstances, certain holders of
unregistered Exchange Notes so request within 135 days after the consummation
of the Exchange Offer or (iv) in the case of any holder of Senior Notes that
participates in the Exchange Offer, such holder of Senior Notes does not
receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such holder of Senior Notes as an affiliate of the Company) and
so notifies the Company within 60 days after such holder of Senior Notes first
becomes aware of such restriction and provides the Company with a reasonable
basis for its conclusion, in the case of each of clauses (i)-(iv) of this
sentence, then the Company will promptly deliver to the holders of Senior
Notes and the Trustee written notice thereof and, at its cost, (a) as promptly
as practicable, file the Shelf Registration Statement, (b) use all reasonable
efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act by the 165th day after the Issue Date and (c) use all
reasonable efforts to keep the Shelf Registration Statement effective until
three years after its effective date, or such shorter period ending when (i)
all Senior Notes covered by the Shelf Registration Statement have been sold in
the manner set forth and as contemplated therein or (ii) a subsequent Shelf
Registration Statement covering all unregistered Senior Notes has been
declared effective under the Securities Act. The Company will, in the event of
the filing of a Shelf Registration Statement, provide to each holder of the
Senior Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement for the Senior Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Senior Notes. A
holder of Senior Notes that sells such Senior Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each
holder of the Senior Notes will be required to deliver information to be used
in connection with the Shelf Registration Statement and to provide comments on
the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have its Senior Notes included in
the Shelf Registration Statement and to benefit from the provisions regarding
liquidated damages set forth in the following paragraph.
In the event that either (i) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 45th calendar day following
the Issue Date, (ii) the Exchange Offer Registration Statement is not declared
effective on or prior to the 135th calendar day following the Issue Date or
(iii) the Exchange Offer is not consummated or the Shelf Registration
Statement is not declared effective on or prior to the 165th calendar day
following the Issue Date or the Shelf Registration Statement ceases to be
effective (each such event referred to in clauses (i) through (iii), a
"Registration Default"), the Company will pay liquidated damages to each
holder of Senior Notes with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$.05 per week per $1,000 principal amount of Senior Notes held by such holder
of Senior Notes ("Liquidated Damages"). The amount of Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Senior
Notes until all such Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.50 per week per $1,000 principal amount of
Senior Notes. All accrued Liquidated Damages will be paid by the Company on
each interest payment date to the Global Security Holder by wire transfer of
same day funds and to holders of Certificated Securities by wire transfer to
the accounts specified by them or by mailing checks to their registered
addresses if no such accounts have been specified. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages shall cease.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
69
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Senior Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder
which is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired
Senior Notes directly from the Company or (iii) a broker-dealer who acquired
Senior Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business, and such holders are not engaged in, and do
not intend to engage in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Notes; provided that
broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in
the Exchange Offer will be subject to a prospectus delivery requirement with
respect to resales of such Exchange Notes. To date, the Staff has taken the
position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to transactions involving an exchange of
securities such as the exchange pursuant to the Exchange Offer (other than a
resale of an unsold allotment from the sale of the Senior Notes to the Initial
Purchasers, or a Participating Broker-Dealer who acquires Exchange Notes
directly from the Company other than as a result of market-making activity or
ordinary trading activities) with the prospectus contained in the Exchange
Offer Registration Statement. Pursuant to the Registration Rights Agreement,
the Company has agreed to permit Participating Broker-Dealers and other
persons, if any, subject to similar prospectus delivery requirements to use
this Prospectus in connection with the resale of such Exchange Notes. The
Company has agreed that, for a period of 120 days after the Exchange Date, it
will make this Prospectus, and any amendment or supplement to this Prospectus,
available to any broker-dealer that requests such documents in the Letter of
Transmittal. However, Participating Broker-Dealers who acquired Notes directly
from the Company other than as a result of market-making activities or
ordinary trading activities may not fulfill their Prospectus delivery
requirements with this Prospectus, but must comply with the registration and
prospectus delivery requirements of the Securities Act.
Each holder of the Senior Notes who wishes to exchange its Senior Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer--Terms and
Conditions of the Letter of Transmittal." In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Senior Notes that were acquired by it as a result of market-making
activities or other trading activities, will be required to acknowledge that
it will deliver a prospectus in connection with any resale by it of such
Exchange Notes.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such Exchange Notes.
Any broker-dealer that resells Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in
the Registration Rights Agreement.
70
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Exchange Notes
will be passed upon for the Company by Willkie Farr & Gallagher, New York, New
York.
EXPERTS
The consolidated audited financial statements included, and schedules
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 included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
71
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Consolidated Condensed Statements of Income for the three month
periods ended March 31, 1996 and 1995................................... F-2
Consolidated Condensed Balance Sheets as of March 31, 1996 (unaudited)
and December 31, 1995................................................... F-3
Unaudited Consolidated Condensed Statements of Cash Flows for the three
month periods ended March 31, 1996 and 1995............................. F-4
Notes to Unaudited Consolidated Condensed Financial Statements........... F-5
Report of Independent Public Accountants................................. F-7
Consolidated Statements of Income for the three years ended December 31,
1995, 1994 and 1993..................................................... F-8
Consolidated Balance Sheets as of December 31, 1995 and 1994 ............ F-9
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993..................................................... F-10
Statements of Changes in Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993........................................ F-11
Notes to Consolidated Financial Statements............................... F-12
</TABLE>
F-1
<PAGE>
WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales............................................ $ 340,900 $354,686
Operating costs:
Cost of sales...................................... 310,752 299,185
Selling, general and administrative expense........ 9,514 8,206
Depreciation....................................... 14,505 15,135
Provision for profit sharing....................... -- 16,072
Insurance recovery................................. -- (34,000)
----------- -----------
Total operating costs............................ 334,771 304,598
----------- -----------
Income from operations............................... 6,129 50,088
----------- -----------
Interest expense................................... (10,733) (10,502)
Interest income.................................... 1,797 911
ESOP contribution.................................. (653) (653)
----------- -----------
Income (loss) before income taxes.................... (3,460) 39,844
Income tax provision (benefit)..................... (675) 7,701
----------- -----------
Net income (loss).................................... $ (2,785) $ 32,143
=========== ===========
Per share data:
Weighted average number of common shares and
equivalents....................................... 42,347 43,764
Net income (loss) per common share................. $ (0.07) $ 0.73
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(UNAUDITED)
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Assets:
Current assets:
Cash and equivalents, includes restricted
cash of $1,381 and $1,373.................. $ 104,432 $ 131,811
Notes and accounts receivable, less
allowances of $9,536 and $8,688............ 160,035 150,213
Inventories................................. 237,924 255,360
Deferred income taxes....................... 49,245 49,245
Other current assets........................ 7,199 7,400
---------- ----------
Total current assets.................... 558,835 594,029
Property, plant, and equipment, net.......... 585,371 586,430
Intangible assets............................ 31,412 31,412
Deferred income taxes........................ 86,879 86,205
Other assets and deferred charges............ 15,048 15,945
---------- ----------
Total assets............................ $1,277,545 $1,314,021
========== ==========
Liabilities:
Current liabilities.......................... $ 212,374 $ 253,726
Long term debt obligations................... 407,907 407,869
Long term pension obligation................. 98,169 94,689
Postretirement benefits other than pensions.. 320,454 317,893
Other long-term liabilities.................. 26,177 25,348
---------- ----------
Total liabilities....................... 1,065,081 1,099,525
---------- ----------
Redeemable stock............................. 16,619 15,868
Stockholders' equity:
Common stock, $.01 par value; 50,000,000
shares authorized; 42,586,337 and 42,289,944
shares issued............................... 426 423
Additional paid-in capital................... 455,207 454,197
Retained earnings (deficit).................. (258,139) (255,354)
Other stockholders' equity................... (1,649) (638)
---------- ----------
Total stockholders' equity.............. 195,845 198,628
---------- ----------
Total liabilities, redeemable stock and
stockholders' equity........................ $1,277,545 $1,314,021
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net cash (used) provided by operating activities........... $ (11,993) $ 24,310
Cash flows from investing activities
Expenditures for property, plant and equipment............. (13,446) (7,141)
Cash flows (used) provided by financing activities
Other, principally net book overdraft...................... (1,940) 2,188
--------- --------
Net change in cash and equivalents......................... (27,379) 19,357
Cash and equivalents at beginning of period................ 131,811 62,905
--------- --------
Cash and equivalents at end of period...................... $ 104,432 $ 82,262
========= ========
Supplemental cash flow information:
Interest paid, net of interest capitalized................ $ 4,307 $ 2,480
Income taxes paid......................................... -- 153
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, OR IN MILLIONSOF DOLLARS WHERE INDICATED)
NOTE 1
BASIS OF PRESENTATION
The Consolidated Condensed Financial Statements presented herein are
unaudited. Weirton Steel Corporation and/or Weirton Steel Corporation together
with its wholly-owned subsidiary, Weirton Receivables, Inc. are hereafter
referred to as the "Company." Certain information and footnote disclosures
normally prepared in accordance with generally accepted accounting principles
have been either condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. Although the Company believes that all
adjustments necessary for a fair presentation have been made, interim periods
are not necessarily indicative of the financial results of operations for a
full year. As such, these financial statements should be read in conjunction
with the financial statements and notes thereto included or incorporated by
reference in the Company's 1995 Annual Report on Form 10-K.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain prior period amounts have been reclassified, where necessary, to
conform to the presentation in the current period.
NOTE 2
INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Raw materials......................................... $ 66,922 $ 77,557
Work-in-process....................................... 68,388 86,491
Finished goods........................................ 102,614 91,312
-------- --------
$237,924 $255,360
======== ========
</TABLE>
NOTE 3
EARNINGS PER SHARE
The weighted average number of common and common equivalent shares used in
the calculation of income (loss) per common share were 42,346,589 and
43,764,379 for the three months ended March 31, 1996 and 1995, respectively.
NOTE 4
ENVIRONMENTAL COMPLIANCE
In December 1993, the Company was informed by the West Virginia Division of
Environmental Protection ("DEP") that the United States Environmental
Protection Agency ("EPA") was considering initiating a
F-5
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
"multimedia" enforcement action against the Company. Multimedia actions
involve coordinated enforcement proceedings related to water, air and waste-
related issues stemming from a number of federal and state statutes and rules.
In October 1995, the Company received a Notice of Violation from the EPA
alleging seven violations of DEP regulations for air pollution control, which
may result in fines and penalties. Additionally, the EPA has conducted
inspections of the Company's facilities regarding waste-related issues.
Although no multimedia enforcement action has been commenced against the
Company, the Company has continued to meet with representatives of the EPA
regarding the alleged violations, as well as environmental compliance issues
related to air, water and waste disposal. The Company and the EPA are
attempting to resolve these issues during a six-month negotiating period,
which extends to September 15, 1996. The EPA has indicated that it would
expect a negotiated settlement to include necessary corrective steps to
address noncompliance issues, remediation programs to address contamination at
solid waste management units and a civil penalty. The EPA has indicated that
consideration would be given to offsetting any cash penalty through the
performance of supplemental environmental projects. If a settlement is not
reached by September 15, 1996, the EPA has indicated that it would likely
commence a civil enforcement action against the Company. Based on its review
of the matters involved and discussions to date with representatives of the
EPA, while no assurance can be given, the Company does not believe that any
fines, penalties or costs to remediate would have a material effect on the
Company's financial position or results of operations. However, it is expected
that related capital expenditure projects and required changes in operating
practices will increase future operating costs, which may have a significant
effect on future results of operations.
F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Weirton Steel Corporation:
We have audited the accompanying consolidated balance sheets of Weirton
Steel Corporation (a Delaware corporation) and subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Weirton Steel
Corporation and subsidiary as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Notes, 7, 8 and 9 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions, postemployment benefits and
income taxes.
Arthur Andersen LLP
Pittsburgh, Pennsylvania
January 22, 1996
(except for the matter discussed
in Note 14, as to which the date
is May 29, 1996)
F-7
<PAGE>
WEIRTON STEEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales.................. $ 1,351,711 $ 1,260,864 $ 1,201,093
Operating costs:
Cost of sales............ 1,180,053 1,136,936 1,105,558
Selling, general and
administrative expense.. 34,440 31,504 32,458
Depreciation............. 54,699 46,309 49,113
Provision for profit
sharing................. 24,178 17,581 --
Insurance recoveries..... (41,502) (20,000) --
Restructuring charge..... -- -- 17,340
--------------- --------------- ---------------
Total operating costs.. 1,251,868 1,212,330 1,204,469
--------------- --------------- ---------------
Income (loss) from
operations................ 99,843 48,534 (3,376)
Adjustment to carrying
value of damaged
facility................ 9,000 44,746 --
Interest expense......... (42,519) (49,999) (52,802)
Interest income.......... 4,615 5,795 2,626
ESOP contribution........ (2,610) (2,610) (2,610)
--------------- --------------- ---------------
Income (loss) before income
taxes..................... 68,329 46,466 (56,162)
Income tax provision
(benefit)............... 13,255 7,454 (13,272)
--------------- --------------- ---------------
Income (loss) before
extraordinary item........ 55,074 39,012 (42,890)
Loss on early
extinguishment of debt.. 6,718 3,851 6,549
--------------- --------------- ---------------
Income (loss) before
cumulative effect of
accounting changes........ 48,356 35,161 (49,439)
Cumulative effect of
accounting changes........ -- -- (179,803)
--------------- --------------- ---------------
Net income (loss).......... $ 48,356 $ 35,161 $ (229,242)
=============== =============== ===============
Less: Preferred stock
dividend requirement...... -- 2,339 3,125
--------------- --------------- ---------------
Net income (loss)
applicable to common
shares.................... $ 48,356 $ 32,822 $ (232,367)
=============== =============== ===============
Per Share Data:
Weighted average number of
common shares and
equivalents (in
thousands)................ 43,781 34,470 26,473
Income (loss) per common
share before extraordinary
item...................... $ 1.26 $ 1.06 $ (1.74)
Loss on early
extinguishment of debt.. (0.16) (0.11) (0.25)
--------------- --------------- ---------------
Income (loss) per common
share before cumulative
effect of accounting
changes................... $ 1.10 $ 0.95 $ (1.99)
Cumulative effect of
accounting changes...... -- -- (6.79)
--------------- --------------- ---------------
Net income (loss) per
common share.............. $ 1.10 $ 0.95 $ (8.78)
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
WEIRTON STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Assets:
Current assets:
Cash and equivalents, includes restricted cash of
$1,373 and $1,329, respectively................... $ 131,811 $ 62,905
Receivables, less allowances of $8,688 and $6,405,
respectively...................................... 150,213 131,902
Inventories........................................ 255,360 270,518
Deferred income taxes.............................. 49,245 42,570
Other current assets............................... 7,400 5,603
----------- -----------
Total current assets............................. 594,029 513,498
----------- -----------
Property, plant and equipment, net................... 586,430 588,903
Intangible asset..................................... 31,412 17,213
Deferred income taxes................................ 86,205 98,493
Other assets and deferred charges.................... 15,945 12,813
----------- -----------
Total assets..................................... $ 1,314,021 $ 1,230,920
=========== ===========
Liabilities:
Current liabilities:
Payables........................................... $ 123,105 $ 136,038
Employment costs................................... 89,793 84,487
Pension liability.................................. 12,471 --
Taxes other than income taxes...................... 19,376 21,256
Income taxes....................................... -- 4,579
Other.............................................. 8,981 10,679
----------- -----------
Total current liabilities........................ 253,726 257,039
Long term debt obligations........................... 407,869 394,505
Long term pension obligation......................... 94,689 68,093
Postretirement benefits other than pensions.......... 317,893 316,185
Other long term liabilities.......................... 25,348 31,429
----------- -----------
Total liabilities................................ 1,099,525 1,067,251
----------- -----------
Redeemable stock:
Preferred stock, 7,500,000 shares authorized:
Preferred stock, Series A, $0.10 par value;
1,769,865 and 1,800,000 shares authorized;
1,769,865 and 1,787,688 shares issued; 1,764,791
and 1,754,327 subject to put...................... 25,589 26,013
Less: Preferred treasury stock, Series A, at cost,
40,423 and 33,361 shares............................ (586) (326)
Deferred ESOP compensation........................... (9,135) (11,202)
----------- -----------
Total redeemable stock............................... 15,868 14,485
----------- -----------
Stockholders' equity:
Preferred stock, Series A, $0.10 par value; 5,074
and 12,312 shares not subject to put.............. 74 87
Common stock, $0.01 par value; 50,000,000 shares
authorized; 42,289,944 and 42,027,405 shares
issued............................................ 423 420
Additional paid-in capital........................... 454,197 452,746
Common shares issuable, 332,076 and 348,040 shares... 1,170 1,747
Retained earnings (deficit).......................... (255,354) (303,710)
Less: common treasury stock, at cost, 275,829 and
373,340 shares...................................... (1,882) (2,106)
----------- -----------
Total stockholders' equity........................... 198,628 149,184
----------- -----------
Total liabilities, redeemable stock and stockholders'
equity.............................................. $ 1,314,021 $ 1,230,920
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-9
<PAGE>
WEIRTON STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................ $ 48,356 $ 35,161 $(229,242)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation............................... 54,699 46,309 49,113
Amortization of deferred financing costs... 2,212 2,509 1,965
Restructuring charge....................... -- -- 17,340
Adjustment to carrying value of damaged
facility.................................. (9,000) (44,746) --
ESOP contribution.......................... 2,610 2,610 2,610
Cumulative effect of accounting changes.... -- -- 179,803
Loss from early extinguishment of debt..... 6,718 3,851 6,549
Deferred income taxes...................... 7,240 1,942 (13,272)
Cash provided (used) by working capital
items:
Receivables.............................. (18,311) (2,898) (5,110)
Inventories.............................. 15,158 (27,859) 1,907
Other current assets..................... (1,797) (1,746) 4,325
Payables................................. (2,351) 17,454 24,986
Other current liabilities................ 9,620 3,099 18,070
Long term pension obligation............... 12,397 (726) 19,374
Other...................................... (6,441) 10,601 (8,963)
--------- --------- ---------
Net cash provided by operating activities.... 121,110 45,561 69,455
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and
equipment:
Spending to restore damaged facility..... (2,948) (74,611) --
Less: Insurance recoveries............... 9,000 45,000 --
Other capital spending................... (49,410) (37,456) (13,324)
--------- --------- ---------
Net cash used by investing activities........ (43,358) (67,067) (13,324)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt obligations............. (118,800) (101,101) (148,114)
Proceeds from issuance of debt
obligations............................... 125,000 -- 140,000
Proceeds from issuance of common stock..... -- 116,087 --
Redemption of preferred stock, Series B.... -- (25,000) --
Dividends paid............................. -- (2,339) (3,125)
Common shares issuable..................... 1,170 1,454 1,119
Purchase of common treasury stock.......... -- -- (1,455)
Deferred financing costs................... (4,325) (2,245) (13,520)
Other, principally net book overdrafts..... (11,891) 8,553 (3,229)
--------- --------- ---------
Net cash used by financing activities........ (8,846) (4,591) (28,324)
--------- --------- ---------
Net change in cash and equivalents........... 68,906 (26,097) 27,807
Cash and equivalents at beginning of period.. 62,905 89,002 61,195
--------- --------- ---------
Cash and equivalents at end of period........ $ 131,811 $ 62,905 $ 89,002
========= ========= =========
Supplemental cash flow information:
Interest paid, net of interest
capitalized............................... $ 44,416 $ 52,091 $ 47,311
Income taxes paid (refunded)............... 10,593 -- (1,779)
</TABLE>
The accompanying notes are an integral part of these statements.
F-10
<PAGE>
WEIRTON STEEL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED
COMMON SHARES COMMON SERIES A
COMMON STOCK ADDITIONAL ISSUABLE RETAINED TREASURY STOCK NOT SUBJECT TO PUT
----------------- PAID-IN ----------------- EARNINGS ---------------- ---------------------
SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT) SHARES AMOUNT SHARES AMOUNT
---------- ------ ---------- -------- ------- --------- ------- ------- ---------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stockholders'
Equity as of
December 31,
1992............. 26,419,705 $264 $334,834 365,421 $ 1,153 $(104,165) 208,353 $ (825) 1,497 $ 10
Net loss......... -- -- -- -- -- (229,242) -- -- -- --
Purchase of
treasury stock... -- -- -- -- -- -- 181,200 (1,455) -- --
Conversion of
preferred stock.. -- -- -- -- -- -- (8,148) 65 -- --
Reclassification
of preferred
Series A not
subject to put... -- -- -- -- -- -- -- -- 1,272 6
Employee stock
purchase plan:
Shares issued... 300,047 3 942 (300,047) (945) -- -- -- -- --
Shares
issuable........ -- -- -- 299,971 1,012 -- -- -- -- --
Board of
Directors
deferred
compensation
plan:
Shares issued... -- -- -- -- -- -- -- -- -- --
Shares
issuable........ -- -- -- 31,704 107 -- -- -- -- --
Dividends payable
($6.25 per
preferred share,
Series B)........ -- -- -- -- -- (3,125) -- -- -- --
---------- ---- -------- -------- ------- --------- ------- ------- ---------- --------
Stockholders'
Equity
Consolidated as
of December 31,
1993............. 26,719,752 267 335,776 397,049 1,327 (336,532) 381,405 (2,215) 2,769 16
Net income....... -- -- -- -- -- 35,161 -- -- -- --
Issuance of
common stock..... 15,000,000 150 115,937 -- -- -- -- -- -- --
Conversion of
preferred stock.. -- -- -- -- -- -- (8,065) 109 -- --
Reclassification
of preferred
Series A not
subject to put... -- -- -- -- -- -- -- -- 9,543 71
Employee stock
purchase plan:
Shares issued... 299,971 3 1,009 (299,971) (1,012) -- -- -- -- --
Shares issua-
ble............. -- -- -- 240,086 1,350 -- -- -- -- --
Board of
Directors
deferred
compensation
plan:
Shares issued... 7,682 -- 24 (7,682) (24) -- -- -- -- --
Shares
issuable........ -- -- -- 18,558 106 -- -- -- -- --
Dividends payable
($4.6875 per
preferred share,
Series B)........ -- -- -- -- -- (2,339) -- -- -- --
---------- ---- -------- -------- ------- --------- ------- ------- ---------- --------
Stockholders'
Equity
Consolidated as
of December 31,
1994............. 42,027,405 420 452,746 348,040 1,747 (303,710) 373,340 (2,106) 12,312 87
Net income....... -- -- -- -- -- 48,356 -- -- -- --
Conversion of
preferred stock.. 22,453 1 74 -- -- -- -- -- (8,546) (32)
Reclassification
of preferred
Series A not
subject to put... -- -- -- -- -- -- -- -- 1,308 19
Employee stock
purchase plan:
Shares issued... 240,086 2 1,348 (240,086) (1,350) -- -- -- -- --
Shares
issuable........ -- -- -- 295,764 893 -- -- -- -- --
Board of
Directors
deferred
compensation
plan:
Shares issued... -- -- 29 (107,954) (253) -- (97,511) 224 -- --
Shares
issuable........ -- -- -- 36,312 133 -- -- -- -- --
---------- ---- -------- -------- ------- --------- ------- ------- ---------- --------
Stockholders'
Equity
Consolidated as
of December 31,
1995............. 42,289,944 $423 $454,197 332,076 $ 1,170 $(255,354) 275,829 $(1,882) 5,074 $ 74
========== ==== ======== ======== ======= ========= ======= ======= ========== ========
<CAPTION>
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Stockholders'
Equity as of
December 31,
1992............. $ 231,271
Net loss......... (229,242)
Purchase of
treasury stock... (1,455)
Conversion of
preferred stock.. 65
Reclassification
of preferred
Series A not
subject to put... 6
Employee stock
purchase plan:
Shares issued... --
Shares
issuable........ 1,012
Board of
Directors
deferred
compensation
plan:
Shares issued... --
Shares
issuable........ 107
Dividends payable
($6.25 per
preferred share,
Series B)........ (3,125)
-------------
Stockholders'
Equity
Consolidated as
of December 31,
1993............. (1,361)
Net income....... 35,161
Issuance of
common stock..... 116,087
Conversion of
preferred stock.. 109
Reclassification
of preferred
Series A not
subject to put... 71
Employee stock
purchase plan:
Shares issued... --
Shares issua-
ble............. 1,350
Board of
Directors
deferred
compensation
plan:
Shares issued... --
Shares
issuable........ 106
Dividends payable
($4.6875 per
preferred share,
Series B)........ (2,339)
-------------
Stockholders'
Equity
Consolidated as
of December 31,
1994............. 149,184
Net income....... 48,356
Conversion of
preferred stock.. 43
Reclassification
of preferred
Series A not
subject to put... 19
Employee stock
purchase plan:
Shares issued... --
Shares
issuable........ 893
Board of
Directors
deferred
compensation
plan:
Shares issued... --
Shares
issuable........ 133
-------------
Stockholders'
Equity
Consolidated as
of December 31,
1995............. $ 198,628
=============
</TABLE>
The accompanying notes are an integral part of these statements.
F-11
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
NOTE 1
BASIS OF PRESENTATION
For the years ended and as of December 31, 1995 and 1994, the financial
statements herein include the accounts of Weirton Steel Corporation and its
wholly-owned subsidiary, Weirton Receivables, Inc. ("WRI"). Prior to August
26, 1993, the financial statements include only the accounts of Weirton Steel
Corporation. Weirton Steel Corporation and/or Weirton Steel Corporation
together with its subsidiary are hereafter referred to as the "Company."
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain portions of the prior periods' financial statements have been
reclassified where necessary to conform to the presentation used in the
current period.
NOTE 2
ORGANIZATION AND BACKGROUND
The Company and its predecessor companies have been in the business of
making and finishing steel products for nearly 90 years. From November 1929 to
January 1984, the Company's business had been operated as a subsidiary of or a
division of National Steel Corporation ("NSC"). Incorporated in Delaware in
November 1982, the Company acquired the principal assets of NSC's former
Weirton Steel Division (the "Division") in January 1984. In connection with
the asset purchase, NSC retained liability for claims and litigation arising
out of the operation of the Division based on occurrences prior to May 1,
1983, principally related to pension, life insurance and healthcare benefits
for retired employees, pension benefits for active employees based upon
service prior to the sale, and certain environmental conditions.
From January 1984 until June 1989, the Company was owned in its entirety by
its employees through an Employee Stock Ownership Plan (the "1984 ESOP"). In
June 1989, the 1984 ESOP sold 4.5 million shares of the Company's common stock
in a public offering. The Company's common stock is listed and traded on the
New York Stock Exchange.
In connection with the public offering of common stock in June 1989, the
Company sold 1.8 million shares of voting Redeemable Preferred Stock, Series A
(the "Series A Preferred") to a new Employee Stock Ownership Plan (the "1989
ESOP"). Each share of Series A Preferred is convertible at any time into one
share of common stock, subject to adjustment, and is entitled to 10 times the
number of votes allotted to the common stock into which it is convertible.
In October 1991, in connection with an iron ore pellet supply agreement, the
Company issued 0.5 million shares of its Redeemable Preferred Stock, Series B
(the "Series B Preferred") to Cleveland-Cliffs Inc for a purchase price equal
to the aggregate redemption amount of $25.0 million. The Company redeemed the
Series B Preferred in September 1994.
In September 1991, the Company contributed to its defined benefit pension
plan (the "Pension Plan") 3,870,968 shares of its common stock having an
aggregate fair value of $15.0 million. In September 1992, the Company issued
2.0 million shares of its common stock to the Pension Plan, having an
aggregate fair value of $8.25 million.
F-12
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In May 1994, the Company's stockholders approved an amendment to the
Company's Restated Certificate of Incorporation increasing the number of
authorized shares of common stock from 30.0 million shares to 50.0 million
shares. The amendment provided that 15.0 million shares of such increase were
to be issued only in conjunction with bona fide public offerings and that up
to 5.0 million shares of such increase were to be issued only pursuant to
employee benefit plans. In August 1994, the Company and the Pension Plan
participated in a public sale of the Company's common stock and sold 15.0
million and 4.55 million shares, respectively.
Substantially all of the Company's employees participate in the 1984 ESOP
and the 1989 ESOP which, after giving effect to the above-mentioned
transactions, owned approximately 27.4% of the issued and outstanding common
and substantially all the preferred shares of the Company as of December 31,
1995. The common and preferred shares owned by the 1984 ESOP and the 1989 ESOP
combined represent approximately 49.2% of the voting power of the Company's
voting stock as of December 31, 1995.
NOTE 3
SIGNIFICANT ACCOUNTING POLICIES
Cash
The liability representing outstanding checks drawn against a zero-balance
general disbursement bank account, that is funded as checks are presented for
payment, is included in accounts payable for financial statement presentation.
Such amount was $3.2 million, $13.8 million and $5.1 million as of December
31, 1995, 1994 and 1993, respectively.
Cash Equivalents
Cash equivalents, which consist primarily of certificates of deposit,
commercial paper and time deposits, are stated at cost, which approximates
fair value. For financial statement presentation, the Company considers all
highly liquid investments purchased with an original maturity of 90 days or
less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market, cost being determined
by the first-in, first-out (FIFO) method. Inventory costs include materials,
labor and manufacturing overhead.
Property, Plant and Equipment
Property, plant and equipment is valued at cost. Major additions are
capitalized, while the cost of maintenance and repairs which do not improve or
extend the lives of the respective assets is charged to expense in the year
incurred. Interest costs applicable to facilities under construction are
capitalized. Gains or losses on property dispositions are credited or charged
to income.
Depreciation of steelmaking facilities is determined by the production-
variable method which adjusts straight-line depreciation to reflect actual
production levels. The cost of relining blast furnaces is amortized over the
estimated production life of the lining. All other assets are depreciated on a
straight-line basis.
Postretirement Benefits Other Than Pensions
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and changed its method of
accounting for these costs from the cash method to an accrual method.
F-13
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Postemployment Benefits
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
112, "Employers' Accounting for Postemployment Benefits." Effective with the
adoption of the standard, the value of all such benefits is actuarially
determined and recognized on an accrual method.
Employee Stock Ownership Plan (ESOP) Accounting
The Company recognizes as compensation expense an amount based upon its
required contributions to the ESOPs. The resulting expense approximates the
cost to the ESOPs for the shares allocated to participants for the period. The
number of shares allocated to participants for the period is determined based
on the ratio of the period's debt principal payment to the total estimated
debt principal payments. Shares are then allocated to individual participants
based on the participant's relative compensation.
Employee Profit Sharing
The provision for employee profit sharing is calculated in accordance with
the Profit Sharing Plan. The pretax provisions in 1995 and 1994 were based
upon 33 1/3% of net income.
Research and Development
Research and development costs related to improvement of existing products,
development of new products and the development of more efficient operating
techniques are charged to expense as incurred and totaled $3.2 million, $6.3
million and $5.4 million in 1995, 1994 and 1993, respectively.
Income Taxes
Effective January 1, 1993, the Company changed its method of accounting for
income taxes for financial reporting by adopting the provisions of SFAS No.
109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income tax
assets and liabilities are recognized to reflect the future income tax
consequences of carryforwards and differences between the tax basis and
financial accounting basis of assets and liabilities.
NOTE 4
INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Raw materials.............................................. $ 77,557 $100,319
Work-in-process............................................ 86,491 89,106
Finished goods............................................. 91,312 81,093
-------- --------
$255,360 $270,518
======== ========
</TABLE>
F-14
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Land................................................... $ 1,098 $ 807
Buildings.............................................. 8,689 7,918
Machinery, equipment and other......................... 845,650 778,161
Construction-in-progress............................... 63,798 80,216
--------- ---------
919,235 867,102
Less: Allowances for depreciation...................... (332,805) (278,199)
--------- ---------
$ 586,430 $ 588,903
========= =========
</TABLE>
In April 1994, the Company's No. 9 Tandem Mill (the "No. 9 Tandem")
sustained major damage from a fire which occurred while the unit was
undergoing maintenance. This cold reduction mill is a major component of the
Company's operating facilities and normally processes approximately 70% to 80%
of the steel coils required for the Company's tin plating operations. The
Company rebuilt the No. 9 Tandem and start-up operations began in October
1994.
The Company maintains insurance for property damage applicable to its
production facilities, including the No. 9 Tandem. The policy providing this
coverage is subject to a deductible. Insurance recoveries related to the No. 9
Tandem in 1995 and 1994 included $9.0 million and $45.0 million, respectively
for property damage.
Insurance recoveries for property damage associated with events of this type
require the recognition of a new cost basis for the rebuilt facility. As a
result, the Company has recognized for the years ended December 31, 1995 and
1994, adjustments to the carrying value of the No. 9 Tandem to the extent of
insurance recoveries received during such periods. Total spending in 1995 and
1994 to restore the No. 9 Tandem was approximately $2.9 million and $74.6
million, respectively.
The Company also maintains insurance for business interruption, subject to a
deductible. The Company's claim for business interruption related to the No. 9
Tandem was settled in 1995. Insurance recoveries of $34.0 million and $20.0
million were received in 1995 and 1994, respectively, for the No. 9 Tandem
business interruption claim. Total funds received in 1995 and 1994 for both
property damage and business interruption claims related to the No. 9 Tandem
were $110.5 million. In addition, the Company's business interruption claim
stemming from an outage at its hot strip mill in March 1991 was settled for
$7.5 million in 1995.
Capitalized interest costs applicable to facilities under construction for
the years ended December 31, 1995, 1994 and 1993, amounted to $1.1 million,
$2.3 million and $0.8 million, respectively.
F-15
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6
FINANCING ARRANGEMENTS
Debt Obligations
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
11 1/2% Senior Notes due 3/1/98........................... $ 77,150 $107,150
10 7/8% Senior Notes due 10/15/99......................... 149,749 231,749
10 3/4% Senior Notes due 6/1/2005......................... 125,000 --
8 5/8% Pollution Control Bonds due 11/1/2014.............. 56,300 56,300
-------- --------
408,199 395,199
Less: Unamortized debt discount........................... 330 694
-------- --------
Long term debt obligations................................ $407,869 $394,505
======== ========
</TABLE>
On October 17, 1989, the Company completed a public offering of its Senior
Notes in the principal amount of $300.0 million. These unsecured Senior Notes
bear interest at 10 7/8% and mature October 15, 1999.
On November 1, 1989, the Company refinanced two previous pollution control
bond issues having an aggregate principal amount of $56.3 million through the
issuance of the 1989 Pollution Control Bonds which bear interest at 8 5/8% and
mature November 1, 2014.
On March 4, 1993, the Company completed a public offering of $140.0 million
of its Senior Notes. These unsecured Senior Notes bear interest at 11 1/2% per
annum and mature March 1, 1998. The Company recognized an after-tax
extraordinary loss of $6.5 million in 1993 related to premiums and the
immediate recognition of previously deferred financing costs related to
indebtedness refinanced with the proceeds from the public sale of its 11 1/2%
Senior Notes.
In the fourth quarter of 1994, the Company purchased in the market $68.3
million of its 10 7/8% Senior Notes and $32.8 million of its 11 1/2% Senior
Notes using cash on hand and a portion of the proceeds from the Company's
August 1994 public offering of 15.0 million shares of its common stock. The
purchases of senior indebtedness included the payment of certain premiums in
excess of their principal amount. In addition, the purchase required the
immediate recognition of previously deferred financing costs. As a result, the
Company recognized in 1994 an after-tax extraordinary loss of $3.9 million.
In June 1995, the Company privately sold $125.0 million of its 10 3/4%
Senior Notes due 2005. The net proceeds were $121.0 million, of which $118.8
million was used during the third quarter of 1995 to purchase approximately
$30.0 million principal amount of its 11 1/2% Senior Notes and $82.0 million
principal amount of its 10 7/8% Senior Notes. In October 1995, the Company
exchanged the privately sold notes for notes that were registered under the
Securities Act of 1933. The Company recognized an after-tax extraordinary loss
of $6.7 million related to premiums paid to purchase the notes together with
the immediate recognition of previously deferred financing costs related to
the purchased notes.
In connection with the sale of the 10 3/4% Senior Notes, the Company
obtained the consent from the remaining holders of the 11 1/2% Senior Notes to
modify certain covenants in the indenture governing such notes, with the
objective of providing uniformity among the covenants in the indentures
governing the Company's 10 3/4% and 10 7/8% Senior Notes. The indentures
governing the Senior Notes contain covenants that limit, among other things,
the incurrence of additional indebtedness, the declaration and payment of
dividends and
F-16
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
distributions on the Company's capital stock, as well as mergers,
consolidations, liens and sales of certain assets. Under covenants affecting
the Company's ability to pay dividends on its common stock, the Company is
limited as to the payment of aggregate dividends after March 31, 1993, to the
greater of (i) $5.0 million or (ii) $5.0 million plus one-half of the
Company's cumulative consolidated net income since March 31, 1993, plus the
net proceeds from future issuances of certain capital stock less certain
allowable payments. As of December 31, 1995, pursuant to this covenant, the
Company's ability to pay dividends on its common stock was limited to $137.2
million. Upon the occurrence of a change in control, as defined under the
indentures, holders of the Senior Notes will have the option to cause the
Company to repurchase their Senior Notes at 101% of the principal amount, plus
accrued interest to the date of repurchase.
The Company's Senior Notes are ranked equally and are senior to the 1989
Pollution Control Bonds.
The Company does not have any scheduled principal payments on its
indebtedness until 1998 when the $77.2 million principal amount outstanding of
the 11 1/2% Senior Notes becomes due and 1999 when the $149.7 million
principal amount outstanding of the 10 7/8% Senior Notes becomes due.
Receivables Participation Agreement
The Company has in place, through a subsidiary, a receivables participation
agreement with a group of four banks. The facility provides for a total
commitment by the banks of up to $85.0 million, including a letter of credit
subfacility of up to $25.0 million. To implement the facility, the Company
sold substantially all of its accounts receivable, and sells additional
receivables as they are generated, to its wholly-owned subsidiary, WRI. WRI
finances its ongoing receivable purchases from a combination of cash
collections on receivables already in the pool, short term intercompany
obligations and issuances of redeemable preferred stock to Weirton Steel
Corporation. As of December 31, 1995, while no funded participation interests
had been sold under the facility, $4.0 million in letters of credit under the
subfacility were in place. The amount of participation interests committed to
be purchased by the banks fluctuates depending upon the amounts and nature of
receivables generated by the Company which are sold into the program, and
certain financial tests applicable to them. With respect to the receivables
comprising the pool and the financial tests applicable to such, and after
reduction for amounts in place under the letter of credit subfacility, the
base amount available for cash sale was approximately $71.6 million as of
December 31, 1995.
Funded purchases of participation interests by the banks under the facility
are generally available on a revolving basis for three years, subject to
extension as agreed to by the banks. In 1995, the Participation Agreement was
extended through April 2000. Weirton Steel Corporation continues to act as
servicer of the assets sold into the program and continues to make billings
and collections in the ordinary course of business according to its
established credit practices. Except for warranties given by Weirton Steel
Corporation concerning the eligibility of receivables sold to WRI under the
program, the transactions under the facility are generally nonrecourse. WRI's
commitments to the banks, which do not include warranties as to collectibility
of the receivables, include those typical of sellers of similar property and
are secured by its interest in the receivables and related security. WRI is
subject to certain restrictions regarding its indebtedness, liens, asset sales
not contemplated by the facility, guarantees, investments, other transactions
with its affiliates, including Weirton Steel Corporation, and the maintenance
of a minimum net worth of not less than the greater of $5.0 million or 10% of
the outstanding receivables. As of December 31, 1995, WRI had a net worth of
$132.3 million and outstanding receivables of $138.2 million. The banks and
other creditors of WRI have a priority claim on all assets of WRI prior to
those assets becoming available to any of Weirton Steel Corporation's
creditors.
Leases
The Company uses certain lease arrangements to supplement its financing
activities.
F-17
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rental expense under operating leases was $4.7 million, $6.7 million and
$7.3 million for the years ended 1995, 1994 and 1993, respectively. The
minimum future lease payments under noncancelable operating leases are $3.9
million, $3.4 million, $2.5 million, $0.9 million and $0.6 million for the
years ending 1996 through 2000, respectively, and $2.0 million thereafter.
NOTE 7
EMPLOYEE RETIREMENT BENEFITS
Pensions
The Company's Pension Plan covers substantially all of its employees. The
Pension Plan provides benefits that are based generally upon years of service
and compensation during the final years of employment.
The Company's funding policy is influenced by its general cash requirements
but, at a minimum, complies with the funding requirements of federal laws and
regulations. During calendar years 1995, 1994 and 1993, the Company
contributed $22.4 million, $69.7 million and $25.6 million, respectively, to
the Pension Plan.
The Pension Plan's assets are held in trust, the investments of which
consist primarily of common stocks, fixed income securities and short term
investments.
Following are the components of the Company's net pension cost recognized in
1995, 1994 and 1993:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost................................. $ 16,060 $ 17,847 $ 10,192
Interest cost on projected benefit
obligation.................................. 48,346 45,155 41,714
Actual return on plan assets................. (33,580) (30,938) (30,300)
Net amortization and deferral................ 16,464 16,464 15,112
-------- -------- --------
$ 47,290 $ 48,528 $ 36,718
======== ======== ========
</TABLE>
The following table reconciles the funded status of the Pension Plan to the
accrued pension obligation recognized as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation:
Vested............................................ $ 518,309 $ 431,632
Nonvested......................................... 29,877 25,416
--------- ---------
548,186 457,048
Effect of projected compensation increases.......... 170,296 131,927
--------- ---------
Actuarial present value of projected benefit
obligation......................................... 718,482 588,975
Plan assets at fair value........................... 441,026 388,955
--------- ---------
Projected benefit obligation in excess of plan
assets............................................. 277,456 200,020
Items not yet recognized:
Actuarial (losses) gains.......................... (41,652) 27,380
Remaining net obligation at transition............ (53,132) (60,522)
Prior service cost................................ (106,924) (115,998)
Additional minimum liability........................ 31,412 17,213
--------- ---------
Accrued pension obligation.......................... $ 107,160 $ 68,093
========= =========
</TABLE>
F-18
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The accrued pension obligation is classified for financial statement
presentation as of December 31, 1995 and 1994, as follows:
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Pension liability, a component of current liabilities..... $ 12,471 $ --
Long term pension obligation.............................. 94,689 68,093
-------- -------
$107,160 $68,093
======== =======
</TABLE>
The Company's projected, accumulated and vested pension obligations and
expense have been actuarially measured through the use of certain significant
assumptions. The table below depicts the assumptions used to measure the
Company's pension obligations and its net periodic expense.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average interest rate used to
discount the projected, accumulated and
vested benefit obligations to present
value.................................. 7.25% 8.5% 7.5%
Expected rate of return on plan assets.. 8.75% 8.75% 8.75%
Assumed increase in compensation 2% for 2% for 2% for
levels................................. 1 year 2 years 3 years
and 4% and 4% and 4%
thereafter thereafter thereafter
</TABLE>
The assumed weighted average interest rate used to discount the pension
obligations to present value is based upon the rates of return on high-
quality, fixed-income investments currently available.
The Company's accumulated pension benefit obligation exceeded assets
available for plan benefits and the Company's unfunded accrued pension
obligations by $31.4 million and $17.2 million as of December 31, 1995 and
1994, respectively. As a result, the Company recognized at the respective
dates an additional minimum liability and an intangible asset of an equal
amount. The increase in the additional minimum liability and intangible asset
as of December 31, 1995, from a year earlier results principally from the
lower interest rate assumption used to discount the accumulated pension
benefit obligation to present value which reflects the recent trend of
decreasing rates of return available on long term investments.
In the first quarter of 1993, as part of the Company's ongoing cost
reduction program, an enhanced retirement package was offered through December
31, 1994, to employees meeting certain eligibility requirements. The Company
recognized a pretax restructuring charge of $17.3 million to account for the
costs associated with implementing the enhanced retirement package.
Benefits Other Than Pensions
Substantially all of the Company's retirees are covered under medical and
life insurance plans.
Retirees who have not yet reached age 65 are entitled to medical benefits
that provide for first-dollar coverage on certain hospital and surgical
services, major medical coverage that contains retiree-paid deductibles and
co-insurance requirements, and a prescription drug program under which a
majority of the cost is paid by the Company. Retirees who have reached age 65
are covered by the same plan, except they are not eligible for the
prescription drug program and the payment of plan benefits is coordinated with
Medicare on a nonduplication basis.
As a result of the collective bargaining agreements with the Company's
represented employees that became effective in September 1993, retirees who
have not yet reached age 65 who retire after January 1, 1995, are
F-19
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
covered by a Point of Service plan which contains retiree paid deductibles and
lower out of network coverage. Such agreements, among other things, limit the
Company's exposure to increased costs of providing these benefits by requiring
retiree contributions should actual costs exceed certain amounts established
under the plan.
Coverage under the medical plan is extended to spouses and unmarried children
with certain age restrictions. Eligibility for benefits continues beyond the
death of the retiree or active employee eligible to retire.
Life insurance benefits provided to retirees are generally based upon annual
base pay at retirement for salaried employees and specific amounts for hourly
employees.
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
106. This accounting method required the accrual of the estimated cost of
retirees' medical and other benefits over the periods during which employees
render the service that qualifies them for such benefits. The provisions of the
standard allowed for a "transition obligation," representing benefits earned in
prior periods by both retirees and current employees, to be recognized in the
period in which the standard was adopted or amortized prospectively over a
period of up to 20 years. The Company elected to immediately recognize its
transition obligation upon adoption, which as of January 1, 1993, was
actuarially determined to be $303.9 million.
The amount of net periodic expense for postretirement health care and life
insurance benefits recognized in 1995, 1994 and 1993 is comprised of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during period....... $ 5,373 $ 7,214 $11,833
Interest cost on accumulated postretirement
benefit obligation.............................. 25,082 20,618 18,548
Net amortization and deferral.................... (4,693) (4,680) --
------- ------- -------
$25,762 $23,152 $30,381
======= ======= =======
</TABLE>
The actuarially determined net periodic expense in 1995, 1994 and 1993 for
retiree medical and life insurance benefits exceeded the $20.4 million, $13.1
million and $12.4 million cash outlay for providing such benefits by
approximately $5.4 million, $10.0 million and $18.0 million, respectively.
The following table sets forth the components of the accumulated
postretirement benefit obligation and the reconciliation of amounts recognized
as of December 31, 1995 and 1994 :
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation
attributable to:
Retirees and beneficiaries........................... $234,058 $184,537
Active employees fully eligible for benefits......... 25,507 23,649
Other active participants............................ 63,524 66,276
-------- --------
Total accumulated postretirement benefit obligation.... 323,089 274,462
Items not yet recognized:
Actuarial (losses) gains............................. (18,540) 19,212
Prior service cost................................... 32,763 38,252
-------- --------
Accrued postretirement benefit obligation.............. $337,312 $331,926
======== ========
</TABLE>
F-20
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The accrued postretirement benefit obligation as of December 31, 1995 and
1994, is classified for financial statement presentation as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accrued postretirement benefits, a component of accrued
employment costs....................................... $ 19,419 $ 15,741
Postretirement benefits other than pensions............. 317,893 316,185
-------- --------
$337,312 $331,926
======== ========
</TABLE>
The increase in the Company's accumulated postretirement benefit obligation
as of December 31, 1995, compared to 1994 results primarily from a lower
interest rate assumption used to discount the obligation to present value
reflecting the recent trend of decreasing rates of return available on long
term investments. Consistent with the Company's approach to measuring its
accumulated benefit obligation for pensions, the interest rate used to measure
the obligation as of December 31, 1995, was decreased to 7.25%. The interest
rate used to discount the accumulated postretirement obligation to present
value as of December 31, 1994, was 8.5%.
The medical cost and administrative expense rates used to project
anticipated cash flows and measure the Company's postretirement benefit
obligation as of December 31, 1995, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>
FOR RETIREES WHO HAVE NOT YET FOR RETIREES WHO ARE AGE 65
REACHED AGE 65 AND OLDER
-------------------------------- -------------------------------
1995 1994 1993 1995 1994 1993
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Base medical cost trend:
Rate in first year.... 9.0% 9.5% 10.0% 8.0% 8.25% 8.5%
Ultimate rate......... 4.25% 5.5% 4.5% 4.25% 5.5% 4.5%
Year in which ultimate
rate is reached...... 2003 2003 2003 2003 2003 2003
Major medical cost
trend:
Rate in first year.... 11.80% 13.1% 14.4% N/A N/A N/A
Ultimate rate......... 4.25% 5.5% 4.5% N/A N/A N/A
Year in which ultimate
rate is reached...... 2003 2003 2003 N/A N/A N/A
Administrative expense
trend.................. 4.25% 5.5% 4.5% 4.25% 5.5% 4.5%
</TABLE>
A one percentage point increase in the assumed health care trend rates for
each future year would have increased the aggregate service and interest cost
components of the net periodic expense by $2.0 million, $1.9 million and $4.8
million in 1995, 1994 and 1993, respectively, and would have increased the
accumulated postretirement benefit obligation by $21.1, million and $18.6
million as of December 31, 1995 and 1994, respectively.
For purposes of measuring life insurance benefits as of December 31, 1995
and 1994, increases in compensation levels were assumed to be 2% through 1996
and 4% thereafter.
Other
As a condition of the purchase of the Company's assets from NSC, NSC agreed
to retain liability for pension service and the cost of life and health
insurance for employees of the Company's predecessor business who retired
through May 1, 1983. NSC also retained the liability for pension service
through May 1, 1983, for employees of the predecessor business who became
active employees of the Company.
F-21
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8
POSTEMPLOYMENT BENEFITS
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
112. This standard required the Company to recognize the present value of its
obligation to provide certain benefits to former or inactive employees who are
not yet eligible for retirement. Liabilities associated with (i) workers'
compensation, (ii) severance programs which include medical coverage
continuation and (iii) sickness and accident protection, which includes
medical and life insurance benefits, are the major items comprising the
Company's obligation for postemployment benefits.
Consistent with the assumptions used to measure the Company's accumulated
benefit obligations for pensions and retiree health care and life insurance
benefits, the interest rate used to discount the accumulated postemployment
benefit obligation to present value as of December 31, 1995 and 1994 was 7.25%
and 8.5%, respectively.
Other actuarial assumptions and demographic data, as applicable, that were
used to measure the postemployment benefit obligation as of December 31, 1995
and 1994, were consistent with those used to measure pension and other
postretirement benefit obligations for each respective year.
Upon determination as of January 1, 1993, of the accumulated postemployment
transition obligation, and after considering amounts already accrued, the
Company recognized in 1993 a cumulative accounting charge of $4.0 million to
fully recognize its postemployment benefit obligation as of January 1, 1993.
NOTE 9
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
109. Under SFAS No. 109, deferred income tax assets and liabilities are
recognized reflecting the future tax consequences of net operating loss and
tax credit carryforwards and differences between the tax basis and the
financial reporting basis of assets and liabilities. The components of the
Company's deferred income tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss and tax credit carryforwards...... $ 101,325 $ 92,423
Deductible temporary differences:
Inventories........................................ 15,662 16,910
Property, plant and equipment...................... 204 17,044
Pensions and other long term liabilities........... 16,101 19,840
Postretirement benefits other than pensions........ 131,779 128,221
Other deductible temporary differences............. 20,715 17,240
Valuation allowance................................ (30,943) (42,640)
--------- ---------
254,843 249,038
Deferred tax liabilities:
Accumulated depreciation............................. (119,393) (107,975)
--------- ---------
Net deferred tax asset................................. $ 135,450 $ 141,063
========= =========
</TABLE>
As of December 31, 1995, the Company had available, for federal and state
income tax purposes, regular net operating loss carryforwards of approximately
$183.2 million expiring in 2006 through 2008; an alternative minimum tax
credit of approximately $17.8 million; and general business tax credits of
approximately $11.6 million.
F-22
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1995 and 1994, as a result of its deferred tax attributes, the Company
did not generate any liability for regular federal income tax purposes;
however, after utilization of available alternative minimum tax net operating
loss carryforwards of $4.7 million in 1995 and $11.7 million in 1994 and $2.5
million and $1.5 million of available general business credits in 1995 and
1994, respectively, the Company recognized alternative minimum taxes of $6.0
million and $4.6 million in 1995 and 1994, respectively.
As of January 1, 1993, deferred tax liabilities associated with existing
taxable temporary differences exceeded deferred tax assets from future
deductible temporary differences, excluding those attributable to SFAS No.
106, by approximately $24.6 million. The recognition by the Company, as of
January 1, 1993, of the entire transition obligation related to adopting the
provisions of SFAS No. 106 resulted in the recognition of a $115.5 million
deferred tax asset. Future operating costs under SFAS No. 106 are expected to
exceed deductible amounts for income tax purposes for many years. In addition,
under current federal tax regulations, should the Company incur tax losses in
future periods, such losses may be carried forward to offset taxable income
for a period of up to 15 years. Based upon the length of the period during
which the SFAS No. 106-generated deferred tax asset can be utilized and the
Company's expectations that under its current business strategy it will be
able to generate taxable income over the long term, the Company believes that
it is more likely than not that future taxable income will be sufficient to
fully offset these future deductions.
The length of time associated with the carryforward period available to
utilize net operating losses and certain tax credits not associated with SFAS
No. 106 liabilities, is more definite. A significant portion of these net
operating losses are attributable to the realization of differences between
the tax basis and financial reporting basis of the Company's fixed assets. In
the aggregate, such differences, including depreciation, are expected to
reverse within the allowable carryforward periods. In addition, certain tax
planning strategies that include, but are not limited to, changes in methods
of depreciation for tax purposes, adjustments to employee benefit plan funding
strategies and potential sale lease-back arrangements, could be employed to
avoid expiration of the attributes.
Notwithstanding the Company's expectations as to its ability to fully
utilize its deferred tax attributes, the Company, since it adopted the
provisions of SFAS No. 109, has conservatively recognized a valuation
allowance that reduces the carrying value of its deferred tax attributes on a
basis that considers the individual characteristics of the attributes
comprising its deferred tax assets.
The elements of the Company's deferred income taxes associated with its
results before extraordinary item and cumulative effect of accounting changes
for the years ended December 31, 1995, 1994 and 1993, respectively, along with
the allocation of deferred taxes to other income statement items are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current income tax provision:
Federal.................................... $ (6,014) $ (4,579) $ --
Deferred income tax (provision) benefit:
Federal.................................... (17,839) (10,242) 21,421
State...................................... (2,726) (1,694) 2,248
Valuation allowance........................ 13,324 9,061 (10,397)
-------- -------- --------
Income tax (provision) benefit........... (13,255) (7,454) 13,272
Other components of the Company's total
income tax (provision) benefit are allocated
to the consolidated statements of income as
follows:
Deferred income tax benefit allocated to
extraordinary item........................ 1,627 933 1,536
Deferred income tax benefit allocated to
cumulative effect on prior years of
accounting changes........................ -- -- 128,197
-------- -------- --------
Total income tax (provision) benefit..... $(11,628) $ (6,521) $143,005
======== ======== ========
</TABLE>
F-23
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The total income tax provision recognized by the Company in 1995 reconciles
to that computed under the federal statutory corporate rate as follows:
<TABLE>
<CAPTION>
INCOME BEFORE EXTRAORDINARY
INCOME TAXES ITEM TOTAL
------------- ------------- --------
<S> <C> <C> <C>
Federal income tax (provision)
benefit computed at statutory rate
of 35%............................. $(23,853) $ 2,921 $(20,932)
State income taxes net of federal
income tax effect.................. (2,726) 333 (2,393)
Valuation allowance................. 13,324 (1,627) 11,697
-------- ------- --------
$(13,255) $ 1,627 $(11,628)
======== ======= ========
</TABLE>
The total income tax provision recognized by the Company in 1994 reconciles
to that computed under the federal statutory corporate rate as follows:
<TABLE>
<CAPTION>
INCOME BEFORE EXTRAORDINARY
INCOME TAXES ITEM TOTAL
------------- ------------- --------
<S> <C> <C> <C>
Federal income tax (provision)
benefit computed at statutory rate
of 35%............................. $(14,821) $1,675 $(13,146)
State income taxes net of federal
income tax effect.................. (1,694) 191 (1,503)
Valuation allowance................. 9,061 (933) 8,128
-------- ------ --------
$ (7,454) $ 933 $ (6,521)
======== ====== ========
</TABLE>
The total income tax provision recognized by the Company in 1993 reconciles
to that computed under the federal statutory corporate rate as follows:
<TABLE>
<CAPTION>
CUMULATIVE
EFFECT OF
LOSS BEFORE EXTRAORDINARY ACCOUNTING
INCOME TAXES ITEM CHANGES TOTAL
------------ ------------- ---------- --------
<S> <C> <C> <C> <C>
Federal income tax benefit
computed at statutory rate
of 34%..................... $ 19,095 $ 2,748 $149,450 $171,293
State income taxes net of
federal income tax effect.. 2,248 324 17,582 20,154
Effect of retroactive change
in federal statutory rate
to 35% and other
adjustments................ 2,326 -- -- 2,326
Valuation allowance......... (10,397) (1,536) (38,835) (50,768)
-------- ------- -------- --------
$ 13,272 $ 1,536 $128,197 $143,005
======== ======= ======== ========
</TABLE>
NOTE 10
REDEEMABLE STOCKS
In June 1989, the Company sold 1.8 million shares of the Series A Preferred
to the 1989 ESOP. The 1989 ESOP financed the purchase by issuing to the
Company a $26.1 million promissory note, payable ratably over a 10 year
period. Each share of Series A Preferred is convertible at any time into one
share of common stock, subject to adjustment, is entitled to 10 times the
number of votes allotted to the common stock into which it is convertible, and
has a preference on liquidation over common stock of $5 per share. The Series
A Preferred has no preference over common stock as to dividends. The Series A
Preferred is not intended to be readily tradable on an established market. As
such, shares of Series A Preferred distributed to 1989 ESOP participants
following
F-24
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
termination of service are given a right, exercisable for limited periods
prescribed by law, to cause the Company to repurchase the shares at fair
value. The Company also has a right of first refusal upon proposed transfers
of distributed shares of Series A Preferred which it has agreed, to the extent
it is permitted, to exercise and to contribute or sell reacquired shares to
the 1989 ESOP. In 1994, the 1989 ESOP was amended to provide that shares of
Series A Preferred reacquired by the 1989 ESOP be reallocated annually among
active employee participants on a per capita basis. If not repurchased by the
Company or reacquired by the 1989 ESOP, shares of Series A Preferred
automatically convert into common stock upon transfer by a distributee.
In October 1991, the Company issued 0.5 million shares of the Series B
Preferred to Cleveland-Cliffs Inc for a purchase price equal to the aggregate
redemption amount of $25.0 million. The Series B Preferred was entitled to
annual dividends of $6.25 per share. The Company redeemed all the Series B
Preferred in September 1994. In connection with the Series B Preferred
issuance, the Company entered into a supply agreement with a subsidiary of
Cleveland-Cliffs Inc to furnish the Company with the majority of its iron ore
pellet requirements for a 12 year period which began in 1992 and extends
through 2005. Upon redemption, the Series B Preferred lost its serial
designation.
NOTE 11
STOCK PLANS
The Company has a stock option plan (the "1987 Stock Option Plan") which
provides for 750,000 shares of the Company's common stock to be available for
the granting of options. In 1995, the Company granted options to purchase
55,000 shares of the Company's common stock at exercise prices ranging from
$4.38 per share to $8.88 per share. Options covering 521,000 shares were
granted in 1994 at an exercise price of $8.69 per share. Generally, the
options granted under the 1987 Stock Option Plan vest in one-third increments
beginning two years after the grant date, with the remaining two-thirds
becoming exercisable ratably after the third and fourth years.
No stock options were granted in 1993. Options covering 180,000 shares were
outstanding as of December 31, 1995, that were granted prior to 1993 under
employment contracts with certain executive officers at an exercise price of
$8.33 per share. All such options remain outstanding and exercisable. Options
granted under the 1987 Stock Option Plan are exercisable for a maximum of 10
years following the date of grant.
Activity under the 1987 Stock Option Plan is summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Options outstanding at beginning of period......... 701,000 240,000 240,000
Granted............................................ 55,000 521,000 --
Repurchased/forfeited.............................. (8,000) (60,000) --
Exercised.......................................... -- -- --
------- ------- -------
Outstanding at end of period....................... 748,000 701,000 240,000
======= ======= =======
Exercisable at end of period....................... 270,000 180,000 240,000
Available for future grant......................... 2,000 49,000 510,000
</TABLE>
In October 1989, the Company registered 1.5 million shares of its common
stock to be offered over a 5-year period beginning January 1, 1990, to
eligible employees through payroll deductions under its 1989 Employee Stock
Purchase Plan. In October 1994, the Company registered an additional 5.0
million shares of its common stock to be offered over a 5-year period
beginning January 1, 1995, to eligible employees under its 1994 Employee Stock
Purchase Plan. The 1994 Employee Stock Purchase Plan provides for participants
to purchase the Company's common stock at 85% of the lesser of the stock's
closing price at the beginning or the end of
F-25
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
each year. As of December 31, 1995, 295,764 shares valued at approximately
$0.9 million were issuable in accordance with the 1994 Employee Stock Purchase
Plan.
During 1991, the Company adopted a deferred compensation plan (the
"Directors' Deferred Compensation Plan") to permit non-employee members of the
Board of Directors to receive shares of common stock in lieu of cash payments
for total compensation or a portion thereof for services provided in their
capacity as a member of the Board of Directors. The Director's Deferred
Compensation Plan provides for the stock portion of the directors compensation
to be valued at 90% of the lesser of the stock's average trading price at the
beginning and the end of each year. As of December 31, 1995, 36,312 shares
valued at $0.1 million were issuable to the directors who selected deferred
compensation.
NOTE 12
ESOP FINANCING
The purchase by the 1989 ESOP of the Series A Preferred was financed through
the issuance of a $26.1 million promissory note to the Company payable ratably
over a 10 year period. The Company's contribution to the 1989 ESOP for the
principal and interest components of debt service was immediately returned. As
such, the respective interest income and expense on the ESOP notes were
entirely offset within the Company's net financing costs.
Effective November 1, 1990, the 1989 ESOP entered into a refinancing, which
was guaranteed by the Company, under which $19.0 million of 9.0% ESOP notes
were sold to certain institutional investors. Following this refinancing, the
net interest expense component of the Company's ESOP contribution was included
in interest expense.
In connection with the Company's sale of $140.0 million of its Senior Notes
in March 1993, the Company purchased the balance of the outstanding 9.0% ESOP
notes which had been reduced to the principal amount of $14.1 million.
Following this purchase, the Company was reestablished as the sole lender to
the 1989 ESOP and, as such, the interest income and expense related to the
9.0% ESOP notes are offset within the Company's net financing costs.
NOTE 13
EARNINGS PER SHARE
The weighted average number of common and common equivalent shares used in
the calculation of the income (loss) per common share was 43,781,395,
34,469,921 and 26,472,907 for the years ended December 31, 1995, 1994 and
1993, respectively. The shares of Series A Preferred were excluded from the
1993 calculations due to their antidilutive effect. The assumed exercise of
stock options would not result in significant dilution in those periods.
If the 1994 offering of the Company's common stock had taken place on
January 1, 1994, and the net proceeds therefrom along with $32.3 million of
the Company's available cash on hand had been used as previously described,
the net income for the year ended December 31, 1994, would have increased to
$40.2 million. Accordingly, the respective net results per share applicable to
common stock would have been net income of $0.92 per common share.
F-26
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14
ENVIRONMENTAL COMPLIANCE, LEGAL PROCEEDINGS AND COMMITMENTS
Environmental Compliance
The Company, as well as its domestic competitors, is subject to stringent
federal, state and local environmental laws and regulations concerning, among
other things, waste water discharges, air emission and waste disposal. The
Company spent approximately $3.9 million for pollution control capital
projects in 1995.
Pursuant to agreements entered into between the Company and NSC under which
the Company acquired its operating assets in 1984, NSC retained liability,
including governmental and third-party claims, arising from environmental
violations prior to the acquisition. NSC also retained liability for cleanup
costs, including third-party claims, related to solid or hazardous waste
sites, as long as the sites were not used by the Company in its operations
subsequent to the acquisition.
In March 1996, the EPA advised the Company that it had identified a number
of enforcement issues pertaining to waste water discharges, air emissions and
waste handling operations by the Company. The EPA proposed that the parties
attempt to resolve these issues during a six-month negotiation period. The EPA
indicated that it would expect a negotiated settlement to include necessary
corrective steps to address noncompliance issues, remediation programs to
address contamination at solid waste management units and a civil penalty.
However, the EPA also indicated that consideration would be given to
offsetting any cash penalty through the Company's performance of supplemental
environmental projects. If a negotiated settlement could not be reached by
September 15, 1996, the EPA indicated that it would commence a civil
enforcement action in federal court. The Company agreed to proceed with the
negotiation process, which began on March 14, 1996. The Company cannot predict
the results of its negotiations with the EPA, including whether an agreement
can be reached, the cost of any required compliance, or the extent of any
penalty. Likewise, the Company cannot predict whether the EPA will initiate
enforcement proceedings or their outcome. Based on its review of the matters
involved, and discussions to date with representatives of the EPA, while no
assurance can be given, the Company does not believe that any fines, penalties
or costs to remediate would have a material effect on the Company's financial
position or results of operations. However, it is expected that related
capital expenditure projects and required changes in operating practices will
increase future operating costs, which may have a significant effect on future
results of operations.
The Company intends to comply with all legal requirements regarding the
environment. New or expanded environmental requirements could increase the
Company's environmental costs in the future. Since the effect of future
requirements are not presently determinable, it is not possible to predict
with a high degree of precision the ultimate future cost of compliance;
however, the Company does not believe the future costs of environmental
compliance or the cost of current outstanding environmental matters will have
a material effect on its financial position, results of operations or on its
competitive position with respect to other integrated domestic steelmakers
that are generally subject to the same environmental requirements.
Legal Proceedings
The Company, in the ordinary course of business, is the subject of, or party
to, various pending or threatened legal actions. The Company believes that any
ultimate liability resulting from these actions will not have a material
adverse effect on its financial position or results of operations.
Commitments
In October 1991, the Company entered into a supply agreement with a
subsidiary of Cleveland-Cliffs Inc to provide the majority of its iron ore
pellet requirements beginning in 1992 and extending through 2005.
F-27
<PAGE>
WEIRTON STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In July 1993, the Company entered into an agreement with USX Corporation to
purchase blast furnace coke during the remainder of 1993 through December
1996. The agreement provides for the purchase of 750,000 tons of blast furnace
coke in 1996, or the actual annual requirement of the Company if less than the
stated amount. The price is to be the prevailing market price (subject to a
ceiling and floor) for blast furnace coke determined each October prior to the
delivery year.
NOTE 15
LINE OF BUSINESS INFORMATION
The Company operates a single line of business, the making and finishing of
carbon steel products including sheet and tin mill products. In 1995 and 1994,
no single customer accounted for 10% or more of net sales. In 1993 one
customer accounted for 11% of net sales. Approximately 82% of the Company's
workforce is covered under collective bargaining agreements with the
Independent Steelworkers' Union and Independent Guards' Union. The current
collective bargaining agreements are due to expire in September 1996.
NOTE 16
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS AND SIGNIFICANT GROUP
CONCENTRATIONS OF CREDIT RISK
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND EQUIVALENTS
The carrying amount approximates fair value because of the short maturity of
those investments.
REDEEMABLE PREFERRED STOCK
The fair value of the Series A Preferred stock was determined based upon an
independent appraisal performed as of December 31, 1995 and 1994.
LONG TERM DEBT
The fair values of the Company's long term debt obligations are estimated
based upon quoted market prices.
The estimated fair values of the Company's financial instruments are as
follows as of December 31, 1995 and 1994, respectively:
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and equivalents.................... $131,811 $131,811 $ 62,905 $ 62,905
Series A Redeemable Preferred stock..... 25,003 7,113 25,687 15,900
Long term debt obligations.............. 407,869 408,231 394,505 392,526
</TABLE>
SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
As of December 31, 1995 and 1994, the Company had trade receivables
outstanding of $17.3 million and $12.8 million, respectively, from customers
who had been acquired in leveraged transactions.
F-28
<PAGE>
WEIRTON STEEL CORPORATION
All tendered Senior Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
BANKERS TRUST COMPANY
By Facsimile:
(212) 250-6037
Confirm By Telephone:
(212) 250-6270
By Mail:
Bankers Trust Company
Corporate Trust and Agency Group
Reorganization Dept.
P.O. Box 1458
Church Street Station
New York, New York 10008-1458
By Hand/Overnight Delivery:
Bankers Trust Company
Corporate Trust and Agency Group
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company, which is a Delaware corporation, is empowered by the Delaware
General Corporation Law, subject to the procedures and limitations stated
therein, to indemnify any person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or completed
action, suit or proceeding in which such person is made a party by reason of
his being or having been a director, officer, employee or agent of the
Company. The statute provides that indemnification pursuant to its provisions
is not exclusive of other rights of indemnification to which a person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. The Certificate of Incorporation and By-Laws of the
Company provide for indemnification of the directors and officers of such
entities to the full extent permitted by the Delaware General Corporation Law.
Article Twelve of the Company's Certificate of Incorporation provides as
follows:
"TWELFTH. No director of the Corporation shall be personally liable to
the Corporation or to any stockholder for monetary damages for a breach of
fiduciary duty as a director, except liability (i) for any breach of a
director's duty of loyalty to the Corporation or to its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for unlawful payments of
dividends or unlawful purchases by the Corporation of its capital stock
pursuant to Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which a director receives an improper personal
benefit, except to the extent any such liability is subsequently authorized
by the law of Delaware to be reduced or eliminated. No amendment to or
repeal of any of the provisions of this Article TWELFTH shall eliminate or
reduce the effect of this Article TWELFTH in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article
TWELFTH would accrue or arise, prior to such amendment or repeal of an
inconsistent provision."
Article IX of the Company's By-Laws provides as follows:
Section 1. Each current or former director, officer, employee or agent of
the Corporation, or any person who may have served at its request as a
director or officer of another corporation in which it owns stock or of
which it is a creditor (or in a comparable position in another form of
entity in which the Corporation owns an equity interest or with which it is
a joint venturer or of which it is a creditor), and such person's heirs,
executors, and administrators (each, an "Indemnitee"), shall be indemnified
by the Corporation against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with any action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Corporation), to which he or she may be
made a party by reason of any alleged acts or omissions in such capacity if
such person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal action or proceeding, such person had no
reasonable cause to believe his or her conduct was unlawful.
Section 2. Each Indemnitee shall be indemnified by the Corporation
against all expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of any alleged acts or omissions in such
capacity if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been finally
adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that despite
the adjudication of liability but in view of all of the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall deem
proper.
II-1
<PAGE>
Section 3. Expenses incurred by an Indemnitee in defending any civil or
criminal action may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Indemnitee to repay such amount if it
shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation.
Section 4. The foregoing rights of indemnification and advancement of
expenses shall be in addition to and not exclusive of any and all other
rights to which such Indemnitee might be entitled as a matter of law.
The Company maintains an insurance policy provided for indemnification of
its officers, directors and certain other persons against liabilities and
expenses incurred by any of them in certain stated proceedings and under
certain stated conditions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation of the Company.(a)
3.2 Certificate of Amendment to Restated Certificate of Incorporation of
the Company.(d)
3.3 By-laws of the Company.(a)
3.4 Amendment to By-laws of the Company.(d)
3.5 Certificate of the Designation, Powers, Preferences and Rights of
the Convertible Voting Preferred Stock, Series A.(b)
4.1 Indenture dated October 17, 1989 between the Company and First Bank
(N.A.), as trustee, relating to the Company's 10 7/8% Senior Notes
Due 1999, including form of Note.(b)
4.2 Indenture dated March 1, 1993 between the Company and Bankers Trust
Company, as trustee, relating to the Company's 11 1/2% Senior Notes
Due 1998, including form of Note.(j)
4.3 First Supplemental Indenture relating to the Company's 11 1/2%
Senior Notes due 1998, dated July 25, 1995. (l)
4.4 Indenture, dated as of June 12, 1995, between the Company and
Bankers Trust Company, as trustee, relating to $125,000,000
principal amount of 10 3/4% Senior Notes due 2005, including form of
Senior Note. (l)
4.5 Indenture dated as of July 3, 1996 between the Company and Bankers
Trust Company, as trustee, relating to $125,000,000 principal amount
of 11 3/8% Senior Notes due 2004, including form of Senior Note.
4.6 Registration Rights Agreement, dated as of July 3, 1996, among the
Company and Lehman Brothers, Inc. and Salomon Brothers Inc.
5 Opinion of Willkie Farr & Gallagher.*
10.1 Pellet Sale Agreement dated June 25, 1991, between USX Corporation
and the Company.(k)
10.2 1984 Employee Stock Ownership Plan, as amended and restated.(b)
10.3 1989 Employee Stock Ownership Plan.(b)
10.4 1987 Stock Option Plan.(a)
10.5 Employment Agreement between Herbert Elish and the Company dated as
of July 1, 1990.(g)
10.6 Employment Agreement between James B. Bruhn and the Company.(a)
10.7 Employment Agreement between Thomas W. Evans and the Company dated
April 21, 1987.(d)
10.8 Employment Agreement between Richard K. Riederer and the Company.(a)
10.9 Amendment dated July 19, 1993 to the Employment Agreement dated
April 21, 1987 between Thomas W. Evans and the Company.(i)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.10 Redacted Pellet Sale and Purchase Agreement dated as of September
30, 1991 between Cleveland-Cliffs Iron Company and the Company.(f)
10.11 Deferred Compensation Plan for Directors effective as of January 1,
1991, for all directors who are not officers or other employees of
the Company.(g)
10.12 Coke Sale Agreement dated January 1, 1993 and signed July 13, 1993
between the Company and USX Corporation.(h)
10.13 Employment Agreement between Craig T. Costello and the Company dated
July 20, 1993.(i)
10.14 Employment Agreement between William R. Kiefer and the Company dated
July 21, 1993.(i)
10.15 Employment Agreement between John H. Walker and the Company dated
July 21, 1993.(i)
10.16 Employment Agreement between Narendra M. Pathipati and the Company
dated December 16, 1993.(i)
10.17 Employment Agreement between Mac S. White and the Company dated July
28, 1993.(i)
10.18 Amendment dated August 5, 1993 to the Employment Agreement dated
July 1, 1990 between Herbert Elish and the Company.(i)
10.19 Amendment dated July 19, 1993 to the Employment Agreement dated June
8, 1987 between David M. Gould and the Company.(i)
10.20 Amendment dated July 21, 1993 to the Employment Agreement dated June
8, 1987 between William C. Brenneisen and the Company. (i)
10.21 Description of the Company's Performance Incentive Plan. (n)
10.22 Amendments to the 1984 and 1989 Employee Stock Ownership Plans,
effective May 26, 1994. (o)
12 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
21 Subsidiary of the Registrant. (m)
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Willkie Farr & Gallagher (included within Exhibit 5).*
24 Powers of Attorney (included on Signature Page).
25 Statement on Form T-1 of Eligibility of Trustee.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Nominees.*
</TABLE>
- --------
* To be filed by amendment.
(a) Incorporated herein by reference to the Company's Registration Statement
on Form S-1, filed May 3, 1989, Commission File No. 33-28515.
(b) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989, filed March 27, 1990,
Commission File No. 1-10244.
(c) Incorporated herein by reference to the Company's Current Report on Form
10-Q for the quarter ended June 30, 1995, Commission File No. 1-10244.
(d) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, filed March 30, 1995,
Commission File No. 1-10244.
(e) Incorporated herein by reference to the Company's Current Report on Form
8-K, filed October 9, 1991, Commission File No. 1-10244.
(f) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992, filed August 14, 1992,
Commission File No. 1-10244.
II-3
<PAGE>
(g) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1990, filed April 1, 1991,
Commission File No. 1-10244.
(h) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993, filed August 13, 1993,
Commission File No. 1-10244.
(i) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, filed March 30, 1994,
Commission File No. 1-10244.
(j) Incorporated herein by reference to Amendment No. 2 to the Company's
Registration Statement on Form S-2, filed February 9, 1993, Commission No.
33-53476.
(k) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1991, filed March 27, 1992,
Commission File No. 1-10244.
(l) Incorporated herein by reference to Amendment No.2 to the Company's
Registration Statement on Form S-2, filed October 6, 1995, Commission File
No. 33-61345.
(m) Incorporated herein by reference to the Company's Registration Statement
on Form S-4, filed July 27, 1995, Commission File No. 33-61345.
(n) Incorporated herein by reference to the caption "Annual Compensation"
appearing on pages 11 and 12 of the Company's Definitive Proxy Statement
dated April 25, 1995 for its 1995 Annual Meeting of Stockholders.
(o) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995, Commission File No. 33-
61345.
(b) Financial Statement Schedules:
Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the provisions, the foregoing provisions described
under Item 20 above, 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 Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of 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 Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this Prospectus pursuant to
Item 4, 10(b), 11 or 13 of Form S-4 of the Securities Act, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of this
Registration Statement through the date of responding to the request.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933. as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Weirton,
State of West Virginia, on July 10, 1996.
WEIRTON STEEL CORPORATION
/s/ Richard K. Riederer
By: Richard K. Riederer
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer and director of Weirton
Steel Corporation whose signature appears below constitutes and appoints
Richard K. Riederer and William R. Kiefer, and each of them, his true and
lawful attorneys-in-fact and agents, with full and several power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said atttorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in fact and agents or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Richard K. Riederer President and Chief July 10, 1996
- ------------------------------------- Executive Officer
RICHARD K. RIEDERER (principal
executive officer)
/s/ Earl E. Davis, Jr. Chief Financial July 10, 1996
- ------------------------------------- Officer (principal
EARL E. DAVIS, JR. financial officer)
/s/ Richard E. Burt Chairman of the July 10, 1996
- ------------------------------------- Board of Directors
RICHARD E. BURT
/s/ Michael Bozic Director July 10, 1996
- -------------------------------------
MICHAEL BOZIC
Director July , 1996
- -------------------------------------
JAMES B. BRUHN
/s/ Craig T. Costello Director July 10, 1996
- -------------------------------------
CRAIG T. COSTELLO
Director July , 1996
- -------------------------------------
ROBERT J. D'ANNIBALLE, JR.
Director July , 1996
- -------------------------------------
MARK G. GLYPTIS
II-5
<PAGE>
SIGNATURE TITLE DATE
Director July , 1996
- -------------------------------------
PHILLIP A. KARBER
/s/ Joseph J. Nowak Director July 10, 1996
- -------------------------------------
JOSEPH J. NOWAK
/s/ Robert S. Reitman Director July 10, 1996
- -------------------------------------
ROBERT S. REITMAN
Director July , 1996
- -------------------------------------
RICHARD F. SCHUBERT
/s/ Thomas R. Sturges Director July 10, 1996
- -------------------------------------
THOMAS R. STURGES
/s/ David J. Wang Director July 10, 1996
- -------------------------------------
DAVID J. WANG
/s/ Ronald C. Whitaker Director July 10, 1996
- -------------------------------------
RONALD C. WHITAKER
/s/ Mark E. Kaplan Controller July 10, 1996
- ------------------------------------- (principal
MARK E. KAPLAN accounting officer)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
4.5 Indenture dated as of July 3, 1996 between the Company and Bankers Trust
Company, as trustee relating to $125,000 principal amount at 11 3/8%
Senior Notes due 2004, including form of Senior Note.
4.6 Registration Rights Agreement, dated as of July 3, 1996, among the
Company and Lehman Brothers Inc. and Salomon Brothers Inc.
5 Opinion of Willkie Farr & Gallagher.*
12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.*
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Willkie Farr & Gallagher (included within Exhibit 5).*
24 Powers of Attorney (included on Signature Page).
25 Statement on Form T-1 of Eligibility of Trustee.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Nominees.*
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 4.5
========================================================
WEIRTON STEEL CORPORATION
AND
BANKERS TRUST COMPANY, Trustee
Indenture
Dated as of July 3, 1996
__________
$125,000,000
11 3/8% Senior Notes Due 2004
========================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. DEFINITIONS.................................................. 2
Section 1.1. Certain Terms Defined.................................... 2
Acquired Indebtedness.......................................... 3
Affiliate...................................................... 3
Asset Disposition.............................................. 3
Asset Disposition Offer........................................ 3
Attributable Debt.............................................. 3
Board of Directors............................................. 4
Business Day................................................... 4
Capital Stock.................................................. 4
Cash Equivalents............................................... 4
Change of Control.............................................. 5
Certificated Securities........................................ 5
Commission..................................................... 5
Commodity Agreement............................................ 5
Common Stock................................................... 5
Consolidated EBITDA............................................ 5
Consolidated Fixed Charges..................................... 5
Consolidated Net Income........................................ 6
Consolidated Net Tangible Assets............................... 7
Consolidated Net Worth......................................... 8
Consolidated Subsidiary........................................ 8
Continuing Director............................................ 8
Corporate Trust Office......................................... 8
Currency Agreement............................................. 8
Default........................................................ 8
Depositary..................................................... 8
Disqualified Stock............................................. 8
Efficiency Program............................................. 9
Event of Default............................................... 9
Exchange Act................................................... 9
Exchange Act Reports........................................... 9
Exchange Offer................................................. 9
Exchange Offer Registration Statement.......................... 9
Exchange Securities............................................ 9
GAAP........................................................... 10
Global Securities.............................................. 10
Holder", "holder of Securities", "Securityholder............... 10
Indebtedness................................................... 10
Indenture...................................................... 10
Initial Purchasers............................................. 10
Interest Protection Agreement.................................. 11
Investments.................................................... 11
Issue Date..................................................... 11
Issuer......................................................... 11
Institutional Accredited Investor.............................. 11
Legended Security.............................................. 11
Lien........................................................... 11
Liquidated Damages............................................. 11
i
<PAGE>
Net Cash Proceeds.............................................. 12
Net Income..................................................... 12
Offer Amounts.................................................. 12
Offer Period................................................... 12
Offering Memorandum............................................ 13
Officers' Certificate.......................................... 13
Opinion of Counsel............................................. 13
Original issue date............................................ 13
Outstanding.................................................... 13
Permitted Indebtedness......................................... 14
Permitted Joint Venture........................................ 15
Permitted Liens................................................ 15
Permitted Payments............................................. 15
Permitted Working Capital Indebtedness......................... 16
Person......................................................... 16
Preferred Stock................................................ 16
principal...................................................... 16
Private Exchange Security...................................... 16
Prohibited Investment.......................................... 16
Property....................................................... 16
Purchase Date.................................................. 17
QIB............................................................ 17
Refinancing Indebtedness....................................... 17
Registrar...................................................... 17
Registration Default........................................... 17
Registration Rights Agreement.................................. 17
Repurchase Date................................................ 17
Responsible Officer............................................ 17
Restricted Payment............................................. 18
Rule 144A...................................................... 18
Rule 144A Global Security...................................... 18
Security" or "Securities....................................... 18
Securities Act................................................. 18
Securities Legend.............................................. 19
Shelf Notice................................................... 19
Shelf Registration Statement................................... 19
Subsidiary..................................................... 19
Trustee........................................................ 19
Trust Indenture Act of 1939.................................... 19
Unregistered Securities........................................ 19
Voting Stock................................................... 19
Wholly Owned Subsidiary........................................ 19
ARTICLE II. ISSUE, EXECUTION, FORM AND REGISTRATION
OF SECURITIES.............................................. 19
Section 2.1. Authentication and Delivery of Securities; Issuance
of Exchange Securities.............................. 19
Section 2.2. Execution of Securities............................. 22
Section 2.3. Certificate of Authentication....................... 22
Section 2.4. Form, Denomination and Date of Securities; Payments
of Interest......................................... 22
Section 2.5. Restrictive Legends................................. 25
Section 2.6. Registration, Transfer and Exchange................. 27
ii
<PAGE>
Section 2.7. Book-Entry Provisions for Global
Securities.................................. 28
Section 2.8. Special Transfer Provisions................. 30
Section 2.9. Mutilated, Defaced, Destroyed,
Lost and Stolen Securities.................. 34
Section 2.10. Cancellation of Securities;
Destruction Thereof......................... 35
Section 2.11. Temporary Securities........................ 35
SECTION 2.12. Wire Payments............................... 36
SECTION 2.13. Deposit of Moneys........................... 36
ARTICLE III. COVENANTS OF THE ISSUER AND THE TRUSTEE.............. 37
Section 3.1. Payment of Principal and Interest........... 37
Section 3.2. Offices for Payments, etc................... 37
Section 3.3. Appointment to Fill a Vacancy
in Office of Trustee........................ 37
Section 3.4. Paying Agents............................... 38
Section 3.5. Certificate to Trustee...................... 39
Section 3.6. Securityholders' Lists...................... 39
Section 3.7. Reports to Holders of the Securities........ 39
Section 3.8. Reports by the Trustee...................... 40
Section 3.9. Limitations on Indebtedness................. 40
Section 3.10. Limitations on Restricted Payments.......... 41
Section 3.11. Limitations on Transactions with
Affiliates.................................. 42
Section 3.12. Restrictions on Disposition of
Assets of the Issuer........................ 43
Section 3.13. Limitations on Liens........................ 46
Section 3.14. Limitations on Sale and
Leaseback Transactions...................... 47
Section 3.15. Limitations on Dividend and Other Payment
Restrictions Affecting Subsidiaries......... 47
Section 3.16. Change of Control Option.................... 47
ARTICLE IV. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT................................... 50
Section 4.1. Event of Default Defined;
Acceleration of Maturity; Waiver of Default. 50
Section 4.2. Collection of Indebtedness by Trustee;
Trustee May Prove Debt...................... 52
Section 4.3. Application of Proceeds..................... 54
Section 4.4. Suits for Enforcement....................... 55
Section 4.5. Restoration of Rights on Abandonment
of Proceedings.............................. 56
Section 4.6. Limitations on Suits by Securityholders..... 56
Section 4.7. Powers and Remedies Cumulative;
Delay or Omission Not Waiver of Default..... 56
Section 4.8. Control by Securityholders.................. 57
Section 4.9. Waiver of Past Defaults..................... 57
Section 4.10. Notice of Defaults.......................... 58
Section 4.11. Rights of Holders to Receive Payment........ 58
iii
<PAGE>
ARTICLE V. CONCERNING THE TRUSTEE.................................... 58
Section 5.1. Duties and Responsibilities of the
Trustee; During Default; Prior
to Default...................................... 58
Section 5.2. Certain Rights of the Trustee................... 60
Section 5.3. Trustee Not Responsible for Recitals,
Disposition of Securities or Application
of Proceeds Thereof............................. 61
Section 5.4. Trustee and Agents May Hold Securities;
Collections, etc................................ 62
Section 5.5. Moneys Held by Trustee.......................... 62
Section 5.6. Compensation and Indemnification of
Trustee and Its Prior Claim..................... 62
Section 5.7. Right of Trustee to Rely on Officers'
Certificate, etc................................ 63
Section 5.8. Persons Eligible for Appointment as Trustee..... 63
Section 5.9. Resignation and Removal; Appointment
of Successor Trustee............................ 63
Section 5.10. Acceptance of Appointment by
Successor Trustee............................... 65
Section 5.11. Merger, Conversion, Consolidation or
Succession to Business of Trustee............... 65
Section 5.12. Preferential Collection of Claims
Against Issuer.................................. 66
ARTICLE VI. CONCERNING THE SECURITYHOLDERS............................ 67
Section 6.1. Evidence of Action Taken by Securityholders..... 67
Section 6.2. Proof of Execution of Instruments and
of Holding of Securities; Record Date........... 67
Section 6.3. Holders to Be Treated as Owners................. 67
Section 6.4. Securities Owned by Issuer Deemed
Not Outstanding................................. 68
Section 6.5. Right of Revocation of Action Taken............. 68
ARTICLE VII SUPPLEMENTAL INDENTURES................................... 69
Section 7.1. Supplemental Indentures Without
Consent of Securityholders...................... 69
Section 7.2. Supplemental Indentures With Consent
of Securityholders.............................. 70
Section 7.3. Effect of Supplemental Indenture................ 71
Section 7.4. Documents to Be Given to Trustee................ 71
Section 7.5. Notation on Securities in Respect
of Supplemental Indentures...................... 71
ARTICLE VIII. CONSOLIDATION, MERGER, SALE OR CONVEYANCE................ 72
Section 8.1. Covenant Not to Merge, Consolidate,
Sell or Convey Property Except
Under Certain Conditions........................ 72
Section 8.2. Successor Corporation Substituted............... 72
Section 8.3. Opinion of Counsel to Trustee................... 73
iv
<PAGE>
ARTICLE IX. SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS............................................ 73
Section 9.1. Satisfaction and Discharge of Indenture........... 73
Section 9.2. Application by Trustee of Funds
Deposited for Payment of Securities............... 75
Section 9.3. Repayment of Moneys Held by Paying Agent.......... 75
Section 9.4. Return of Moneys Held by Trustee and
Paying Agent Unclaimed for Three Years............ 75
ARTICLE X. MISCELLANEOUS PROVISIONS..................................... 75
Section 10.1. Incorporators, Stockholders,
Officers and Directors of Issuer
Exempt from Individual Liability.................. 76
Section 10.2. Provisions of Indenture for the Sole
Benefit of Parties and Securityholders............ 76
Section 10.3. Successors and Assigns of Issuer
Bound by Indenture................................ 76
Section 10.4. Notices and Demands on Issuer,
Trustee and Securityholders....................... 76
Section 10.5. Officers' Certificates and Opinions
of Counsel; Statements to
Be Contained Therein.............................. 77
Section 10.6. Payments Due on Saturdays, Sundays
and Holidays...................................... 78
Section 10.7. Trust Indenture Act of 1939....................... 79
Section 10.8. New York Law to Govern............................ 79
Section 10.9. Counterparts...................................... 79
Section 10.10. Effect of Headings................................ 79
ARTICLE XI. REDEMPTION OF SECURITIES..................................... 79
Section 11.1. Right of Optional Redemption; Prices.............. 80
Section 11.2. Notice of Redemption; Partial
Redemptions....................................... 80
Section 11.3. Payment of Securities Called for
Redemption........................................ 81
Section 11.4. Exclusion of Certain Securities from
Eligibility for Selection for Redemption.......... 81
PARTIES.................................................................. 1
RECITALS................................................................. 1
TESTIMONIUM.............................................................. 85
SIGNATURES............................................................... 85
EXHIBIT A - Form of Rule 144A Global Security............................ A-1
EXHIBIT B - Form of Certificated Security................................ B-1
EXHIBIT C - Form of Exchange Security.................................... C-1
EXHIBIT D - Form of Private Exchange Security............................ D-1
EXHIBIT E - Trustee's Certificate of Authentication...................... E-1
EXHIBIT F - Form of Institutional Accredited Investor
Transfer Certificate......................................... F-1
EXHIBIT G - Form of Private Exchange Security Transfer Certificate....... G-1
EXHIBIT H - Schedule of Certain Properties of the Issuer................. H-1
v
<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE
- --- ---------
SECTION SECTION
- ------- -------
310(a)(1).................................................... 5.8
(a)(2).................................................... 5.8
(a)(3).................................................... N.A.
(a)(4).................................................... N.A.
(a)(5).................................................... 5.8
(b)....................................................... 5.9, 10.4
(c)....................................................... N.A.
311(a)....................................................... 5.12
(b)....................................................... 5.12
(c)....................................................... N.A.
312(a)....................................................... 3.6
(b)....................................................... 3.6
(c)....................................................... 3.6
313(a)....................................................... 3.8
(b)....................................................... 3.8; 4.2
(c)....................................................... 3.8 10.4
(d)....................................................... 3.8
314(a)....................................................... 3.5, 3.7, 10.4
(b)....................................................... 5.2, 10.5
(c)(1).................................................... 5.2, 10.5
(c)(2).................................................... 5.2, 10.5
(c)(3).................................................... 10.5
(d)....................................................... 10.7
(e)....................................................... 10.5
(f)....................................................... N.A.
315(a)....................................................... 5.1, 5.2(e)
..................................................
(b)....................................................... 5.1, 5.2
(c)....................................................... 5.1, 5.2(e)
(d)....................................................... 5.1, 5.2(e)
(e)....................................................... 5.1, 5.9
(a)(last sentence)........................................ 5.1
(a)(1)(A)................................................. 4.8, 5.1
(a)(1)(B)................................................. 4.9, 5.1
(a)(2).................................................... 5.1
(b)....................................................... 4.6, 4.9, 5.1
317(a)(1).................................................... 4.2
(a)(2).................................................... 4.2
(b)....................................................... 3.4
318(a)....................................................... 10.7
________________
N.A. means not applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
THIS INDENTURE, dated as of July 3, 1996 between Weirton Steel
Corporation, a Delaware corporation (the "Issuer"), and Bankers Trust Company, a
New York banking corporation (the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the issue of its 11 3/8% Senior
Notes Due 2004 (the "Securities") and, to provide, among other things, for the
authentication, delivery and administration thereof, the Issuer has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make the Securities, when executed by
the Issuer and authenticated and delivered by the Trustee as in this Indenture
provided, the valid, binding and legal obligations of the Issuer, and to
constitute these presents a valid indenture and agreement according to its
terms, have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by
the holders thereof, the Issuer and the Trustee mutually covenant and agree for
the equal and proportionate benefit of the respective holders from time to time
of the Securities as follows:
ARTICLE 1.
DEFINITIONS.
Section 1.1 Certain Terms Defined. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section. All other terms
used in this Indenture which are defined in the Trust Indenture Act of 1939 or
the definitions of which in the Securities Act of 1933, as amended (the
"Securities Act"), are referred to in the Trust Indenture Act of 1939 (except as
herein otherwise expressly provided or unless the context otherwise clearly
requires), shall have the meanings assigned to such terms in said Trust
Indenture Act of 1939 and in said Securities Act as in force at the date of this
Indenture. All accounting terms used herein and not expressly defined shall
have the meanings given to them in accordance with generally accepted accounting
principles, and the term "GAAP" shall mean such accounting principles which are
generally accepted at the date or time of any computation or at the date hereof.
The words "herein", "hereof" and "hereunder"
2
<PAGE>
and other words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision. The terms defined in this
Article include the plural as well as the singular.
"Acquired Indebtedness" means Indebtedness or Preferred Stock of any
Person existing at the time such Person became a Subsidiary of the Issuer (or
such Person is merged into the Issuer or one of the Issuer's Subsidiaries) or
assumed in connection with the acquisition of assets from any such Person (other
than assets acquired in the ordinary course of business), excluding Indebtedness
or Preferred Stock incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Issuer.
"Affiliate" means, when used with reference to a specified Person, any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Person specified. For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"Asset Disposition" means, with respect to any Person, any sale,
transfer, conveyance, lease or other disposition (including, without limitation,
by way of merger, consolidation or sale and leaseback or sale of shares of
Capital Stock in any Subsidiary) by such Person or any of its Subsidiaries to
any Person (other than to such Person or a Wholly Owned Subsidiary of such
Person and other than in the ordinary course of business) of any Property. For
purposes of this definition, the term "Asset Disposition" shall not include any
sale, transfer, conveyance, lease or other disposition of assets and properties
of the Issuer that is governed by Section 8.1.
"Asset Disposition Offer" has the meaning set forth in Section 3.12
hereof.
"Attributable Debt" means, with respect to any sale and leaseback
transaction, at the date of determination, the present value (discounted at the
rate of interest implicit in the terms of the lease) of the obligation of the
lessee for net rental payments during the remaining term of the lease (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended); provided, however, there shall not be deemed to be any
Attributable Debt in respect of any sale and leaseback transaction if the Issuer
or a Subsidiary would be entitled pursuant to the provisions of clauses (a)
through (f) under the definition of "Permitted Liens" to issue, assume or
guarantee debt secured by a mortgage upon the property involved in such
transaction without equally and ratably securing the Securities. "Net rental
payments" under any lease for any
3
<PAGE>
period means the sum of such rental and other payments required to
be paid in such period by the lessee thereunder, not including, however, any
amount required to be paid by such lessee (whether or not designated as rent or
additional rent) on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges required to be paid by such lessee
thereunder or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges.
"Board of Directors" means either the Board of Directors of the Issuer
or any committee of such Board duly authorized to act hereunder.
"Business Day" means a day which, in the City of New York (or in any of
the cities, if more than one), where amounts are payable in respect of the
Securities, as specified on the face of the form of Securities set forth in
Exhibits A-D hereof, is neither a legal holiday nor a day on which banking
institutions are authorized or obligated by law or regulation to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designed) of such
Person's capital stock whether now outstanding or issued after the Issue Date,
this including, without limitation, all Common Stock and Preferred Stock.
"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America, (ii) commercial paper with a maturity of
180 days or less issued by a corporation organized under the laws of any state
of the United States of America or the District of Columbia and rated at
least A-2 by Standard and Poor's Ratings Services, a division of the McGraw-Hill
Companies, Inc. or at least P-2 by Moody's Investors Service, Inc., (iii) time
deposits with, and certificates of deposits and banker's acceptances issued by,
any bank having capital surplus and undivided profits of not less than
$100,000,000 and maturing not more than 180 days from the date of creation
thereof, (iv) repurchase agreements that are secured by a perfected security
interest in an obligation described in clause (i) and are with any bank
described in clause (iii), and (v) readily marketable direct obligations issued
by any state of the United States of America or any political subdivision
thereof having one of the two highest rating categories obtainable from either
Moody's Investors Service, Inc. or Standard and Poor's Ratings Services.
"Change of Control" has the meaning set forth in Section 3.16 hereof.
4
<PAGE>
"Certificated Securities" has the meaning provided in Section 2.4.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act of 1939, then the body
performing such duties at such time.
"Commodity Agreement" means any option or futures contract or similar
agreement or arrangement designed to protect the Issuer against fluctuations in
commodity prices.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the Issue Date, and includes, without limitation, all series and
classes of such common stock.
"Consolidated EBITDA" means, for any period, on a consolidated basis for
the Issuer and its Subsidiaries, the sum for such period (without duplication)
of (a) Consolidated Net Income, (b) income taxes (other than income taxes
positive or negative attributable to extraordinary and non-recurring gains or
losses on asset sales) with respect to such period, determined in accordance
with GAAP, (c) net interest expense for such period, determined in accordance
with GAAP, (d) depreciation and amortization expenses (including, without
duplication, amortization of debt discount and debt issue costs), determined in
accordance with GAAP and (e) other non-cash items reducing Net Income, minus
non-cash items increasing Net Income, determined in accordance with GAAP, less
any cash payments made in such period with respect to any accruals for non-cash
items subsequent to the Issue Date which are included in the foregoing clause
(e) for any period.
"Consolidated Fixed Charges" means, for any period, the sum of (a) the
net interest expense of the Issuer and its Subsidiaries for such period whether
paid or accrued (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
capital lease obligations and imputed interest with respect to attributable
Debt), (b) interest incurred during the period and capitalized by the Issuer,
(c) any interest expense on Indebtedness of another Person that is guaranteed by
the Issuer or one of its Subsidiaries or secured by a Lien on assets of the
Issuer or one of its Subsidiaries (whether or not such guarantee or Lien is
called upon) and (d) the product of (i) all cash dividend payments on any series
of Preferred Stock of any Subsidiary or Disqualified Stock of the Issuer or any
of its
5
<PAGE>
Subsidiaries, times (ii) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of the Issuer and its Subsidiaries, expressed as a
decimal, in each case, on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Issuer for any period means (i) the Net
Income (or loss) of the Issuer and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP; provided that there shall be
excluded from this clause (i): (a) the Net Income of any Person other than a
Consolidated Subsidiary in which the Issuer or any of its Consolidated
Subsidiaries has a joint interest with a third party except to the extent of the
amount of dividends or distributions actually paid in cash to the Issuer or a
Consolidated Subsidiary during such period, (b) the Net Income of any other
Person accrued prior to the date it becomes a Subsidiary with respect to which
Consolidated Net Income is calculated, or is merged into or consolidated with
such Person or any of its Subsidiaries or that Person's assets are acquired by
such Person or any of its Subsidiaries, (c) the Net Income (but only if
positive) of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary to such Person or to any
other Subsidiary of such Net Income is not at the time permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (d)
without duplication, any gains or losses attributable to the sale, lease,
conveyance or other disposition of assets (including without limitation Capital
Stock of any Subsidiary of such Person), whether owned on the date of issuance
of the Securities or thereafter acquired, in one or more related transactions
outside the ordinary course of business, (e) any non-cash charge reducing Net
Income resulting from the adoption by the Issuer of Statement 106 of the
Financial Accounting Standards Board and (f) any non-cash charge reducing Net
Income required by Statement 5 of the Financial Accounting Standards Board which
relates to increased pension or retirement costs resulting from the
implementation of the Issuer's Efficiency Program less (ii) the aggregate amount
of net cash payments made during the period by the Issuer or any Subsidiary not
reflected in Net Income during such period which relate to the increased pension
and retirement costs of the Issuer resulting from the implementation of the
Issuer's Efficiency Program.
"Consolidated Net Tangible Assets" means, as of any particular time, the
total assets of the Issuer and its Consolidated Subsidiaries, as shown on the
audited consolidated balance sheet contained in the latest annual report to
stockholders of the Issuer after deducting therefrom:4.
(a) all current liabilities excluding any thereof which are by their
terms extendible or renewable at the option of the obligor thereon to a time
more than 12 months
6
<PAGE>
after the time as of which the amount thereof is being computed and
excluding current maturities of long-term indebtedness;5.
(b) deferred income taxes and deferred pension liabilities to the extent
the related intangible asset, if any, is not otherwise deducted in calculating
Consolidated Net Tangible Assets, deferred income taxes resulting from the
adoption by the Issuer of Statement 106 of the Financial Accounting Standards
Board and deferred income taxes resulting from the implementation of the
Issuer's Efficiency Program;6.
(c) all reserves, including, without limitation, reserves for
liabilities, fixed or contingent, depreciation, amortization, obsolescence,
depletion, insurance and inventory valuation (but excluding contingency reserves
not allocated for any particular purpose) carried by such corporation or other
person and not deducted in computing such total assets;
(d) any prepaid expenses, deferred charges or unamortized debt discount
and expense;
(e) minority interests in Subsidiaries, if any;
(f) any write-up in the book value of any asset resulting from a
revaluation thereof subsequent to December 31, 1995 (other than a write-up of
any assets constituting part of the assets and business of another corporation
made in connection with the acquisition, direct or indirect, of the assets and
business of such other corporation);
(g) the amount, if any, at which any stock of the Issuer appears upon
the asset side of such balance sheet; and
(h) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangible assets, all as shown in such
consolidated balance sheet;
plus an amount equal to Attributable Debt in respect of any sale and leaseback
transactions not capitalized on such balance sheet.
"Consolidated Net Worth" means, with respect to any Person engaged in a
merger, consolidation or sale of assets, the consolidated stockholder's equity
of such Person and its Subsidiaries, as determined in accordance with GAAP but
excluding the effect of the adoption by such Person of Statement 106 of the
Financial Accounting Standards Board and excluding any
7
<PAGE>
restructuring charges taken by such Person in connection with such merger,
consolidation or sale of assets.
"Consolidated Subsidiary" of any Person means a Subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such Person as a consolidated subsidiary.
"Continuing Director" has the meaning set forth in Section 3.16 hereof.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located at Four Albany Street, New York, New York 10006
Attention: Corporate Trust and Agency Group.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Issuer against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time,
or both, would be, an Event of Default.
"Depositary" shall mean The Depository Trust Company, its nominees, and
their respective successors.
"Disqualified Stock" means any Capital Stock (i) that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Securities or (ii) upon which the Issuer or any of
its Subsidiaries has a contractual obligation to compensate the holder thereof
for losses incurred upon the sale or other disposition thereof; provided that
any portion or series of such Capital Stock which by its terms, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund or otherwise, no earlier than the day following the maturity date
of the Securities shall not constitute Disqualified Stock; and provided further,
that any Capital Stock which would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require the Issuer to
repurchase or
8
<PAGE>
redeem such Capital Stock upon the occurrence of a change in control occurring
on or prior to the maturity date of the Securities shall not constitute
Disqualified Stock if (i) the change in control provisions applicable to such
Capital Stock are no more favorable to the holders of such Capital Stock than
the provisions of Section 3.16 and (ii) such Capital Stock specifically provides
that the Issuer will not repurchase or redeem any such stock pursuant to such
provisions prior to the Issuer's repurchase of such Securities as are required
to be repurchased pursuant to the provisions of Section 3.16.
"Efficiency Program" means the program announced by the Issuer in July
1992 involving manpower reductions to be achieved over a five year period.
"Event of Default" means any event or condition specified as such in
Section 4.1 which shall have continued for the period of time or after notice
thereof, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Reports" means the Issuer's Annual Report on Form 10-K for
the year ended December 31, 1995 and Quarterly Report on Form 10-Q for the three
months ended March 31, 1996, each filed with the Commission pursuant to the
Exchange Act.
"Exchange Offer" means an offer to exchange the Securities for Exchange
Securities.
"Exchange Offer Registration Statement" means a registration statement
under the Securities Act with respect to the Exchange Offer.
"Exchange Securities" means any securities of the Issuer containing
terms identical to the Securities (except that such Exchange Securities (i)
shall be registered under the Securities Act and (ii) shall have an interest
rate equal to 11 3/8% per annum, without provision for adjustment as provided in
the third paragraph of the Form of Reverse of Security set forth in each of
Exhibits A and B hereof) that are issued and exchanged for the Securities
pursuant to the Registration Rights Agreement and this Indenture. The Exchange
Securities shall be in the form attached hereto as Exhibit C.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"Global Securities" has the meaning provided in Section 2.4.
"Holder", "holder of Securities", "Securityholder" or other similar
terms means the registered holder of any Security.
9
<PAGE>
"Indebtedness" means, without duplication, (i) any liability of any
entity (A) for borrowed money, or under any reimbursement obligation relating to
a letter of credit, (B) evidenced by a bond, note, debenture or similar
instrument (including a purchase money obligation) given in connection with the
acquisition of any businesses, properties or assets of any kind or with services
incurred in connection with capital expenditures, or (C) in respect of
capitalized lease obligations, (ii) any liability of others described in the
preceding clause (i) that the entity has guaranteed or that is otherwise its
legal liability, (iii) to the extent not otherwise included, obligations under
Currency Agreements, Commodity Agreements or Interest Protection Agreements,
(iv) all Disqualified Stock valued at the greatest amount payable in respect
thereof on a liquidation (whether voluntary or involuntary) plus accrued and
unpaid dividends, and (v) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (i)-(iv) above, provided that Indebtedness shall not include accounts
payable (including, without limitation, accounts payable to the Issuer by any
Subsidiary or to any such Subsidiary by the Issuer or any other Subsidiary, in
each case, in accordance with customary industry practice) or liabilities to
trade creditors of any entity arising in the ordinary course of business.
"Indenture" means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or
supplemented.
"Initial Purchasers" means Lehman Brothers Inc. and Salomon Brothers
Inc, the initial purchasers of the Securities pursuant to a Purchase Agreement
with the Issuer dated June 27, 1996.
"Interest Protection Agreement" of any Person means any interest rate
swap agreement, interest rate collar agreement, option or future contract or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates.
"Investments" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person
and (iv) all other items that would be classified as investments (including,
without limitation, purchases of assets outside the ordinary course of business)
on a balance sheet of such Person prepared in accordance with GAAP.
"Issue Date" means July 3, 1996, the date on which the Securities are
originally issued under this Indenture.
10
<PAGE>
"Issuer" means (except as otherwise provided in Article Five) Weirton
Steel Corporation, a Delaware corporation, and, subject to Article Eight, its
successors and assigns.
"Institutional Accredited Investor" shall mean an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Legended Security" means a Security bearing the Securities Legend.
"Lien" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, the Issuer shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Liquidated Damages" means liquidated damages payable to each holder of
Securities with respect to the first 90-day period immediately following the
occurrence of a Registration Default in an amount equal to $.05 per week per
$1,000 principal amount of Securities held by such Securityholder. For any
portion of a week that the Registration Default continues, such Liquidated
Damages shall be calculated on a pro-rata basis. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 principal amount
of Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 principal amount of Securities.
"Net Cash Proceeds" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise (including
any cash received upon sale or disposition of such note or receivable), but only
as and when received), excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the Property disposed of in such Asset Disposition or received in any other
non-cash form unless and until such non-cash consideration is converted into
cash therefrom, in each case, net of all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP as a consequence of such Asset Disposition, and in each case net of a
reasonable reserve for the after-tax cost of any indemnification payments (fixed
and contingent) attributable to seller's indemnities to the purchaser undertaken
by the Issuer or any of its Subsidiaries in connection with such Asset
Disposition (but excluding any
11
<PAGE>
payments, which by the terms of the indemnities will not, under any
circumstances, be made during the term of the Securities), and net of all
payments made on any Indebtedness which is secured by such Property, in
accordance with the terms of any Lien upon or with respect to such Property or
which must by its terms or by applicable law be repaid out of the proceeds from
such Asset Disposition, and net of all distributions and other payment made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition.
"Net Income" of any Person for any period means the consolidated net
income or loss, as the case may be, of such Person and its Subsidiaries for such
period determined in accordance with GAAP; provided that there shall be excluded
all extraordinary gains or losses net of respective tax effects (less, without
duplication, all fees and expenses relating thereto).
"Offer Amounts" has the meaning set forth in Section 3.12 hereof.
"Offer Period" has the meaning set forth in Section 3.12 hereof.
"Offering Memorandum" means the Offering Memorandum dated June 27, 1996
relating to the Securities.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors or the President or any Vice President (whether or not
designated by a number or numbers or a word or words added before or after the
title "Vice President") and by the Treasurer or the Secretary or any Assistant
Secretary of the Issuer and delivered to the Trustee. Each such certificate
shall comply with Section 314 of the Trust Indenture Act of 1939 and include the
statements provided for in Section 10.5.
"Opinion of Counsel" means an opinion in writing signed by legal counsel
who may be an employee of or counsel to the Issuer or who may be other counsel
satisfactory to the Trustee and delivered to the Trustee. Each such opinion
shall comply with Section 314 of the Trust Indenture Act and include the
statements provided for in Section 10.5, if and to the extent required hereby.
"Original issue date" of any Security (or portion thereof) means the
earlier of (a) the date of such Security or (b) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"Outstanding", when used with reference to Securities, shall, subject to
the provisions of Section 6.4, mean, as of any
12
<PAGE>
particular time, all Securities authenticated and delivered by the Trustee under
this Indenture, except
(a) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or redemption of
which moneys in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Issuer) or shall have been set
aside, segregated and held in trust by the Issuer (if the Issuer shall act as
its own paying agent), provided that if such Securities are to be redeemed prior
to the maturity thereof, notice of such redemption shall have been given as
herein provided, or provision satisfactory to the Trustee shall have been made
for giving such notice; and
(c) Securities in substitution for which other Securities shall have
been authenticated and delivered, or which shall have been paid, pursuant to the
terms of Section 2.6 (unless proof satisfactory to the Trustee is presented that
any of such Securities is held by a person in whose hands such Security is a
legal, valid and binding obligation of the Issuer).
"Permitted Indebtedness" means (i) Indebtedness of the Issuer and its
Subsidiaries outstanding immediately following the issuance of the Securities
and the application of the proceeds of the Securities in the manner set forth
under "Use of Proceeds" in the Offering Memorandum, including Indebtedness of
the Issuer's 1989 ESOP guaranteed by the Issuer even if acquired by the Issuer;
(ii) the Securities; (iii) Indebtedness in respect of obligations of the Issuer
to the Trustee under this Indenture; (iv) Permitted Working Capital
Indebtedness; (v) intercompany obligations (including intercompany debt or
Disqualified Stock of a Subsidiary which is held by the Issuer or a Subsidiary
of the Issuer) of the Issuer and each of its Subsidiaries; provided, however,
that the obligations of the Issuer to any of its Subsidiaries with respect to
such Indebtedness shall be subject to a subordination agreement between the
Issuer and its Subsidiaries providing for the subordination of such obligations
in right of payment from and after such time as all Securities issued and
outstanding shall become due and payable (whether at stated maturity, by
acceleration or otherwise) to the payment and performance of the Issuer's
obligations under this Indenture and the Securities; provided further, that any
Indebtedness or Disqualified Stock of the Issuer or any Subsidiary owed to any
other Subsidiary that ceases to be a Subsidiary shall be deemed to be incurred
and shall be treated as an incurrence for purposes of Section 3.9 at the time
the Subsidiary in question ceased to be a Subsidiary; (vi) Indebtedness of the
Issuer under any Currency Agreements, Commodity Agreements or Interest
Protection Agreements; (vii) additional Indebtedness of the Issuer or its
13
<PAGE>
Subsidiaries the aggregate principal amount of which does not exceed
$100,000,000; and (viii) any Refinancing Indebtedness; provided that (A) the
original issue amount of the Refinancing Indebtedness shall not exceed the
maximum principal amount (following the date of the Indenture and the
application of the net proceeds of the Securities in accordance with the manner
described under "Use of Proceeds" in the Offering Memorandum) and accrued
interest of this Indebtedness to be repaid (or if such Indebtedness was issued
at an original issue discount, the original issue price plus amortization of the
original issue discount at the time of the incurrence of the Refinancing
Indebtedness less the amount of any prepayments on or prior to the date of the
Indenture and any prepayments made applying the net proceeds of the Securities),
plus the reasonable fees and expenses directly incurred in connection with such
Refinancing Indebtedness, (B) Refinancing Indebtedness incurred by any
Subsidiary shall not be used to repay or refund outstanding Indebtedness of the
Issuer or any other Subsidiary, and (C) with respect to any Refinancing
Indebtedness that refinances Indebtedness ranking junior in right of payment to
the Securities, (1) the Refinancing Indebtedness does not require any principal
payments prior to the maturity of the Securities and has an average weighted
life that is equal to or greater than the average weighted life of the
Securities and (2) the Refinancing Indebtedness is subordinated to the
Securities to the same or greater extent and on substantially the same terms or
terms more favorable to the holder of the Securities.
"Permitted Joint Venture" means the interest of the Issuer in any
corporation, association or other business entity of which 50% or less, but not
less than 10%, of the total Voting Stock or other interest is at the time owned
or controlled, directly or indirectly, by the Issuer or one or more of its
Subsidiaries or a combination thereof, provided that such corporation,
association or entity is engaged in the business or businesses of the Issuer or
any related business.
14
<PAGE>
"Permitted Liens" means (a) Liens on Property of, or any shares of stock
of or debt of, any corporation existing at the time such corporation becomes a
Subsidiary or at the time such corporation is merged into the Issuer or a
Subsidiary, (b) Liens in favor of the Issuer or any Subsidiary, (c) Liens in
favor of governmental bodies to secure progress or advance payments, (d) Liens
securing industrial revenue or pollution control bonds, (e) Liens upon the
accounts receivable and related intangibles and inventory of the Issuer or any
Subsidiary securing Permitted Working Capital Indebtedness, (f) statutory Liens
or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor or (g)
any extensions, renewals or replacements of Liens referred to in clauses (a)
through (f) above.
"Permitted Payments" means, with respect to the Issuer or any of its
Subsidiaries, (i) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Disqualified Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Disqualified Stock); (ii)
any dividend or other distribution with respect to Capital Stock payable to the
Issuer by any of its Subsidiaries or by a Subsidiary to another Subsidiary; and
(iii) payments made by the Issuer in satisfaction of any put obligation imposed
on the Issuer by Section 409 of the Internal Revenue Code of 1986, as amended,
and any successor provision, relating to shares of the Issuer's Preferred Stock,
Series A, authorized and issued on or before the Issue Date and held in the
Issuer's 1989 ESOP.
"Permitted Working Capital Indebtedness" means indebtedness of the
Issuer or any of its Subsidiaries pursuant to a credit facility, the principal
amount outstanding under which shall not exceed, on the date such indebtedness
is incurred, 80% of the accounts receivable as reflected on the consolidated
financial statements of the Issuer and 50% of the inventory as reflected on the
consolidated financial statements of the Issuer and which indebtedness is
secured by such accounts receivable or inventory.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person
which has a preference in liquidation or a preference with respect to the
payment of dividends.
15
<PAGE>
"principal", wherever used with reference to the Securities or any
Security or any portion thereof, shall be deemed to include "and premium, if
any".
"Private Exchange Security" has the meaning set forth in Section 2.4
hereof.
"Prohibited Investment" means, with respect to any Person, any
Investment by such Person in any Person that is not a Subsidiary of such Person,
other than (i) an Investment in Cash Equivalents, (ii) to the extent not
included in clause (i), (a) negotiable instruments held for collection, (b)
outstanding travel, moving or other similar advances to officers, employees and
consultants of such Person, (c) lease or utility deposits or other similar
deposits or (d) Capital Stock, debt obligations or similar securities received
in settlement of debts owed to such Person or its Subsidiaries as a result of
the foreclosure, perfection or enforcement of any Liens by such Person or any of
its Subsidiaries, but, in each case, only to the extent such Investments are
made in the ordinary course of business, and (iii) sales of goods on trade
credit terms consistent with the past practices of such Person or otherwise
consistent with trade credit terms in common use in the industry.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Purchase Date" has the meaning set forth in Section 3.12 hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Refinancing Indebtedness" means any renewals, extensions,
substitutions, refundings, refinancings or replacements of the Indebtedness
referred to in clauses (i) through (vii) of the definition of Permitted
Indebtedness.
"Registrar" means an office or agency maintained by the Issuer where
Securities may be presented for registration of transfer or for exchange, which
shall initially be maintained by the Trustee.
"Registration Default" means, the occurrence of any of the following:
(i) the Exchange Offer Registration Statement is not filed with the Commission
on or prior to the 45th calendar day following the Issue Date, (ii) the Exchange
Offer Registration Statement is not declared effective on or prior to the 135th
calendar day following the Issue Date, or (iii) an Exchange Offer is not
consummated or the Shelf Registration
16
<PAGE>
Statement is not declared effective on or prior to the 165th calendar day
following the Issue Date or the Shelf Registration Statement ceases to be
effective (except as specifically permitted therein) without being succeeded
immediately by an additional registration statement filed and declared
effective, each of the conditions set forth in clauses (i) - (iii) in accordance
with the terms of the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of July 3, 1996, between the Issuer, Lehman Brothers Inc. and Salomon
Brothers Inc, and certain permitted assigns specified therein.
"Repurchase Date" has the meaning set forth in Section 3.16 hereof.
"Responsible Officer" when used with respect to the Trustee means any
officer within the Corporate Trust and Agency Group (or any successor group) of
the Trustee, including, without limitation, any vice president (whether or not
designated by numbers or words added before or after the title "vice
president"), any assistant vice president, any assistant secretary, any
assistant treasurer or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by any of the above-
designated officers who shall in any case, be responsible for the administration
of this document or have familiarity with it, and also means with respect to
particular corporate trust matters any other officer to whom any corporate trust
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the Issuer
or any Subsidiary of the Issuer or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Issuer or any
Subsidiary of the Issuer (other than (x) dividends or distributions payable
solely in Capital Stock (other than Disqualified Stock) and (y) in the case of
Subsidiaries of the Issuer, dividends or distributions payable to the Issuer or
to a Subsidiary of the Issuer); (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock, or any option,
warrant, or other right to acquire shares of Capital Stock, of the Issuer or any
of its Subsidiaries; (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition or retirement
for value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Indebtedness which is subordinated in right of
payment to the Securities; (iv) the making of any Prohibited Investment or
guarantee of any Prohibited Investment in any Person and (v) the making of any
payment to a holder of Capital Stock of the Issuer to reimburse such holder for
losses incurred by such holder upon the disposition of such Capital Stock by
such holder.
17
<PAGE>
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Security" means Securities offered and sold in
reliance on Rule 144A issued initially in the form of a single permanent global
security in registered form.
"Security" or "Securities" means any 11 3/8% Senior Note Due 2004, as
the case may be, authenticated and delivered under this Indenture. For all
purposes of this Indenture, the term "Securities" shall include any Exchange
Securities or Private Exchange Securities to be issued and exchanged for any
Securities pursuant to the Registration Rights Agreement and this Indenture and,
for purposes of this Indenture, all Securities, Exchange Securities and Private
Exchange Securities shall be considered, and vote together as, one series of
Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Legend" means the legend set forth in Section 2.5(a) hereof.
"Shelf Notice" means a notice delivered to the Holders by the Issuer
pursuant to the Registration Rights Agreement with respect to its intention to
file a Shelf Registration Statement.
"Shelf Registration Statement" means a shelf registration statement
filed with the Commission pursuant to the Registration Rights Agreement covering
resales of the Securities.
"Subsidiary" means, with respect of any Person, any corporation or other
entity of which a majority of the Capital Stock or other ownership interests
having ordinary voting power to elect a majority of the Board of Directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Trustee" means the entity identified as "Trustee" in the first
paragraph hereof and, subject to the provisions of Article Five, shall also
include any successor trustee.
"Trust Indenture Act of 1939" (except as otherwise provided in Sections
7.1 and 7.2) means the Trust Indenture Act of 1939 as in force at the date as of
which this Indenture was originally executed.
"Unregistered Securities" means the Rule 144A Global Security, the
Certificated Securities and the Private Exchange Securities.
"Voting Stock" means Capital Stock which ordinarily has voting power for
the election of directors (or persons performing similar functions), whether at
all times or only so long as no
18
<PAGE>
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" means, at any time, a Subsidiary all of the
Capital Stock of which (except directors' qualifying shares) are at the time
owned directly or indirectly by the Issuer.
ARTICLE 12.
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES.
Section 2.1. Authentication and Delivery of Securities; Issuance of
Exchange Securities. Upon the execution and delivery of this Indenture, or from
time to time thereafter, Securities in an aggregate principal amount not in
excess of $125,000,000 (including the principal amount of any outstanding
Exchange Securities or Private Exchange Securities that may be issued pursuant
to the Registration Rights Agreement) (except as otherwise provided in Section
2.6), may be executed by the Issuer and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Securities to or upon the written order of the Issuer, signed by both (a) its
Chairman of the Board of Directors, or any Vice Chairman of the Board of
Directors, or its President or any Vice President (whether or not designated by
a number or numbers or a word or words added before or after the title "Vice
President") and (b) by its Treasurer or any Assistant Treasurer, any Vice
President or any Secretary without any further action by the Issuer.
In the case of the original issuance of Exchange Securities, the Trustee
shall be entitled to receive an Opinion of Counsel of the Issuer dated the date
thereof substantially to the effect that:15.
(a) The Exchange Securities have been duly authorized and, when
executed, authenticated and delivered to the Holders of the Securities in
exchange for the Securities and assuming due authentication by the Trustee, will
be (x) valid and binding obligations of the Issuer enforceable in accordance
with their terms, except as (A) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law) and (B) rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of
19
<PAGE>
general applicability and (y) entitled to the benefits of the Indenture.
(b) No consent, approval, authorization or order of, or qualification
or filing with, any governmental body or agency is required for the issuance of
the Exchange Securities in exchange for the Securities or the performance by the
Issuer of its obligations under the Exchange Securities, except such as have
been obtained by the date of such opinion and such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and exchange of Securities for Exchange Securities.
(c) The issuance and delivery of the Exchange Securities in exchange
for the Securities and the performance by the Issuer of its obligations under
the Exchange Securities will not contravene (i) any provision of applicable law,
(ii) the certificate of incorporation or by-laws of the Issuer or (iii) to the
knowledge of such counsel, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Issuer.
(d) Such counsel has reviewed evidence that the Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable, relating
to the Exchange Securities has been declared effective under the Securities Act
of 1933, as amended and the Indenture qualified under the Trust Indenture Act of
1939, as amended.
In connection with the initial issuance of Exchange Securities, the
Issuer shall, within five (5) Business Days after filing of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as applicable,
deliver a copy thereof to the Trustee. Upon the declaration of effectiveness of
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as applicable, by the Commission, the Issuer shall, within five (5) Business
Days thereafter, deliver a notice of such declaration of effectiveness to each
Holder, which may take the form of a copy of the prospectus included in such
Exchange Offer Registration Statement or Shelf Registration Statement, and an
Officers' Certificate to the Trustee stating that such Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable, has been
declared effective by the Commission, together with a copy of the order of
effectiveness, when available. If a Global Security is to be issued in respect
of the Exchange Securities, the Issuer shall execute and deliver a letter of
representation and other materials requested by the Depositary in connection
with the initial issuance of Exchange Securities.
20
<PAGE>
The Issuer and the Trustee may require, as a condition to the issuance
and authentication of any Exchange Security in exchange for an Unregistered
Security, such certificates, opinions or other evidence, in form and substance
reasonably satisfactory to the Issuer and the Trustee, that the transfer or
issuance of Exchange Securities will not violate applicable law or any
applicable interpretation of the Commission. Each Holder who wishes to exchange
Unregistered Securities for Exchange Securities in the Exchange Offer will be
required to make certain representations, including that (i) it is not an
Affiliate of the Issuer, (ii) any Exchange Securities to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
consummation of the Exchange Offer, it has no arrangement or understanding with
any Person to participate in the distribution of the Exchange Securities in
violation of the provisions of the Securities Act. Each Holder of Private
Exchange Securities who wishes to transfer or exchange such Private Exchange
Securities for Exchange Securities pursuant to a Shelf Registration Statement
will be required to make certain representations set forth in Exhibit G hereto.
Section 2.2. Execution of Securities. The Securities shall be signed
on behalf of the Issuer by both (a) its Chairman of the Board of Directors or
any Vice Chairman of the Board of Directors or its President or any Vice
President (whether or not designated by a number or numbers or a word or words
added before or after the title "Vice President") and (b) by its Treasurer or
any Assistant Treasurer or its Secretary or any Assistant Secretary, under its
corporate seal which may, but need not, be attested. Such signatures may be the
manual or facsimile signatures of the present or any future such officers. The
seal of the Issuer may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities.
Typographical and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security which has been duly authenticated and delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the
Securities shall cease to be such officer before the Security so signed shall be
authenticated and delivered by the Trustee or disposed of by the Issuer, such
Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed such Security had not ceased to be such officer of
the Issuer; and any Security may be signed on behalf of the Issuer by such
persons as, at the actual date of the execution of such Security, shall be the
proper officers of the Issuer, although at the date of the execution and
delivery of this Indenture, any such person was not such officer.
21
<PAGE>
Section 2.3. Certificate of Authentication. Only such Securities as
shall bear thereon a certificate of authentication substantially in the form set
forth in Exhibit E hereof, executed by the Trustee by manual signature of one of
its authorized signatories, shall be entitled to the benefits of this Indenture
or be valid or obligatory for any purpose. Such certificate by the Trustee upon
any Security executed by the Issuer shall be conclusive evidence that the
Security so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.
Section 2.4. Form, Denomination and Date of Securities; Payments of
Interest24.. The Securities and the Trustee's certificates of authentication
shall be substantially in the forms attached hereto as Exhibits A-E,
respectively. The Securities shall be issuable as registered securities without
coupons and in denominations provided for in the forms of Security attached
hereto as Exhibits A-D, as applicable. The Securities shall be numbered,
lettered, or otherwise distinguished in such manner or in accordance with such
plans as the officers of the Issuer executing the same may determine with the
approval of the Trustee.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of a single permanent global Security in registered form,
substantially in the form set forth as Exhibit A hereto (the "Rule 144A Global
Security"), deposited on the date of the closing of the sale of the Securities
offered under the Offering Memorandum with the Depositary, or with the Trustee,
as custodian for the Depositary, duly executed by the Issuer and authenticated
by the Trustee as hereinafter provided and registered in the name of Cede & Co.,
as nominee of the Depositary. The Rule 144A Global Security shall be subject to
certain restrictions on transfer set forth herein and in the Offering
Memorandum. The aggregate principal amount of the Global Security may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Securities offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Securities
in registered form in substantially the form set forth as Exhibit B hereto (the
"Certificated Securities").
Exchange Securities shall be issued substantially in the form set forth
in Exhibit C hereto. Exchange Securities shall be issued in registered form and
may, if agreed by the Issuer and the Holder, be issued in the form of a
permanent global security (any such global security, together with the Rule 144A
Global Security, "Global Securities"). Any Exchange
22
<PAGE>
Security issued in the form of a Global Security shall be issued in a form
substantially identical to Exhibit C hereto (except that any such Global
Security representing Exchange Securities shall include on the face thereof the
legend set forth in Section 2.5(b)). Notwithstanding the foregoing, if, prior to
consummation of the Exchange Offer, the Initial Purchaser holds any Securities
acquired by it and having, or which are reasonably likely to be determined to
have, the status of an unsold allotment in the initial distribution, or any
other Holder is not entitled to participate in the Exchange Offer, the Issuer
upon the request of the Initial Purchaser or any such Holder pursuant to the
Registration Rights Agreement shall simultaneously with the delivery of the
Exchange Securities in the Exchange Offer, issue and deliver to the Initial
Purchaser and any such Holder, in exchange for such Securities held by the
Initial Purchaser and any such Holder, a like principal amount of debt
securities of the Issuer that are identical in all material respects to the
Exchange Securities (except for the inclusion of any such transfer restrictions
that may, in the opinion of counsel for the Issuer, be required under the
Securities Act) (the "Private Exchange Securities"); provided, however, the
Issuer shall not be required to effect such exchange if, in the written opinion
of counsel for the Issuer (a copy of which shall be delivered to the Initial
Purchaser and any Holder affected thereby), such exchange cannot be effected
without registration under the Securities Act. Any Private Exchange Securities
shall be issued in the form of permanent certificated securities in registered
form, substantially in the form set forth in Exhibit D hereto.
Any of the Securities may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or otherwise
reproduced thereon such legend or legends, not inconsistent with the provisions
of this Indenture, as may be required to comply with any law or with any rules
or regulations pursuant thereto, or with the rules of any securities market in
which the Securities are admitted to trading, or to conform to general usage.
The Issuer shall furnish any such legends or endorsements to the Trustee in
writing. The Issuer shall approve the form of the Securities and any notation,
legend or endorsement on them.
Each Security shall be dated the date of its authentication, shall bear
interest from the date stated therein and shall be payable on the dates
specified on the face of the applicable form of Security.
The person in whose name any Security is registered at the close of
business on any record date with respect to any interest payment date shall be
entitled to receive the interest, and Liquidated Damages, if any, payable on
such interest payment date notwithstanding any transfer or exchange of such
Security subsequent to the record date and prior to such interest payment date,
except if and to the extent the Issuer shall default in the payment of the
interest due on such interest payment date, in
23
<PAGE>
which case such defaulted interest and Liquidated Damages, if any, shall be paid
to the persons in whose names outstanding Securities are registered at the close
of business on a subsequent record date (which shall be not less than five
business days prior to the date of payment of such defaulted interest and
Liquidated Damages, if any,) established by notice given by mail by or on behalf
of the Issuer to the holders of Securities not less than 15 days preceding such
subsequent record date. The term "record date" as used with respect to any
interest payment date (except a date for payment of defaulted interest and
Liquidated Damages, if any,) shall mean if such interest payment date is the
first day of a calendar month, the fifteenth day of the next preceding calendar
month and shall mean, if such interest payment date is the fifteenth day of a
calendar month, the first day of such calendar month, whether or not such record
date is a business day.
Section 2.5. Restrictive Legends. (a) Unless and until a Security is
exchanged for an Exchange Security in connection with an effective Exchange
Offer Registration Statement or Shelf Registration Statement pursuant to the
Registration Rights Agreement, or unless otherwise agreed by the Issuer and the
Holder thereof, each Unregistered Security shall bear a legend on the face
thereof in substantially the following form:
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") (2) AGREES
THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY
EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY,
EXCEPT (A) TO WEIRTON STEEL CORPORATION (THE "ISSUER"), (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH
24
<PAGE>
TRANSFER, FURNISHES TO THE TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (E) PURSUANT TO OFFERS OR SALES THAT OCCUR OUTSIDE THE UNITED STATES
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY TO
THEM OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY
EVIDENCED HEREBY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH
SECURITY, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE, AS TRANSFER AGENT. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR AND IN CERTAIN OTHER CASES NOTED ABOVE, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE ISSUER AND THE TRUSTEE, AS TRANSFER AGENT
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THREE YEARS
FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY.
(b) Each Global Security, whether or not an Exchange Security, shall
also bear the following legend on the face thereof:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN
25
<PAGE>
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.8 OF THE INDENTURE.
Section 2.6. Registration, Transfer and Exchange. The Issuer will keep
at each office or agency to be maintained for the purpose as provided in Section
3.2 a register or registers in which the transfer of Securities as in this
Article provided. Such register shall be in written form in the English language
or in any other form capable of being converted into such form within a
reasonable time. At all reasonable times, such register or registers shall be
open for inspection by the Trustee.
The Securities are issuable only in registered form. A Holder may
transfer a Security by written application to the Registrar stating the name of
the proposed transferee and otherwise complying with the terms of this
Indenture. No such transfer shall be effected until, and such transferee shall
succeed to the rights of a Holder only upon, final acceptance and registration
of the transfer by the Registrar in the Security Register. Prior to the
registration of any transfer by a Holder as provided herein, the Issuer, the
Trustee, and any agent of the Issuer shall treat the person in whose name the
Security is registered as the owner thereof for all purposes whether or not the
Security shall be overdue, and neither the Issuer, the Trustee, nor any such
agent shall be affected by notice to the contrary. Furthermore, the Depositary
shall, by acceptance of a Global Security, agree that transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depositary (or its agent), and that ownership of a
beneficial interest in the Global Security shall be required to be reflected in
a book entry. When Securities are presented to the Registrar with a request to
register the transfer or to exchange them for an equal principal amount of
Securities of other authorized denominations (including on exchange of
Securities for Exchange Securities or Private Exchange Securities), the
Registrar shall register the transfer
26
<PAGE>
or make the exchange as requested if its requirements for such transactions are
met; provided that no exchanges of Unregistered Securities for Exchange
Securities shall occur until an Exchange Offer Registration Statement or a Shelf
Registration Statement with respect to such Securities shall have been declared
effective by the Commission and provided, further, that any Unregistered
Securities that are exchanged for Exchange Securities shall be cancelled by the
Trustee. To permit registrations of transfers and exchanges in accordance with
the terms, conditions and restrictions hereof, the Issuer shall execute and the
Trustee shall authenticate Securities at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange or redemption
of the Securities, but the Issuer may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other similar governmental
charge payable upon exchanges pursuant to Section 2.11, 7.5 or 11.2).
The Registrar shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 11.2 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Upon due presentation for registration of transfer of any Security at
each such office or agency, the Issuer shall execute and the Trustee shall
authenticate and deliver in the name of the transferee or transferees a new
Security or Securities in authorized denominations for a like aggregate
principal amount.
All Securities presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Issuer or the Trustee) be
duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Issuer and the Trustee duly executed by the
holder or his attorney duly authorized in writing.
All Securities issued upon any transfer or exchange of Securities shall
be valid obligations of the Issuer, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
Section 2.7. Book-Entry Provisions for Global Securities. (a) Each
Global Security initially shall (i) be registered in the name of the Depositary
or the nominee of such Depositary and (ii) be delivered to the Trustee as
custodian
27
<PAGE>
for such Depositary and (iii) bear legends as set forth in Section 2.5(b).
Except as described in this Article II, owners of interests in the Global
Securities shall not have Securities registered in their names, will not receive
physical delivery of Securities in definitive form and will not be considered
the registered owners or holders thereof under this Indenture for any purpose.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under any
Global Security and the Depositary and/or its nominee may be treated by the
Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute
owner of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of
the Issuer or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Security.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Beneficial interests in the Global
Security may be transferred in accordance with the applicable rules and
procedures of the Depositary and the provisions of Section 2.8. In addition,
definitive Securities in physical form shall be transferred to all beneficial
owners in exchange for their beneficial interests in the Global Security if (i)
the Depositary notifies the Issuer that it is unwilling or unable to continue as
Depositary for the Global Security and a successor depositary is not appointed
by the Issuer within 90 days of such notice or (ii) there shall have occurred
and be continuing an Event of Default or any event which after notice or lapse
of time or both would be an Event of Default with respect to the Securities or
(iii) as provided in Section 2.8(a). Securities issued in definitive form will
be in fully registered form, without coupons, in minimum denominations of
$100,000 and integral multiples of $1,000 above that amount. Upon issuance of
Securities in definitive form, the Trustee is required to register Securities in
the name of, and cause the Securities to be delivered to, the person or persons
(or nominee thereof) identified as the beneficial owners as the Depositary shall
direct.
(c) In connection with any transfer of a beneficial interest in a
Global Security to a transferee receiving definitive Securities in physical form
pursuant to paragraph (b) of this Section, the Registrar shall reflect on its
books and records the date and the decrease in the principal amount of the
Global Security in an amount equal to the principal amount of the
28
<PAGE>
beneficial interest in the Global Security to be transferred, and the Issuer
shall execute, and the Trustee shall authenticate and deliver, one or more
definitive Securities in physical form of like tenor and amount (which
Securities shall be Certificated Securities in the case of a transfer of a
beneficial interest in the Rule 144A Global Security).
(d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to paragraph (b) of this Section, the Global Security
shall be deemed to be surrendered to the Trustee for cancellation, and the
Issuer shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Security, an equal aggregate principal amount of
definitive Securities in physical form (which Securities shall be Certificated
Securities in the case of a transfer of a beneficial interest in the Rule 144A
Global Security) or of authorized denominations.
(e) Any Certificated Security received in exchange for an interest in
the Rule 144A Global Security pursuant to paragraph (b) or (c) of this Section
shall, except as otherwise provided by paragraph (e) of Section 2.8, bear the
legend regarding transfer restrictions applicable to the Certificated Security
set forth in Section 2.5(a).
(f) The registered holder of the Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
Section 2.8. Special Transfer Provisions. Unless and until a Security
is exchanged for an Exchange Security in connection with an effective Exchange
Offer Registration Statement or Shelf Registration Statement pursuant to the
Registration Rights Agreement, the following provisions shall apply: 33.
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Security to any Institutional Accredited Investor which
is not a QIB:
(i) The Registrar shall register the transfer of any Security, if (x)
the requested transfer is at least three years after the later of the Original
issue date of the Securities and the last date on which such Security was held
by an affiliate of the Issuer or (y) the proposed transferee has delivered to
the Registrar a certificate substantially in the Form of Institutional
Accredited Investor Certificate set forth in Exhibit F hereto.
29
<PAGE>
(ii) If the proposed transferor is an Agent Member holding a beneficial
interest in the Rule 144A Global Security, upon receipt by the Registrar of (x)
the documents, if any, required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and a decrease in the principal
amount of the Rule 144A Global Security in an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Certificated Securities of like tenor and amount. 35.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security to a QIB:
(i) Upon the transfer of Certificated Securities initially issued to an
Institutional Accredited Investor to a QIB, such Certificated Securities will,
unless the Rule 144A Global Security has previously been exchanged in whole for
Certificated Securities, be exchanged for an interest in the Rule 144A Global
Security. If the Security to be transferred consists of Certificated Securities
or Private Exchange Securities, the Registrar shall register the transfer if
such transfer is being made by a proposed transferor who has checked the box
provided for on the form of Security stating, or has otherwise advised the
Issuer and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has otherwise
advised the Issuer and the Registrar in writing, that it is purchasing the
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Issuer as it has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Security to
be transferred consists of Certificated Securities, upon receipt by the
Registrar of the documents referred to in clause (i) and
30
<PAGE>
instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Rule 144A Global Security in an amount
equal to the principal amount of the Certificated Security to be transferred,
and the Trustee shall cancel the Certificated Security.
(c) Exchange of Rule 144A Global Security or Certificated Securities
for Exchange Securities or Private Exchange Securities. The following provisions
shall apply with respect to the registration of any proposed exchange of an
interest in the Rule 144A Global Security or a Certificated Security for an
Exchange Security or a Private Exchange Security, provided, that any such
Exchange Securities or Private Exchange Securities, as applicable, shall be
issued and authenticated in accordance with the terms of Sections 2.1, 2.4 and
2.6 hereof:
(i) If the proposed transferor is an Agent Member holding a beneficial
interest in the Rule 144A Global Security, upon receipt of instructions given in
accordance with the Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and a decrease in the principal
amount of the Rule 144A Global Security in an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Exchange Securities or Private Exchange Securities, as
applicable, of like tenor and amount.
(ii) If the proposed transferor is a Holder of a Certificated Security,
the Registrar shall cancel such Certificated Security on its books and records
and the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Exchange Securities or Private Exchange Securities, as applicable,
of like tenor and amount.
(d) Transfer and Exchange of Private Exchange Securities. The following
additional provisions will apply with respect to the registration of any
proposed transfer or exchange of an interest in a Private Exchange Security:
(i) If the Private Exchange Security is submitted for registration of
transfer (i) in connection with a change of beneficial ownership other than that
resulting from a sale or other transfer for value pursuant to an effective Shelf
Registration Statement or (ii) solely of record ownership not involving the
31
<PAGE>
delivery of any consideration, upon receipt of the Holder's transfer
certification set forth on the reverse of the Private Exchange Security, the
Registrar shall cancel such Private Exchange Security on its books and records
and the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Private Exchange Securities of like tenor and amount.
(ii) If the Private Exchange Security is submitted for registration of
transfer in connection with a change of beneficial ownership resulting from a
sale or other transfer for value pursuant to an effective Shelf Registration
Statement, upon receipt of the Private Exchange Security Transfer Certificate
set forth in Exhibit G hereto (or such other documentation in form and substance
satisfactory to the Issuer and the Trustee), the Registrar shall cancel such
Private Exchange Security on its books and records and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Exchange
Securities of like tenor and amount, provided, that any such Exchange Securities
shall be issued and authenticated in accordance with the terms of Sections 2.1,
2.4 and 2.6 hereof.
(e) Securities Legend. Upon the transfer, exchange or replacement of
Legended Securities, the Registrar shall deliver only Legended Securities unless
either (i) the transfer is at least three years after the later of the Original
issue date of the Securities and the last date on which such Security was held
by an affiliate of the Company or (ii) there is delivered to the Registrar an
opinion of counsel reasonably satisfactory to the Issuer and the Registrar to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(f) Suspension of Effectiveness of Shelf Registration Statement. Upon
the issuance of a stop order or any other suspension of effectiveness of the
Shelf Registration Statement by the Commission, the Issuer shall immediately
deliver a notice of such suspension of effectiveness to the Trustee and the
Registrar, whereupon the Trustee shall cease to authenticate and the Registrar
shall cease to record the transfer of additional Exchange Securities being sold
pursuant to such Shelf Registration Statement until it shall have received an
Officers' Certificate stating that the Shelf Registration Statement, or a
succeeding registration statement, has again been declared effective by the
Commission, together with a copy of the order of effectiveness, when available.
During the period of any suspension of effectiveness of the Shelf Registration
32
<PAGE>
Statement, transfers of Unregistered Securities shall be made only in accordance
with an Exchange Offer Registration Statement, if available, or pursuant to
Section 2.8(a) or (b).
(g) General. By its acceptance of any Security bearing the Securities
Legend, each Holder of such a Security acknowledges the restrictions on transfer
of such Security set forth in this Indenture and in the Securities Legend and
agrees that it will transfer such Security only as provided in this Indenture.
The Registrar shall not register a transfer of any Security unless such transfer
complies with the restrictions on transfer of such Security set forth in this
Indenture. In connection with any transfer of Securities, each Holder agrees by
its acceptance of the Securities to furnish the Registrar or the Issuer such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act, provided that the Registrar shall not be required to
determine (but may rely on a determination made by the Issuer with respect to)
the sufficiency of any such certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.7 or this Section 2.8. The
Issuer shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
Section 2.9. Mutilated, Defaced, Destroyed, Lost and Stolen
Securities48.. In case any temporary or definitive Security shall become
mutilated, defaced or be apparently destroyed, lost or stolen, the Issuer in its
discretion may execute, and upon the written request of any officer of the
Issuer, the Trustee shall authenticate and deliver, a new Security, bearing a
number not contemporaneously outstanding, in exchange and substitution for the
mutilated or defaced Security, or in lieu of and substitution for the Security
so apparently destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Issuer and to the Trustee and any agent
of the Issuer or the Trustee such security or indemnity as may be required by
them to indemnify and defend and to save each of them harmless and, in every
case of destruction, loss or theft evidence to their satisfaction of the
apparent destruction, loss or theft of such Security and of the ownership
thereof.
Upon the issuance of any substitute Security, the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation
33
<PAGE>
thereto and any other expenses (including the fees and expenses of the Trustee
and its counsel) connected therewith. In case any Security which has matured or
is about to mature, shall become mutilated or defaced or be apparently
destroyed, lost or stolen, the Issuer may, instead of issuing a substitute
Security, pay or authorize the payment of the same (without surrender thereof
except in the case of a mutilated or defaced Security), if the applicant for
such payment shall furnish to the Issuer and to the Trustee and any agent of the
Issuer or the Trustee such security or indemnity as any of them may require to
save each of them harmless from all risks, however remote, and, in every case of
apparent destruction, loss or theft, the applicant shall also furnish to the
Issuer and the Trustee and any agent of the Issuer or the Trustee evidence to
their satisfaction of the apparent destruction, loss or theft of such Security
and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of this
Section by virtue of the fact that any Security is apparently destroyed, lost or
stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the apparently destroyed, lost or stolen Security shall be at any
time enforceable by anyone and shall be entitled to all the benefits of (but
shall be subject to all the limitations of rights set forth in) this Indenture
equally and proportionately with any and all other Securities duly authenticated
and delivered hereunder. All Securities shall be held and owned upon the express
condition that, to the extent permitted by law, the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, defaced, or
apparently destroyed, lost or stolen Securities and shall preclude any and all
other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
Section 2.10. Cancellation of Securities; Destruction Thereof. All
Securities surrendered for payment, redemption, registration of transfer or
exchange, if surrendered to the Issuer or any agent of the Issuer or the
Trustee, shall be delivered to the Trustee for cancellation or, if surrendered
to the Trustee, shall be cancelled by it; and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture. The Trustee shall destroy cancelled Securities held by it and deliver
a certificate of destruction to the Issuer. If the Issuer shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless and until
the same are delivered to the Trustee for cancellation.
Section 2.11. Temporary Securities. Pending the preparation of
definitive Securities, the Issuer may execute and
34
<PAGE>
the Trustee shall authenticate and deliver temporary Securities
(printed, lithographed, typewritten or otherwise reproduced, in each case in
form satisfactory to the Trustee). Temporary Securities shall be issuable as
registered Securities without coupons, of any authorized denomination, and
substantially in the form of the definitive Securities but with such omissions,
insertions and variations as may be appropriate for temporary Securities, all as
may be determined by the Issuer with the concurrence of the Trustee. Temporary
Securities may contain such reference to any provisions of this Indenture as may
be appropriate. Every Temporary Security shall be executed by the Issuer and be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with like effect, as the definitive Securities. Without
unreasonable delay, the Issuer shall execute and shall furnish definitive
Securities and thereupon temporary Securities may be surrendered in exchange
therefor without charge at each office or agency to be maintained by the Issuer
for the purpose pursuant to Section 3.2, and the Trustee shall authenticate and
deliver in exchange for such temporary Securities a like aggregate principal
amount of definitive Securities of authorized denominations. Until so exchanged,
the temporary Securities shall be entitled to the same benefits under this
Indenture as definitive Securities.
Section 0.1. Wire Payments. Notwithstanding any provisions of this
Indenture and the Securities to the contrary, if the Issuer and a Holder so
agree, payments of interest on, and Liquidated Damages, if any, and any portion
of the principal of any Securities other than the final payment of principal on
a Security, may be made by the paying agent upon receipt from the Issuer in
immediately available funds, directly to the Holder of such Security (whether by
Federal funds, wire transfer or otherwise) if the Holder has delivered written
instructions to the Trustee 15 days prior to such payment date requesting that
such payment will be so made and designating the bank account to which such
payment shall be so made and in the case of payments of a portion of the
principal of any Securities other than the final payment of principal on a
Security, the holder of such Security surrenders the same to the Trustee in
exchange for a Security or Securities aggregating the same principal amount as
the unredeemed principal amount of the Securities surrendered. The Trustee shall
be entitled to rely on the last instruction delivered by the Holder pursuant to
this Section 2.12 unless a new instruction is delivered 15 days prior to a
payment date. The Issuer will indemnify and hold the Trustee harmless against
any loss, liability or expense (including attorneys' fees) resulting from any
act or omission to act on the part of the Issuer or any such Holder in
connection with any such agreement or which the paying agent may incur as a
result of making any payment in accordance with any such agreement.
Section 0.2. Deposit of Moneys. On or before each payment date
(including a Repurchase Date), the Issuer shall
35
<PAGE>
deposit with the paying agent (or if the Issuer or one of its Subsidiaries or
any Affiliate of any thereof is the paying agent, shall segregate and hold in
trust) money sufficient to make the payment of principal of, interest and
Liquidated Damages, if any, due hereunder on such payment date which shall, to
the extent wire payments are to be made pursuant to Section 2.12 or otherwise
pursuant to this Indenture be made in immediately available funds.
ARTICLE III.
COVENANTS OF
THE ISSUER AND THE TRUSTEE.
Section 3.1. Payment of Principal and Interest. The Issuer covenants
and agrees that it will duly and punctually pay or cause to be paid the
principal of, interest and Liquidated Damages, if any, on each of the Securities
at the place or places, at the respective times and in the manner provided in
the Securities. Each installment of interest on the Securities may be paid by
mailing checks for such interest payable to or upon the written order of the
holders of Securities entitled thereto as they shall appear on the registry
books of the Issuer. The Issuer shall pay interest on overdue principal at the
rate borne by the Securities and shall pay interest on overdue installments of
interest and Liquidated Damages, if any, at the same rate to the extent lawful.
Section 3.2. Offices for Payments, etc. So long as any of the
Securities remain outstanding, the Issuer will maintain in the Borough of
Manhattan, the City of New York, the following: (a) an office or agency where
the Securities may be presented for payment (the "Paying Agent"), (b) an office
or agency where the Securities may be presented for registration of transfer and
for exchange as in this Indenture provided (the "Registrar") and (c) an office
or agency where notices and demands to or upon the Issuer in respect of the
Securities or of this Indenture may be served. The Issuer will give to the
Trustee written notice of the location of any such office or agency and of any
change of location thereof. The Issuer hereby initially designates the Corporate
Trust Office of the Trustee as the office or agency for each such purpose. In
case the Issuer shall fail to maintain any such office or agency or shall fail
to give such notice of the location or of any change in the location thereof,
presentations and demands may be made and notices may be served at the Corporate
Trust Office. The Trustee shall initially be the Registrar and Paying Agent;
provided, however, that the Issuer may act as Paying Agent or Registrar.
36
<PAGE>
Section 3.3. Appointment to Fill a Vacancy in Office of Trustee. The
Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 5.9, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 3.4. Paying Agents. Whenever the Issuer shall appoint a paying
agent other than the Trustee, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section,
(a) that it will hold all sums received by it as such agent for the
payment of the principal of, interest and Liquidated Damages, if any, on the
Securities (whether such sums have been paid to it by the Issuer or by any other
obligor on the Securities) in trust for the benefit of the holders of the
Securities or of the Trustee,
(b) that it will give the Trustee notice of any failure by the Issuer
(or by any other obligor on the Securities) to make any payment of the principal
of, interest and Liquidated Damages, if any, on the Securities when the same
shall be due and payable, and
(c) pay any such sums so held in trust by it to the Trustee upon the
Trustee's written request at any time during the continuance of the failure
referred to in clause (b) above.
The Issuer will, prior to each due date of the principal of, interest
and Liquidated Damages, if any, on the Securities, deposit with the paying agent
a sum sufficient to pay such principal, interest and Liquidated Damages, if any,
and (unless such paying agent is the Trustee) the Issuer will promptly notify
the Trustee of any failure to take such action.
If the Issuer shall act as its own paying agent, it will, on or before
each due date of the principal of, interest and Liquidated Damages, if any, on
the Securities, set aside, segregate and hold in trust for the benefit of the
holders of the Securities a sum sufficient to pay such principal interest and
Liquidated Damages, if any, so becoming due. The Issuer will promptly notify the
Trustee of any failure to take such action.
Anything in this Section to the contrary notwithstanding, the Issuer may
at any time, for the purpose of obtaining a satisfaction and discharge of this
Indenture or for any other reason, pay or cause to be paid to the Trustee all
sums held in trust by the Issuer or any paying agent hereunder, as required by
this Section, such sums to be held by the Trustee upon the trusts herein
contained.
37
<PAGE>
Anything in this Section to the contrary notwithstanding, the agreement
to hold sums in trust as provided in this Section is subject to the provisions
of Sections 9.3 and 9.4.
Section 3.5. Certificate to Trustee. The Issuer will furnish to the
Trustee within 120 days after the end of each fiscal year a brief certificate
(which need not comply with Section 10.5) from the principal executive,
financial or accounting officer of the Issuer as to his or her knowledge of the
Issuer's compliance with all conditions and covenants under the Indenture during
such fiscal year (such compliance to be determined without regard to any period
of grace or requirement of notice provided under the Indenture).
Section 3.6. Securityholders' Lists. If and so long as the Trustee
shall not be the Security registrar, the Issuer will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of the Securities pursuant to
Section 312 of the Trust Indenture Act (a) semiannually not more than 15 days
after each record date for the payment of semiannual interest on the Securities,
as hereinabove specified, as of such record date, and (b) at such other times as
the Trustee may request in writing, within thirty days after receipt by the
Issuer of any such request as of a date not more than 15 days prior to the time
such information is furnished.
Section 3.7. Reports to Holders of the Securities. The Issuer covenants
to file with the Trustee, within 15 days after the Issuer is required to file
the same with the Commission, copies of the annual reports and of the
information, documents, and other reports which the Issuer may be required to
file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange
Act. If, during any period in which Securities with an aggregate principal
amount equal to or greater than ten percent of the aggregate principal amount of
Securities originally issued under this Indenture are outstanding, the Issuer is
not obligated to file annual reports, documents or other reports with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, the Issuer will
furnish to the Trustee the same such annual reports, documents or other reports
as if the Issuer were so subject. In addition, whether or not required by the
rules and regulations of the Commission, the Issuer shall file a copy of all
such information and reports with the Commission for public availability (unless
the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, for so long as any Unregistered Securities remain outstanding, upon
the request of any Holder or any prospective purchaser of such Unregistered
Securities, the Company shall supply to such Holder or such prospective
purchaser the information required under Rule 144A under the Securities Act,
38
<PAGE>
unless the Issuer is then subject to Section 13 or 15(d) of the Exchange Act and
reports filed thereunder satisfy the information requirements of Rule 144A(d)(4)
as then in effect.
Section 3.8. Reports by the Trustee. Any Trustee's report required
under Section 313(a) of the Trust Indenture Act of 1939 shall be transmitted on
or before the first date for the regular payment of semiannual interest on the
Securities next succeeding November 15 in each year, and shall be dated as of a
date convenient to the Trustee no more than 60 nor less than 45 days prior
thereto (unless such November 15 is less than 45 days prior to such interest
payment date, in which case such report shall be (a) so transmitted on or before
the second such interest payment date next succeeding such November 15 and (b)
as of a date determined as provided above). The Trustee also shall comply with
Section 313(b)(2) of the Trust Indenture Act of 1939. In addition, the Trustee
shall transmit by mail all reports as required by Section 313(c) of the Trust
Indenture Act of 1939.
A copy of each report, at the time of its mailing to the Holders of
Securities, shall be mailed to the Issuer and filed with the Commission and with
each stock exchange on which the Securities are listed in accordance with
Section 313(d) of the Trust Indenture Act of 1939. The Issuer shall promptly
notify the Trustee when the Securities are listed on any stock exchange or of
any delisting thereof.
Section 3.9. Limitations on Indebtedness. The Issuer will not, and will
not permit any Subsidiary to, create, incur, assume, become liable for or
guarantee the payment of (collectively, an "incurrence") any Indebtedness
(including Acquired Indebtedness), other than Permitted Indebtedness, or permit
any Subsidiary to issue any Preferred Stock other than Preferred Stock that is
issued to and held by the Issuer or a wholly owned Subsidiary of the Issuer (so
long as the Issuer or a wholly owned Subsidiary of the Issuer owns such
Preferred Stock); provided the Issuer may incur, and may permit any Subsidiary
to incur, Indebtedness (including Acquired Indebtedness) if (a) at the time of
such event and after giving effect thereto, on a pro forma basis, the ratio of
Consolidated EBITDA to Consolidated Fixed Charges for the four fiscal quarters
immediately preceding such event for which financial information is available
consistent with the Issuer's prior practice, taken as one period and calculated
on the assumption that such Indebtedness had been incurred on the first day of
such four-quarter period and, in the case of Acquired Indebtedness, on the
assumption that the related acquisition (whether by means of purchase, merger or
otherwise) also had occurred on such date with the appropriate adjustments with
respect to such acquisition being included in such pro forma calculation, would
have been greater than 1.75 to 1, and (b) no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness.
39
<PAGE>
Notwithstanding the foregoing, the Issuer will not permit any Subsidiary
to incur Indebtedness (including Acquired Indebtedness) unless, at the time of
the incurrence of such Indebtedness and after giving effect thereto, on a pro
forma basis, without duplication, the sum of (i) the aggregate amount of
Indebtedness (including Acquired Indebtedness and Permitted Indebtedness) of all
Subsidiaries of the Issuer plus (ii) the aggregate amount of all outstanding
Indebtedness secured by Liens issued, assumed or guaranteed by the Issuer or any
Subsidiary (excluding Indebtedness secured by Permitted Liens) plus (iii) the
aggregate amount of Attributable Debt incurred by the Issuer or any Subsidiary
in respect of sale and leaseback transactions does not at such time exceed 10%
of Consolidated Net Tangible Assets.
Section 3.10. Limitations on Restricted Payments. The Issuer will not,
and will not permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Payment unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments (the fair market value of any such
Restricted Payment, if other than cash, as determined in good faith by the
Issuer's Board of Directors and evidenced by a resolution of such Board)
declared or made after the Issue Date does not exceed the greater of (i)
$5,000,000 or (ii) the sum of (A) 50% of the Consolidated Net Income of the
Issuer on a cumulative basis during the period (taken as one accounting period)
from and including April 1, 1993 and ending on the last day of the Issuer's last
fiscal quarter ending prior to the date of such Restricted Payment (or in the
event such Consolidated Net Income shall be a deficit, minus 100% of such
deficit), plus (B) 100% of the aggregate net cash proceeds of, and the fair
market value of marketable securities (as determined in good faith by the
Issuer's Board of Directors and evidenced by a resolution of such Board)
received by the Issuer from, the issue or sale after April 1, 1993 of Capital
Stock of the Issuer (other than the issue or sale of (x) Disqualified Stock, (y)
Capital Stock of the Issuer to any Subsidiary of the Issuer or (z) Capital Stock
convertible (whether at the option of the Issuer or the holder thereof or upon
the happening of any event) into any security other than its Capital Stock) and
any Indebtedness or other securities of the Issuer convertible into or
exercisable for Capital Stock (other than Disqualified Stock) of the Issuer
which has been so converted or exercised, as the case may be, minus (C) $25
million in respect of the redemption of the Issuer's
40
<PAGE>
Preferred Stock, Series B, in September 1994 plus (D) $5,000,000;
provided that, notwithstanding the foregoing, (I) the Issuer shall be permitted
to make Permitted Payments and (II) the Issuer and any Subsidiary shall be
permitted to make Investments in Permitted Joint Ventures if at the time of such
Investment and after giving effect thereto, on a pro forma basis, (X) the Issuer
could incur at least $1.00 of Indebtedness (other than Permitted Indebtedness)
pursuant to clause (a) of Section 3.9 (assuming for purposes of such
calculation, if such Investment is made other than with borrowed funds or funds
obtained from the issuance of Capital Stock specifically for the purpose of such
Investment, that the Issuer incurred Indebtedness in an amount equal to such
Investment bearing interest at the weighted average rate of interest paid by the
Issuer on its outstanding Indebtedness during the four fiscal quarters most
recently ended), (Y) the aggregate amount of Investments made pursuant to this
clause (II), less the aggregate amount of dividends, other distributions of
earnings and returns of capital received by the Issuer from such Permitted Joint
Ventures in cash, does not exceed $50,000,000 and (Z) no Default or Event of
Default shall have occurred and be continuing; and provided further that the
foregoing clause (b) shall not prevent (i) the payment of any dividend within 60
days of its declaration if such dividend could have been made on the date of its
declaration without violation of the provisions of this covenant or (ii) the
redemption, repurchase, retirement or other acquisition of any Capital Stock of
the Issuer in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Issuer) of other Capital
Stock of the Issuer (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause
(b)(ii)(B) of the preceding paragraph; or (iii) the defeasance, redemption or
repurchase of Indebtedness which is subordinated in right of payment to the
Securities with the net cash proceeds from an incurrence of Refinancing
Indebtedness or the substantially concurrent sale (other than to a Subsidiary of
the Issuer) of other Capital Stock of the Issuer (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (b)(ii)(B) of the preceding paragraph.
Section 3.11. Limitations on Transactions with Affiliates. So long as
any of the Securities remain outstanding, neither the Issuer nor any of its
Subsidiaries will directly or indirectly enter into any transaction or series of
related transactions involving aggregate consideration in excess of $1,000,000
in any fiscal year with any Affiliate or holder of 5% or more of any class of
Capital Stock of the Issuer (including any Affiliates of such holders) except
for any transaction (including any loans or advances by or to any Affiliate) (i)
the
41
<PAGE>
terms of which are fair and reasonable to the Issuer or such Subsidiary, as
the case may be, and are at least as favorable as the terms which could be
obtained by the Issuer or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not such a
holder, an Affiliate of such holder or Affiliate of the Issuer and (ii) which
has been approved by a majority of the Issuer's directors (including a majority
of the Issuer's independent directors, if any) in the exercise of their
fiduciary duties; provided that any such transaction shall be conclusively
deemed to be on terms which are fair and reasonable to the Issuer or any of its
Subsidiaries and on terms which are at least as favorable as the terms which
could be obtained on an arm's length basis with Persons who are not such a
holder, an Affiliate of such holder or Affiliate of the Issuer if such
transaction is approved by a majority of the Board of Directors (including a
majority of the Issuer's independent directors, if any). This covenant does not
apply to (a) any transaction between the Issuer and any of its Wholly Owned
Subsidiaries or between any of its Wholly Owned Subsidiaries, (b) any Restricted
Payment not otherwise prohibited by Section 3.10 or (c) any transaction pursuant
to an agreement in existence on the date of the Indenture and included as an
exhibit to the Company's Exchange Act Reports.
Section 3.12. Restrictions on Disposition of Assets of the Issuer. (a)
Subject to the provisions of Section 8.1, the Issuer will not, and will not
permit any of its Subsidiaries to, make any Asset Disposition unless (i) the
Issuer (or the Subsidiary, as the case may be) receives consideration at the
time of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Issuer's management if the
consideration is less than $200,000 or, if the consideration is greater than
$200,000, as determined in good faith by the Issuer's Board of Directors and
evidenced by a resolution of such Board; provided, that no resolution of the
Board shall be required in connection with the disposition of approximately 200
contiguous acres adjacent to the Issuer's headquarters at 400 Three Springs
Drive, Weirton, West Virginia, as depicted on Exhibit H hereto, (ii) not less
than 75% of the consideration received by the Issuer (or the Subsidiary, as the
case may be) is in the form of cash or Cash Equivalents and (iii) the Net Cash
Proceeds of the Asset Disposition are within 270 days, at the Issuer's election,
(A) invested in the business or businesses of the Issuer as of the Issue Date or
any related business, or (B) to the extent not so invested are applied (1) to
make an Asset Disposition Offer to purchase the Securities (on a pro rata basis
if the amount available for such repurchase is less than the outstanding
principal amount of the Securities) or (2) to purchase any other Indebtedness
which is pari passu with the Securities, at a purchase price of 100% of the
principal amount thereof plus, in each case, accrued interest and Liquidated
Damages, if any, to the date of repayment. Notwithstanding the foregoing, the
Issuer and its Subsidiaries
42
<PAGE>
will not be required to apply any Net Cash Proceeds in accordance with this
provision except to the extent that the aggregate gross proceeds from all Asset
Dispositions which are not applied in accordance with this provision exceed
$25,000,000.
(b) In the event that the Issuer elects to purchase Securities pursuant
to Section 3.12(a)(iii)(B)(1) above, the Issuer will purchase Securities
tendered pursuant to a tender offer by the Issuer for the Securities (the "Asset
Disposition Offer") in accordance with the procedures (including prorationing in
the event of oversubscription) set forth in Section 3.12(c). If the aggregate
purchase price of Securities tendered pursuant to the Asset Disposition Offer is
less than the Net Cash Proceeds allotted to the purchase of the Securities, the
Issuer shall apply the remaining Net Cash Proceeds in accordance with clauses
(A) and (B)(2) of Section 3.12(a)(iii) above.
(c) (i) In the event that the Issuer elects to purchase Securities
pursuant to Section 3.12(a)(iii)(B)(1) above, the Issuer shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that:
(1) such Holder may elect to have his Securities purchased by the Issuer either
in whole or in part (subject to prorationing as hereinafter described in
the event the Asset Disposition Offer is oversubscribed) in multiples of
$1,000 principal amount, at the applicable purchase price, plus accrued
interest and Liquidated Damages, if any, to the date of purchase by the
Issuer;
(2) any Security not tendered or accepted for payment will continue to accrue
interest and Liquidated Damages, if any,;
(3) any Security accepted for payment pursuant to the Asset Disposition Offer
shall cease to accrue interest and Liquidated Damages, if any, after the
Purchase Date; and
(4) Holders will be entitled to withdraw their election in the manner described
in clause (iii) below.
The notice shall also specify a purchase date not less than 30 days nor more
than 60 days after the date of such notice (the "Purchase Date"), shall include
all instructions and materials necessary to enable each Holder to tender
Securities pursuant to the Asset Disposition Offer, and shall contain
information concerning the business of the Issuer which the Issuer in good faith
believes will enable such Holders to make an informed decision (which at a
minimum will include (A) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Issuer, the most
recent subsequently filed Quarterly Report on Form 10-Q and any Current Report
on Form 8-K of the Issuer filed subsequent to such Quarterly Report,
43
<PAGE>
other than Current Reports describing other asset dispositions otherwise
described in the offering materials, (B) corresponding successor reports or
reports otherwise required pursuant to Section 3.7 to be delivered to Holders if
the Issuer is no longer filing reports pursuant to the Securities Exchange Act
of 1934, (C) a description of material developments in the Issuer's business
subsequent to the date of the latest of such reports, and (D) if material,
appropriate pro forma financial information. Substantially simultaneously with
the mailing of the notice, the Issuer shall cause a copy of such notice to be
published in The Wall Street Journal or another newspaper of general circulation
in the Borough of Manhattan, the City of New York.
(ii) Not later than the date upon which written notice of an Asset
Disposition Offer is delivered to the Trustee as provided above, the Issuer
shall deliver to the Trustee an Officers' Certificate as to (A) the amount of
the Asset Disposition Offer (the "Offer Amount"), (B) the allocation of the Net
Cash Proceeds pursuant to which such Asset Disposition Offer is being made and
(C) the compliance of such allocation with the provisions of Section 3.12(a).
Not later than one Business Day prior to the Purchase Date, the Issuer shall
also irrevocably deposit with the Trustee or with a paying agent (or, if the
Issuer is acting as its own paying agent, segregate and hold in trust) in
immediately available funds an amount equal to the Offer Amount to be held for
payment in accordance with the provisions of this Section. Upon the expiration
of the period for which the Asset Disposition Offer remains open (the "Offer
Period"), the Issuer shall deliver to the Trustee the Securities or portions
thereof which have been properly tendered to and are to be accepted by the
Issuer. The Trustee or a paying agent (if any) shall, on the Purchase Date, mail
or deliver payment to each tendering Holder in the amount of the purchase price.
In the event that the aggregate purchase price of the Securities delivered by
the Issuer to the Trustee is less than the Offer Amount, the Trustee shall
deliver the excess to the Issuer immediately after the expiration of the Offer
Period.
(iii) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Trustee
at the address specified in the notice at least one Business Day prior to the
Purchase Date. Holders will be entitled to withdraw their election if the
Trustee or paying agent (if any) receives not later than the close of business
on the Business Day prior to the Purchase Date a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder and a statement that
such Holder is withdrawing his election to have all or a portion of his
Securities purchased. If at the expiration of the Offer Period, the aggregate
principal amount of Securities surrendered by Holders exceeds the Offer Amount,
the Issuer shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Issuer so that only
Securities in denominations of $1,000 or multiples thereof
44
<PAGE>
shall be purchased). Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
(iv) At the time the Issuer delivers Securities to the Trustee which are
to be accepted for purchase, the Issuer will also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Issuer
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
(d) In the event the Issuer is unable to purchase Securities from
Holders in an Asset Disposition Offer because such purchase is prohibited by any
provision of applicable law, the Issuer need not make an Asset Disposition
Offer. The Issuer shall then be obligated to apply the Net Cash Proceeds in
accordance with clause (A) or (B)(2) of Section 3.12(a)(iii).
(e) Whenever Net Cash Proceeds are received by the Issuer, and prior to
the allocation of such Net Cash Proceeds pursuant to this Section 3.12, such Net
Cash Proceeds shall be set aside by the Issuer in a separate account pending
allocation.
Section 3.13. Limitations on Liens. The Issuer will not, and will not
permit any Subsidiary to, issue, assume or guarantee any Indebtedness secured by
a Lien (other than a Permitted Lien) of or upon any Property (including any
income or profits therefrom or assignment or conveyance of any right to receive
income therefrom) of the Issuer or any Subsidiary or any shares of stock or debt
of any Subsidiary which owns Property, whether such Property is owned at the
date of the Indenture or thereafter acquired, without making effective provision
whereby the Securities (together with, if the Issuer shall so determine, any
other debt of the Issuer ranking equally with the Securities and then existing
or thereafter created) shall be secured by such Lien equally and ratably with
such Indebtedness, so long as such Indebtedness shall be so secured; provided
that the foregoing prohibition shall not apply to liens with respect to sale and
leaseback transactions regarding the facility known as the "Number 9 Tandem
Mill" or the facility known as the "Foster Wheeler Steam Generating Facility".
45
<PAGE>
Notwithstanding the foregoing, and subject to the provisions of Section
3.9, the Issuer or any Subsidiary may issue, assume or guarantee Indebtedness
secured by Liens without equally and ratably securing the Securities, provided
that, after giving effect thereto, without duplication, the sum of (i) the
aggregate amount of all outstanding Indebtedness secured by Liens so issued,
assumed or guaranteed (excluding Indebtedness secured by Permitted Liens) plus
(ii) the aggregate amount of Attributable Debt incurred by the Issuer or any
Subsidiary in respect of sale and leaseback transactions plus (iii) the
aggregate amount of Indebtedness (including Acquired Indebtedness and Permitted
Indebtedness) of all Subsidiaries of the Issuer does not at such time exceed 10%
of Consolidated Net Tangible Assets.
Section 3.14. Limitations on Sale and Leaseback Transactions. The
Issuer will not and will not permit any Subsidiary to enter into any sale and
leaseback transaction with respect to any Property (whether now owned or
hereafter acquired) unless the net proceeds of the sale or transfer of the
property to be leased are at least equal to the fair market value (as determined
by the Board of Directors of the Issuer) of such Property and unless the Issuer
or such Subsidiary would be entitled under Sections 3.9 and 3.13, without
equally and ratably securing the Securities, to issue, assume or guarantee debt
secured by a mortgage on such Property in an amount at least equal to the
Attributable Debt in respect of such sale and leaseback transaction; provided,
however, that the foregoing prohibition does not apply to leases between the
Issuer and a Subsidiary or between Subsidiaries or to sales and leasebacks with
respect to the facility known as the "Number 9 Tandem Mill" or the facility
known as the "Foster Wheeler Steam Generating Facility"; provided, that the
Company must be able to incur, in respect of such sale and leaseback
transactions, debt in an amount at least equal to the present value (discounted
at the rate of interest implicit in the terms of the lease) of the obligation of
the lessee for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended) under Section 3.9 hereof.
Section 3.15. Limitations on Dividend and Other Payment Restrictions
Affecting Subsidiaries. The Issuer will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary of the Issuer to (a)(i) pay dividends or make any
other distributions on its Capital Stock, or any other interest or participation
in or measured by its profits, owned by the Issuer or a Subsidiary of the
Issuer, or (ii) pay any Indebtedness owed to the Issuer or a Subsidiary of the
Issuer, (b) make loans or advances to the Issuer or a Subsidiary of the Issuer
or (c) transfer any of its properties or assets to
46
<PAGE>
the Issuer or a Subsidiary of the Issuer, except for Permitted Liens and Liens
permitted under the second paragraph of Section 3.13 and such other encumbrances
or restrictions existing under or by reason of (i) any restrictions, with
respect to a Subsidiary that is not a Subsidiary on the date of this Indenture,
under any agreement in existence at the time such Subsidiary becomes a
Subsidiary (unless such agreement was entered into in connection with, or in
contemplation of, such entity becoming a Subsidiary on or after the date of the
Indenture), (ii) any restrictions under any agreement evidencing any Acquired
Indebtedness of a Subsidiary of the Issuer incurred pursuant to the provisions
of Section 3.9; provided that such restrictions shall not restrict or encumber
any assets of the Issuer or its Subsidiaries other than such Subsidiary, (iii)
terms relating to the nonassignability of any operating lease, (iv) any
encumbrance or restriction existing under any agreement that refinances or
replaces the agreements containing restrictions described in clauses (i)-(iii),
provided that the terms and conditions of any such restrictions are no less
favorable to the holders of the Securities than those under the agreement so
refinanced or replaced, or (v) any encumbrance or restriction due to applicable
law.
Section 3.16. Change of Control Option. In the event that there shall
occur a Change of Control, each Holder of Securities shall have the right, at
such Holder's option, to require the Issuer to purchase all or any part of such
Holder's Securities, on the date (the "Repurchase Date") that is 90 days after
notice of the Change of Control, at 101% of the principal amount thereof, plus
accrued interest and Liquidated Damages, if any, to the Repurchase Date.
On or before the thirtieth day after the Change of Control, the Issuer
is obligated to mail, or cause to be mailed, to all Holders of record of such
Securities a notice regarding the Change of Control and the repurchase right.
Substantially simultaneously with mailing of the notice, the Issuer shall cause
a copy of such notice to be published in The Wall Street Journal or another
newspaper of general circulation in the Borough of Manhattan, the City of New
York.
Each such notice of a repurchase right shall state: (i) the Repurchase
Date; (ii) the date by which the repurchase right must be exercised; (iii) the
price for such Securities; and (iv) the procedure which the Holder of Securities
must follow to exercise such right.
To exercise a repurchase right, the holder of such Securities must
deliver, at least two Business Days prior to the Repurchase Date, written notice
to the Issuer (or an agent designated by the Issuer for such purpose) of the
Holder's exercise of such right, together with the Securities with respect to
which the right is being exercised, duly endorsed for
47
<PAGE>
transfer. Such written notice from the Holder shall be irrevocable unless the
rescission thereof is duly approved by the Continuing Directors.
In the event a repurchase right shall be exercised in accordance with
the terms hereof, the Issuer shall pay or cause to be paid the price payable
with respect to the Security or Securities as to which the repurchase price has
been exercised in cash to the Holder of such Security or Securities, on the
Repurchase Date. In the event that a repurchase right is exercised with respect
to less than the entire principal amount of a surrendered Security, the Issuer
shall execute and deliver to the Trustee and the Trustee shall authenticate for
issuance in the name of the Holder a new Security or Securities in the aggregate
principal amount of that portion of such surrendered Security not repurchased.
The Issuer will comply with all applicable tender offer rules and
regulations, including Section 14(e) of the Exchange Act and the rules
thereunder, if the Issuer is required to give a notice of right of repurchase as
a result of a Change of Control.
As used herein, "Change of Control" means (i) any sale, lease or other
transfer (in one transaction or a series of transactions) of more than 75% of
the assets of the Issuer to any Person (other than a Wholly Owned Subsidiary of
the Issuer); (ii) a "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act (other than the 1984 ESOP, the 1989 ESOP or any
other employee benefit plan of the Issuer)) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Capital Stock of the Issuer
representing more than 50% of the voting power of such Capital Stock; (iii)
Continuing Directors cease to constitute at least a majority of the Board of
Directors of the Issuer; or (iv) the stockholders of the Issuer approve any plan
or proposal for the liquidation or dissolution of the Issuer.
As used herein, "Continuing Director" means a director who either was a
member of the Board of Directors of the Issuer on the date of the Indenture or
who became a director of the Issuer subsequent to such date and whose election,
or nomination for election by the Issuer's stockholders, was duly approved by a
majority of the Continuing Directors then on the Board of Directors of the
Issuer.
ARTICLE IV.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT.
Section 4.1. Event of Default Defined; Acceleration of Maturity; Waiver
of Default. In case one or more of the following Events of Default (whatever the
reason for such Event
48
<PAGE>
of Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) shall
have occurred and be continuing, that is to say:
(a) default in the payment of any installment of interest and
Liquidated Damages, if any, upon any of the Securities as and when the same
shall become due and payable, and continuance of such default for a period of 30
days; or
(b) default in the payment of all or any part of the principal on any
of the Securities as and when the same shall become due and payable either at
maturity, by declaration or otherwise; or
(c) failure on the part of the Issuer duly to observe or perform any
other of the covenants or agreements on the part of the Issuer contained in the
Securities or in this Indenture for a period of 60 days after the date on which
written notice specifying such failure, stating that such notice is a "Notice of
Default" hereunder and demanding that the Issuer remedy the same, shall have
been given by registered or certified mail, return receipt requested, to the
Issuer by the Trustee, or to the Issuer and the Trustee by the holders of at
least 25% in aggregate principal amount of the Securities at the time
outstanding; or
(d) an event of default, as defined in any indenture or instrument
evidencing or under which the Issuer has at the date of this Indenture or shall
hereafter have outstanding at least $25,000,000 aggregate principal amount of
indebtedness for borrowed money, shall happen and be continuing and such
indebtedness shall have been accelerated so that the same shall be or become due
and payable prior to the date on which the same would otherwise have become due
and payable, and such a acceleration shall not be rescinded or annulled within
ten days after notice thereof shall have been given to the Issuer by the Trustee
(if such event be known to it), or to the Issuer and the Trustee by the holders
of at least 25% in aggregate principal amount of the Securities at the time
outstanding; provided that if such event of default under such indenture or
instrument shall be remedied or cured by the Issuer or waived by the holder of
such indebtedness, then the Event of Default hereunder by reason thereof shall
be deemed likewise to have been thereupon remedied, cured or waived without
further action upon the part of either the Trustee or any of the
Securityholders, and provided further that, subject to the provisions of
Sections 5.1 and 5.2, the Trustee shall not be charged with knowledge of any
such default unless written notice thereof shall have been given to the Trustee
by the
49
<PAGE>
Issuer, by the holder or an agent of the holder of any such indebtedness, by the
trustee then acting under any indenture or other instrument under which such
default shall have occurred, or by the holders of not less than 25% in the
aggregate principal amount of the Securities at the time outstanding.
(e) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Issuer in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Issuer or for any substantial part of
its property or ordering the winding up or liquidation of its affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(f) the Issuer shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Issuer or for any substantial part of its property, or make any general
assignment for the benefit of creditors.
Then, and in each and every such case, unless the principal of all of
the Securities shall have already become due and payable, either the Trustee or
the holders of not less than 25% in aggregate principal amount of the Securities
then outstanding hereunder, by notice in writing to the Issuer (and to the
Trustee if given by Securityholders), may declare the entire principal of all
the Securities, the interest and Liquidated Damages, if any, accrued thereon, to
be due and payable immediately, and upon any such declaration the same shall
become immediately due and payable. This provision, however, is subject to the
condition that if, at any time after the principal of the Securities shall have
been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Issuer shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest and Liquidated Damages,
if any, upon all the Securities and the principal of any and all Securities
which shall have become due otherwise than by acceleration (with interest and
Liquidated Damages, if any, upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments of
interest and Liquidated Damages, if any, at the same rate as the rate of
interest specified in the Securities, to the date of such payment or deposit)
and if any and all Events of Default under the Indenture, other than the non-
payment of the principal of Securities which shall have become due by
acceleration, shall
50
<PAGE>
have been cured, waived or otherwise remedied as provided herein--then and in
every such case the holders of a majority in aggregate principal amount of the
Securities then outstanding, by written notice to the Issuer and to the Trustee,
may waive all defaults and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereon.
Section 4.2. Collection of Indebtedness by Trustee; Trustee May Prove
Debt. The Issuer covenants that (a) in case default shall be made in the
payment of any installment of interest and Liquidated Damages, if any, on any of
the Securities when such interest and Liquidated Damages, if any, shall have
become due and payable, and such default shall have continued for a period of 30
days or (b) in case default shall be made in the payment of all or any part of
the principal of any of the Securities when the same shall have become due and
payable, whether upon maturity or upon any redemption or by declaration or
otherwise--then upon demand of the Trustee, the Issuer will pay to the Trustee
for the benefit of the holders of the Securities the whole amount that then
shall have become due and payable on all such Securities for principal, interest
and Liquidated Damages, if any, as the case may be (with interest to the date of
such payment upon the overdue principal and, to the extent that payment of such
interest and Liquidated Damages, if any, is enforceable under applicable law, on
overdue installments of interest at the same rate as the rate of interest
specified in the Securities); and in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, and any expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of its negligence or bad faith. In connection therewith, the
Trustee shall comply with the provisions of Section 313(b)(2) of the Trust
Indenture Act of 1939 to the extent applicable.
Until such demand is made by the Trustee, the Issuer may pay the
principal of, interest and Liquidated Damages, if any, on the Securities to the
registered holders, whether or not the Securities be overdue.
In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Issuer or other
51
<PAGE>
obligor upon the Securities and collect in the manner provided by law out of the
property of the Issuer or other obligor upon the Securities, wherever situated,
the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the Issuer or any
other obligor upon the Securities under Title 11 of the United States Code or
any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor, or in case
of any other comparable judicial proceedings relative to the Issuer or other
obligor upon the Securities, or to the creditors or property of the Issuer or
such other obligor, the Trustee, irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount of
principal, interest and Liquidated Damages, if any, owing and unpaid in respect
of the Securities, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for reasonable compensation to the Trustee and each predecessor Trustee,
and their respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the Trustee and
each predecessor Trustee, except as a result of negligence or bad faith) and of
the Securityholders allowed in any judicial proceedings relative to the Issuer
or other obligor upon the Securities, or to the creditors or property of the
Issuer or such other obligor,
(b) unless prohibited by applicable law and regulations, to vote on
behalf of the holders of the Securities in any election of a trustee or a
standby trustee in arrangement, reorganization, liquidation or other bankruptcy
or insolvency proceedings or person performing similar functions in comparable
proceedings, and
(c) to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Securityholders and of the Trustee on their behalf;
and any trustee, receiver, or liquidator, custodian or other similar official is
hereby authorized by each of the Securityholders to make payments to the
Trustee, and, in the event that the Trustee shall consent to the making of
payments directly to the Securityholders, to pay to the Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Trustee, each
predecessor Trustee and their respective agents, attorneys and counsel,
52
<PAGE>
and all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan or reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar person.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities or the production thereof on any trial or
other proceedings relative thereto, and any such action or proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each predecessor
Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the holders of the Securities.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Securities, and it shall not be necessary to make any holders of the
Securities parties to any such proceedings.
Section 4.3. Application of Proceeds. Any moneys collected by the
Trustee pursuant to this Article shall be applied in the following order at the
date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal, interest and Liquidated Damages, if any, upon
presentation of the several Securities and stamping (or otherwise noting)
thereon the payment, or issuing Securities in reduced principal amounts in
exchange for the presented Securities if only partially paid, or upon surrender
thereof if fully paid:
First: To the payment of costs and expenses, including reasonable
compensation to the Trustee and each predecessor Trustee and their respective
agents and attorneys and of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a result of
negligence or bad faith;
Second: In case the principal of the Securities shall not have become
and be then due and payable, to the payment of interest and Liquidated Damages,
if any, in default in
53
<PAGE>
the order of the maturity of the installments of such interest and Liquidated
Damages, if any,, with interest (to the extent that such interest and Liquidated
Damages, if any, has been collected by the Trustee) upon the overdue
installments of interest and Liquidated Damages, if any, at the same rate as the
rate of interest specified in the Securities, such payments to be made ratably
to the persons entitled thereto, without discrimination or preference;
Third: In case the principal of the Securities shall have become and
shall be then due and payable, to the payment of the whole amount then owing and
unpaid upon all the Securities for principal, interest and Liquidated Damages,
if any, with interest upon the overdue principal, and (to the extent that such
interest and Liquidated Damages, if any, has been collected by the Trustee) upon
overdue installments of interest and Liquidated Damages, if any, at the same
rate as the rate of interest specified in the Securities; and in case such
moneys shall be insufficient to pay in full the whole amount so due and unpaid
upon the Securities, then to the payment of such principal and interest, without
preference or priority of principal over interest or Liquidated Damages, if any,
or of interest over principal, or of any installment of interest or Liquidated
Damages, if any, over any other installment of interest or Liquidated Damages,
if any, or of any Security over any other Security, ratably to the aggregate of
such principal and accrued and unpaid interest or Liquidated Damages, if any;
and
Fourth: To the payment of the remainder, if any, to the Issuer or any
other person lawfully entitled thereto.
Section 4.4. Suits for Enforcement. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Section 4.5. Restoration of Rights on Abandonment of Proceedings. In
case the Trustee shall have proceeded to enforce any right under this Indenture
and such proceedings shall have been discontinued or abandoned for any reason,
or shall have been determined adversely to the Trustee, then and in every such
case the Issuer and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the
54
<PAGE>
Securityholders shall continue as though no such proceedings had been taken.
Section 4.6. Limitations on Suits by Securityholders. No holder of any
Security shall have any right by virtue of or by availing of any provision of
this Indenture to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this Indenture, or for
the appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless such holder previously shall
have given to the Trustee written notice of default and of the continuance
thereof, as hereinbefore provided, and unless also the holders of not less than
25% in aggregate principal amount of the Securities then outstanding shall have
made written request upon the Trustee to institute such action or proceedings in
its own name as trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby and the Trustee for 60 days after
its receipt of such notice, request and offer of indemnity shall have failed to
institute any such action or proceedings and no direction inconsistent with such
written request shall have been given to the Trustee pursuant to Section 4.8; it
being understood and intended, and being expressly covenanted by the taker and
holder of every Security with every other taker and holder and the Trustee, that
no one or more holders of Securities shall have any right in any manner whatever
by virtue or by availing of any provision of this Indenture to affect, disturb
or prejudice the rights of any other holder of Securities, or to obtain or seek
to obtain priority over or preference to any other such holder or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Securities. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Section 4.7. Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. Except as provided in Section 2.6, no right or remedy herein
conferred upon or reserved to the Trustee or to the Securityholders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any holder of any of the
Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be
55
<PAGE>
a waiver of any such Event of Default or an acquiescence therein; and, subject
to Section 4.6, every power and remedy given by this Indenture or by law to the
Trustee or to the Securityholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the Securityholders.
Section 4.8. Control by Securityholders. The holders of a majority in
aggregate principal amount of the Securities at the time outstanding shall have
the right to direct the time, method, and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee by this Indenture; provided that such direction shall not be
otherwise than in accordance with law and the provisions of this Indenture and
provided further that (subject to the provisions of Section 5.1) the Trustee
shall have the right to decline to follow any such direction if the Trustee,
being advised by counsel, shall determine that the action or proceeding so
directed may not lawfully be taken or if the Trustee in good faith by its board
of directors, the executive committee, or a trust committee of directors or
responsible officers of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in personal liability or if
the Trustee in good faith shall so determine that the actions or forbearances
specified in or pursuant to such direction shall be unduly prejudicial to the
interests of holders of the Securities not joining in the giving of said
direction, it being understood that (subject to Section 5.1) the Trustee shall
have no duty to ascertain whether or not such actions or forbearances are unduly
prejudicial to such holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction by Securityholders.
Section 4.9. Waiver of Past Defaults. Prior to the declaration of the
acceleration of maturity of the Securities as provided in Section 4.1, the
holders of a majority in aggregate principal amount of the Securities at the
time outstanding may on behalf of the holders of all the Securities waive any
past default or Event of Default hereunder and its consequences, except a
default (a) in the payment of principal of, interest or Liquidated Damages, if
any, on any of the Securities or (b) in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the holder of
each Security affected. In the case of any such waiver, the Issuer, the Trustee
and the holders of the Securities shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be deemed to
have been cured and not to have occurred, and
56
<PAGE>
any Event of Default arising therefrom shall be deemed to have been cured, and
not to have occurred for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon.
Section 4.10. Notice of Defaults. If a Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to Securityholders a
notice of the Default within 90 days after it occurs. Except in the case of a
Default in payment of principal of, interest and Liquidated Damages, if any on
any Security, the Trustee may withhold the notice if the Trustee in good faith
by its board of directors, the executive committee, or a trust committee of
directors or Responsible Officers determines that withholding the notice is in
the interest of Securityholders.
Section 4.11. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Security to
receive payment of principal of, interest and Liquidated Damages, if any, on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
ARTICLE V.
CONCERNING THE TRUSTEE.
Section 5.1. Duties and Responsibilities of the Trustee; During
Default; Prior to Default. The Trustee, prior to the occurrence of an Event of
Default and after the curing or waiving of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no covenants or obligations shall
be implied in this Indenture or the Securities. In case an Event of Default has
occurred (which has not been cured or waived), the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that
57
<PAGE>
(a) prior to the occurrence of an Event of Default and after the curing
or waiving of all such Events of Default which may have occurred:116.
(i) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Indenture, and the Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements, certificates
or opinions furnished to the Trustee and conforming to the requirements of this
Indenture; but in the case of any such statements, certificates or opinions
which by any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture but need not
verify the accuracy of the contents thereof;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
holders of not less than a majority in principal amount of the Securities at the
time outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture.
(d) none of the provisions contained in this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
58
<PAGE>
(e) whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to (a), (b), (c) and
(d) of this Section 5.1.
This Section 5.1 is in furtherance of and subject to Sections 315 and
316 of the Trust Indenture Act of 1939.
Section 5.2. Certain Rights of the Trustee. In furtherance of and
subject to the Trust Indenture Act of 1939, and subject to Section 5.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon, security or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(b) any request, direction, order or demand of the Issuer mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the secretary or an assistant secretary of the Issuer;
(c) the Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be bound
to make any
59
<PAGE>
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, or other paper or
document unless requested in writing so to do by the holders of not less than a
majority in aggregate principal amount of the Securities then outstanding;
provided that, if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expenses or liabilities as
a condition to proceeding; the reasonable expenses of every such examination
shall be paid by the Issuer or, if paid by the Trustee or any predecessor
trustee, shall be repaid by the Issuer upon demand; and130.
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
Section 5.3. Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein and
in the Securities, except the Trustee's certificates of authentication, shall be
taken as the statements of the Issuer, and the Trustee assumes no responsibility
for the correctness of the same. The Trustee makes no representation as to the
validity or sufficiency of this Indenture or of the Securities. The Trustee
shall not be accountable for the use or application by the Issuer of any of the
Securities or of the proceeds thereof.
Section 5.4. Trustee and Agents May Hold Securities; Collections,
etc. The Trustee or any agent of the Issuer or the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
with the same rights it would have if it were not the Trustee or such agent and
may otherwise deal with the Issuer and receive, collect, hold and retain
collections from the Issuer with the same rights it would have if it were not
the Trustee or such agent.
Section 5.5. Moneys Held by Trustee. Subject to the provisions of
Section 9.4 hereof, all moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any
60
<PAGE>
agent of the Issuer or the Trustee shall be under any liability for interest on
any moneys received by it hereunder.
Section 5.6. Compensation and Indemnification of Trustee and Its Prior
Claim. The Issuer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) and the Issuer covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of it in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Issuer also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this Indenture or the trusts hereunder
and its duties hereunder, including the costs and expenses of defending itself
against or investigating any claim of liability in the premises. The
obligations of the Issuer under this Section to compensate and indemnify the
Trustee and each predecessor Trustee and to pay or reimburse the Trustee and
each predecessor Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. Such additional indebtedness shall be a senior
claim to that of the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of the holders
of particular Securities, and the Securities are hereby subordinated to such
senior claim. When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 4.1(e) or (f) occurs, the expenses and the
compensation for such services are intended to constitute expenses of
administration under any bankruptcy law.
Section 5.7. Right of Trustee to Rely on Officers' Certificate,
etc. Subject to Sections 5.1 and 5.2, whenever in the administration of the
trusts of this Indenture the Trustee shall deem it necessary or desirable that a
matter be proved or established prior to taking or suffering or omitting any
action hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or bad faith
on the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee, and such certificate, in
the absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action
61
<PAGE>
taken, suffered or omitted by it under the provisions of this Indenture upon the
faith thereof.
Section 5.8. Persons Eligible for Appointment as Trustee. The Trustee
hereunder shall at all times be a corporation having a combined capital and
surplus of at least $25,000,000, and which is eligible in accordance with the
provisions of Section 310(a) of the Trust Indenture Act of 1939. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of a Federal, State or District of Columbia supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
Section 5.9. Resignation and Removal; Appointment of Successor
Trustee144.. (a) The Trustee may at any time resign by giving written notice of
resignation to the Issuer and by mailing notice thereof by first-class mail to
holders of Securities at their last addresses as they shall appear on the
Security register. Upon receiving such notice of resignation, the Issuer shall
promptly appoint a successor trustee by written instrument in duplicate,
executed by authority of the Board of Directors, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so appointed and have accepted
appointment within 60 days after the mailing of such notice of resignation, the
resigning trustee, the Issuer, the resigning Trustee or the Holders of at least
ten percent in aggregate principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section
310(b) of the Trust Indenture Act of 1939, after written request therefor by the
Issuer or by any Securityholder who has been a bona fide holder of a Security or
Securities for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 5.8 and shall fail to resign after written request
therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting, or shall be adjudged
a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its
62
<PAGE>
property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Issuer, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to Section 315(e) of the Trust Indenture Act of 1939, any Securityholder
who has been a bona fide holder of a Security or Securities for at least six
months may on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, remove the Trustee and
appoint a successor trustee.149.
(b) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee so removed, to the
successor trustee so appointed and to the Issuer the evidence provided for in
Section 6.1 of the action in that regard taken by the Securityholders.
(c) Any resignation or removal of the Trustee and any appointment of a
successor trustee pursuant to any of the provisions of this Section 5.9 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 5.10.
Section 5.10. Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed as provided in Section 5.9 shall execute and deliver
to the Issuer and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Issuer or of the successor trustee, upon payment of its charges then
unpaid, the trustee ceasing to act shall, subject to Section 9.4, pay over to
the successor trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Issuer shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
63
<PAGE>
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 5.6.
Upon acceptance of appointment by a successor trustee as provided in
this Section 5.10, the Issuer shall mail notice thereof by first-class mail to
the holders of Securities at their last addresses as they shall appear in the
Security register. If the acceptance of appointment is substantially
contemporaneous with the resignation, then the notice called for by the
preceding sentence may be combined with the notice called for by Section 5.9. If
the Issuer fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Issuer.
Section 5.11. Merger, Conversion, Consolidation or Succession to
Business of Trustee. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation shall be eligible under the provisions of Section 5.8, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided, that the right to
adopt the certificate of authentication of any predecessor Trustee or to
authenticate Securities in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 5.12. Preferential Collection of Claims Against Issuer. The
Trustee is subject to Section 311(a) of the Trust Indenture Act of 1939,
excluding any creditor relationship listed in Section 311(b) thereof. A Trustee
who has resigned or been removed shall be subject to Section 311(a) of the Trust
Indenture Act of 1939 to the extent indicated therein.
64
<PAGE>
ARTICLE VI.
CONCERNING THE SECURITYHOLDERS.
Section 6.1. Evidence of Action Taken by Securityholders. Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Securityholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee. Proof of execution of any instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture and (subject to
Sections 5.1 and 5.2) conclusive in favor of the Trustee and the Issuer, if made
in the manner provided in this Article.
Section 6.2. Proof of Execution of Instruments and of Holding of
Securities; Record Date. Subject to Sections 5.1 and 5.2, the execution of any
instrument by a Securityholder or his agent or proxy may be proved in accordance
with such reasonable rules and regulations as may be prescribed by the Trustee
or in such manner as shall be satisfactory to the Trustee. The holding of
Securities shall be proved by the Security register or by a certificate of the
registrar thereof. The Issuer may set a record date for purposes of determining
the identity of holders of Securities entitled to vote or consent to any action
referred to in Section 6.1, which record date may be set at any time or from
time to time by notice to the Trustee, for any date or dates (in the case of any
adjournment or resolicitation) not more than 60 days nor less than five days
prior to the proposed date of such vote or consent, and thereafter,
notwithstanding any other provisions hereof, only holders of Securities of
record on such record date shall be entitled to so vote or give such consent or
to withdraw such vote or consent.
Section 6.3. Holders to Be Treated as Owners. The Issuer, the Trustee
and any agent of the Issuer or the Trustee may deem and treat the person in
whose name any Security shall be registered upon the Security register as the
absolute owner of such Security (whether or not such Security shall be overdue
and notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of and, subject
to the provisions of this Indenture, interest and Liquidated Damages, if any, on
such Security and for all other purposes; and neither the Issuer nor the Trustee
nor any agent of the Issuer or the Trustee shall be affected by any notice to
the contrary. All such payments so made to any such person, or upon his order,
shall be valid, and,
65
<PAGE>
to the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Security.
Section 6.4. Securities Owned by Issuer Deemed Not Outstanding. In
determining whether the holders of the requisite aggregate principal amount of
Securities have concurred in any direction, consent or waiver under this
Indenture, Securities which are owned by the Issuer or any other obligor on the
Securities or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuer or any other obligor
on the Securities shall be disregarded and deemed not to be outstanding for the
purpose of any such determination, except that for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, consent
or waiver only Securities which the Trustee knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Issuer or any other obligor upon the Securities or any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Issuer or any other obligor on the Securities.
In case of a dispute as to such right, the advice of counsel shall be full
protection in respect of any decision made by the Trustee in accordance with
such advice. Upon request of the Trustee, the Issuer shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Securities, if any, known by the Issuer to be owned or held by or for the
account of any of the above-described persons; and, subject to Sections 5.1 and
5.2, the Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are outstanding for the purpose of any such
determination.
Section 6.5. Right of Revocation of Action Taken. At any time prior to
(but not after) the evidencing to the Trustee, as provided in Section 6.1, of
the taking of any action by the holders of the percentage in aggregate principal
amount of the Securities specified in this Indenture in connection with such
action, any holder of a Security the serial number of which is shown by the
evidence to be included among the serial numbers of the Securities the holders
of which have consented to such action may, by filing written notice at the
Corporate Trust Office and upon proof of holding as provided in this Article,
revoke such action so far as concerns such Security. Except as aforesaid any
such action taken by the holder of any Security shall be conclusive and binding
upon such holder and upon all future holders and owners of such Security and of
any Securities issued in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon any such
66
<PAGE>
Security. Any action taken by the holders of the percentage in aggregate
principal amount of the Securities specified in this Indenture in connection
with such action shall be conclusively binding upon the Issuer, the Trustee and
the holders of all the Securities.
ARTICLE VII.
SUPPLEMENTAL INDENTURES.
Section 7.1. Supplemental Indentures Without Consent of
Securityholders170.. The Issuer, when authorized by a resolution of its Board of
Directors, and the Trustee may from time to time and at any time, without the
consent of the holders of any of the Securities at the time outstanding, enter
into an indenture or indentures supplemental hereto for one or more of the
following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities any property or assets;
(b) to evidence the succession of another corporation to the Issuer, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of the Issuer pursuant to Article Eight;
(c) to add to the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as its Board of Directors and the Trustee
shall consider to be for the protection of the holders of Securities, and to
make the occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions, conditions or provisions an Event of Default
permitting the enforcement of all or any of the several remedies provided in
this Indenture as herein set forth; provided, that in respect of any such
additional covenant, restriction, condition or provision such supplemental
indenture may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other defaults)
or may provide for an immediate enforcement upon such an Event of Default or may
limit the remedies available to the Trustee upon such an Event of Default or may
limit the right of the holders of a majority in aggregate principal amount of
the Securities to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture; or to make such other provisions in regard to
67
<PAGE>
matters or questions arising under this Indenture or under any supplemental
indenture as the Board of Directors may deem necessary or desirable and
which shall not adversely affect the interests of the holders of the
Securities; and
(e) to provide for the issuance under this Indenture of Securities in
coupon form (including Securities registrable as to principal only) and to
provide for exchangeability of such Securities with Securities issued hereunder
in fully registered form, and to make all appropriate changes for such purpose.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Section 7.2. Supplemental Indentures With Consent of
Securityholders. With the consent (evidenced by a majority as provided in
Article Six) of the holders of not less than a majority in aggregate principal
amount of the Securities at the time outstanding, the Issuer, when authorized by
a resolution of its Board of Directors, and the Trustee may, from time to time
and at any time, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights of the holders of the Securities; provided,
that no such supplemental indenture shall (a) reduce the rate or change the time
or place for payment of interest or Liquidated Damages, if any, or reduce any
amount payable on redemption thereof; (b) reduce the principal of or change the
fixed maturity or place of payment of any Security; (c) change the currency of
payment of principal of, interest or Liquidated Damages, if any, on any
Security; (d) reduce the principal amount of outstanding Securities necessary to
modify or amend this Indenture; or (e) make any change in Section 4.9, 4.11 or
the first paragraph of this Section 7.2, without the consent of the holders of
all Securities then outstanding.
Upon the request of the Issuer, accompanied by a copy of a resolution of
the Board of Directors certified by the Secretary or an Assistant Secretary of
the Issuer authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Securityholders
and other documents, if any, required by Section 6.1, the Trustee shall join
with the Issuer in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture
68
<PAGE>
or otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Issuer
shall mail a notice thereof by first-class mail to the holders of Securities at
their addresses as they shall appear on the registry books of the Issuer,
setting forth in general terms the substance of such supplemental indenture. Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
Section 7.3. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the holders of Securities
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 7.4. Documents to Be Given to Trustee. The Trustee, subject to
the provisions of Sections 5.1 and 5.2, may receive an Officers' Certificate and
an Opinion of Counsel as conclusive evidence that any such supplemental
indenture complies with the applicable provisions of this Indenture and is a
legal, valid and binding obligation of the Issuer enforceable against the Issuer
in accordance with its terms, subject to the customary exceptions. Such
supplemental indenture will comply with the Trust Indenture Act of 1939.
Section 7.5. Notation on Securities in Respect of Supplemental
Indentures. Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Trustee as to any matter provided for by such
supplemental indenture or as to any action taken at any such meeting. If the
Issuer or the Trustee shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared by the Issuer, authenticated by the Trustee and delivered in
exchange for the Securities then outstanding.
69
<PAGE>
ARTICLE VIII.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE.
Section 8.1. Covenant Not to Merge, Consolidate, Sell or Convey
Property Except Under Certain Conditions. The Issuer will not consolidate or
merge with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets (as an entirety or substantially an entirety in
one transaction or a series of related transactions) to, any Person (other than
a merger with or into a Wholly Owned Subsidiary; provided that such Wholly Owned
Subsidiary is not organized in a foreign jurisdiction) unless: (a) the entity
formed by or surviving any such consolidation or merger (if other than the
Issuer), or to which sale, lease, conveyance or other disposition shall have
been made (the "Surviving Entity"), is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia; (b) the Surviving Entity assumes by supplemental indenture all of the
obligations of the Issuer on the Securities and this Indenture in form and
substance satisfactory to the Trustee; (c) immediately after the transaction, no
Default or Event of Default shall have occurred and be continuing; (d)
immediately after giving effect to such transaction, the Consolidated Net Worth
of the Surviving Entity would be at least equal to the Consolidated Net Worth of
the Issuer immediately prior to such transaction; and (e) immediately after
giving effect to such transaction on a pro forma basis, the Surviving Entity
could incur at least $1.00 of Indebtedness (other than Permitted Indebtedness)
pursuant to clause (a) of Section 3.9.
Section 8.2. Successor Corporation Substituted. In case of any such
consolidation, merger, sale or conveyance, and following such an assumption by
the successor corporation, such successor corporation shall succeed to and be
substituted for the Issuer, with the same effect as if it had been named herein.
Such successor corporation may cause to be signed, and may issue either
in its own name or in the name of the Issuer prior to such succession any or all
of the Securities issuable hereunder which theretofore shall not have been
signed by the Issuer and delivered to the Trustee; and, upon the order of such
successor corporation, instead of the Issuer, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Issuer to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All of
the Securities so issued shall in all respects have the same legal rank and
benefit under this Indenture as the
70
<PAGE>
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance,
such changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by
way of lease), the Issuer or any successor corporation which shall theretofore
have become such in the manner described in this Article shall be discharged
from all obligations and covenants under this Indenture and the Securities and
may be liquidated and dissolved.
Section 8.3. Opinion of Counsel to Trustee. The Trustee, subject to the
provisions of Sections 5.1 and 5.2, may receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, lease or conveyance, and any such assumption, and any such liquidation or
dissolution, complies with the applicable provisions of this Indenture, is in
compliance with all conditions precedent contained in this Indenture and that
such supplemental indenture, if any, constitutes the legal, valid and binding
obligation of the surviving corporation, enforceable against the surviving
corporation in accordance with its terms, subject to the customary exceptions.
ARTICLE IX.
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS.
Section 9.1. Satisfaction and Discharge of Indenture. If at any time
(a) the Issuer shall have paid or caused to be paid the principal of, interest
and Liquidated Damages, if any, on all the Securities outstanding hereunder, as
and when the same shall have become due and payable, or (b) the Issuer shall
have delivered to the Trustee for cancellation all Securities theretofore
authenticated (other than any Securities which shall have been destroyed, lost
or stolen and which shall have been replaced or paid as provided in Section 2.6)
or (c)(1) the Issuer shall have irrevocably deposited or caused to be deposited
with the Trustee as trust funds the entire amount in cash (other than moneys
repaid by the Trustee or any paying agent to the Issuer in accordance with
Section 9.4) or direct obligations of the United States of America, backed by
its full faith and credit, maturing as to principal, interest and Liquidated
Damages, if any, in such amounts and at such times as will insure the
availability of cash sufficient to pay at maturity or upon redemption all such
Securities not theretofore delivered to the Trustee for
71
<PAGE>
cancellation, including principal and interest due or to become due to such date
of maturity as the case may be, and (2) the Issuer shall have delivered to the
Trustee (i) either (A) a ruling directed to the Trustee received from the
Internal Revenue Service to the effect that the Holders of the Securities will
not recognize income, gain or loss for federal income tax purposes as a result
of the Issuer's exercise of its option under this Section 9.1(c) and will be
subject to Federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such option had not been exercised
or (B) an Opinion of Counsel, reasonably satisfactory to the Trustee, to the
same effect as the ruling described in clause (A) accompanied by a ruling to
that effect published by the Internal Revenue Service and (ii) an Opinion of
Counsel, reasonably satisfactory to the Trustee, to the effect that after the
passage of 90 days following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and if, in any such case, the Issuer
shall also pay or cause to be paid all other sums payable hereunder by the
Issuer, then this Indenture shall cease to be of further effect (except as to
(i) rights of registration of transfer and exchange, and the Issuer's right of
optional redemption, (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Securities, (iii) rights of holders to receive
payments of principal thereof, interest and Liquidated Damages, if any, thereon,
upon the original stated due dates therefor (but not upon acceleration), (iv)
the rights, obligations and immunities of the Trustee hereunder and (v) the
rights of the Securityholders as beneficiaries hereof with respect to the
property so deposited with the Trustee payable to all or any of them), and the
Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an
Opinion of Counsel and at the cost and expense of the Issuer, shall execute
proper instruments acknowledging such satisfaction of and discharging this
Indenture.
The Issuer agrees to reimburse the Trustee for any costs or expenses
thereafter reasonably incurred and to compensate the Trustee for any services
thereafter reasonably and properly rendered by the Trustee in connection with
this Indenture or the Securities.
Section 9.2. Application by Trustee of Funds Deposited for Payment of
Securities. Subject to Section 9.4, all moneys deposited with the Trustee
pursuant to Section 9.1 shall be held in trust and applied by it to the payment,
either directly or through any paying agent (including the Issuer acting as its
own paying agent), to the holders of the particular Securities for the payment
or redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal, interest and Liquidated
Damages, if any; but such money need not be segregated from other funds except
to the extent required by law.
72
<PAGE>
Section 9.3. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture, all moneys then held by
any paying agent under the provisions of this Indenture shall, upon demand of
the Issuer, be repaid to it or paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such moneys.
Section 9.4. Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Three Years. Any moneys deposited with or paid to the Trustee or
any paying agent for the payment of the principal of, interest or Liquidated
Damages, if any, on any Security and not applied but remaining unclaimed for
three years after the date upon which such principal, interest or Liquidated
Damages, if any, shall have become due and payable, shall, upon the written
request of the Issuer and unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property law, be repaid to the
Issuer by the Trustee or such paying agent, and the holder of such Security
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property laws, thereafter look only to the Issuer for
any payment which such holder may be entitled to collect, and all liability of
the Trustee or any paying agent with respect to such moneys shall thereupon
cease.
ARTICLE X.
MISCELLANEOUS PROVISIONS.
Section 10.1. Incorporators, Stockholders, Officers and Directors of
Issuer Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture, or in any
Security, or because of any indebtedness evidenced thereby, shall be had against
any incorporator, as such or against any past, present or future stockholder,
officer or director, as such, of the Issuer or of any successor, either directly
or through the Issuer or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of the Securities by the holders thereof and as
part of the consideration for the issue of the Securities.
Section 10.2. Provisions of Indenture for the Sole Benefit of Parties
and Securityholders. Nothing in this Indenture or in the Securities, expressed
or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and their successors and the holders
of the Securities, any legal or equitable right, remedy or claim under this
Indenture or under any covenant or provision herein
73
<PAGE>
contained, all such covenants and provisions being for the sole benefit of the
parties hereto and their successors and of the holders of the Securities.
Section 10.3. Successors and Assigns of Issuer Bound by Indenture. All
the covenants, stipulations, promises and agreements in this Indenture contained
by or in behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.
Section 10.4. Notices and Demands on Issuer, Trustee and
Securityholders. Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the holders of Securities to or on the Issuer shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in writing and
mailed, first-class postage prepaid, to the Issuer addressed (until another
address of the Issuer is filed by the Issuer with the Trustee) to Weirton Steel
Corporation, 400 Three Springs Drive, Weirton, West Virginia 26062, Attention:
Vice President - Law and Secretary or transmitted by facsimile transmission
(confirmed by guaranteed overnight courier) to the following facsimile numbers:
telephone number: (304) 797-2000
facsimile number: (304) 797-3420
Any notice, direction, request or demand by the Issuer or any
Securityholder to or upon the Trustee shall be sufficient for every purpose
hereunder if made, given, furnished or filed, in each case in writing, to or
with the Trustee at its Corporate Trust Office, Four Albany Street, New York,
New York 10006, Attention: Corporate Trust Agency Group or transmitted by
facsimile transmission (confirmed by guaranteed overnight courier) to the
following facsimile numbers:
telephone number: (212) 250-6792
facsimile number: (212) 250-6392 or
(212) 250-6961
Where this Indenture provides for notice to holders, such notice shall
be sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, to each holder entitled thereto, at his
last address as it appears in the Security register. In any case where notice to
holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular holder shall affect the
sufficiency of such notice with respect to other holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by holders
shall be filed with the Trustee, but
74
<PAGE>
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular
mail service, it shall be impracticable to mail notice to the Issuer and
Securityholders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
Section 10.5. Officers' Certificates and Opinions of Counsel;
Statements to Be Contained Therein. Upon any application or demand by the Issuer
to the Trustee to take any action under any of the provisions of this Indenture,
the Issuer shall furnish to the Trustee an Officers' Certificate stating that
all conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Indenture shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition, (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based, (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with and (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters or information with respect to which is in the possession of
the Issuer, upon the certificate, statement or opinion of or representations by
an officer or officers of the Issuer, unless
75
<PAGE>
such counsel knows that the certificate, statement or opinion or representations
with respect to the matters upon which his certificate, statement or opinion may
be based as aforesaid are erroneous, or in the exercise of reasonable care
should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with the Trustee shall contain a statement that such firm is independent.
Section 10.6. Payments Due on Saturdays, Sundays and Holidays. If the
date of maturity of interest and Liquidated Damages, if any, on or principal of
the Securities or the date fixed for redemption of any Security shall not be a
Business Day, then payment of interest and Liquidated Damages, if any, or
principal need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption, and no interest or Liquidated Damages, if any,
shall accrue for the period after such date.
Section 10.7. Trust Indenture Act of 1939. Prior to the
effectiveness of the Exchange Offer Registration Statement or Shelf Registration
Statement, as applicable, this Indenture shall incorporate and be governed by
the provisions of the Trust Indenture Act of 1939 that are required to be part
of and to govern indentures qualified under the Trust Indenture Act of 1939.
After the effectiveness of the Exchange Offer Registration Statement or Shelf
Registration Statement, as applicable, this Indenture shall be subject to the
provisions of the Trust Indenture Act of 1939 that are required to be a part of
this Indenture and shall, to the extent applicable, be governed by such
provisions. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture by
operation of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939
(an "incorporated provision"), such incorporated provision shall control.
Section 10.8. New York Law to Govern. This Indenture and each Security
shall be deemed to be a contract under the laws of the State of New York, and
for all purposes shall be construed
76
<PAGE>
in accordance with the laws of said State, except as may otherwise be required
by mandatory provisions of law.
Section 10.9. Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
Section 10.10. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
ARTICLE XI.
REDEMPTION OF SECURITIES.
Section 11.1. Right of Optional Redemption; Prices. The Securities may
not be redeemed at the option of the Issuer prior to maturity, except as set
forth in this Section 11.1. The Securities may not be redeemed at the option of
the Issuer prior to July 1, 2000. At any time and from time to time after July
1, 2000, the Issuer may redeem the Securities at a redemption price from July 1,
2000 to June 30, 2001 of 105.68750% of the principal amount thereof, from July
1, 2001 to June 30, 2002 at a redemption price of 102.8438% of the principal
amount thereof, and thereafter until maturity of 100% of the principal amount
thereof, in each case plus accrued interest and Liquidated Damages, if any, to
the redemption date. Notwithstanding the foregoing, if the date fixed for
redemption as set forth in this paragraph is a July 1 or January 1, then the
interest and Liquidated Damages, if any, payable on such date shall be paid to
the holder of record on the preceding June 15 or December 15. Notice of such
redemption shall be mailed not less than 30 nor more than 60 days prior to the
date fixed for redemption to the holders of Securities to be redeemed, all as
provided in the Indenture, in the circumstances set forth in this paragraph.
Section 11.2. Notice of Redemption; Partial Redemptions. Notice of
redemption to the holders of Securities to be redeemed as a whole or in part
shall be given by mailing notice of such redemption by first class mail, postage
prepaid, at least 30 days and not more than 60 days prior to the date fixed for
redemption to such holders of Securities at their last addresses as they shall
appear upon the registry books. Any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives the notice. Failure to give notice by mail, or any defect
in the notice to the holder of any Security designated for redemption as a whole
or in part shall not affect the validity of the proceedings for the redemption
of any other Security.
77
<PAGE>
The notice of redemption to each such holder shall specify the principal
amount of each Security held by such holder to be redeemed, the date fixed for
redemption, the redemption price, the place or places of payment, that payment
will be made upon presentation and surrender of such Securities, that interest
and Liquidated Damages, if any, accrued to the date fixed for redemption will be
paid as specified in said notice and that on and after said date interest and
Liquidated Damages, if any, thereon or on the portions thereof to be redeemed
will cease to accrue. In case any Security is to be redeemed in part only the
notice of redemption shall state the portion of the principal amount thereof to
be redeemed and shall state that on and after the date fixed for redemption,
upon surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof will be issued.
The notice of redemption of Securities to be redeemed at the option of
the Issuer shall be given by the Issuer or, at the Issuer's request, by the
Trustee in the name and at the expense of the Issuer. The Issuer shall notify
the Trustee of such redemption at least 15 days prior to the date the notice of
redemption is to be sent to the Holders (unless a shorter period of time shall
be satisfactory to the Trustee) and shall specify in such notice whether the
Trustee is to give such notice.
At least one business day prior to the redemption date specified in the
notice of redemption given as provided in this Section, the Issuer will deposit
with the Trustee or with one or more paying agents (or, if the Issuer is acting
as its own paying agent, set aside, segregate and hold in trust as provided in
Section 3.4) an amount of money sufficient to redeem on the redemption date all
the Securities so called for redemption at the appropriate redemption price,
together with accrued interest and Liquidated Damages, if any, to the date fixed
for redemption. If less than all the outstanding Securities are to be redeemed,
the Issuer will deliver to the Trustee at least 70 days prior to the date fixed
for redemption an Officers' Certificate stating the aggregate principal amount
of Securities to be redeemed.
In the event that less than all of the Securities are to be redeemed at
any time, selection of securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the securities are listed or, if the securities are not listed
on a national securities exchange, on a pro-rata basis. The particular
Securities to be redeemed shall be selected unless otherwise provided herein,
not less than 40 days or more than 60 days prior to the redemption date by the
Trustee from the outstanding Securities not previously called for redemption.
The Trustee shall promptly notify the Issuer in writing of the
Securities selected for redemption and, in the case of any
78
<PAGE>
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities and portions of them selected shall be in amounts of $1,000
or whole multiples of $1,000. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption.
Section 11.3. Payment of Securities Called for Redemption. If notice of
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date and
at the place stated in such notice at the applicable redemption price, together
with interest and Liquidated Damages, if any, accrued to the date fixed for
redemption, and on and after said date (unless the Issuer shall default in the
payment of such Securities at the redemption price, together with interest and
Liquidated Damages, if any, accrued to said date) interest and Liquidated
Damages, if any, on the Securities or portions of Securities so called for
redemption shall cease to accrue and, except as provided in Sections 5.5 and
9.4, such Securities shall cease from and after the date fixed for redemption to
be entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Securities except the right to
receive the redemption price thereof and unpaid interest and Liquidated Damages,
if any, to the date fixed for redemption. On presentation and surrender of such
Securities at a place of payment specified in said notice, said Securities or
the specified portions thereof shall be paid and redeemed by the Issuer at the
applicable redemption price, together with interest and Liquidated Damages, if
any, accrued thereon to the date fixed for redemption; provided that any
semiannual payment of interest and Liquidated Damages, if any, becoming due on
the date fixed for redemption shall be payable to the holders of such Securities
registered as such on the relevant record date subject to the terms and
provisions of Section 2.4 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate borne
by the Security.
Upon presentation of any Security redeemed in part only, the Issuer
shall execute and the Trustee shall authenticate and deliver to or on the order
of the holder thereof, at the expense of the Issuer, a new Security or
Securities, of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.
Section 11.4. Exclusion of Certain Securities from Eligibility for
Selection for Redemption. Securities shall be excluded from eligibility for
selection for redemption if they are identified by registration and certificate
number in a written statement signed by an authorized officer of the Issuer
79
<PAGE>
and delivered to the Trustee at least 40 days prior to the last date on which
notice of redemption may be given as being owned of record and beneficially by,
and not pledged or hypothecated by either (a) the Issuer or (b) an entity
specifically identified in such written statement directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Issuer.
80
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first above written.
WEIRTON STEEL CORPORATION (SEAL)
Attest: By /s/ William R. Kiefer
-------------------------
Name: William R. Kiefer
Title: Vice President - Law
/s/ David L. Robertson
- -------------------------------
Name: David L. Robertson
Title: Executive Vice President -
Human resources and
Corporate Law (SEAL)
BANKERS TRUST COMPANY, as Trustee
/s/ Jackie Bartnick
Attest: By__________________________
Name: Name: JACKIE BARTNICK
/s/ Matthew Seeley Title: ASSISTANT VICE PRESIDENT
- ---------------------------
Name: MATTHEW SEELEY
Title:VICE PRESIDENT
(SEAL)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first above written.
WEIRTON STEEL CORPORATION
Attest: By
-------------------------
Name:
Title:
- -------------------------------
Name:
Title:
(SEAL)
BANKERS TRUST COMPANY, as Trustee
Attest: By /s/ Jackie Bartnick
--------------------------
Name: Jackie Bartnick
Title: ASSISTANT VICE PRESIDENT
/s/
- ----------------------------
Name:
Title: VICE PRESIDENT
(SEAL)
<PAGE>
Exhibit A
---------
[FORM OF RULE 144A GLOBAL SECURITY]
[FORM OF FACE OF SECURITY]
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") (2) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY RESELL
OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY, EXCEPT (A) TO WEIRTON STEEL
CORPORATION (THE "ISSUER"), (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED
HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E) PURSUANT
TO OFFERS OR SALES THAT OCCUR OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY TO THEM OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH SECURITY, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE, AS TRANSFER AGENT. IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IN CERTAIN
OTHER CASES NOTED ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
ISSUER AND THE TRUSTEE, AS
A-1
<PAGE>
TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED
HEREBY.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.8 OF THE INDENTURE.
CUSIP NO. 948774AE4
No. 001 $125,000,000
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
Weirton Steel Corporation, a Delaware corporation (the "Issuer"), for
value received hereby promises to pay to Cede & Co. or registered assigns the
principal sum of one hundred twenty-five million Dollars ($125,000,000) at the
Issuer's office or agency for said purpose in the Borough of Manhattan, the City
of New York on July 1, 2004 in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, and to pay interest, semi-annually in arrears on July
1 and January 1 of each year, on said principal sum in like coin or currency at
the rate per annum set forth above at said office or agency from the July 1 or
the January 1, as the case may be, next preceding the date of this Security to
which interest and Liquidated Damages (as defined herein), if any, on the
Securities has
A-2
<PAGE>
been paid or duly provided for, unless the date hereof is a date to which
interest and Liquidated Damages, if any, on the Securities has been paid or duly
provided for, in which case from the date of this Security, or unless no
interest or Liquidated Damages, if any, have been paid or duly provided for on
the Securities, in which case from July 3, 1996 until payment of said principal
sum has been made or duly provided for. Notwithstanding the foregoing, if the
date hereof is after June 15 or December 15, as the case may be, and before the
following July 1 or January 1, this Security shall bear interest from such July
1 or January 1; provided, that if the Issuer shall default in the payment of
interest or Liquidated Damages, if any, due on such July 1 or January 1, then
this Security shall bear interest from the next preceding July 1 or January 1 to
which interest and Liquidated Damages, if any, on the Securities have been paid
or duly provided for, or, if no interest and Liquidated Damages, if any, has
been paid or duly provided for on the Securities since the Original issue date
of this Security, from July 3, 1996. The interest and Liquidated Damages, if
any, so payable on any July 1 or January 1 will, except as otherwise provided in
the Indenture referred to on the reverse hereof, be paid to the person in whose
name this Security is registered at the close of business on the June 15 or
December 15 preceding such July 1 or January 1, whether or not such day is a
Business Day (as defined in the Indenture); provided that interest and
Liquidated Damages, if any, may be paid, at the option of the Issuer, by mailing
a check therefor payable to the registered holder entitled thereto at his last
address as it appears on the Security register.
Reference is made to the further provisions set forth on the reverse
hereof. Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Security shall not be valid or obligatory until the certificate of
authentication hereon shall have been duly manually signed by the Trustee acting
under the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
WEIRTON STEEL CORPORATION
[Seal]
______________________________
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY
_______________________
Authorized Signatory
Dated: as of _______, 1996
A-4
<PAGE>
[FORM OF REVERSE OF SECURITY]
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
This Security is one of a duly authorized issue of debt securities of
the Issuer, limited to the aggregate principal amount of $125,000,000 (except as
otherwise provided in the Indenture mentioned below), issued or to be issued
pursuant to an indenture dated as of July 3, 1996 (the "Indenture"), duly
executed and delivered by the Issuer to Bankers Trust Company, Trustee (herein
called the "Trustee"). Reference is hereby made to the Indenture and all
indentures supplemental thereto for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the Issuer
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Securities.
The Issuer promises to pay interest and Liquidated Damages, if any, on
the principal amount of this Security on each July 1 and January 1, until July
1, 2004 or the earlier redemption of the Securities as set forth below, at the
rate of 11 3/8% per annum (subject to adjustment as provided below). Interest on
the Securities shall be computed on the basis of a 360-day year of twelve 30-day
months. Unless otherwise agreed by the Issuer and the holder of any Security,
payments by the Issuer in respect of the Securities (including principal,
premium, if any, interest and Liquidated Damages, if any,) shall be paid to
holders of the Securities in same-day funds. If the date of maturity of interest
and Liquidated Damages, if any, on or principal of the Securities or the date
fixed for redemption of any Security shall not be a Business Day, then payment
of interest and Liquidated Damages, if any, or principal will be made on the
next succeeding Business Day, with the same force and effect as if made on the
date of maturity or the date fixed for redemption, and no interest or Liquidated
Damages, if any, shall accrue for the period after such date.
In the event that either (i) the Exchange Offer Registration Statement
(as defined in the Indenture) is not filed with the Securities and Exchange
Commission on or prior to the 45th calendar day following July 3, 1996 and a
Shelf Notice (as defined in the Indenture) has not been delivered with respect
to all Securities eligible for exchange in the Exchange Offer on or prior to
such 45th calendar day, (ii) the Exchange Offer Registration Statement is not
declared effective on or prior to the 135th calendar day following July 3, 1996
and a Shelf Notice has not been delivered with respect to all Securities
eligible for exchange in the Exchange Offer (as defined in the Indenture) on or
prior to such 135th calendar day, or (iii) (A) an Exchange Offer is not
consummated on or prior to the 165th calendar day
A-5
<PAGE>
following July 3, 1996 and a Shelf Notice has not been delivered with respect to
all Securities eligible for exchange in the Exchange Offer on or prior to such
165th calendar day, or (B) the Shelf Registration Statement (as defined in the
Indenture) is not declared effective on or prior to the 165th calendar day
following July 3, 1996 or (C) if applicable, the Shelf Registration Statement
ceases to be effective (except as specifically permitted therein) without being
succeeded immediately by an additional registration statement filed and declared
effective (each such event referred to in clauses (i) through (iii) a
"Registration Default"), the Issuer will pay liquidated damages to each Holder
of Securities, with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $.05 per week per
$1,000 principal amount of Securities held by such Holder ("Liquidated
Damages"). For any portion of a week that the Registration Default continues,
such Liquidated Damages shall be calculated on a pro-rata basis. The amount of
the Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal amount of Securities.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease. Upon (x) the filing of the Exchange Offer Registration
Statement or the delivery of a Shelf Notice with respect to all Securities
eligible for exchange in the Exchange Offer in the case of clause (i) above, (y)
the effectiveness of the Exchange Offer Registration Statement or the delivery
of a Shelf Notice with respect to all Securities eligible for exchange in the
Exchange Offer in the case of clause (ii) above or (z) the consummation of the
Exchange Offer or the delivery of a Shelf Notice with respect to all Securities
eligible for exchange in the Exchange Offer (in the case of clause (iii) (A)
above) or the effectiveness of a Shelf Registration Statement (in the case of
clause (iii) (B) above) or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (except as specifically permitted
therein) without being succeeded immediately by an additional registration
statement filed and declared effective (in the case of clause (iii) (C) above),
and provided that none of the conditions set forth in clauses (i), (ii) and
(iii) above continues to exist, such Liquidated Damages, if any, shall cease to
accrue on the Securities from the date of such filing, effectiveness or
consummation; and provided further, that no such Liquidated Damages, if any,
shall accrue on any Security (i) subsequent to the time of the consummation of
an Exchange Offer with respect to such Security, or (ii) at any time that a
Shelf Registration Statement is available with respect to such Security. Each of
the conditions set forth in clauses (i) - (iii) above shall be fulfilled in
accordance with the terms of the Registration Rights Agreement dated as of July
3, 1996 among the Issuer, Lehman Brothers Inc. and Salomon Brothers Inc (the
"Registration Rights
A-6
<PAGE>
Agreement"). The Holder of this Security is entitled to the benefits of such
Registration Rights Agreement.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all the Securities may be declared
due and payable, in the manner and with the effect, and subject to the
conditions, provided in the Indenture. The Indenture provides that in certain
events such declaration and its consequences may be waived by the holders of a
majority in aggregate principal amount of the Securities then outstanding and
that, prior to any such declaration, such holders may waive any past default
under the Indenture and its consequences except a default in the payment of
principal of, interest or Liquidated Damages, if any, on any of the Securities.
Any such consent or waiver by the holder of this Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Security and any Security which may
be issued in exchange or substitution therefor, whether or not any notation
thereof is made upon this Security or such other Securities.
The Indenture permits the Issuer and the Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding, evidenced as in the Indenture provided, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the holders of
the Securities; provided that no such supplemental indenture shall (a) reduce
the rate or change the time or place for payment of interest and Liquidated
Damages, if any, on any Security or reduce any amount payable on the redemption
hereof; (b) reduce the principal of or change the fixed maturity or place of
payment of any Security; (c) change the currency of payment of principal,
interest and Liquidated Damages, if any, on any Security; (d) reduce the
principal amount of outstanding Securities necessary to modify or amend this
Indenture; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security; or (f) modify any of the foregoing
provisions or reduce the principal amount of outstanding Securities necessary to
waive any covenant or past Default, without the consent of the holders of all
Securities then outstanding.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of, interest and Liquidated
Damages, if any, on this Security at the place, times, and rate, and in the
currency, herein prescribed.
The Securities are issuable only as registered Securities without
coupons in denominations of $1,000 and any
A-7
<PAGE>
integral multiple of $1,000; provided, that Certificated Securities (as defined
in the Indenture) shall be issued in minimum denominations of $100,000 and
integral multiples of $1,000 above that amount.
At the office or agency of the Issuer referred to on the face hereof and
in the manner and subject to the limitations provided in the Indenture,
Securities may be exchanged for a like aggregate principal amount of Securities
of other authorized denominations.
Upon due presentment for registration of transfer of this Security at
the above-mentioned office or agency of the Issuer, a new Security or Securities
of authorized denominations, for a like aggregate principal amount, will be
issued to the transferee as provided in the Indenture. No service charge shall
be made for any such transfer, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
The Securities may not be redeemed at the option of the Issuer prior to
maturity, except as set forth in this paragraph. The Securities may not be
redeemed at the option of the Issuer prior to July 1, 2000. At any time and from
time to time after July 1, 2000, the Issuer may redeem the Securities at a
redemption price from July 1, 2000 to June 30, 2001 of 105.68750% of the
principal amount thereof, from July 1, 2001 to June 30, 2002 at a redemption
price of 102.8438% of the principal amount thereof, and thereafter until
maturity at 100% of the principal amount thereof, in each case plus accrued
interest and Liquidated Damages, if any, to the redemption date. Notwithstanding
the foregoing, if the date fixed for redemption as set forth in this paragraph
is a July 1 or January 1, then the interest and Liquidated Damages, if any,
payable on such date shall be paid to the holder of record on the preceding June
15 or December 15. Notice of such redemption shall be mailed not less than 30
nor more than 60 days prior to the date fixed for redemption to the holders of
Securities to be redeemed, all as provided in the Indenture, in the
circumstances set forth in this paragraph.
Subject to payment by the Issuer of a sum sufficient to pay the amount
due on redemption, interest and Liquidated Damages, if any, on this Security (or
portion hereof if this Security is redeemed in part) shall cease to accrue upon
the date duly fixed for redemption of this Security (or portion hereof if this
Security is redeemed in part).
Subject to the terms of the Indenture, if the Issuer or any of its
Subsidiaries consummate any Asset Disposition (as defined in the Indenture), the
Issuer or any of its Subsidiaries shall be required to invest the Net Cash
Proceeds (as defined in the Indenture) of the Asset Disposition within 270 days,
at the Issuer's election, in the business or businesses of the Issuer as of the
Issue Date or any related business, or, to the extent not
A-8
<PAGE>
so invested, make an Asset Disposition Offer (as defined in the Indenture) to
purchase the Securities (on a pro rata basis if the amount available for such
repurchase is less than the outstanding principal amount of the Securities) or
any other Indebtedness which is pari passu with the Securities, at a purchase
price of 100% of the principal amount thereof plus accrued interest and
Liquidated Damages, if any, to the date of repayment. Notwithstanding the
foregoing, the Issuer and its Subsidiaries will not be required to apply any Net
Cash Proceeds in accordance with this provision except to the extent that the
aggregate gross proceeds from all Asset Dispositions which are not applied in
accordance with this provision exceed $25,000,000.
In the event that there shall occur a Change of Control (as defined in
the Indenture), each holder of the Securities shall have the right, at the
Holder's option, to require the Issuer to purchase all or any part of such
Holder's Securities on the date (the "Repurchase Date") that is 90 days after
notice of the Change of Control, at 101% of the principal amount thereof, plus
accrued interest and Liquidated Damages, if any, to the Repurchase Date. To be
repaid, the Security must be received, with the completed form entitled Option
of Holder to Elect Purchase (set forth below), by the paying agent at its then
specified office at least two Business Days prior to the Repurchase Date.
Exercise of the repayment option by the Securityholder will be irrevocable
unless the rescission thereof is duly approved by the Continuing Directors.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee, may deem and treat the registered holder hereof as the absolute owner
of this Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by anyone
other than the Issuer or the Trustee or any authorized agent of the Issuer or
the Trustee), for the purpose of receiving payment of, or on account of, the
principal hereof and, subject to the provisions on the face hereof, interest and
Liquidated Damages, if any, hereon and for all other purposes, and neither the
Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of, interest
or Liquidated Damages, if any, on this Security, for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 3.16 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 3.16 of the Indenture, state the amount (in aggregate
principal amount):
$[ ].
Date: [ ] Your Signature: [ ]
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: [ ]
A-10
<PAGE>
Schedule A
----------
Exchange of portions of this Global
Security for other forms of Securities
Principal Amount of Remaining
Securities Issued Principal
in Exchange for Amount of
a Portion of This This Global Notation
Date Global Security Security Made By
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
- ---- ------------------- ----------- --------
A-11
<PAGE>
Exhibit B
---------
[FORM OF CERTIFICATED SECURITY]
[FORM OF FACE OF SECURITY]
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") (2) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY RESELL
OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY, EXCEPT (A) TO WEIRTON STEEL
CORPORATION (THE "ISSUER "), (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED
HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E) PURSUANT
TO OFFERS OR SALES THAT OCCUR OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY TO THEM OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH SECURITY, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE, AS TRANSFER AGENT. IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IN CERTAIN
OTHER
B-1
<PAGE>
CASES NOTED ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
ISSUER AND THE TRUSTEE, AS TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
AFTER THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY
EVIDENCED HEREBY.
No. $125,000,000
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
Weirton Steel Corporation, a Delaware corporation (the "Issuer"), for
value received hereby promises to pay to or registered assigns the
principal sum of Dollars at the Issuer's office or agency for said
purpose in the Borough of Manhattan, the City of New York on July 1, 2004 in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest, semi-annually in arrears on July 1 and January 1 of each year, on said
principal sum in like coin or currency at the rate per annum set forth above at
said office or agency from the July 1 or the January 1, as the case may be, next
preceding the date of this Security to which interest and Liquidated Damages (as
defined herein), if any, on the Securities has been paid or duly provided for,
unless the date hereof is a date to which interest and Liquidated Damages, if
any, on the Securities has been paid or duly provided for, in which case from
the date of this Security, or unless no interest or Liquidated Damages, if any,
have been paid or duly provided for on the Securities, in which case from July
3, 1996 until payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after June 15 or December
15, as the case may be, and before the following July 1 or January 1, this
Security shall bear interest from such July 1 or January 1; provided, that if
the Issuer shall default in the payment of interest or Liquidated Damages, if
any, due on such July 1 or January 1, then this Security shall bear interest
from the next preceding July 1 or January 1 to which interest and Liquidated
Damages, if any, on the Securities have been paid or duly provided for, or, if
no interest and Liquidated Damages, if any, has been paid or duly provided for
on the Securities since the Original issue date of this Security, from July 3,
1996. The interest and Liquidated Damages, if any, so payable on any July 1 or
January 1 will, except as otherwise provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose
B-2
<PAGE>
name this Security is registered at the close of business on the June 15 or
December 15 preceding such July 1 or January 1, whether or not such day is a
Business Day (as defined in the Indenture); provided that interest and
Liquidated Damages, if any, may be paid, at the option of the Issuer, by mailing
a check therefor payable to the registered holder entitled thereto at his last
address as it appears on the Security register.
Reference is made to the further provisions set forth on the reverse
hereof. Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Security shall not be valid or obligatory until the certificate of
authentication hereon shall have been duly manually signed by the Trustee acting
under the Indenture.
B-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
WEIRTON STEEL CORPORATION
[Seal]
______________________________
B-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY
_______________________
Authorized Signatory
Dated: as of _______, 1996
B-5
<PAGE>
[FORM OF REVERSE OF SECURITY]
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
This Security is one of a duly authorized issue of debt securities of
the Issuer, limited to the aggregate principal amount of $125,000,000 (except as
otherwise provided in the Indenture mentioned below), issued or to be issued
pursuant to an indenture dated as of July 3, 1996 (the "Indenture"), duly
executed and delivered by the Issuer to Bankers Trust Company, Trustee (herein
called the "Trustee"). Reference is hereby made to the Indenture and all
indentures supplemental thereto for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the Issuer
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Securities.
The Issuer promises to pay interest and Liquidated Damages, if any, on
the principal amount of this Security on each July 1 and January 1, until July
1, 2004 or the earlier redemption of the Securities as set forth below, at the
rate of 11 3/8% per annum (subject to adjustment as provided below). Interest on
the Securities shall be computed on the basis of a 360-day year of twelve 30-day
months. Unless otherwise agreed by the Issuer and the holder of any Security,
payments by the Issuer in respect of the Securities (including principal,
premium, if any, interest and Liquidated Damages, if any,) shall be paid to
holders of the Securities in same-day funds. If the date of maturity of interest
and Liquidated Damages, if any, on or principal of the Securities or the date
fixed for redemption of any Security shall not be a Business Day, then payment
of interest and Liquidated Damages, if any, or principal will be made on the
next succeeding Business Day, with the same force and effect as if made on the
date of maturity or the date fixed for redemption, and no interest or Liquidated
Damages, if any, shall accrue for the period after such date.
In the event that either (i) the Exchange Offer Registration Statement
(as defined in the Indenture) is not filed with the Securities and Exchange
Commission on or prior to the 45th calendar day following July 3, 1996 and a
Shelf Notice (as defined in the Indenture) has not been delivered with respect
to all Securities eligible for exchange in the Exchange Offer on or prior to
such 45th calendar day, (ii) the Exchange Offer Registration Statement is not
declared effective on or prior to the 135th calendar day
B-6
<PAGE>
following July 3, 1996 and a Shelf Notice has not been delivered with respect to
all Securities eligible for exchange in the Exchange Offer (as defined in the
Indenture) on or prior to such 135th calendar day, or (iii) (A) an Exchange
Offer is not consummated on or prior to the 165th calendar day following July 3,
1996 and a Shelf Notice has not been delivered with respect to all Securities
eligible for exchange in the Exchange Offer on or prior to such 165th calendar
day, or (B) the Shelf Registration Statement (as defined in the Indenture) is
not declared effective on or prior to the 165th calendar day following July 3,
1996 or (C) if applicable, the Shelf Registration Statement ceases to be
effective (except as specifically permitted therein) without being succeeded
immediately by an additional registration statement filed and declared effective
(each such event referred to in clauses (i) through (iii) a "Registration
Default"), the Issuer will pay liquidated damages to each Holder of Securities,
with respect to the first 90-day period immediately following the occurrence of
such Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Securities held by such Holder ("Liquidated Damages"). For
any portion of a week that the Registration Default continues, such Liquidated
Damages shall be calculated on a pro-rata basis. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 principal amount
of Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 principal amount of Securities. Following
the cure of all Registration Defaults, the accrual of Liquidated Damages will
cease. Upon (x) the filing of the Exchange Offer Registration Statement or the
delivery of a Shelf Notice with respect to all Securities eligible for exchange
in the Exchange Offer in the case of clause (i) above, (y) the effectiveness of
the Exchange Offer Registration Statement or the delivery of a Shelf Notice with
respect to all Securities eligible for exchange in the Exchange Offer in the
case of clause (ii) above or (z) the consummation of the Exchange Offer or the
delivery of a Shelf Notice with respect to all Securities eligible for exchange
in the Exchange Offer (in the case of clause (iii) (A) above) or the
effectiveness of a Shelf Registration Statement (in the case of clause (iii) (B)
above) or upon the effectiveness of the Shelf Registration Statement which had
ceased to remain effective (except as specifically permitted therein) without
being succeeded immediately by an additional registration statement filed and
declared effective (in the case of clause (iii) (C) above), and provided that
none of the conditions set forth in clauses (i), (ii) and (iii) above continues
to exist, such Liquidated Damages, if any, shall cease to accrue on the
Securities from the date of such filing, effectiveness or consummation; and
provided further, that no such Liquidated Damages, if any, shall accrue on any
Security (i) subsequent to the time of the consummation of an Exchange Offer
with respect to such Security, or (ii) at any time that a Shelf Registration
Statement is available with respect to such Security. Each of the conditions set
forth in clauses (i) - (iii) above shall be fulfilled in accordance with the
terms of the Registration Rights Agreement dated as of July 3, 1996 among the
Issuer, Lehman Brothers Inc. and Salomon Brothers Inc (the "Registration Rights
B-7
<PAGE>
Agreement"). The Holder of this Security is entitled to the benefits of such
Registration Rights Agreement.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all the Securities may be declared
due and payable, in the manner and with the effect, and subject to the
conditions, provided in the Indenture. The Indenture provides that in certain
events such declaration and its consequences may be waived by the holders of a
majority in aggregate principal amount of the Securities then outstanding and
that, prior to any such declaration, such holders may waive any past default
under the Indenture and its consequences except a default in the payment of
principal of, interest or Liquidated Damages, if any, on any of the Securities.
Any such consent or waiver by the holder of this Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Security and any Security which may
be issued in exchange or substitution therefor, whether or not any notation
thereof is made upon this Security or such other Securities.
The Indenture permits the Issuer and the Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding, evidenced as in the Indenture provided, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the holders of
the Securities; provided that no such supplemental indenture shall (a) reduce
the rate or change the time or place for payment of interest and Liquidated
Damages, if any, on any Security or reduce any amount payable on the redemption
hereof; (b) reduce the principal of or change the fixed maturity or place of
payment of any Security; (c) change the currency of payment of principal,
interest and Liquidated Damages, if any, on any Security; (d) reduce the
principal amount of outstanding Securities necessary to modify or amend this
Indenture; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security; or (f) modify any of the foregoing
provisions or reduce the principal amount of outstanding Securities necessary to
waive any covenant or past Default, without the consent of the holders of all
Securities then outstanding.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of, interest and Liquidated
Damages, if any, on this Security at the place, times, and rate, and in the
currency, herein prescribed.
The Securities are issuable only as registered Securities without
coupons in denominations of $1,000 and any
B-8
<PAGE>
integral multiple of $1,000; provided, that Certificated Securities (as defined
in the Indenture) shall be issued in minimum denominations of $100,000 and
integral multiples of $1,000 above that amount.
At the office or agency of the Issuer referred to on the face hereof and
in the manner and subject to the limitations provided in the Indenture,
Securities may be exchanged for a like aggregate principal amount of Securities
of other authorized denominations.
Upon due presentment for registration of transfer of this Security at
the above-mentioned office or agency of the Issuer, a new Security or Securities
of authorized denominations, for a like aggregate principal amount, will be
issued to the transferee as provided in the Indenture. No service charge shall
be made for any such transfer, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
The Securities may not be redeemed at the option of the Issuer prior to
maturity, except as set forth in this paragraph. The Securities may not be
redeemed at the option of the Issuer prior to July 1, 2000. At any time and from
time to time after July 1, 2000, the Issuer may redeem the Securities at a
redemption price from July 1, 2000 to June 30, 2001 of 105.68750% of the
principal amount thereof, from July 1, 2001 to June 30, 2002 at a redemption
price of 102.8438% of the principal amount thereof, and thereafter until
maturity at 100% of the principal amount thereof, in each case plus accrued
interest and Liquidated Damages, if any, to the redemption date. Notwithstanding
the foregoing, if the date fixed for redemption as set forth in this paragraph
is a July 1 or January 1, then the interest and Liquidated Damages, if any,
payable on such date shall be paid to the holder of record on the preceding June
15 or December 15. Notice of such redemption shall be mailed not less than 30
nor more than 60 days prior to the date fixed for redemption to the holders of
Securities to be redeemed, all as provided in the Indenture, in the
circumstances set forth in this paragraph.
Subject to payment by the Issuer of a sum sufficient to pay the amount
due on redemption, interest and Liquidated Damages, if any, on this Security (or
portion hereof if this Security is redeemed in part) shall cease to accrue upon
the date duly fixed for redemption of this Security (or portion hereof if this
Security is redeemed in part).
Subject to the terms of the Indenture, if the Issuer or any of its
Subsidiaries consummate any Asset Disposition (as defined in the Indenture), the
Issuer or any of its Subsidiaries shall be required to invest the Net Cash
Proceeds (as defined in the Indenture) of the Asset Disposition within 270 days,
at the Issuer's election, in the business or businesses of the Issuer as of the
Issue Date or any related business, or, to the extent not
B-9
<PAGE>
so invested, make an Asset Disposition Offer (as defined in the Indenture) to
purchase the Securities (on a pro rata basis if the amount available for such
repurchase is less than the outstanding principal amount of the Securities) or
any other Indebtedness which is pari passu with the Securities, at a purchase
price of 100% of the principal amount thereof plus accrued interest and
Liquidated Damages, if any, to the date of repayment. Notwithstanding the
foregoing, the Issuer and its Subsidiaries will not be required to apply any Net
Cash Proceeds in accordance with this provision except to the extent that the
aggregate gross proceeds from all Asset Dispositions which are not applied in
accordance with this provision exceed $25,000,000.
In the event that there shall occur a Change of Control (as defined in
the Indenture), each holder of the Securities shall have the right, at the
Holder's option, to require the Issuer to purchase all or any part of such
Holder's Securities on the date (the "Repurchase Date") that is 90 days after
notice of the Change of Control, at 101% of the principal amount thereof, plus
accrued interest and Liquidated Damages, if any, to the Repurchase Date. To be
repaid, the Security must be received, with the completed form entitled Option
of Holder to Elect Purchase (set forth below), by the paying agent at its then
specified office at least two Business Days prior to the Repurchase Date.
Exercise of the repayment option by the Securityholder will be irrevocable
unless the rescission thereof is duly approved by the Continuing Directors.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee, may deem and treat the registered holder hereof as the absolute owner
of this Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by anyone
other than the Issuer or the Trustee or any authorized agent of the Issuer or
the Trustee), for the purpose of receiving payment of, or on account of, the
principal hereof and, subject to the provisions on the face hereof, interest and
Liquidated Damages, if any, hereon and for all other purposes, and neither the
Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of, interest
or Liquidated Damages, if any, on this Security, for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
B-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 3.16 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 3.16 of the Indenture, state the amount (in aggregate
principal amount):
$[ ].
Date: [ ] Your Signature: [ ]
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: [ ]
B-11
<PAGE>
TRANSFER CERTIFICATION
In connection with any transfer of this Security occurring prior to the
date which is the earlier of three years after the later of the original
issuance of this Security or the last date on which this Security was held by an
Affiliate of the Issuer, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
---------
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.8 of the Indenture shall have
been satisfied.
Date: ________________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
B-12
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Issuer as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
-------------------------- ------------------------------
NOTICE: To be executed by an
executive officer
B-13
<PAGE>
Exhibit C
---------
[FORM OF EXCHANGE SECURITY]
[FORM OF FACE OF SECURITY]
No. $125,000,000
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
Weirton Steel Corporation, a Delaware corporation (the "Issuer"), for
value received hereby promises to pay to or registered assigns the
principal sum of Dollars at the Issuer's office or agency for said
purpose in the Borough of Manhattan, the City of New York on July 1, 2004 in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest, semi-annually in arrears on July 1 and January 1 of each year, on said
principal sum in like coin or currency at the rate per annum set forth above at
said office or agency from the July 1 or the January 1, as the case may be, next
preceding the date of this Security to which interest on the Securities has been
paid or duly provided for, unless the date hereof is a date to which interest on
the Securities has been paid or duly provided for, in which case from the date
of this Security, or unless no interest has been paid or duly provided for on
the Securities, in which case from July 3, 1996 until payment of said principal
sum has been made or duly provided for. Notwithstanding the foregoing, if the
date hereof is after June 15 or December 15, as the case may be, and before the
following July 1 or January 1, this Security shall bear interest from such July
1 or January 1; provided, that if the Issuer shall default in the payment of
interest due on such July 1 or January 1, then this Security shall bear interest
from the next preceding July 1 or January 1 to which interest on the Securities
has been paid or duly provided for, or, if no interest has been paid or duly
provided for on the Securities since the Original issue date of this Security,
from July 3, 1996. The interest so payable on any July 1 or January 1 will,
except as otherwise provided in the Indenture referred to on the reverse hereof,
be paid to the person in whose name this Security is registered at the close of
business on the June 15 or December 15 preceding such July 1 or January 1,
whether or not such day is a Business Day (as defined in the Indenture);
provided that interest may be paid, at the option of the Issuer, by mailing a
check therefor payable to the registered holder entitled thereto at his last
address as it appears on the Security register.
C-1
<PAGE>
Reference is made to the further provisions set forth on the reverse
hereof. Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Security shall not be valid or obligatory until the certificate of
authentication hereon shall have been duly manually signed by the Trustee acting
under the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
WEIRTON STEEL CORPORATION
[Seal]
______________________________
C-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY
_______________________
Authorized Signatory
Dated: as of _______, 1996
C-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
This Security is one of a duly authorized issue of debt securities of
the Issuer, limited to the aggregate principal amount of $125,000,000 (except as
otherwise provided in the Indenture mentioned below), issued or to be issued
pursuant to an indenture dated as of July 3, 1996 (the "Indenture"), duly
executed and delivered by the Issuer to Bankers Trust Company, Trustee (herein
called the "Trustee"). Reference is hereby made to the Indenture and all
indentures supplemental thereto for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the Issuer
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Securities.
The Issuer promises to pay interest on the principal amount of this
Security on each July 1 and January 1, until July 1, 2004 or the earlier
redemption of the Securities as set forth below, at the rate of 11 3/8% per
annum. Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months. Unless otherwise agreed by the Issuer and the
holder of any Security, payments by the Issuer in respect of the Securities
(including principal, premium, if any, and interest) shall be paid to holders of
the Securities in same-day funds. If the date of maturity of interest on or
principal of the Securities or the date fixed for redemption of any Security
shall not be a Business Day, then payment of interest or principal will be made
on the next succeeding Business Day, with the same force and effect as if made
on the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all the Securities may be declared
due and payable, in the manner and with the effect, and subject to the
conditions, provided in the Indenture. The Indenture provides that in certain
events such declaration and its consequences may be waived by the holders of a
majority in aggregate principal amount of the Securities then outstanding and
that, prior to any such declaration, such holders may waive any past default
under the Indenture and its consequences except a default in the payment of
principal of or interest on any of the Securities. Any such consent or waiver by
the holder of this Security (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such holder and upon all future holders and
owners of this Security and any Security which may be issued in exchange or
substitution therefor, whether or not any notation thereof is made upon this
Security or such other Securities.
C-4
<PAGE>
The Indenture permits the Issuer and the Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding, evidenced as in the Indenture provided, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the holders of
the Securities; provided that no such supplemental indenture shall (a) reduce
the rate or change the time or place for payment of interest on any Security or
reduce any amount payable on the redemption hereof; (b) reduce the principal of
or change the fixed maturity or place of payment of any Security; (c) change the
currency of payment of principal or interest on any Security; (d) reduce the
principal amount of outstanding Securities necessary to modify or amend this
Indenture; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security; or (f) modify any of the foregoing
provisions or reduce the principal amount of outstanding Securities necessary to
waive any covenant or past Default, without the consent of the holders of all
Securities then outstanding.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this
Security at the place, times, and rate, and in the currency, herein prescribed.
The Securities are issuable only as registered Securities without
coupons in denominations of $1,000 and any integral multiple of $1,000;
provided, that Certificated Securities (as defined in the Indenture) shall be
issued in minimum denominations of $100,000 and integral multiples of $1,000
above that amount.
At the office or agency of the Issuer referred to on the face hereof and
in the manner and subject to the limitations provided in the Indenture,
Securities may be exchanged for a like aggregate principal amount of Securities
of other authorized denominations.
Upon due presentment for registration of transfer of this Security at
the above-mentioned office or agency of the Issuer, a new Security or Securities
of authorized denominations, for a like aggregate principal amount, will be
issued to the transferee as provided in the Indenture. No service charge shall
be made for any such transfer, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
The Securities may not be redeemed at the option of the Issuer prior to
maturity, except as set forth in this paragraph. The Securities may not be
redeemed at the option of the Issuer
C-5
<PAGE>
prior to July 1, 2000. At any time and from time to time after July 1, 2000, the
Issuer may redeem the Securities at a redemption price from July 1, 2000 to June
30, 2001 of 105.68750% of the principal amount thereof, from July 1, 2001 to
June 30, 2002 at a redemption price of 102.8438% of the principal amount
thereof, and thereafter until maturity at 100% of the principal amount thereof,
in each case plus accrued interest to the redemption date. Notwithstanding the
foregoing, if the date fixed for redemption as set forth in this paragraph is a
July 1 or January 1, then the interest payable on such date shall be paid to the
holder of record on the preceding June 15 or December 15. Notice of such
redemption shall be mailed not less than 30 nor more than 60 days prior to the
date fixed for redemption to the holders of Securities to be redeemed, all as
provided in the Indenture, in the circumstances set forth in this paragraph.
Subject to payment by the Issuer of a sum sufficient to pay the amount
due on redemption, interest on this Security (or portion hereof if this Security
is redeemed in part) shall cease to accrue upon the date duly fixed for
redemption of this Security (or portion hereof if this Security is redeemed in
part).
Subject to the terms of the Indenture, if the Issuer or any of its
Subsidiaries consummate any Asset Disposition (as defined in the Indenture), the
Issuer or any of its Subsidiaries shall be required to invest the Net Cash
Proceeds (as defined in the Indenture) of the Asset Disposition within 270 days,
at the Issuer's election, in the business or businesses of the Issuer as of the
Issue Date or any related business, or, to the extent not so invested, make an
Asset Disposition Offer (as defined in the Indenture) to purchase the Securities
(on a pro rata basis if the amount available for such repurchase is less than
the outstanding principal amount of the Securities) or any other Indebtedness
which is pari passu with the Securities, at a purchase price of 100% of the
principal amount thereof plus accrued interest to the date of repayment.
Notwithstanding the foregoing, the Issuer and its Subsidiaries will not be
required to apply any Net Cash Proceeds in accordance with this provision except
to the extent that the aggregate gross proceeds from all Asset Dispositions
which are not applied in accordance with this provision exceed $25,000,000.
In the event that there shall occur a Change of Control (as defined in
the Indenture), each holder of the Securities shall have the right, at the
Holder's option, to require the Issuer to purchase all or any part of such
Holder's Securities on the date (the "Repurchase Date") that is 90 days after
notice of the Change of Control, at 101% of the principal amount thereof, plus
accrued interest to the Repurchase Date. To be repaid, the Security must be
received, with the completed form entitled Option of Holder to Elect Purchase
(set forth below), by the paying agent at its then specified office at least two
Business Days prior to the Repurchase Date. Exercise of the repayment
C-6
<PAGE>
option by the Securityholder will be irrevocable unless the rescission thereof
is duly approved by the Continuing Directors.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee, may deem and treat the registered holder hereof as the absolute owner
of this Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by anyone
other than the Issuer or the Trustee or any authorized agent of the Issuer or
the Trustee), for the purpose of receiving payment of, or on account of, the
principal hereof and, subject to the provisions on the face hereof, interest
hereon and for all other purposes, and neither the Issuer nor the Trustee nor
any authorized agent of the Issuer or the Trustee shall be affected by any
notice to the contrary.
No recourse shall be had for the payment of the principal of or interest
on this Security, for any claim based hereon, or otherwise in respect hereof, or
based on or in respect of the Indenture or any indenture supplemental thereto,
against any incorporator, shareholder, officer or director, as such, past,
present or future, of the Issuer or of any successor corporation, either
directly or through the Issuer or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
C-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 3.16 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 3.16 of the Indenture, state the amount (in aggregate
principal amount):
$[ ].
Date: [ ] Your Signature: [ ]
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: [ ]
C-8
<PAGE>
Exhibit D
---------
[FORM OF PRIVATE EXCHANGE SECURITY]
[FORM OF FACE OF SECURITY]
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") (2) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY RESELL
OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY, EXCEPT (A) TO WEIRTON STEEL
CORPORATION (THE "ISSUER"), (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED
HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (E)
PURSUANT TO OFFERS OR SALES THAT OCCUR OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY TO THEM OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH SECURITY, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE, AS TRANSFER AGENT. IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IN CERTAIN
OTHER CASES NOTED ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
ISSUER AND THE TRUSTEE, AS TRANSFER AGENT SUCH
D-1
<PAGE>
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THREE YEARS
FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY.
No. $
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
Weirton Steel Corporation, a Delaware corporation (the "Issuer"), for
value received hereby promises to pay to or registered assigns the
principal sum of Dollars at the Issuer's office or agency for said
purpose in the Borough of Manhattan, the City of New York on July 1, 2004 in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest, semi-annually in arrears on July 1 and January 1 of each year, on said
principal sum in like coin or currency at the rate per annum set forth above at
said office or agency from the July 1 or the January 1, as the case may be, next
preceding the date of this Security to which interest on the Securities has been
paid or duly provided for, unless the date hereof is a date to which interest on
the Securities has been paid or duly provided for, in which case from the date
of this Security, or unless no interest has been paid or duly provided for on
the Securities, in which case from July __, 1996 until payment of said principal
sum has been made or duly provided for. Notwithstanding the foregoing, if the
date hereof is after June 15 or December 15, as the case may be, and before the
following July 1 or January 1, this Security shall bear interest from such July
1 or January 1; provided, that if the Issuer shall default in the payment of
interest due on such July 1 or January 1, then this Security shall bear interest
from the next preceding July 1 or January 1 to which interest on the Securities
has been paid or duly provided for, or, if no interest has been paid or duly
provided for on the Securities since the Original issue date of this Security,
from July 3, 1996. The interest so payable on any July 1 or January 1 will,
except as otherwise provided in the Indenture referred to on the reverse hereof,
be paid to the person in whose name this Security is registered at the close of
business on the June 15 or December 15 preceding such July 1 or January 1,
whether or not such day is a Business Day (as defined in the Indenture);
provided that interest may be paid, at the option of the Issuer, by mailing a
D-2
<PAGE>
check therefor payable to the registered holder entitled thereto at his last
address as it appears on the Security register.
Reference is made to the further provisions set forth on the reverse
hereof. Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Security shall not be valid or obligatory until the certificate of
authentication hereon shall have been duly manually signed by the Trustee acting
under the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
WEIRTON STEEL CORPORATION
[Seal]
______________________________
D-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY
_______________________
Authorized Signatory
Dated: as of _______, 1996
D-4
<PAGE>
[FORM OF REVERSE OF SECURITY]
WEIRTON STEEL CORPORATION
11 3/8% Senior Notes Due 2004
This Security is one of a duly authorized issue of debt securities of
the Issuer, limited to the aggregate principal amount of $125,000,000 (except as
otherwise provided in the Indenture mentioned below), issued or to be issued
pursuant to an indenture dated as of July 3, 1996 (the "Indenture"), duly
executed and delivered by the Issuer to Bankers Trust Company, Trustee (herein
called the "Trustee"). Reference is hereby made to the Indenture and all
indentures supplemental thereto for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the Issuer
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Securities.
The Issuer promises to pay interest on the principal amount of this
Security on each July 1 and January 1, until July 1, 2004 or the earlier
redemption of the Securities as set forth below, at the rate of 11 3/8% per
annum. Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months. Unless otherwise agreed by the Issuer and the
holder of any Security, payments by the Issuer in respect of the Securities
(including principal, premium, if any, and interest) shall be paid to holders of
the Securities in same-day funds. If the date of maturity of interest on or
principal of the Securities or the date fixed for redemption of any Security
shall not be a Business Day, then payment of interest or principal will be made
on the next succeeding Business Day, with the same force and effect as if made
on the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all the Securities may be declared
due and payable, in the manner and with the effect, and subject to the
conditions, provided in the Indenture. The Indenture provides that in certain
events such declaration and its consequences may be waived by the holders of a
majority in aggregate principal amount of the Securities then outstanding and
that, prior to any such declaration, such holders may waive any past default
under the Indenture and its consequences except a default in the payment of
principal of or interest on any of the Securities. Any such consent or waiver by
the holder of this Security (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such holder and upon all future holders and
owners of this Security and any Security which may be issued in exchange or
D-5
<PAGE>
substitution therefor, whether or not any notation thereof is made upon this
Security or such other Securities.
The Indenture permits the Issuer and the Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding, evidenced as in the Indenture provided, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the holders of
the Securities; provided that no such supplemental indenture shall (a) reduce
the rate or change the time or place for payment of interest on any Security or
reduce any amount payable on the redemption hereof; (b) reduce the principal of
or change the fixed maturity or place of payment of any Security; (c) change the
currency of payment of principal or interest on any Security; (d) reduce the
principal amount of outstanding Securities necessary to modify or amend this
Indenture; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security; or (f) modify any of the foregoing
provisions or reduce the principal amount of outstanding Securities necessary to
waive any covenant or past Default, without the consent of the holders of all
Securities then outstanding.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this
Security at the place, times, and rate, and in the currency, herein prescribed.
The Securities are issuable only as registered Securities without
coupons in denominations of $1,000 and any integral multiple of $1,000;
provided, that Certificated Securities (as defined in the Indenture) shall be
issued in minimum denominations of $100,000 and integral multiples of $1,000
above that amount.
At the office or agency of the Issuer referred to on the face hereof and
in the manner and subject to the limitations provided in the Indenture,
Securities may be exchanged for a like aggregate principal amount of Securities
of other authorized denominations.
Upon due presentment for registration of transfer of this Security at
the above-mentioned office or agency of the Issuer, a new Security or Securities
of authorized denominations, for a like aggregate principal amount, will be
issued to the transferee as provided in the Indenture. No service charge shall
be made for any such transfer, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
D-6
<PAGE>
The Securities may not be redeemed at the option of the Issuer prior to
maturity, except as set forth in this paragraph. The Securities may not be
redeemed at the option of the Issuer prior to July 1, 2000. At any time and from
time to time after July 1, 2000, the Issuer may redeem the Securities at a
redemption price from July 1, 2000 to June 30, 2001 of 105.68750% of the
principal amount thereof, from July 1, 2001 to June 31, 2002 at a redemption
price of 102.8438% of the principal amount thereof, and thereafter until
maturity at 100% of the principal amount thereof, in each case plus accrued
interest to the redemption date. Notwithstanding the foregoing, if the date
fixed for redemption as set forth in this paragraph is a July 1 or January 1,
then the interest payable on such date shall be paid to the holder of record on
the preceding June 15 or December 15. Notice of such redemption shall be mailed
not less than 30 nor more than 60 days prior to the date fixed for redemption to
the holders of Securities to be redeemed, all as provided in the Indenture, in
the circumstances set forth in this paragraph.
Subject to payment by the Issuer of a sum sufficient to pay the amount
due on redemption, interest on this Security (or portion hereof if this Security
is redeemed in part) shall cease to accrue upon the date duly fixed for
redemption of this Security (or portion hereof if this Security is redeemed in
part).
Subject to the terms of the Indenture, if the Issuer or any of its
Subsidiaries consummate any Asset Disposition (as defined in the Indenture), the
Issuer or any of its Subsidiaries shall be required to invest the Net Cash
Proceeds (as defined in the Indenture) of the Asset Disposition within 270 days,
at the Issuer's election, in the business or businesses of the Issuer as of the
Issue Date or any related business, or, to the extent not so invested, make an
Asset Disposition Offer (as defined in the Indenture) to purchase the Securities
(on a pro rata basis if the amount available for such repurchase is less than
the outstanding principal amount of the Securities) or any other Indebtedness
which is pari passu with the Securities, at a purchase price of 100% of the
principal amount thereof plus accrued interest to the date of repayment.
Notwithstanding the foregoing, the Issuer and its Subsidiaries will not be
required to apply any Net Cash Proceeds in accordance with this provision except
to the extent that the aggregate gross proceeds from all Asset Dispositions
which are not applied in accordance with this provision exceed $25,000,000.
In the event that there shall occur a Change of Control (as defined in
the Indenture), each holder of the Securities shall have the right, at the
Holder's option, to require the Issuer to purchase all or any part of such
Holder's Securities on the date (the "Repurchase Date") that is 90 days after
notice of the Change of Control, at 101% of the principal amount thereof, plus
accrued interest to the Repurchase Date. To be repaid, the Security must be
received, with the completed form entitled
D-7
<PAGE>
Option of Holder to Elect Purchase (set forth below), by the paying agent at its
then specified office at least two Business Days prior to the Repurchase Date.
Exercise of the repayment option by the Securityholder will be irrevocable
unless the rescission thereof is duly approved by the Continuing Directors.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee, may deem and treat the registered holder hereof as the absolute owner
of this Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by anyone
other than the Issuer or the Trustee or any authorized agent of the Issuer or
the Trustee), for the purpose of receiving payment of, or on account of, the
principal hereof and, subject to the provisions on the face hereof, interest
hereon and for all other purposes, and neither the Issuer nor the Trustee nor
any authorized agent of the Issuer or the Trustee shall be affected by any
notice to the contrary.
No recourse shall be had for the payment of the principal of or interest
on this Security, for any claim based hereon, or otherwise in respect hereof, or
based on or in respect of the Indenture or any indenture supplemental thereto,
against any incorporator, shareholder, officer or director, as such, past,
present or future, of the Issuer or of any successor corporation, either
directly or through the Issuer or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
D-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 3.16 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 3.16 of the Indenture, state the amount (in aggregate
principal amount):
$[ ].
Date: [ ] Your Signature: [ ]
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: [ ]
D-9
<PAGE>
TRANSFER CERTIFICATION
In connection with any transfer of this Security occurring prior to the
date which is the earlier of three years after the later of the original
issuance of this Security or the last date on which this Security was held by an
Affiliate of the Issuer, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
---------
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[ ] (b) this Security is being transferred to an institutional "accredited
investor", as such term is defined in Rule 501 (a) (1), (2), (3) or
(7) under the Securities Act of 1933, as amended. An executed
Institutional Accredited Investor Transfer Certificate is submitted
herewith.
or
--
[ ] (c) this Security is being transferred other than in accordance with (a)
or (b) above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.8 of the Indenture shall have
been satisfied.
Date:
----------------------- ----------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
D-10
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Issuer as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
--------------------------- ---------------------------
NOTICE: To be executed by
an executive officer
D-11
<PAGE>
Exhibit E
---------
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
_____________________, as Trustee
Dated:
---------------------------------
Authorized Signatory
E-1
<PAGE>
Exhibit F
---------
[FORM OF INSTITUTIONAL ACCREDITED INVESTOR CERTIFICATE]
_______________, ____
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: Weirton Steel Corporation (the "Issuer") 11 3/8% Senior Notes
due 2004 (the "Securities")
-------------------------------------------------------------
Ladies and Gentlemen:
In connection with our purchase of $_______________ principal amount of
11 3/8% Senior Notes due 2004 (the "Securities") of Weirton Steel Corporation
(the "Issuer"), we represent, warrant, agree and acknowledge as follows:
1. The Securities have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or any other applicable securities law and
may not be offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act and any other applicable
securities law, pursuant to an exemption therefrom or in a transaction not
subject thereto, and in each case in compliance with the terms of this letter.
2. We are an institutional investor that is an "accredited investor" (as
defined in Rule 501(a)(1), (2), (3), or (7) under the Securities Act). We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of an investment in the Securities; we and
any accounts for which we are acting are acquiring the Securities for investment
purposes and not with a view to, or offer or sale in connection with, any
distribution in violation of the Securities Act, and we and any accounts for
which we are acting are each able to bear the economic risk of our or its
investments.
3. We are acquiring the Securities purchased by us for our account or for one
or more accounts (each of which is an institutional "accredited investor" as
defined above) as to each of which we exercise sole
F-1
<PAGE>
investment discretion and for each of which we are acquiring not less than
$100,000 total principal amount of Securities.
4. We understand that the Securities are being sold to us pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. We are not purchasing the Securities with a
view to the resale, distribution or other disposition thereof.
5. If, within three years after the original issuance of the Securities, we
should decide to dispose of any Securities, we shall not offer, sell, transfer,
pledge hypothecate or otherwise dispose of any Securities except:
(a) to the Issuer;
(b) pursuant to a registration statement which has been declared effective
under the Securities Act;
(c) for so long as the Securities are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A;
(d) inside the United States to an institutional investor that (i) is an
"accredited investor" (as defined in Rule 501(a)(1), (2), (3), or (7) under
the Securities Act);
(e) pursuant to offers and sales that occur outside the United States in
compliance with Rule 904 under the Securities Act, or
(f) pursuant to any other available exemption from the registration
requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and to compliance with any
applicable state securities laws.
6. We understand that, prior to any proposed transfer of Securities within
three years after the original issuance of Securities pursuant to paragraphs
5(d), 5(e) and 5(f), we shall be required to furnish to you
F-2
<PAGE>
and the Issuer, such certifications, legal opinions or other information as you
and the Issuer may reasonably require to confirm that the proposed transfer is
being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act.
7. We understand that that the certificates representing the Securities will,
until the third anniversary of the original issuance of the Securities or upon
the earlier satisfaction of the Issuer that such Securities have been or are
being offered and sold in compliance with Rule 904 under the Securities Act,
bear a legend substantially similar to the effect set forth in paragraphs 1, 5
and 7 hereof.
8. We shall preserve copies of this letter and all related letters,
certifications, legal opinions, notices and other documents, and upon request
shall furnish you with copies thereof. You and the Issuer are entitled to rely
on such documents and we irrevocably authorize you to produce such documents in
connection with an administrative or legal proceeding or official inquiry with
respect to the matters covered hereby.
9. As used herein, the term "United States" has the meaning given to it by
Rule 904 under the Securities Act.
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
Very truly yours,
[Name of Transferee]
By:___________________________
Authorized Signature
F-3
<PAGE>
Exhibit G
[FORM OF PRIVATE EXCHANGE SECURITY TRANSFER CERTIFICATE]
In connection with a sale, for value, of 11 3/8% Senior Notes Due 2004
(the "Securities") of Weirton Steel Corporation (the "Company") the undersigned
Holder confirms the following with respect to the undersigned's sale of a
Private Exchange Security (Certificate No. _________):
(a) The undersigned is listed as a "Selling Securityholder" in the Shelf
Registration Statement with respect to the Securities (the "Registration
Statement").
(b) The sale is being made pursuant to the plan of distribution described in
the Prospectus which is part of the Registration Statement (as supplemented
by all supplements and post-effective amendments thereto, the
"Prospectus").
(c) The Security described above is submitted for registration of transfer in
connection with a change of beneficial ownership resulting from a sale or
other transfer for value.
(d) The undersigned Holder has delivered to the transferee a Prospectus in
connection with the sale of the above-described Security under the above-
mentioned Registration Statement, or has delivered to the Registrar an
opinion of counsel, acceptable to the Registrar, to the effect that
delivery of a Prospectus is not required under the Securities Act of 1933,
as amended.
Defined terms used but not defined herein have the meaning assigned in
the Indenture dated as of July 3, 1996 relating to the Securities.
Name of
Selling Holder _________________________________
Signed
________________________________________________
Date:__________________________
G-1
<PAGE>
Exhibit H
---------
SCHEDULE OF CERTAIN PROPERTIES OF THE ISSUER
[AERIAL PHOTOGRAPH OF THE ISSUER'S PROPERTIES
IN WEIRTON, WEST VIRGINIA]
<PAGE>
EXHIBIT 4.6
REGISTRATION RIGHTS AGREEMENT
Dated as of July 3, 1996
Among
WEIRTON STEEL CORPORATION
as Issuer
and
LEHMAN BROTHERS INC.
and
SALOMON BROTHERS INC
as Initial Purchasers
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions....................................... 1
2. Exchange Offer.................................... 4
3. Shelf Registration................................ 8
4. Liquidated Damages................................ 11
5. Registration Procedures........................... 13
6. Registration Expenses............................. 22
7. Indemnification................................... 23
8. Rules 144 and 144A................................ 27
9. Underwritten Registrations........................ 28
10. Miscellaneous..................................... 28
(a) No Inconsistent Agreements................. 28
(b) Adjustments Affecting Registrable Notes.... 28
(c) Amendments and Waivers..................... 29
(d) Notices.................................... 29
(e) Successors and Assigns..................... 30
(f) Counterparts............................... 31
(g) Headings................................... 31
(h) Governing Law.............................. 31
(i) Severability............................... 31
(j) Third Party Beneficiaries.................. 31
(k) Entire Agreement........................... 31
(l) Underwriting Agreement..................... 32
(m) Termination................................ 32
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
---------
July 3, 1996 among Weirton Steel Corporation, a Delaware corporation (the
"Company"), Lehman Brothers Inc. and Salomon Brothers Inc (the "Initial
- -------- -------
Purchasers").
- ----------
This Agreement is entered into in connection with the Purchase
Agreement, dated June 27, 1996, between the Company and the Initial Purchasers
(the "Purchase Agreement") which provides for the sale by the Company to the
------------------
Initial Purchasers of $125,000,000 aggregate principal amount of the Company's
11 3/8% Senior Notes Due 2004 (the "Notes"). In order to induce the Initial
-----
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchasers and its direct and indirect transferees and assigns. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Advice: See the last paragraph of Section 5 hereof.
------
Agreement: See the introductory paragraphs hereto.
---------
Applicable Period: See Section 2(b) hereof.
-----------------
Company: See the introductory paragraphs hereto.
-------
Effectiveness Date: The 135th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a) hereof.
--------------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Offer Registration Statement: See Section 2(a) hereof.
-------------------------------------
<PAGE>
Filing Date: The 45th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: The Indenture, dated as of July 3, 1996 between the
---------
Company and Bankers Trust Company, as Trustee, pursuant to which the Notes are
being issued, as amended or supplemented from time to time in accordance with
the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
------------------
Inspectors: See Section 5(o) hereof.
----------
Issue Date: The date on which the Notes were originally issued under
----------
the Indenture.
Liquidated Damages: See Section 4(a) hereof.
------------------
NASD: See Section 5(t) hereof.
----
Notes: See the introductory paragraphs hereto.
-----
Participant: See Section 7(a) hereof.
-----------
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, joint stock
------
company, trust, unincorporated association, union, business association, firm or
other legal entity.
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
2
<PAGE>
Purchase Agreement: See the introductory paragraphs hereto.
------------------
Records: See Section 5(o) hereof.
-------
Registrable Notes: Each Note upon original issuance of the Notes and
-----------------
at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement)
covering such Note, Exchange Note or such Private Exchange Note having been
declared effective by the SEC and such Note or such Private Exchange Note, as
the case may be, having been disposed of in accordance with such effective
Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note,
as the case may be, being eligible for sale to the public pursuant to Rule 144,
(iii) such Note having been exchanged for an Exchange Note pursuant to an
Exchange Offer which may be resold without restriction under state and federal
securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceasing to be outstanding for purposes of the Indenture.
Registration Default: See Section 4(a) hereof.
--------------------
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Offer Registration Statement, filed
with the SEC pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
3
<PAGE>
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration Statement: See Section 3(a) hereof.
----------------------------
Subsequent Shelf Registration Statement: See Section 3(b) hereof.
---------------------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any subsequent indenture governing the Exchange Notes and Private
Exchange Notes (if any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Company shall file with the SEC no later than the Filing Date,
a registration statement under the Securities Act with respect to a registered
offer to exchange (the "Exchange Offer") any and all of the Registrable Notes
--------------
(other than Private Exchange Notes, if any) for a like aggregate principal
amount of debt securities of the Company which are substantially similar in all
material respects to the Notes (the "Exchange Notes"), except that the Exchange
--------------
Notes shall have been registered pursuant to an effective Registration Statement
under the Securities Act and shall contain no restrictive legend thereon, and
which are entitled to the benefits of the Indenture or a trust indenture which
is identical in all material respects to the Indenture (other than such changes
to the Indenture or any such identical trust indenture as are necessary to
comply with any requirements of the SEC to effect or maintain the qualification
thereof under the TIA) and which, in either case, has been qualified under the
TIA. The Exchange Offer shall be registered under the Securities Act on an
appropriate form (the "Exchange Offer Registration Statement") and shall comply
-------------------------------------
with all applicable tender offer rules and regulations under the Exchange Act.
The Company shall use reasonable best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date. Upon the Exchange Offer Registration Statement
being declared effective, the Company will offer the Exchange Notes in exchange
for
4
<PAGE>
surrender of the Notes. The Company will keep the Exchange Offer open for
at least 20 business days (or longer if required by applicable law) after the
date that notice of the Exchange Offer is mailed to Holders. For purposes of
this Section 2(a) only, if after such Exchange Offer Registration Statement is
initially declared effective by the SEC, the Exchange Offer or the issuance of
the Exchange Notes thereunder is interfered with by any stop order, injunction
or other order or requirement of the SEC or any other governmental agency or
court, such Exchange Offer Registration Statement shall be deemed not to have
become effective for purposes of this Agreement. Each Holder who participates
in the Exchange Offer will be required to represent that any Exchange Notes
received by it will be acquired in the ordinary course of its business, that at
the time of the consummation of the Exchange Offer such Holder will have no
arrangement or understanding with any Person to participate in the distribution
of the Exchange Notes in violation of the provisions of the Securities Act, and
that such Holder is not an affiliate of the Company within the meaning of the
Securities Act. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
-------
mutandis, solely with respect to Registrable Notes that are Private Exchange
- --------
Notes and Exchange Notes held by Participating Broker-Dealers, and the Company
shall have no further obligation to register Registrable Notes pursuant to
Section 3 hereof (other than Private Exchange Notes and other than in respect of
any Exchange Notes as to which clause 2(c)(iv) hereof applies). No securities
other than the Exchange Notes shall be included in the Exchange Offer
Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement certain information necessary to allow a
broker-dealer who holds Notes that were acquired for its own account as a result
of market-making activities or other ordinary course trading activities (other
than Notes acquired directly from the Company or one of the Company's
affiliates) to exchange such Notes pursuant to the Exchange Offer and to satisfy
the prospectus delivery requirements in connection with resales of Exchange
Notes received by such broker-dealer in the Exchange Offer, including a section
entitled "Plan of Distribution," reasonably acceptable to the Initial
Purchasers, which shall contain a summary statement of the positions taken or
policies made by the Staff of the Division of Corporation Finance of the SEC
(the "Staff") with respect to the potential "underwriter" status of any broker-
-----
dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
- ----------------------------
publicly disseminated by the Staff or such positions or policies, in the
judgment of the Initial Purchasers, represent the prevailing views of the Staff.
Such "Plan of Distribution" section shall also expressly permit the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of the
Securities
5
<PAGE>
Act, including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes where such Notes were acquired by such broker-
dealer as a result of market-making activities must acknowledge that it will
comply with any prospectus delivery requirements under the Securities Act in
connection with any resale of Exchange Notes.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes; provided, however, that such
-------- -------
period shall not exceed 120 days after the Exchange Offer Registration Statement
is declared effective (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, or any other Holder is not entitled to participate in the
Exchange Offer, the Company upon the request of the Initial Purchasers or any
such Holder shall simultaneously with the delivery of the Exchange Notes in the
Exchange Offer, issue and deliver to the Initial Purchasers and any such Holder,
in exchange (the "Private Exchange") for such Notes held by the Initial
----------------
Purchasers and any such Holder, a like principal amount of debt securities of
the Company that are substantially similar in all material respects to the
Exchange Notes except for any such restrictions on transfer that, in the opinion
of counsel for the Company, are required under the Securities Act (the "Private
-------
Exchange Notes") (and which are issued pursuant to the same indenture as the
- --------------
Exchange Notes); provided, however, the Company shall not be required to effect
-------- -------
such exchange if, in the written opinion of counsel for the Company (a copy of
which shall be delivered to the Initial Purchasers and any Holder affected
thereby), such exchange cannot be effected without registration under the
Securities Act. The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (B) if no interest has been paid on the Notes, from the Issue
Date.
6
<PAGE>
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, the City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or the Private Exchange,
as the case may be, does not violate applicable law or any applicable
interpretation of the Staff, (ii) no action or proceeding is instituted or
threatened in any court or by any governmental agency which might materially
impair the ability of the Company to proceed with the Exchange Offer or the
Private Exchange and no material adverse development has occurred in any
existing action or proceeding with respect to the Company and (iii) all
governmental approvals have been obtained, which approvals the Company deems
necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that the Exchange Notes shall not
be subject to the
7
<PAGE>
transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes shall vote and consent together on all matters as one class and that
neither the Exchange Notes, the Private Exchange Notes or the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If (i) the Company determines in reasonably good faith that (x)
any changes in law or in the applicable interpretations of the Staff of the SEC
do not permit the Company to effect an Exchange Offer prior to the Effectiveness
Date, or (y) that the Exchange Notes would not be tradeable upon receipt by the
Holders that participate in the Exchange Offer without restriction under
applicable state and federal securities laws (other than due solely to the
status of a Holder as an affiliate of the Company within the meaning of the
Securities Act), (ii) the Exchange Offer is not consummated within 165 days of
the Issue Date, (iii) any holder of Private Exchange Notes so requests within
135 days after the consummation of the Private Exchange, or (iv) in the case of
any Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Notes on the date of the exchange that may be sold without restriction
under state and federal securities laws (other than due solely to the status of
such Holder as an affiliate of the Company within the meaning of the Securities
Act) and so notifies the Company within 60 days after such Holder first becomes
aware of any such restriction and provides the Company with a reasonable basis
for its conclusion, in the case of each of clauses (i), (ii), (iii) and (iv) of
this sentence, then the Company shall promptly deliver to the Holders of
Registrable Notes and the Trustee written notice thereof (the "Shelf Notice")
------------
and shall file a Shelf Registration pursuant to Section 3 hereof.
(3) Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration. The Company shall file with the SEC a
------------------
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes (the "Shelf Registration
------------------
Statement"). If the Company shall not have filed an Exchange Offer Registration
- ---------
Statement, the Company shall use its diligent best efforts to file with the SEC
the Shelf Registration Statement as promptly as practicable, but no later than
30 days from the delivery of the Shelf Notice. The Shelf Registration Statement
shall be on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Company shall not permit any securities other than the Registrable Notes to be
included in the Shelf Registration Statement or any Subsequent Shelf
Registration Statement.
8
<PAGE>
The Company shall use its diligent best efforts to cause the initial
Shelf Registration Statement to be declared effective under the Securities Act
by the 165th day after the Issue Date and to keep the Shelf Registration
Statement continuously effective under the Securities Act until the date which
is 36 months from its effective date, subject to extension pursuant to the last
paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter
--------------------
period ending when (i) all Registrable Notes covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
initial Shelf Registration Statement or (ii) a Subsequent Shelf Registration
Statement covering all of the Registrable Notes has been declared effective
under the Securities Act.
(b) Subsequent Shelf Registrations. If the initial Shelf Registration
------------------------------
Statement or any Subsequent Shelf Registration Statement ceases to be effective
for any reason at any time during the Effectiveness Period (other than because
of the sale of all of the securities registered thereunder), the Company shall
use all reasonable efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 30 days of
such cessation of effectiveness amend the Shelf Registration Statement in a
manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Notes (a "Subsequent Shelf Registration
-----------------------------
Statement"). If a Subsequent Shelf Registration Statement is filed, the Company
- ---------
shall use its best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such Registration Statement continuously effective for a
period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Shelf Registration Statement or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration Statement" means the Shelf Registration
----------------------------
Statement and any Subsequent Shelf Registration Statement.
(c) Supplements and Amendments. The Company shall promptly supplement
--------------------------
and amend the Shelf Registration Statement if required by the rules, regulations
or instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
(d) Hold-Back Agreements
--------------------
(1) Restrictions on Public Sale by Holders of Registrable Notes.
------------------------------------------------------------
Each Holder of Registrable Notes whose Registrable Notes are covered by a
Shelf Registration
9
<PAGE>
Statement filed pursuant to this Section 3 (which Registrable Notes are not
being sold in the underwritten offering described below) agrees, if
requested (pursuant to a timely written notice) by the Company or the
managing underwriter or underwriters in an underwritten offering, not to
effect any public sale or distribution of any of the Registrable Notes or a
similar security of the Company, including a sale pursuant to Rule 144 or
Rule 144A (except as part of such underwritten offering), during the period
beginning 20 days prior to, and ending 90 days after, the closing date of
each underwritten offering made pursuant to such Shelf Registration
Statement, to the extent timely notified in writing by the Company or by
the managing underwriter or underwriters; provided, however, that each
holder of Registrable Notes shall be subject to the hold-back restrictions
of this Section 3(d)(1) only once during the term of this Agreement.
The foregoing provisions shall not apply to any Holder if such
Holder is prevented by applicable statute or regulation from entering into
any such agreement; provided, however, that any such Holder shall
-------- -------
undertake, in its request to participate in any such underwritten offering,
not to effect any public sale or distribution of the class of securities
covered by such Shelf Registration Statement (except as part of such
underwritten offering) during such period unless it has provided 30 days'
prior written notice of such sale or distribution to the Company or the
managing underwriter or underwriters, as the case may be.
(2) Restrictions on the Company and Others. The Company agrees
---------------------------------------
(A) not to effect any public or private sale or distribution (including,
without limitation, a sale pursuant to Regulation D under the Securities
Act) of any securities the same as or similar to those covered by a Shelf
Registration Statement filed pursuant to this Section 3, or any securities
convertible into or exchangeable or exercisable for such securities, during
the 10 days prior to, and during the 90-day period beginning on, the
commencement of an underwritten public distribution of Registrable Notes,
where the managing underwriter or underwriters so requests; (B) to include
in any agreements entered into by the Company on or after the date of this
Agreement (other than any underwriting agreement relating to a public
offering registered under the Securities Act) pursuant to which the Company
issues or agrees to issue securities the same as or similar to the Notes a
provision that each holder of such securities that are the same as or
similar to Notes issued at any time on or after the date of this Agreement
agrees not to effect any public or private sale or distribution, or request
or demand the registration, of any such securities (or any securities
convertible into or exchangeable or exercisable for such securities) during
the period referred to in clause (A) of this Section
10
<PAGE>
3(d)(2), including any sale pursuant to Rule 144 or Rule 144A; and (C) not
to grant or agree to grant any "piggy-back registration" or other similar
rights to any holder of the Company's or any of their respective
subsidiaries' securities issued on or after the date of this Agreement with
respect to any Registration Statement.
4. Liquidated Damages
------------------
(a) The Company and the Initial Purchasers agree that the Holders of
Notes will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
liquidated damages to each Holder of Notes, with respect to the first 90-day
period immediately following the occurrence of a Registration Default (as
defined below) in an amount equal to $.05 per week per $1,000 principal amount
of Notes held by such Holder ("Liquidated Damages"). For any portion of a week
that the Registration Default continues, such Liquidated Damages shall be
calculated on a pro-rata basis. The amount of Liquidated Damages will increase
by an additional $.05 per week per $1,000 principal amount of Notes with respect
to each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000
principal amount of Notes. Each event referred to in clauses (i) through (iii)
below will constitute a "Registration Default" and each such event shall be
--------------------
given independent effect:
(i) if the Exchange Offer Registration Statement has not been
filed on or prior to the 45th calendar day following the Issue Date
and a Shelf Notice has not been delivered with respect to all Notes
eligible for exchange in the Exchange Offer on or prior to such 45th
calendar day, then commencing on the 46th day after the Issue Date,
the Company shall pay Liquidated Damages over and above the accrued
interest on the Notes;
(ii) if the Exchange Offer Registration Statement is not declared
effective by the SEC on or prior to the 135th calendar day following
the Issue Date and a Shelf Notice has not been delivered with respect
to all Notes eligible for exchange in the Exchange Offer on or prior
to such 135th calendar day, then commencing on the 136th day after the
Issue Date, the Company shall pay Liquidated Damages on the Notes
included or which should have been included in such Exchange Offer
Registration Statement over and above the accrued interest on the
Notes; and
(iii) if (A) the Exchange Offer is not consummated on or prior
to the 165th calendar day following the Issue Date and a Shelf Notice
has not been delivered with respect to all Notes eligible for
11
<PAGE>
exchange in the Exchange Offer on or prior to such 165th calendar day,
(B) the Shelf Registration Statement is not declared effective on or
prior to the 165th calendar day following the Issue Date or (C) if
applicable, the Shelf Registration Statement has been declared
effective and ceases to be effective (except as specifically permitted
therein) without being succeeded immediately by an additional
registration statement filed and declared effective, then commencing
on the day immediately following the date of such Registration
Default, the Company shall pay Liquidated Damages over and above the
accrued interest on the Notes;
provided, however, that (1) upon the filing of the Exchange Offer Registration
- --------
Statement or the delivery of a Shelf Notice with respect to all Notes eligible
for exchange in the Exchange Offer (in the case of clause (i) of this Section
4(a)), (2) upon the effectiveness of the Exchange Offer Registration Statement
or the delivery of a Shelf Notice with respect to all Notes eligible for
exchange in the Exchange Offer (in the case of clause (ii) of this Section
4(a)), or (3) upon the consummation of the Exchange Offer or the delivery of a
Shelf Notice with respect to all Notes eligible for exchange in the Exchange
Offer (in the case of clause (iii)(A) of this Section 4(a)), or upon the
effectiveness of the Shelf Registration Statement (in the case of clause
(iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective (except as
specifically permitted therein) without being succeeded immediately by an
additional registration statement filed and declared effective (in the case of
clause (iii)(C) of this Section 4(a)), Liquidated Damages on the Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue; and provided further, that no Liquidated Damages shall be
-------- -------
paid with respect to any Note (i) subsequent to the time of the consummation of
the Exchange Offer with respect to such Note, or (ii) at any time that a Shelf
Registration Statement is available with respect to such Note. Notwithstanding
the foregoing, the Company shall not be required to pay Liquidated Damages with
respect to the Notes of a Holder if the applicable Registration Default arises
from the Company's failure to file, or cause to become effective, a Shelf
Registration Statement within the time periods specified in this Section 4 by
reason of the failure of such Holder to provide such information as (i) the
Company may reasonably request, with reasonable prior written notice, for use in
the Shelf Registration Statement or any Prospectus included therein to the
extent the Company reasonably determines that such information is required to be
included therein by applicable law, (ii) the NASD or the SEC may request in
connection with such Shelf Registration Statement or (iii) is required to comply
with the agreements of such Holder as contained in the penultimate paragraph of
Section 5 to the extent compliance thereof is necessary for the Shelf
Registration Statement to be declared effective.
12
<PAGE>
(b) The Company shall notify the Trustee within one business day after
each Registration Default (an "Event Date"). Any amounts of Liquidated Damages
----------
due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in
cash semi-annually on each July 1 and January 1 (to the holders of record on the
June 15 and December 15 immediately preceding such dates), commencing with the
first such date occurring after any such Liquidated Damages commences to accrue.
Any such Liquidated Damages will be paid by the Company to the Holder of Global
Securities (as defined in the Indenture) by wire transfer of same day funds and
to Holders of Certificated Securities (as defined in the Indenture) by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will cease.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Company hereunder the Company
shall:
(a) Prepare and file with the SEC on or prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its diligent best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
--------
however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a
- -------
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to and afford the
Holders of the Registrable Notes covered by such Registration Statement or each
such Participating Broker-Dealer, as the case may be, one counsel selected by
the Holders of a majority in aggregate principal amount of the Registrable Notes
(the "Holders' Counsel"), counsel for such Participating Broker-Dealer and the
----------------
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each case
at least five business days prior to such filing, or such later date as is
reasonable under the circumstances). The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto if
the Holders of a majority in aggregate principal amount of the
13
<PAGE>
Registrable Notes covered by such Registration Statement and the Holders'
Counsel, or any such Participating Broker-Dealer and its counsel, as the case
may be, or the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Company shall be deemed not to have used
its diligent best efforts to keep a Registration Statement effective during the
Applicable Period if it voluntarily takes any action that would result in
selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless (i) such
action is required by applicable law or (ii) such action is taken by the Company
in good faith and for valid business reasons (not including avoidance of the
Company's obligations hereunder), including the acquisition or divestiture of
assets.
(c) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, notify the selling Holders of Registrable
Notes and Holders' Counsel, or each such Participating Broker-Dealer and their
counsel, as the case may be, and the managing underwriters, if any, promptly
(but in any event within two business days), (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole expense
of the Company, one conformed copy of such Registration Statement or post-
effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for
14
<PAGE>
that purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable Notes
or resales of Exchange Notes by Participating Broker-Dealers the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement), contemplated by Section 5(n) hereof, to the knowledge
of the Company, cease to be true and correct in all material respects, (iv) of
the receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of a Registration Statement or
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in or
amendments or supplements to such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
and that in the case of the Prospectus, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vi) of the
Company's determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its reasonable best efforts to prevent
the issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating Broker-
Dealer, for sale in any jurisdiction, and, if any such order is issued, to use
its best efforts to obtain the withdrawal of any such order at the earliest
possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any), the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly incorporate in a prospectus supplement or post-
effective amendment such information as the
15
<PAGE>
managing underwriter or underwriters (if any), their counsel, such Holders,
Holders' Counsel, any Participating Broker-Dealer or their counsel determine is
reasonably necessary to be included therein, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes, Holders' Counsel and to each such Participating Broker-Dealer
who so requests and its counsel and each managing underwriter, if any, at the
sole expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes and Holders' Counsel, or each such Participating Broker-Dealer
and its counsel, as the case may be, and the underwriters, if any, at the sole
expense of the Company, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 5, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Notes or each
such Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers (if any), in connection with the offering and sale
of the Registrable Notes covered by, or the sale by Participating Broker-Dealers
of the Exchange Notes pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to cooperate with the selling Holders of
Registrable Notes and Holders' Counsel or each such Participating
16
<PAGE>
Broker-Dealer and its counsel, as the case may be, the managing underwriter or
underwriters, if any, and their counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters reasonably request;
provided, however, that where Exchange Notes held by Participating
- -------- -------
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Company agrees to cause the Company's counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers
or the Registrable Notes covered by the applicable Registration Statement;
provided, however, that the Company shall not be required (A) to qualify
- -------- -------
generally to do business in any jurisdiction where it is not then so qualified,
(B) to take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or (C) to subject itself
to taxation in excess of a nominal dollar amount in any such jurisdiction where
it is not then so subject.
(i) If a Shelf Registration statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Company will cooperate in all reasonable respects with the filing
of such registration statement and the granting of such approvals; provided,
--------
however, that the Company shall not be required (A) to qualify generally to do
- -------
business in any jurisdiction where it is not then so qualified, (B) to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) to subject itself to
taxation in
17
<PAGE>
excess of a nominal dollar amount in any such jurisdiction where it is not then
so subject.
(k) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating Broker-
Dealer, any such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be rated
with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration Statement, enter into an underwriting agreement
as is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants with,
the underwriters with respect to the business of the Company and its
subsidiaries (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings of
debt
18
<PAGE>
securities similar to the Notes, and confirm the same in writing if and when
requested; (ii) use reasonable best efforts to obtain the written opinions of
counsel to the Company and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) use reasonable best
efforts to obtain "cold comfort" letters and updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or underwriters
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by the
managing underwriter or underwriters as permitted by the Statement on Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(c) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating Broker-
Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at
----------
the offices where normally kept, during reasonable business hours, all financial
and other records, pertinent corporate documents and instruments of the Company
and its subsidiaries (collectively, the "Records") as shall be reasonably
-------
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the Company
and its subsidiaries to supply all information reasonably requested by any such
Inspector in
19
<PAGE>
connection with such Registration Statement; provided, however, that all
-------- -------
information shall be kept confidential by each such Inspector, except to the
extent that (i) the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in such Registration Statement, (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) disclosure of such information is, in the opinion
of counsel for any Inspector, necessary or advisable in connection with any
action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon, relating
to, or involving this Agreement, or any transactions contemplated hereby or
arising hereunder; provided, however, that prior notice be provided as soon as
-------- -------
practicable to the Company of the potential disclosure of any information by
such Inspector pursuant to clause (ii) or this clause (iii) to permit the
Company to obtain a protective order (or waive the provisions of this paragraph
(o)) and that such Inspector shall take such actions as are reasonably necessary
to protect the confidentiality of such information to the extent such action is
otherwise not inconsistent with, an impairment of or in derogation of the rights
and interests of the Holders or any Inspector, or (iv) the information in such
Records has been made generally available to the public by the Company. Each
selling Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential, shall be used only for
due diligence purposes pursuant to this Section 5(p) and shall not be used by it
as the basis for any market transactions in the securities of the Issuer unless
and until such information is generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer will
be required to further agree that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company to undertake appropriate action to prevent
disclosure of the Records deemed confidential at the Company's sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
20
<PAGE>
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes,
as the case may be, and the related indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to customary exceptions and
qualifications.
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement, Holders' Counsel and each underwriter, if any,
participating in the disposition of such Registrable Notes and its counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD") .
----
(u) Use its diligent best efforts to take all other steps necessary or
advisable to effect the registration of the Exchange Notes and/or Registrable
Notes covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude
from
21
<PAGE>
such registration the Registrable Notes of any seller who fails to furnish
such information within a reasonable time after receiving such request. Each
seller as to which any registration pursuant to a Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
------
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto and, if so directed by the Company, such Holder or
Participating Broker-Dealer, as the case may be, will deliver to the Company all
copies, other than permanent file copies, then in such Holder's or Participating
Broker-Dealer's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Notes covered by such Registration
Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as
the case may be, shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer or a Shelf Registration Statement is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws
22
<PAGE>
of such jurisdictions (x) where the holders of Registrable Notes are located, in
the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in
the case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Regis trable Notes or Exchange Notes to be sold by
any Participating Broker-Dealer during the Applicable Period, as the case may
be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and reasonable fees and disbursements
of Holders' Counsel (subject to the provisions of Section 6(b) hereof), (v) fees
and disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act liability insurance,
if the Company desires such insurance, (viii) fees and expenses of all other
Persons retained by the Company, (ix) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (x) the expense
of any annual audit, (xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange, if
applicable, and (xii) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agreements, indentures and any other documents necessary in order to
comply with this Agreement.
(b) The Company shall reimburse the Holders of the Registrable Notes
being registered in a Shelf Registration Statement for the reasonable fees and
disbursements, not to exceed $25,000, of Holders' Counsel (in addition to
appropriate local counsel) and other out-of-pocket expenses of such Holders of
Registrable Notes incurred in connection with the registration and sale of the
Registrable Notes.
7. Indemnification
---------------
(a) In the event of a Shelf Registration Statement or in connection
with any delivery by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, the Company agrees to indemnify and
hold harmless each Holder of Registrable Notes and each Participating Broker-
Dealer selling Exchange Notes during the Applicable Period, the officers and
directors of each such Person, and each Person, if any, who controls any such
Person within the meaning
23
<PAGE>
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant"), from and against any and all losses, claims, damages
-----------
and liabilities (including, without limitation, and subject to Section 7(c)
below, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement (or any amendment
thereto) or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the case of the Prospectus, in the light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Company
in writing by such Participant expressly for use therein; provided, however,
-------- -------
that the Company shall not be required to indemnify any such Person if such
untrue statement or omission or alleged untrue statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
or any amendment or supplement thereto and the Prospectus does not contain any
other untrue statement or omission or alleged untrue statement or omission of a
material fact that was the subject matter of the related proceeding and any such
loss, liability, claim, damage or expense suffered or incurred by the
Participants resulted from any action, claim or suit by any Person who purchased
Registrable Notes or Exchange Notes which are the subject thereof from such
Participant and it is established in the related proceeding that such
Participant failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Registrable Notes or Exchange Notes sold to such Person if required by
applicable law, unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Participant,
but only with reference to information relating to such Participant furnished to
the Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the
24
<PAGE>
proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Person against whom such indemnity may be sought (the "Indemnifying
------------
Person") in writing, and the Indemnifying Person, upon request of the
- ------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Company and the Company was not otherwise aware of such action or claim).
In any such proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed in writing to the contrary, (ii)
the Indemnifying Person shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person or any affiliate and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that,
unless there exists a conflict among Indemnified Persons, the Indemnifying
Person shall not, in connection with any one such proceeding or separate but
substantially similar related proceeding in the same jurisdiction arising out of
the same general allegations, be liable for the fees and expenses of more than
one separate firm (in addition to any appropriate local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed
promptly after receipt of the invoice therefor as they are incurred. Any such
separate firm for the Participants and such control Persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes and Exchange Notes sold by all such Participants and any
such separate firm for the Company, its directors, its officers and such control
Persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent (which consent shall not be
unreasonably withheld), but if settled with such consent or if there be a final
judgment for the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to
25
<PAGE>
this Agreement, the Indemnifying Person agrees to indemnify and hold harmless
each Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by the second sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of
such settlement; provided, however, that the Indemnifying Person shall not be
-------- -------
liable for any settlement effected without its consent pursuant to this sentence
if the Indemnifying Person is contesting, in good faith, the request for
reimbursement. No Indemnifying Person shall, without the prior written consent
of the Indemnified Persons (which consent shall not be unreasonably withheld),
effect any settlement or compromise of any pending or threatened proceeding in
respect of which any Indemnified Person is or could have been a party, or
indemnity could have been sought hereunder by such Indemnified Person, unless
such settlement or compromise (A) includes an unconditional written release of
such Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to (other than by
reason of exceptions provided therein), or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Notes or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Participants on the other shall
26
<PAGE>
be deemed to be in the same proportion as the total proceeds from the offering
(net of discounts and commissions but before deducting expenses) of the Notes
received by the Company bears to the total proceeds received by such Participant
from the sale of Registrable Notes or Exchange Notes, as the case may be. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
The Company covenants to file with the Trustee, within 15 days after the
Company is required to file the same with the SEC, copies of the annual reports
and of the information, documents and other reports which the Company may be
required to file with the SEC pursuant to Section 13 or Section 15(d) of the
Exchange Act. If, during any period in which Registrable Notes with an
aggregate principal amount equal to or greater than ten percent
27
<PAGE>
of the aggregate principal amount of Registrable Notes originally issued under
the Indenture are outstanding, the Company is not obligated to file annual
reports, documents or other reports with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, the Company will furnish to the Trustee the same such
annual reports documents or other reports as if the Company were so subject. The
Company further covenants, for so long as any Registrable Notes remain
outstanding, to make available to any Holder or beneficial owner of Registrable
Notes in connection with any sale thereof and any prospective purchaser of such
Registrable Notes from such Holder or beneficial owner, the information required
by Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Notes pursuant to Rule 144A, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act and reports filed thereunder satisfy the
information requirements of Rule 144A(d)(4) as then in effect.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and the Company shall not after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements. The Company has not entered and will not
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back registration rights with respect to a Registration
Statement.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
---------------------------------------
directly or indirectly, take any action with
28
<PAGE>
respect to the Registrable Notes as a class that would adversely affect the
ability of the Holders of Registrable Notes to include such Registrable Notes in
a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate principal
amount of the then outstanding Registrable Notes and (B) in circumstances that
would adversely affect the Participating Broker-Dealers, the Participating
Broker-Dealers holding not less than a majority in aggregate principal amount of
the Exchange Notes held by all Participating Broker-Dealers; provided, however,
-------- -------
that Section 7 and this Section 10(c) may not be amended, modified or
supplemented without the prior written consent of each Holder and each
Participating Broker-Dealer (including any person who was a Holder or
Participating Broker Dealer of Registrable Notes or Exchange Notes, as the case
may be, disposed of pursuant to any Registration Statement). Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Notes whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Registrable Notes may be given by Holders of at least
a majority in aggregate principal amount of the Registrable Notes being sold by
such Holders pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
(1) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Attention: Syndicate Department
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Attention: Legal Department
29
<PAGE>
with a copy to:
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Attention: Director of Litigation,
Office of the General
Counsel
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No: (212) 450-4800
Attention: Winthrop B. Conrad, Jr., Esq.
(2) if to the Initial Purchasers, at the address specified in
Section 10(d)(1);
(3) if to the Company, at the addresses as follows:
Weirton Steel Corporation
400 Three Springs Drive
Weirton, West Virginia 26062
Facsimile No: (304) 797-3420
Attention: William R. Kiefer,
Vice President-Law
and Secretary
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No: (212) 821-8111
Attention: Harvey L. Sperry, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and
30
<PAGE>
assigns of each of the parties hereto, the Holders and the Participating Broker-
Dealers; provided, however, that this Agreement shall not inure to the benefit
-------- -------
of or be binding upon a successor or assign of a Holder unless such successor or
assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(k) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchasers on
the one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
31
<PAGE>
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
(l) Underwriting Agreement. Notwithstanding the provisions of
----------------------
Sections 3(d), 5, 6 and 7, in the event of a Shelf Registration pursuant to
Section 3 hereof, to the extent that the Holders of Registrable Notes shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections with
substantially similar effect, the provisions contained in such Sections
addressing such issue or issues shall be of no force or effect with respect to
the registration of securities being effected in connection with such
underwriting or similar agreement.
(m) Termination. This Agreement shall terminate and be of no further
-----------
force or effect when there shall not be any Registrable Notes, except that the
provisions of Section 4, 6, 7 and Sections 10(h) and (j) shall survive any such
termination.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
WEIRTON STEEL CORPORATION
By: /s/ William R. Kiefer
----------------------------------
Name: WILLIAM R. KIEFER
Title: VICE PRESIDENT-LAW
LEHMAN BROTHERS INC.
By: /s/ Robert D. Redmond
----------------------------------
Name: ROBERT D. REDMOND
Title: MANAGING DIRECTOR
SALOMON BROTHERS INC
By: /s/ Anna Cheung
----------------------------------
Name: ANNA CHEUNG
Title: ASSOCIATE
33
<PAGE>
Exhibit 23.1
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
July 10, 1996
<PAGE>
Exhibit 25
_______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2) ___________
______________________________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
_________________________________
WEIRTON STEEL CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 06-1075442
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
400 THREE SPRINGS DRIVE
WEIRTON, WEST VIRGINIA 26062-4989
(Address of principal executive offices) (Zip Code)
______________________________
$ 125,000,000 SENIOR NOTES DUE 2004
(Title of the indenture securities)
______________________________________________________________________________
<PAGE>
-2-
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to which
it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEM 3. -15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990 and Certificate of Amendment
of the Organization Certificate of Bankers Trust Company
dated June 21, 1995 - Incorporated herein by reference to
Exhibit 1 filed with Form T-1 Statement, Registration No.
33-65171.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed with
Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust
powers - Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, dated as
amended on October 19, 1995. - Incorporated herein by
reference to Exhibit 4 filed with Form T-1 Statement,
Registration No. 33-65171.
<PAGE>
-3-
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration No.
22-18864.
EXHIBIT 7 - A copy of the latest report of condition of Bankers
Trust Company dated as of March 31, 1996.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 9th day
of July, 1996.
BANKERS TRUST COMPANY
By: /s/ Jackie Bartnick
---------------------------
Jackie Bartnick
Assistant Vice President
<PAGE>
<TABLE>
Legal Title of Bank: Bankers Trust Company Call Date: 3/31/96 ST-BK: 36-4840 FFIEC 031
<S> <C> <C> <C> <C>
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: - 0 - 0 - 6 - 2 - 3
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS MARCH 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
--------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1)....................... 0081 1,145,000 1.a.
b. Interest-bearing balances(2)................................................ 0071 1,403,000 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A).................. 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)................ 1773 3,535,000 2.b.
3 Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds sold.......................................................... 0276 3,190,000 3.a.
b. Securities purchased under agreements to resell............................. 0277 2,242,000 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 24,678,000 4.a.
b. LESS: Allowance for loan and lease losses.........................RCFD 3123 938,000 4.b.
c. LESS: Allocated transfer risk reserve.............................RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)......................... 2125 23,740,000 4.d.
5. Assets held in trading accounts................................................... 3545 32,261,000 5.
6. Premises and fixed assets (including capitalized leases).......................... 2145 857,000 6.
7. Other real estate owned (from Schedule RC-M)...................................... 2150 247,000 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)............................................................. 2130 253,000 8.
9. Customers' liability to this bank on acceptances outstanding...................... 2155 402,000 9.
10. Intangible assets (from Schedule RC-M)............................................ 2143 12,000 10.
11. Other assets (from Schedule RC-F)................................................. 2160 11,579,000 11.
12. Total assets (sum of items 1 through 11).......................................... 2170 80,866,000 12.
----------------
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
<TABLE>
Legal Title of Bank: Bankers Trust Company Call Date: 3/31/96 ST-BK: 36-4840 FFIEC 031
<S> <C> <C> <C> <C>
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State ZIP: New York, NY 10006 12
FDIC Certificate No.: - 0 - 0 - 6 - 2 - 3
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC--CONTINUED
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
<S> <C> <C> <C>
13. Deposits:
a. In domestic offices (sum of totals of columns RCON 2200 7,327,000 13.a.
A and C from Schedule RC-E, part I)
(1) Noninterest-bearing(1) ................................................ RCON 6631 2,132,000 13.a.(1)
(2) Interest-bearing ...................................................... RCON 6636 5,195,000 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from
Schedule RC-E part II)..................................................... RCFN 2200 18,575,000 13.b.
(1) Noninterest-bearing ................................................... RCFN 6631 552,000 13.b.(1)
(2) Interest-bearing ...................................................... RCFN 6636 18,023,000 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds purchased.................................................... RCFD 0278 2,324,000 14.a.
b. Securities sold under agreements to repurchase............................. RCFD 0279 651,000 14.b.
15. a. Demand notes issued to the U.S. Treasury................................... RCON 2840 0 15.a.
b. Trading liabilities........................................................ RCFD 3548 18,807,000 15.b.
16. Other borrowed money:
a. With original maturity of one year or less................................. RCFD 2332 13,784,000 16.a.
b. With original maturity of more than one year............................... RCFD 2333 3,462,000 16.b.
17. Mortgage indebtedness and obligations under capitalized leases................ RCFD 2910 34,000 17.
18. Bank's liability on acceptances executed and outstanding...................... RCFD 2920 415,000 18.
19. Subordinated notes and debentures............................................. RCFD 3200 1,227,000 19.
20. Other liabilities (from Schedule RC-G)........................................ RCFD 2930 9,724,000 20.
21. Total liabilities (sum of items 13 through 20)................................ RCFD 2948 76,330,000 21.
22. Limited-life preferred stock and related surplus.............................. RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................................. RCFD 3838 500,000 23.
24. Common stock.................................................................. RCFD 3230 1,002,000 24.
25. Surplus (exclude all surplus related to preferred stock)...................... RCFD 3839 528,000 25.
26. a. Undivided profits and capital reserves..................................... RCFD 3632 2,879,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities RCFD 8434 ( 8,000) 26.b.
27. Cumulative foreign currency translation adjustments........................... RCFD 3284 ( 365,000) 27.
28. Total equity capital (sum of items 23 through 27)............................. RCFD 3210 4,536,000 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21, 22,
and 28)....................................................................... RCFD 3300 80,866,000 29.
-------------------------
<CAPTION>
Memorandum
<S> <C>
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1994 ........................................................... RCFD 6724 2 M.1
-----------------
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed
with generally accepted auditing standards by a certified by other external auditors (may be required
public accounting firm which submits a report on the bank by state chartering authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statement by
conducted in accordance with generally accepted auditing external auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements
submits a report on the consolidated holding company by external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax prep-
3 = Directors' examination of the bank conducted in aration work)
accordance with generally accepted auditing standards 8 = No external audit work
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
- --------------------------------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
