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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NO. 1-10244
WEIRTON STEEL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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
(Address of principal executive offices) (Zip code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 304-797-2000
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, Par Value $0.01 Per Share New York
11 3/8% Notes due 2004 New York
10 3/4% Notes due 2005 New York
</TABLE>
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes: X No:
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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Based on the closing price as of March 21, 2000, the aggregate market value
of the voting stock held by nonaffiliates of the Registrant was $342,612,303.
(The foregoing calculation includes shares allocated under the Registrant's 1984
and 1989 Employee Stock Ownership Plans to the accounts of employees who are not
otherwise affiliates and unallocated shares under the Registrant's 1989 Employee
Stock Ownership Plan subject to voting instructions of employees who are not
otherwise affiliates.)
The number of shares of Common Stock ($.01 par value) of the Registrant
outstanding as of March 21, 2000 was 41,528,764.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain portions of the Registrant's 1999 Annual Report to Stockholders are
incorporated by reference into Parts I, II and IV of this Annual Report on
Form 10-K to the extent provided herein.
(2) Certain portions of the Registrant's definitive Proxy Statement filed
pursuant to Regulation 14 (filed within 120 days after the end of the fiscal
year covered hereby) in connection with the Registrant's 2000 Annual Meeting
of Stockholders are incorporated by reference into Part III of this Annual
Report on Form 10-K to the extent provided herein.
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TABLE OF CONTENTS
ITEM
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PAGE
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PART I
1. Business.................................................... 1
2. Properties.................................................. 12
3. Legal Proceedings........................................... 13
4. Submission of Matters to a Vote of Security Holders......... 13
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters....................................... 13
6. Selected Financial Data..................................... 14
7. Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 14
7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 14
8. Financial Statements and Supplementary Data................. 14
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 14
PART III
10. Directors and Executive Officers of the Registrant.......... 14
11. Executive Compensation...................................... 16
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 16
13. Certain Relationships and Related Transactions.............. 16
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 17
SIGNATURES............................................................ 21
EXHIBIT INDEX......................................................... 22
FINANCIAL STATEMENT SCHEDULES......................................... S-2
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PART I
ITEM 1. BUSINESS
BACKGROUND
Weirton Steel Corporation (the "Company") and its predecessor companies
have been in the business of making and finishing steel products for over 90
years at the Company's facilities located in Weirton, West Virginia. From
November 1929 to January 1984, the Company's business had been operated as the
Weirton Steel Division of National Steel Corporation. Incorporated in Delaware
in November 1982, the Company acquired its principal operating assets in January
1984.
The Company is a major "integrated" steelmaker. As such, it makes carbon
steel from raw materials to industry and customer specifications. 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 ("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 Company's multi-
strand continuous caster. The slabs are then reheated, reduced and finished into
coils by extensive rolling and shaping at the Company's modern hot strip mill
and, in many cases, by further tempering, plating or coating at the Company's
downstream finishing operations. See Item 2. "Properties" for a more detailed
description of the specific units involved in the Company's operations.
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 (collectively "Sheet Products"), as well as a broad line of coated
steels, including tin plate, chrome coated, and black plate, comprising Tin Mill
Products ("TMP"). The Company's products emphasize the narrow to medium widths,
up to 48" wide, reflective of its rolling and finishing equipment. The Company's
products cover a broad range of gauges, finishes and performance specifications.
In addition to its core product offerings, the Company's joint venture W&A
Manufacturing LLC ("W&A") offers a steel roofing product and the Company's joint
venture GalvPro L.P. ("GalvPro") offers a galvanized product greater than 48"
wide. See "Business Strategy" under Item 1.
The percentages of the Company's total revenues derived from the sale of
Sheet Products and TMP for each year in the five-year period ended December 31,
1999 are shown in the following table. Total revenues include the sale of
"secondary" products, principally those products not meeting prime
specifications.
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<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sheet products.................................... 59% 60% 62% 59% 64%
Tin mill products................................. 41 40 38 41 36
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
Sheet Products. The Company's presence in the overall domestic Sheet
Products market is limited. To compete more effectively, 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 focuses
on increasing its mix of cold roll and galvanized products. As part of this
strategy, the Company expects to supply up to one half of the cold roll
requirements of GalvPro, the Company's galvanizing joint venture with
Koninklijke Hoogovens, now a unit of Corus Group plc. See "Business Strategy"
under Item 1. While the Company's efforts are aimed at increasing the mix of
cold rolled and coated products, the relative strength of markets for individual
product offerings has a strong influence on the mix of products the Company
ships in any given period.
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The following table provides information concerning the Company's shipments
of Sheet Products relative to the domestic industry for the periods shown.
SHEET PRODUCTS
HISTORICAL MARKET SHARE
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<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C>
Industry shipments.................... 50,993 51,586 52,015 50,022 47,845
Company shipments (1)................. 1,743 1,771 1,918 1,957 1,955
Company market share.................. 3.4% 3.4% 3.7% 3.9% 4.1%
</TABLE>
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(1) Includes secondary products.
Description of Sheet Product Offerings. 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"
or "hot rolled pickled and oiled." Hot roll 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 1999, the Company shipped 752 thousand tons of
hot rolled sheet, which accounted for 19% of total revenues.
Cold rolled sheet requires further processing including additional rolling,
annealing and tempering to enhance ductility and surface characteristics. Cold
roll is used in the construction, steel service center, commercial equipment and
container markets, primarily for exposed parts where appearance and surface
quality are important considerations. In 1999, the Company shipped 373 thousand
tons of cold rolled sheet, which accounted for 13% of total revenues.
Galvanized hot-dipped and electrolytic sheet is coated primarily with zinc
compounds to provide extended anti-corrosive properties. Galvanized is sold to
the electrical, construction, automotive, container, appliance and steel service
center markets. In 1999, the Company shipped 618 thousand tons of galvanized
products, which accounted for 27% of total revenues.
Tin Mill Products. Historically, the Company has emphasized the production
and sale of tin mill products, as a result of which it has become one of the
largest domestic producers of TMP. The Company has enjoyed substantial market
share and a widely held reputation as a high quality producer of TMP. During
1999, the Company's market share of TMP was approximately 20%, which was
consistent with its historic market share levels. Although categorized as "tin
mill products," these products actually comprise a wide variety of light gauge
coated steels, including black plate, tin coated steel and electrolytic chromium
coated steel. The TMP market is primarily directed at food and general line
cans. While the domestic TMP market offers limited opportunities for expansion,
as part of its ongoing strategy, the Company continues to seek new product and
market opportunities by capitalizing on developing specialty markets.
The following table provides information concerning the Company's shipments
of TMP relative to the domestic industry for the periods shown.
TIN MILL PRODUCTS
HISTORICAL MARKET SHARE
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1999 1998 1997 1996 1995
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(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C>
TMP industry shipments..................... 3,771 3,714 4,058 4,108 3,942
Company shipments (1)...................... 771 804 854 899 763
Company market share....................... 20% 22% 21% 22% 19%
</TABLE>
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(1) Includes secondary products.
Sales and Distribution Logistics. The Company's products are primarily sold
through salaried Company employees who operate from corporate headquarters and
through nine regional locations. Sales orders taken in the field are subject to
home office approval. The sales organization is closely linked with technical
service personnel who assist the Company with product engineering and
development. The Company believes that the sales organization plays an important
role in identifying and achieving a more favorable strategic market mix for the
Company.
To supplement its traditional sales force, the Company has, since October
1996, initiated product sales over the Internet. The Company currently sells its
prime, excess prime and non-prime products through MetalSite L.P. ("MetalSite").
See "Business Strategy" under Item 1. The Company expects to continue to explore
and develop new means and methods of expanding customer access through
electronic markets.
Market Demand and Customers. The demand for rolled carbon steel products in
the United States has been strong and consistent for the past seven years.
Domestic producers and foreign producers exporting to the United States have
benefited from strong domestic consumption during most of that time. The long
duration of strong rates of domestic consumption is unusual in the history of
the steel industry. The outlook for domestic carbon steel consumption for 2000
is also positive. However, a variety of factors including overall strength of
the U.S. economy, consumer purchases of automobiles and appliances, new housing
development and industrial steel orders affect the domestic demand for steel.
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.
The following table shows the principal types of customers for the
Company's products for the years indicated.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Service Centers and Sheet and Strip Converters.... 48% 44% 43% 44% 40%
Food.............................................. 23 25 23 24 21
Pipe and Tube..................................... 10 12 14 15 15
Construction...................................... 7 9 8 7 8
Consumer Durables................................. 2 2 3 3 3
Exports........................................... 4 3 3 2 8
Other............................................. 6 5 6 5 5
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
A substantial portion of the Company's revenues is derived from long-time
customers, although the Company actively seeks new customers and constantly
seeks new markets for its products. A substantial share of the Company's Sheet
Products and TMP are shipped to customers located in the eastern portion of the
United States. The Company continually attempts to develop customer bases in
other portions of the United States as well as abroad. In 1999, the Company's
exports reached one of the highest levels in Company history, reflecting a
concerted effort to explore and develop international markets. The Company
exported 105 thousand tons of TMP, representing 4% of its total shipments.
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. Domestic TMP markets are characterized by a small number
of manufacturers and an increasing concentration of buying power. During 1999,
shipments to the Company's five largest TMP customers accounted for 25% of total
revenues. Shipments to the Company's largest customer, Ball Corporation,
accounted for approximately 11% of total revenues. The balance of 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. Because the annual requirements of the Company's
largest TMP customers are established in advance, the TMP market has generally
offered a more stable pricing environment than Sheet Products.
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RELATED PRODUCTS AND SERVICES
The Company is currently rolling and finishing various types and grades of
stainless steel on its hot mill on a tolling basis for several major stainless
steelmakers. Special operating procedures and expertise, generally not possessed
by the Company's domestic integrated carbon steel competitors, are required to
roll and finish stainless steel. To date, revenues from these activities have
not been material to the Company. From time to time, the Company has produced
and sold carbon steel slabs and hot metal to other carbon steelmakers. On
limited occasions, the Company has also performed downstream processing of
products for other carbon steelmakers, as well as having its own products
further processed by other steelmakers.
BUSINESS STRATEGY
The Company's strategic objective is to be a first tier global provider in
terms of cost, quality and customer service, of specialty plated, coated and
cold rolled products. The Company's business strategy seeks to achieve this
objective by: (i) continuing to implement cost and productivity improvements;
(ii) maximizing utilization of its assets; and (iii) developing markets for and
capacity to produce higher value-added products.
Over the past four years, the Company has pursued initiatives to
aggressively improve operating profit margins so that it would be better
positioned to compete with other domestic and foreign producers. Prior to 1996,
the Company's strategic efforts focused on cost reductions through major capital
improvements, particularly for its hot mill and steelmaking operations.
More recently, the Company's strategy has included developing partnerships
and joint ventures designed to create further opportunities for higher
value-added products and to more fully harness electronic commerce and to create
value. This has resulted in the formation of four new ventures since 1997: WeBCo
International LLC ("WeBCo"), GalvPro, W&A, and MetalSite.
WeBCo. WeBCo is a joint venture formed in September 1997 by the Company and
Balli Group, plc., a United Kingdom based trading company. WeBCo's objective is
to penetrate new foreign markets for the export of the Company's products and to
expand the Company's domestic offerings with a range of products complementary
to those from its own mill. WeBCo has played a key role in finding and
developing TMP market opportunities in Germany and the United Kingdom. Focusing
its export activities in WeBCo, the Company exported 53 thousand tons of TMP in
1999, its highest export level ever. While export opportunities are dramatically
affected by the relative strength of foreign economies, the Company expects that
WeBCo will assist the Company in maximizing future export opportunities.
GalvPro. GalvPro is a joint venture formed in the fourth quarter of 1997 by
the Company and affiliates of Dutch steelmaker Koninklijke Hoogovens (now a unit
of Corus Group plc). In 1998, GalvPro obtained financing and began construction
on a state of the art 300,000 ton per year 60-inch hot dip galvanizing facility
in Jeffersonville, Indiana. Construction of the facility was substantially
completed and GalvPro began producing galvanized sheet product in the fourth
quarter of 1999. The Company anticipates that GalvPro will penetrate new markets
in the Midwestern United States where it is geographically advantaged. Further,
the Company believes GalvPro will access markets for galvanized products wider
than the 48" product the Company is otherwise able to produce. The Company also
expects to benefit from being a major cold roll substrate supplier to GalvPro.
W&A. W&A is a joint venture formed in the second quarter of 1998 between
the Company and ATAS International. W&A produces a steel roofing product for
commercial and residential use. The Company and W&A are seeking to expand the
market for steel roofing and capture a significant share of that emerging
market. The Company also expects to benefit by supplying the galvanized coils
used to manufacture W&A's steel roofing.
MetalSite. MetalSite is a partnership venture formed in November 1998 by
the Company, LTV Corporation and Steel Dynamics Inc. During 1999, Bethlehem
Steel Corporation, Ryerson Tull, Inc. and Internet Capital Group, Inc. ("ICG")
were added as partners. Prior to November 15, 1998, MetalSite was a component of
the Company. MetalSite provides a secure, web-based market place for buyers and
sellers of steel. The Company currently sells prime, excess prime and non-prime
products through MetalSite's web site. The Company anticipates that MetalSite
will continue to explore electronic commerce opportunities related to the metals
industry. Such opportunities may come in the form of: (i) sales of prime, excess
prime and secondary steel
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products via internet auction and on-line listing formats; (ii) sales of other
metals including aluminum, copper and zinc in an electronic marketplace; (iii)
advertising on the website; and (iv) providing a forum for parties along the
steel supply chain to communicate electronically.
In addition to product sales and its ownership percentage in MetalSite, the
Company expects to realize benefits from the efficiency of electronic exchange
of information with customers, suppliers, transportation providers and other
parties utilizing the site.
The Company sold a portion of its interest in MetalSite to ICG in December
1999 resulting in net cash proceeds to the Company of $170.1 million.
The MetalSite transaction, along with the reduction of approximately $127
million in debt over the last two years has significantly improved the financial
position from which the Company can seek to pursue strategic alternatives. The
Company will continue to explore opportunities to improve its profit margins,
balance sheet and productivity as well as capitalize on value added steel
product markets. As it has for the past several years, the Company may form
further strategic partnerships and alliances which will enable it to capitalize
on new and emerging markets for steel products and services.
RAW MATERIALS
Unlike many of its larger competitors, the Company does not own or
participate in the ownership of raw materials, or operate production facilities,
from which it can draw its raw material requirements. As a result, the Company
must buy these materials in the open market.
The Company has a contract with a subsidiary of Cleveland-Cliffs Inc. to
purchase the Company's standard and flux grade iron ore pellet requirements.
This contract, which extends through 2006, provides for a minimum tonnage of
pellets to be supplied based on mine production capacity and for pricing
dependent on mine production costs. The Company has entered into an amendment to
its existing agreement with that supplier extending through 2005 to purchase its
additional pellet requirements based on competitive market prices.
The Company has a contract with USX Corporation to purchase blast furnace
coke for a term which extends through December 31, 2001, subject to extension.
Under the contract, the Company must give notice by mid-October of each year of
its required coke volumes for the following year and has the option to purchase
up to 100% of its coke requirements for each year, subject to a minimum of
either 80% of requirements or a fixed tonnage. If the Company does not commit to
take the tonnages above minimum requirements for any year, the supplier has the
option of determining whether it will supply future tonnages above the minimum,
until such time as it actually does so, after which the Company again has the
option to take its full requirements. During the period in 1999 that its No. 4
Blast Furnace was idled, the Company and the supplier adjusted the minimum
volume requirements under the contract. Coke prices under the contract are based
on the prevailing market, subject to a ceiling and floor over the life of the
contract and a limit on annual change. The Company cannot predict whether, or
upon what terms, the coke supply agreement may be extended or replaced. However,
in order to reduce its vulnerability to single source procurement, the Company
continues to develop and utilize alternative sources of coke, including from
overseas suppliers. The Company, like other steelmakers, has utilized
technologies calculated to achieve some reduction in the consumption of coke in
blast furnace operations. Nevertheless, if coke making capacity available to the
industry were to decline faster than alternative sources could be developed,
future coke prices may be subject to significant escalation.
The Company obtains its limestone, tin, zinc and other raw materials
requirements, in most cases, from multiple sources with the issue being price
and quality rather than availability of supply.
The Company utilizes scrap in its steelmaking process. Scrap is available
from multiple sources with the issue being price and quality rather than
availability of supply.
The Company operates as a 100% continuously cast producer. However, the
Company's requirements for slabs occasionally have exceeded its capacity to
produce them, and production outages from iron or steelmaking operations have
required the use of slabs from outside sources. Generally, the Company has been
able to purchase
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slabs as and when needed. While its No. 4 Blast Furnace remained idle in 1999,
the Company was able to obtain a sufficient supply of outside slabs to maintain
operations at levels required by its order book.
The primary sources of energy used by the Company in its steel
manufacturing process are natural gas and electricity. In recent years, the
Company has entered into natural gas purchase contracts with gas suppliers and
transportation contracts with transmission companies. These arrangements have
helped to reduce or control fluctuations in prices paid for gas. The Company
also has a contract, expiring in 2011, for the supply of oxygen and nitrogen
requirements to its steelmaking facilities. This agreement significantly reduced
the Company's oxygen and nitrogen supply costs compared to prior arrangements.
The Company generates in its own facilities a significant amount of
electricity and steam for its processing operations from a mixture of blast
furnace gas and natural gas. The Company has in effect through 2001 a power
generation deferral agreement with its outside electric utility, which permits
the Company to purchase outside power at greatly reduced rates in exchange for
limiting its internal power generation. The Company expects to pursue
alternative electric power supply sources when free market practices for
electricity are implemented in its home state of West Virginia. This could
happen as early as 2001.
The Company continually attempts to conserve and reduce the consumption of
energy in its steelmaking operations. The Company evaluates and seeks to utilize
technological developments and improved operating practices to accomplish these
goals. A number of the Company's facilities have alternate fuel burning
capability, increasing their flexibility to utilize more economic fuels from
time to time.
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. Where
feasible, the Company seeks to protect itself against rapid price rises in
commodities and energy by means of forward buying activities. The Company seeks
to avail itself of the benefits of price decreases by continuing to participate
in spot market purchases. To the extent deemed appropriate, the Company also
protects the availability of supplies, such as for natural gas, by means of non-
interruptible contracts.
Management believes that the Company's long term raw materials contracts
are at generally competitive terms.
COMPARATIVE PRODUCTION AND SHIPMENTS
The rebound in domestic steel industry production and shipments which had
occurred over the five year period from 1993 through 1997 was halted in the
second half of 1998 due to record levels of imports. Capacity utilization, which
had peaked at 93% in 1995, dropped to 86% in 1998 and 84% in 1999 as most
domestic steelmakers, including the Company, curtailed production in response to
the oversupply condition brought on by the import glut. In addition to curtailed
production, capacity utilization was affected by new steel production and
finishing facilities entering the market place
In 1999, the Company produced 1.8 million tons of raw steel on a one blast
furnace configuration and shipped 2.5 million tons of finished and semi-finished
steel products. 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 each year in the five year period
ended December 31, 1999.
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PRODUCTION AND SHIPMENTS
HISTORICAL MARKET SHARE
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<CAPTION>
1999 1998 1997 1996 1995
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(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C>
Company
Raw steel production..................... 1.8 2.8 2.9 2.8 2.8
Capability............................... 3.0 3.0 3.0 3.0 3.0
Utilization.............................. 63%(1) 93% 97% 95% 95%
Shipments................................ 2.5 2.6 2.8 2.9 2.7
Shipments as a percentage of industry
total................................. 2.4% 2.5% 2.6% 2.9% 2.8%
Industry
Raw steel production..................... 107.2 107.6 105.4 102.2 102.7
Capability............................... 128.1 125.3 119.0 116.1 110.4
Utilization.............................. 84% 86% 89% 90% 93%
Shipments................................ 105.1 102.1 105.5 100.5 97.5
</TABLE>
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(1) The Company's utilization is based on a one blast furnace configuration in
1999.
COMPETITION AND OTHER INDUSTRY FACTORS
The domestic steel industry is a cyclical business with intense competition
on a global scale. Manufacturers of non-steel products, including plastics,
aluminum, cardboard, ceramics and glass, have made substantial competitive
inroads into traditional steel markets offering substitute materials sometimes
with enhanced performance at lower prices. The international steel industry's
high level of production capacity relative to demand levels can adversely affect
the U.S. industry and has come to result in cyclical selling price reductions
across a broad range of steel products.
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. These capital projects, together with other
developments, such as manning and work rule changes, information management and
improved operating practices, have tended to lower costs and enhance the
competitive advantages of those producers who make them. The Company has
responded to competitive cost reductions through its own capital improvement
programs and ongoing cost reduction efforts to achieve operating efficiencies.
Domestic producers face increasing competition from foreign steelmakers
over a wide range of products. As a percentage of domestic consumption, steel
imports excluding semi-finished products (primarily slabs) have surged to
historical highs, amounting to approximately 21%, 26% and 20% in 1999, 1998 and
1997, respectively. Imports of hot rolled and cold rolled products increased 42%
in 1998 compared to 1997, but declined significantly in 1999 as a result of fair
trade enforcement actions discussed below. Imports of TMP have risen
substantially in the past two years, amounting to approximately 17.5%, 12.3% and
10.8% of domestic consumption in 1999, 1998 and 1997, respectively. Competition
in the industry is influenced increasingly by global trade patterns and currency
fluctuations. For example, a strong U.S. Dollar, weak demand in Asian markets
and financial crises in Russia have created intense competitive pressure from
steel imports over the past several years. Moreover, some foreign producers, as
a result of mergers and other consolidations in their regions, have achieved
greater resources for global scale competition extending into the domestic
market.
Competition with foreign steel producers has been marked by unfairly
priced, or "dumped," products and subsidization. Dumping, which involves selling
a product below cost or for less than in a home market, is a violation of U.S.
trade laws. Given the strategic role of the steel industry in many countries,
some foreign steelmakers are aligned with governmental interests and thereby
influenced by political and economic policy considerations, as well as
prevailing market conditions. As a result, these producers may maintain
production capabilities at the expense of returns generally considered
acceptable for the domestic industry to operate profitably and, when their home
market demand is slack, seek to flood the U.S. market with deeply discounted
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products. On September 30, 1998, the Company, 11 of its competitors and two
labor organizations filed trade cases involving dumping and subsidization
against imported hot rolled steel from Brazil, Japan, and Russia. The cases were
filed with the U.S. International Trade Commission (the "ITC") and the U.S.
Department of Commerce. Anti-dumping cases were filed against the three
countries, while a subsidy complaint was also filed against Brazil. In November
1998, the ITC issued a preliminary ruling that the high volumes of low-priced
imported steel had damaged the domestic steel industry. In February 1999, the
Commerce Department issued a preliminary ruling in favor of the U.S. producers
on the hot rolled cases against Brazil and Japan. The Commerce Department
imposed anti-dumping duties against the steel producers of both nations, as well
as countervailing duties against the Brazilian producers. (Countervailing duties
are meant to counter the effect of government subsidization.) The anti-dumping
margins ranged from 25% to 67% against Japanese producers and were to range from
50% to 71% against Brazilian producers. However, in June 1999, the Commerce
Department reached an agreement limiting the import volume of Brazilian hot
rolled products for five years, thereby superseding the duties. Also in June,
the ITC confirmed the injury resulting from the Japanese hot rolled imports
thereby permitting the dumping duties against them to remain in effect for five
years. A preliminary finding also was made against Russian producers, but was
replaced in July 1999 by a five year quota agreement on a variety of products,
including hot rolled coil, cold rolled and galvanized sheet and slabs. Among
other things, the agreement provides for significant reductions in the permitted
import tonnages of these products, except for slabs, whose tonnages are allowed
to increase significantly, and a price floor on hot rolled coil.
In June 1999, the Company and seven other domestic producers filed trade
cases against allegedly illegal imports of cold rolled steel from 12 countries
(Argentina, Brazil, China, Indonesia, Japan, Russia, Slovakia, South Africa,
Taiwan, Thailand, Turkey and Venezuela). In November 1999, the Commerce
Department assessed preliminary duties ranging from 17 % to 178% on cold rolled
products from seven of the named countries and in December 1999 assessed
preliminary duties ranging from 5% to 49% on cold rolled products from the
remaining five named countries. In January 2000, final antidumping
determinations ranging from 17% to 81 % and countervailing duties ranging from
7% to 11% were announced by the Commerce Department on cold rolled products from
six of the 12 countries. However, on March 3, 2000, the ITC reversed the
Commerce Department determination through a finding that the domestic industry
was not injured by the imports. The Company believes that the ITC's
determinations are erroneous, but if it proceeds on the same basis, it is likely
to render negative determinations in the other six cases. Unless successfully
appealed, the determination will result in an end to any dumping duty
requirements and a return of duties.
In October 1999, the Company and two labor organizations also filed anti
dumping actions against TMP imports from Japan. In December 1999, the ITC ruled
that domestic TMP producers had been injured by Japanese imports. The Commerce
Department is expected to announce preliminary duties on those products in mid
April 2000. The Department is expected to announce final determinations in June
and the ITC is expected to make final determinations of injury in August.
The Company believes that the successful trade cases in hot rolled sheet
have helped to reduce import volumes, stabilize prices and increase the relative
competitive strengths of domestic producers. Successes against one group of
foreign producers in certain product lines sometimes has been followed by
increased imports from such producers in other lines, or from producers in other
countries in the same lines. Efforts to rationalize these shifting factors and
reduce the need to file cases through legislative efforts, such as quota bills,
generally have not been successful. Accordingly, so long as the relative
strength of the U.S. currency and economy and the relative weakness of many
foreign currencies and economies make it attractive to export to the U.S.
market, continued strong competitive pressures from foreign steelmakers can be
anticipated. The Company will continue to seek vigorous enforcement of U.S.
trade laws and regulations in appropriate cases to assure that foreign
competition takes place on a fair basis.
Integrated steelmakers also face strong competition from mini-mills.
Mini-mills are efficient, low-cost producers that generally produce steel by
melting scrap in electric arc furnaces, utilize new technologies, have lower
employment costs and target regional markets. Mini-mills historically produced
lower profit margin products, such as bars, rods, wire and other commodity-type
steel products not produced by the Company. Thin cast technology has allowed
mini-mills to enter sheet markets supplied by integrated producers, and they are
now competing in the hot rolled, cold rolled and galvanized marketplace. In
other instances, mini-mills seeking to
8
<PAGE> 11
capture segments of the flat rolled market have located facilities where they
are geographically advantaged compared to their integrated competition.
Mini-mills generally continue to have a cost advantage over integrated steel
producers, particularly for labor, and when scrap prices are low. Most of the
new capacity in the domestic industry has resulted from growth in mini-mill
operations, some of which rival the capacity and product range of the larger
integrated mills
The Company's primary competitors in Sheet Products consist of most
domestic and international integrated steel producers and mini-mills. The
Company's primary domestic TMP competitors in recent years have been USX
Corporation, LTV Corporation, Bethlehem Steel Corporation, National Steel
Corporation, Wheeling Pitt - Ohio Coatings and USS-POSCO Industries. However,
imports, particularly from Japan, have increasingly penetrated the market.
The Company experiences strong competition in all its principal markets
with respect to price, service and quality. The Company believes that it
competes effectively in all these categories by focusing its marketing efforts
on creating strong customer relationships through high quality products at
competitive prices.
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 1999, 1998, and 1997, the Company spent approximately $2.0,
$5.9 million, and $4.1 million, respectively, for research and development
activities.
WEIRTEC, the Company's research and development center, is the industry
leader in the advancement of steel can making technology, maintaining prototype
steel packaging manufacturing facilities, analytical laboratory facilities and
computer simulation systems in Weirton, West Virginia. WEIRTEC assists customers
in the development of new products and collaborates with the AISI in the
development of new product lines and production techniques to increase the use
and quality of steel as a material of choice.
In 1999, WEIRTEC capitalized on the Company's production expertise,
particularly in coated products, by developing two new steel products with
advanced coatings: Weirlube with a dry-film lubricant coating and Performax with
an acrylic coating that resists finger marking.
Longer-term research projects have also included clean steel production
techniques, polymer to steel lamination, and the application of galvanized steel
products to the residential and commercial construction industry. The Company
believes that the WEIRTEC scientists, engineers, technicians and facilities
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
laws and regulations 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 regulations have been marked by increasingly strict
compliance standards. Violators of these regulations 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 $0.7 million in 1999, $11.5 million in 1998, and $8.4 million in
1997. For 2000, the Company has budgeted approximately $2.3 million in capital
expenditures for environmental control facilities. Given the nature of the
steelmaking industry, it can be expected that additional capital expenditures
will be required from time to time to permit the
9
<PAGE> 12
Company to remain in compliance with current and future environmental
regulations. Since the effects of future requirements are not determinable at
present, 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 negotiated consent orders and decrees with environmental authorities,
pursuant to which the Company has paid civil penalties. The Company believes
that it is in substantial compliance with its environmental control consent
orders and decrees.
1996 CONSENT DECREE
Under a 1996 consent decree the Company entered into with the Environmental
Protection Agency (the "EPA"), and the West Virginia Division of Environmental
Protection (the "DEP"), the Company paid a civil penalty and was required to
undertake certain capital projects to assure compliance with water, air and
waste-related regulations in accordance with detailed construction schedules.
The consent decree also provided for stipulated penalties for non-compliance
with certain of the decree's provisions.
The capital projects undertaken in connection with the decree included
upgrades and modifications to air emissions control equipment, wastewater
treatment systems and waste handling facilities. Construction of most of the
projects has been substantially completed, resulting in Company expenditures of
approximately $ 15.3 million through 1999. A significant portion of these
expenditures had been included in the Company's capital budget prior to the
consent decree. The Company anticipates that it will expend approximately an
additional $1.0 million through 2000 to complete the construction and
implementation of the remaining capital projects.
The new projects and other terms of the consent decree have necessitated
changes in operating procedures at the Company's facilities. Generally, these
changes have tended to increase operating costs. Based on its experience thus
far, however, the Company does not believe that resulting increased costs will
be material to its results of operations.
WATER DISCHARGE PERMITTING
In February 1997, the Company reached a settlement with the DEP regarding
outstanding issues under its National Pollutant Discharge Elimination System
("NPDES") permit renewal, which has since been amended twice. Among other
things, the amended settlement requires the Company to achieve compliance with
more stringent effluent limitations and to conduct certain defined studies
related to the limitations by specified deadlines. It is not possible at this
time to accurately predict the costs which may be necessary to achieve
compliance with the final limitations, in part because DEP has not made final
determinations regarding the limitations.
CORRECTIVE ACTION ORDER
A Resource Conservation and Recovery Act ("RCRA") corrective action order
related to the consent decree and covering the Company's plant was issued by the
EPA in 1996. The order requires the Company to conduct investigative activities
and interim corrective measures to determine the nature and extent of hazardous
substances which may be located on the Company's property and to evaluate and
propose corrective measures needed to abate unacceptable risks. Areas within the
Company's property have been prioritized, work plans for the first two areas
have been developed and investigations have been implemented in compliance with
the order. Generally, these activities are at an early stage. Moreover, their
future course and timing will depend to a significant extent on acceptance of
the Company's investigation work plans by the EPA and the investigation results.
As a result, the Company does not know the nature or extent of hazardous
substances located on its property and it is not possible at present to estimate
the ultimate cost to comply with the order or to conduct any required remedial
activity. At December 31, 1999, the Company has accrued a total of approximately
$9.0 million related to cleanup costs for environmental liabilities, including
costs associated with the corrective action order. The Company believes that it
may be entitled to indemnification, as described below, for at least a portion
of the costs incurred by the Company to comply with the corrective action order.
10
<PAGE> 13
Waste Sites. Under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), and similar state statutes,
the EPA and state regulators have authority to impose strict, joint and several
liability on waste generators, owners, operators and other potentially
responsible parties ("PRPs") for the cost of remediating contaminated
properties. According to the agreements pursuant to which the Company purchased
its operating assets, the Company is entitled to indemnification from the seller
for certain environmental liabilities, including those relating to the
remediation of certain contaminated sites, as more fully described below.
The Company and/or its predecessors have been conducting steel
manufacturing and related disposal operations for over 90 years. The Company and
its predecessors also have disposed of solid and hazardous wastes at various
off-site waste disposal sites. Although the Company and its predecessors
utilized operating and disposal practices that were standard in the industry at
the time, hazardous substances may have been released on or under these sites.
Under CERCLA and similar state laws, the Company may be required to remediate
contamination at some of these sites or participate in the sharing of
remediation costs as deemed necessary. The Company does not have sufficient
information to estimate its potential liability in connection with potential
future remediation in general. However, the Company believes that if 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 rights of
indemnity or reimbursement in favor of the Company as more fully described
below.
HANOVER TOWNSHIP SITE
In May 1992, the Company received notice from the Pennsylvania Department
of Environmental Resources 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 1983, the Company's predecessors, and after 1983 the
Company, disposed of solid wastes at the facility. The Company believes that,
while it disposed of various materials which were residual to the steelmaking
industry, the materials disposed of by the Company were not classified as
hazardous wastes under applicable law. At this time, definitive closure plans
and post-closure care plans have not been adopted. The Company's rights to
indemnification concerning the closure of this facility are limited to $1.0
million. Although there can be no assurances, the Company does not anticipate
that its costs for site closure will exceed the limitation on its right to
indemnification.
SEVEN & SEVEN INC. SITE
During demolition and cleanup activities of the former Mainland Coke Plant,
the Company arranged for certain hazardous substances to be taken to the Seven &
Seven Inc. ("7&7") facility in Wooster, Ohio for recycling. In 1998, 7&7
liquidated, leaving un-recycled hazardous wastes at its facility. In May 1999,
20 corporate entities, including the Company (collectively, the "7&7 PRPs"),
received a General Notice of Potential Liability from the EPA, advising the
recipients that the site would be investigated and remediated by the EPA
pursuant to CERCLA and the recipients would be held liable for such response
costs. The 7&7 PRPs have executed an administrative order concerning this matter
which awaits signing by the Department of Justice. The order provides for the
Company to pay 3.2% of the total costs incurred. The 7&7 PRPs have contributed
an aggregate of $625,000 thus far to comply with the order and have received
estimates that the total costs to complete the work (excluding payment of EPA
costs) could range up to $ 1.4 million (including certain contingencies). The
Company believes that it may be entitled to indemnification, as described below,
for the costs incurred by the Company to comply with the order.
Indemnification. According to the agreements by which the Company acquired
the assets of the Weirton Steel Division (the "Division") from National Steel
Corporation ("National") in January 1984, the Company is entitled to
indemnification from National for liabilities, including governmental and
third-party claims, arising from violations of environmental laws and
regulations prior to the acquisition, and National is entitled to
indemnification from the Company concerning those matters after the acquisition.
Furthermore, subject to the $1.0 million limitation applicable to the Hanover
Site described above, the Company is generally entitled to reimbursement for all
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
11
<PAGE> 14
after the acquisition. Third-party liability claims relating to Waste Sites are
likewise covered by the respective indemnifications.
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, on the nature of future claims made by
the Company and on the parties' agreement as to contractual coverage of the
claims.
In 1999, the Company received $2.2 million from National for remediation
costs that were subject to the indemnification.
EMPLOYEES
At December 31, 1999, the Company had 4,302 active employees, of whom 3,285
were engaged in the manufacture of steel products, 520 in support services, 120
in sales and marketing activities and 377 in management and administration. Of
the 4,302 active employees at December 31, 1999, 62 were on short-term layoff.
Since 1992, the Company has implemented various strategic programs designed to
reduce its workforce primarily through retirement programs and attrition. The
Company reduced its supervisory and managerial workforce by 12% in 1999.
At December 31, 1999, approximately 3,566 Company employees in bargaining
units covering production and maintenance workers, clerical workers and nurses
were represented by the Independent Steelworkers Union (the "ISU"). The Company
is a party to collective bargaining agreements with the ISU for those units and
with the Independent Guard Union for security personnel, which expire in March
2001 and May 2000, respectively. The Company believes that the terms of its
collective bargaining agreements are generally comparable to those between other
major steel producers and their unions. However, the Company's agreements
provide for the continuation of a Company-wide profit sharing plan pursuant to
which up to 35% of adjusted net earnings may be paid to employees and
substantially eliminate many restrictive workrules pertaining to the assignment
and scheduling of employees.
From January 1984 until June 1989, the Company was owned in its entirety by
its employees through the Company's 1984 Employee Stock Ownership Plan (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
that security being listed and traded on the New York Stock Exchange.
Substantially all the Company's employees participate in its two ESOPs
which owned approximately 23.4% of the outstanding common and substantially all
of the outstanding preferred shares of the Company at December 31, 1999. These
securities represented approximately 46.7% of the voting power of the Company's
voting stock.
ITEM 2. PROPERTIES
The Company owns approximately 2,700 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 two operable blast furnaces with
an annual hot metal capacity of approximately 2.6 million tons. In March 1997,
the Company completed a planned major reline and rebuild of its largest iron
making vessel, the No. 1 Blast Furnace, as part of a capital expenditure program
for that facility approximating $85.0 million. The rebuild was designed to
increase iron production and quality, improve production efficiencies, reduce
costs and enhance environmental protection. In December 1998, the Company
temporarily idled its smaller No. 4 Blast Furnace to more closely align iron
production with reduced demand, which necessitated the purchase of some outside
slabs for finishing purposes. See Item 1. "Business--Raw Materials." The Company
restarted its No. 4 Blast Furnace in December 1999. The Company's ironmaking
operations through 1996 also included a sinter plant, used to process scale,
sludge and other by-products for
12
<PAGE> 15
recycling back into blast furnace operations. In December 1996, the Company
temporarily discontinued operations at the sinter plant pending an assessment of
the facility's production equipment and the feasibility of improvements believed
necessary to assure the plant's continuing compliance with more stringent future
air pollution control standards. The facility remains idle pending ongoing
assessment. The Company has purchased iron pellets from outside commercial
sources to replace the sinter plant output. 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 bi-metallic chrome/tin plating line and
various annealing, temper rolling, shearing, cleaning and edge slitting lines,
together with packaging, storage and shipping and receiving facilities. See the
"Comparative Production and Shipments" section of Item 1 for additional
information regarding production capacity and utilization rates.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved as a defendant or plaintiff in various litigation
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
As of March 21, 2000, there were 41,528,764 shares of common stock, $.01
par value ("Common Stock"), outstanding held by stockholders of record. The
principal market for the Common Stock is the New York Stock Exchange, on which
that security has been listed since June 1989.
Dividends on the Company's Common Stock may be paid when and as declared by
the Company's Board of Directors. The payment of dividends is subject to the
applicable provisions of Delaware corporate law governing the Company and the
discretion of the Company's Board of Directors, which, in exercising such
discretion, considers the financial performance and capital requirements of the
Company.
Under restrictive covenants relating to the Company's indebtedness, the
Company's ability to pay dividends on its stock is limited 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
subsequent issuances of certain capital stock, less certain allowable payments.
As of December 31, 1999, pursuant to these covenants, the Company could pay
dividends on its Common Stock of up to $132.7 million.
As of March 21, 2000, 9,575,739 shares of Common Stock, or 23.1% of the
outstanding shares of Common Stock, were held by one stockholder of record,
United National Bank--North, as Trustee of the 1984 ESOP. As of that date, the
1984 ESOP had approximately 6,014 participants who were active or former
employees of the Company. In addition, as of March 21, 2000 there were 1,644,260
shares of Convertible Voting Preferred Stock, Series A (the "Series A Preferred
Stock"), outstanding. As of that date, United National Bank--North, as Trustee
of the Company's second Employee Stock Ownership Plan (the "1989 ESOP"), was the
record owner of 1,601,429 shares of the Series A Preferred Stock, or over 97.4%
of the outstanding shares of Series A Preferred Stock, subject to the terms and
conditions of said Plan. As of that date, the 1989 ESOP had approximately 6,861
participants who were active or former employees of the Company. The Series A
Preferred Stock is not listed for trading on any exchange. The Series A
Preferred Stock has a liquidation preference of $5 per share and is
13
<PAGE> 16
convertible into one share of Common Stock, subject to adjustment. Each share of
Series A Preferred Stock is entitled to 10 votes in all matters presented to the
stockholders for approval. Participants in the Company's two ESOPs have full
voting rights over all shares allocated to their accounts. See "Employees" under
Item 1.
The following table sets forth, for the periods indicated, the high and low
sales prices of the Common Stock as reported in the consolidated transaction
reporting system.
<TABLE>
<CAPTION>
2000(1) 1999 1998
----------- ----------- -----------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
QUARTER
First...................................... 10 13/16 6 1/16 2 1/8 1 7/16 3 3/16 2 11/16
Second..................................... 2 7/8 1 7/16 4 7/16 3 3/8
Third...................................... 2 7/8 1 7/8 3 7/8 2 1/2
Fourth..................................... 7 3/16 2 1/16 2 1/2 1 1/2
</TABLE>
- ---------------
(1) First Quarter 2000 through March 21, 2000.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference
to the caption "Selected Financial and Statistical Data" of the Company's 1999
Annual Report to Stockholders. With the exception of the information
specifically incorporated by reference, the 1999 Annual Report to Stockholders
is not to be deemed filed as part of this Report for purposes of this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated herein by reference
to the "Management's Discussion and Analysis" caption of Company's 1999 Annual
Report to Stockholders. With the exception of the information specifically
incorporated by reference, the 1999 Annual Report to Stockholders is not to be
deemed filed as part of this Report for purposes of this Item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is incorporated by reference to the
"Quantitative and Qualitative Disclosures About Market Risk" caption within
"Management's Discussion and Analysis" in the Company's 1999 Annual Report to
Stockholders. With the exception of the information specifically incorporated by
reference, the 1999 Annual Report to Stockholders is not deemed filed as part of
this Report for purposes of this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item are
incorporated herein by reference to the Company's 1999 Annual Report to
Stockholders and are listed in Item 14. "Exhibits, Financial Statement Schedules
and Reports on Form 8-K" hereof. With the exception of the information
specifically incorporated by reference, the 1999 Annual Report to Stockholders
is not to be deemed filed as part of this Report for purposes of this Item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
The information required by this Item with respect to Directors of the
Company is incorporated herein by reference to the caption "Election of
Directors" and "Security Ownership of Certain Beneficial Owners and Management"
in the Company's definitive Proxy Statement relating to its 2000 Annual Meeting
of Stockholders. With the exception of the information specifically incorporated
by reference, said definitive Proxy Statement is not deemed to be filed as part
of this report for purposes of this item.
14
<PAGE> 17
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of March 27, 2000 were as follows:
<TABLE>
<CAPTION>
AGE AT
NAME MARCH 27, 2000 OFFICE
---- -------------- ------
<S> <C> <C>
Richard K. Riederer................... 56 Chief Executive Officer
John H. Walker........................ 42 President and Chief Operating Officer
Craig T. Costello..................... 52 Executive Vice President
Earl E. Davis, Jr..................... 51 Executive Vice President--Affiliated Operations
David L. Robertson.................... 56 Executive Vice President--Human Resources and
Corporate Law
Narendra M. Pathipati................. 42 Senior Vice President--Corporate Development and
Strategy
Thomas W. Evans....................... 63 Vice President--Materials Management
William R. Kiefer..................... 50 Vice President--Law and Secretary
Frank G. Tluchowski................... 49 Vice President--Engineering and Technology
Mark E. Kaplan........................ 38 Vice President--Information Technology and
Controller
Michael J. Scott...................... 37 Vice President--Sales and Marketing
</TABLE>
Richard K. Riederer has been Chief Executive Officer since November 1995.
From January 1995 to March 2000, he was President. 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.
John H. Walker was named President and Chief Operating Officer on March 21,
2000. Mr. Walker was employed by Kaiser Aluminum Corporation as Corporate Vice
President and President--Flat Rolled Products from July 1997 to March 2000 and
as Vice President--Operations from September 1996 to July 1997. Prior to that,
Mr. Walker was employed by the Company as Vice President--Operations from August
1995 to September 1996. He was General Manager--Operations from 1994 to 1995 and
Director--Operations Planning from 1990 to 1994. Mr. Walker was elected as a
director on March 29, 2000.
Craig T. Costello was Chief Operating Officer from January 1997 to March
21, 2000. From September 1994 to the present, he also served as Executive Vice
President. From October 1993 to September 1994 he served as Vice
President--Operations. Mr. Costello served as General Manager--Operations from
1988 to 1993. He has been a director of the Company since April 1996. Mr.
Costello will be retiring effective April 1, 2000.
Earl E. Davis, Jr. was named Executive Vice President--Affiliated
Operations on March 27, 2000. Prior to that, Mr. Davis served as Executive Vice
President--Commercial beginning in October 1997. From July 1995 to October 1997,
he served as Vice President--Finance and Chief Financial Officer. From May 1994
to July 1995, he served as Controller. From August 1991 to April 1994, he served
as Assistant Controller. He has been a director of the Company since October
1997.
David L. Robertson has served as the Executive Vice President--Human
Resources and Corporate Law since March 1996. Prior to that, Mr. Robertson was a
senior partner in the law firm of Volk, Robertson & Hellerstedt.
15
<PAGE> 18
Narendra M. Pathipati has been serving as Senior Vice President--Corporate
Development and Strategy since October 1997. From July 1995 until October 1997,
Mr. Pathipati served as Vice President--Corporate Development and Strategy. He
also served as Treasurer of the Company from August 1991 to July 1995.
Thomas W. Evans has been Vice President--Materials Management since
February 1988.
William R. Kiefer has been Vice President--Law and Secretary since May
1990.
Frank G. Tluchowski was appointed to the position of Vice
President--Engineering and Technology in February 1998. Prior to that
appointment, Mr. Tluchowski served as General Manager--Engineering since
September 1996. He was also area manager of the tin mill from November 1990 to
September 1996.
Mark E. Kaplan was appointed Vice President--Information Technology in
March 1999. Mr. 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 Audit Manager.
Michael J. Scott was named Vice President--Sales and Marketing on March 27,
2000. Mr. Scott was employed by National Steel Corporation from 1997 through
1999 as General Manager--Construction Sales Group. Prior to that, he was
employed by Cresco Steel Service Center as General Manager from 1995 to 1996.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item with respect to Directors of the
Company is incorporated herein by reference to the caption "Executive
Compensation" in the Company's definitive Proxy Statement relating to its 2000
Annual Meeting of Stockholders. With the exception of the information
specifically incorporated by reference, said definitive Proxy Statement is not
deemed to be filed as part of this report for purposes of this Item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item with respect to Directors of the
Company is incorporated herein by reference to the caption "Security Ownership
of Certain Beneficial Owners and Management" in the Company's definitive Proxy
Statement relating to its 2000 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by reference, said
definitive Proxy Statement is not deemed to be filed as part of this report for
purposes of this Item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
16
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The list of financial statements required to be filed by Item 8.
Financial Statements and Supplementary Data of this Annual Report on Form
10-K is as follows:
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS PAGE
-------------------- ----
<S> <C>
Report of Independent Public Accountants.................... (*)
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997.......................... (*)
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... (*)
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... (*)
Notes to Consolidated Financial Statements.................. (*)
Supplementary Financial Information......................... (*)
---------
* Incorporated in this Report by reference from the
Company's 1999 Annual Report to Stockholders referred to
in Exhibit 13.1 below.
</TABLE>
2. The list of financial statement schedules required to be filed by Item
8. Financial Statements and Supplementary Data of this Annual Report on
Form 10-K is as follows:
<TABLE>
<S> <C>
Report of Independent Public Accountants on Financial
Statement Schedules....................................... S-1
Schedules:
I Condensed Financial Information of Registrant........ S-2
II Valuation and Qualifying Accounts................... S-5
</TABLE>
3. Exhibits.
The following exhibits are included in this Annual Report or are
incorporated herein by reference:
<TABLE>
<S> <C>
Exhibit 3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 Filed May 3, 1989,
Commission File No. 33-28515).
Exhibit 3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, Commission File No.
1-10244).
Exhibit 3.3 By-laws of the Company (incorporated by reference to Exhibit
3.3 to the Company's Registration Statement on Form S-1
filed May 3, 1989, Commission File No. 33-28515).
Exhibit 3.4 Amendment to the by-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-10244).
Exhibit 3.5 Certificate of the Designation, Powers, Preferences and
Rights of the Convertible Voting Preferred Stock, Series A
(incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244).
</TABLE>
17
<PAGE> 20
<TABLE>
<S> <C>
Exhibit 4.2 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 2003,
including Form of Note (incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-4 filed on July 27, 1995, Commission File No. 33-61345).
Exhibit 4.3 First Supplemental Indenture dated as of August 12, 1996 between the Company and Bankers
Trust Company, as trustee, relating to the Company's 10 3/4% Senior Notes due 2005
(incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, Commission File No. 1-10244).
Exhibit 4.4 Indenture dated July 3, 1996 between the Company and Bankers Trust Company, as trustee,
relating to the Company's 11 3/8% Notes due 2004 (incorporated by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-4 filed on July 10, 1996, Commission File
No. 333-07913).
Exhibit 10.1 Redacted Pellet Sale and Purchase Agreement dated as of September 30, 1991 between
Cleveland-Cliffs Iron Company and the Company (incorporated by reference to Exhibit 10.18 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, Commission
File No. 1-10244).
Exhibit 10.2 Coke Sale Agreement dated December 9, 1996 between the Company and USX Corporation
(incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, Commission File No. 1-10244).
Exhibit 10.3 Securities Purchase Agreement evidencing the sale of a portion of the Company's interest in
MetalSite L.P. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K
of Internet Capital Group, Inc., filed on January 11, 2000, Commission File No. 000-26929).
Exhibit 10.4 Amended and Restated Receivables Participation Agreement among Weirton Steel Corporation,
various financial institutions and PNC Bank (filed herewith).
Exhibit 10.5 1984 Employee Stock Ownership Plan, as amended and restated (incorporated by reference to
Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1989, Commission File No. 1-10244).
Exhibit 10.6 1989 Employee Stock Ownership Plan (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission
File No. 1-10244).
Exhibit 10.7 Amendments to the 1984 and 1989 Employee Stock Ownership Plans, effective May 26, 1994
(incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
Exhibit 10.8 Weirton Steel Corporation 1987 Stock Option Plan (incorporated by reference to Exhibit 10.5
to the Company's Registration Statement on Form S-1 filed May 3, 1989, Commission File No.
33-28515).
Exhibit 10.9 Weirton Steel Corporation 1998 Stock Option Plan (incorporated by reference to Exhibit 10.7
to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
Commission File No. 1-10244).
Exhibit 10.10 Deferred Compensation Plan for Directors (incorporated by reference to Exhibit 10.19 of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission
File No. 1-10244).
</TABLE>
18
<PAGE> 21
<TABLE>
<S> <C>
Exhibit 10.11 Weirton Steel Corporation Executive Healthcare Program
effective date July 1, 1999 (filed herewith).
Exhibit 10.12 Weirton Steel Corporation Supplemental Senior Executive
Retirement Plan (incorporated by reference to the Exhibit
10.10 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, Commission File No.
1-10244).
Exhibit 10.13 Weirton Steel Corporation Supplemental Executive Retirement
Plan (incorporated by reference to Exhibit 10.11 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, Commission File No. 1-10244).
Exhibit 10.14 Employment Agreement between Richard K. Riederer and the
Company dated April 24, 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244).
Exhibit 10.15 Letter Agreement between Richard K. Riederer and the Company
dated December 24, 1996 (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-10244).
Exhibit 10.16 Employment Agreement between Thomas W. Evans and the Company
dated April 21, 1987, including Amendment dated July 19,
1993 (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 and Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 1-10244).
Exhibit 10.17 Employment Agreement between Craig T. Costello and the
Company dated July, 20, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.18 Employment Agreement between William R. Kiefer and the
Company dated July 21, 1993 (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.19 Employment Agreement between David L. Robertson and the
Company dated March 11, 1996 (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244).
Exhibit 10.20 Employment Agreement between Narendra M. Pathipati and the
Company dated December 16, 1993 (incorporated by reference
to Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.21 Employment Agreement between Earl E. Davis, Jr. and the
Company, as amended dated March 25, 1998 (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended March 30, 1998, Commission File No. 1-10244).
Exhibit 10.22 Employment Agreement between Mark E. Kaplan and the Company
dated August 13, 1996 (incorporated by reference to Exhibit
10.1 on the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, Commission File No.
1-10244).
Exhibit 10.23 Employment Agreement between Frank G. Tluchowski and the
Company dated April 9, 1998 (incorporated by reference to
Exhibit 10.2 on the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1998 Commission File No.
1-10244).
</TABLE>
19
<PAGE> 22
<TABLE>
<S> <C>
Exhibit 13.1 1999 Annual Report to Stockholders of Weirton Steel
Corporation (filed herewith). Except for those portions of
the Annual Report specifically incorporated by reference,
such report is furnished for the information of the
Securities and Exchange Commission and is not to be deemed
filed as part of this Annual Report on Form 10-K.
Exhibit 22.1 Subsidiaries of the Company (filed herewith).
Exhibit 23.1 Consent of Arthur Andersen LLP, independent public
accountants (filed herewith).
Exhibit 27 Financial data schedule for year ended December 31, 1999
(filed herewith).
</TABLE>
(b) Reports on Form 8-K -- None.
(c) The exhibits listed under Item 14(a)(3) are filed herewith or
incorporated herein by reference.
(d) The financial statement schedules listed under Item 14(a)(2) are filed
herewith.
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Weirton Steel Corporation has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 29th day of March 2000.
WEIRTON STEEL CORPORATION
By: /s/ RICHARD K. RIEDERER
----------------------------------
Richard K. Riederer
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
Weirton Steel Corporation and in the capacities indicated on the 29th day of
March 2000.
/s/ RICHARD K. RIEDERER
- ------------------------------------------------------
Richard K. Riederer
Director and Chief Executive Officer
(principal executive and financial officer)
/s/ MARK E. KAPLAN
- ------------------------------------------------------
Mark E. Kaplan
Controller
(principal accounting officer)
/s/ MICHAEL BOZIC
- ------------------------------------------------------
Michael Bozic
Director
/s/ RICHARD R. BURT
- ------------------------------------------------------
Richard R. Burt
Chairman of the Board of Directors
/s/ ROBERT J. D'ANNIBALLE, JR.
- ------------------------------------------------------
Robert J. D'Anniballe, Jr.
Director
/s/ EARL E. DAVIS
- ------------------------------------------------------
Earl E. Davis
Director
/s/ GEORGE E. DOTY, JR.
- ------------------------------------------------------
George E. Doty, Jr.
Director
/s/ MARK G. GLYPTIS
- ------------------------------------------------------
Mark G. Glyptis
Director
/s/ RALPH E. REINS
- ------------------------------------------------------
Ralph E. Reins
Director
/s/ ROBERT S. REITMAN
- ------------------------------------------------------
Robert S. Reitman
Director
/s/ RICHARD F. SCHUBERT
- ------------------------------------------------------
Richard F. Schubert
Director
/s/ THOMAS R. STURGES
- ------------------------------------------------------
Thomas R. Sturges
Director
/s/ JOHN H. WALKER
- ------------------------------------------------------
John H. Walker
Director
/s/ RONALD C. WHITAKER
- ------------------------------------------------------
Ronald C. Whitaker
Director
/s/ D. LEONARD WISE
- ------------------------------------------------------
D. Leonard Wise
Director
21
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 Filed May 3, 1989,
Commission File No. 33-28515).
Exhibit 3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, Commission File No.
1-10244).
Exhibit 3.3 By-laws of the Company (incorporated by reference to Exhibit
3.3 to the Company's Registration Statement on Form S-1
filed May 3, 1989, Commission File No. 33-28515).
Exhibit 3.4 Amendment to the by-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-10244).
Exhibit 3.5 Certificate of the Designation, Powers, Preferences and
Rights of the Convertible Voting Preferred Stock, Series A
(incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244).
Exhibit 4.2 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 2003,
including Form of Note (incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-4
filed on July 27, 1995, Commission File No. 33-61345).
Exhibit 4.3 First Supplemental Indenture dated as of August 12, 1996
between the Company and Bankers Trust Company, as trustee,
relating to the Company's 10 3/4% Senior Notes due 2005
(incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, Commission File No. 1-10244).
Exhibit 4.4 Indenture dated July 3, 1996 between the Company and Bankers
Trust Company, as trustee, relating to the Company's 11 3/8%
Notes due 2004 (incorporated by reference to Exhibit 4.5 to
the Company's Registration Statement on Form S-4 filed on
July 10, 1996, Commission File No. 333-07913).
Exhibit 10.1 Redacted Pellet Sale and Purchase Agreement dated as of
September 30, 1991 between Cleveland-Cliffs Iron Company and
the Company (incorporated by reference to Exhibit 10.18 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, Commission File No. 1-10244).
Exhibit 10.2 Coke Sale Agreement dated December 9, 1996 between the
Company and USX Corporation (incorporated by reference to
Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-10244).
Exhibit 10.3 Securities Purchase Agreement evidencing the sale of a
portion of the Company's Interest in MetalSite L.P.
(incorporated by reference to Exhibit 2.1 to the Current
Report on Form 8-K of Internet Capital Group, Inc., filed on
January 11, 2000, Commission File No. 000-26929).
Exhibit 10.4 Amended and Restated Receivables Participation Agreement
among Weirton Steel Corporation, various financial
institutions and PNC Bank (filed herewith).
Exhibit 10.5 1984 Employee Stock Ownership Plan, as amended and restated
(incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-10244).
Exhibit 10.6 1989 Employee Stock Ownership Plan (incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-10244).
</TABLE>
22
<PAGE> 25
<TABLE>
<S> <C>
Exhibit 10.7 Amendments to the 1984 and 1989 Employee Stock Ownership
Plans, effective May 26, 1994 (incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
Exhibit 10.8 Weirton Steel Corporation 1987 Stock Option Plan
(incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1 filed May 3, 1989,
Commission File No. 33-28515).
Exhibit 10.9 Weirton Steel Corporation 1998 Stock Option Plan
(incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, Commission File No. 1-10244).
Exhibit 10.10 Deferred Compensation Plan for Directors (incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-10244).
Exhibit 10.11 Weirton Steel Corporation Executive Healthcare Program
effective date July 1, 1999 (filed herewith).
Exhibit 10.12 Weirton Steel Corporation Supplemental Senior Executive
Retirement Plan (incorporated by reference to the Exhibit
10.10 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, Commission File No.
1-10244).
Exhibit 10.13 Weirton Steel Corporation Supplemental Executive Retirement
Plan (incorporated by reference to Exhibit 10.11 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, Commission File No. 1-10244).
Exhibit 10.14 Employment Agreement between Richard K. Riederer and the
Company dated April 24, 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244).
Exhibit 10.15 Letter Agreement between Richard K. Riederer and the Company
dated December 24, 1996 (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-10244).
Exhibit 10.16 Employment Agreement between Thomas W. Evans and the Company
dated April 21, 1987, including Amendment dated July 19,
1993 (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 and Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 1-10244).
Exhibit 10.17 Employment Agreement between Craig T. Costello and the
Company dated July, 20, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.18 Employment Agreement between William R. Kiefer and the
Company dated July 21, 1993 (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.19 Employment Agreement between David L. Robertson and the
Company dated March 11, 1996 (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10244).
Exhibit 10.20 Employment Agreement between Narendra M. Pathipati and the
Company dated December 16, 1993 (incorporated by reference
to Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 1-10244).
Exhibit 10.21 Employment Agreement between Earl E. Davis, Jr. and the
Company, as amended dated March 25, 1998 (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended March 30, 1998, Commission File No. 1-10244).
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C>
Exhibit 10.22 Employment Agreement between Mark E. Kaplan and the Company
dated August 13, 1996 (incorporated by reference to Exhibit
10.1 on the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, Commission File No.
1-10244).
Exhibit 10.23 Employment Agreement between Frank G. Tluchowski and the
Company dated April 9, 1998 (incorporated by reference to
Exhibit 10.2 on the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1998 Commission File No.
1-10244).
Exhibit 13.1 1999 Annual Report to Stockholders of Weirton Steel
Corporation (filed herewith). Except for those portions of
the Annual Report specifically incorporated by reference,
such report is furnished for the information of the
Securities and Exchange Commission and is not to be deemed
filed as part of this Annual Report on Form 10-K.
Exhibit 22.1 Subsidiaries of the Company (filed herewith).
Exhibit 23.1 Consent of Arthur Andersen LLP, independent public
accountants (filed herewith).
Exhibit 27 Financial data schedule for year ended December 31, 1999
(filed herewith).
</TABLE>
24
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Weirton Steel Corporation:
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements included in Weirton
Steel Corporation's annual report to stockholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January 25, 2000. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The schedules listed in the index in Item 14(a)2 of the Form 10-K
are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 25, 2000
S-1
<PAGE> 28
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY STATEMENTS OF INCOME
SCHEDULE 1
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
NET SALES.............................................. $1,090,791 $1,254,796 $1,397,204
OPERATING COSTS:
Cost of sales........................................ 1,034,658 1,116,450 1,258,035
Discount on sale of finance receivables to
subsidiary........................................ 10,764 18,014 19,369
Selling, general and administrative expense.......... 39,523 34,186 32,544
Depreciation......................................... 59,086 60,677 60,855
Restructuring charge................................. -- 2,871 17,000
Asset impairment..................................... 22,522 -- --
Profit sharing provision............................. 15,473 -- --
---------- ---------- ----------
Total operating costs............................. 1,182,026 1,232,198 1,387,803
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS.......................... (91,235) 22,598 9,401
Gain on sale of investment, net...................... 170,117 -- --
Equity income (loss) from unconsolidated
subsidiaries...................................... (2,506) 5,038 8,323
Interest expense..................................... (42,483) (43,687) (48,095)
Other income, net.................................... 3,257 5,929 5,597
ESOP contribution.................................... (1,305) (2,610) (2,610)
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES...................... 35,845 (12,732) (27,384)
Income tax provision (benefit)....................... 4,898 (6,605) (9,642)
---------- ---------- ----------
NET INCOME (LOSS)...................................... $ 30,947 $ (6,127) $ (17,742)
========== ========== ==========
PER SHARE DATA:
Weighted average number of common shares (in
thousands):
Basic................................................ 41,600 41,924 42,622
Diluted.............................................. 43,299 41,924 42,622
NET INCOME (LOSS) PER SHARE:
Basic................................................ $ 0.74 $ (0.15) $ (0.42)
Diluted.............................................. $ 0.71 $ (0.15) $ (0.42)
</TABLE>
S-2
<PAGE> 29
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY BALANCE SHEETS
SCHEDULE I
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---- ----
<S> <C> <C>
Assets:
Current assets:
Cash and equivalents...................................... $ 182,422 $ 53,063
Receivables............................................... 389 229
Inventories............................................... 186,710 259,332
Deferred income taxes..................................... 42,517 43,254
Other current assets...................................... 3,136 7,710
---------- ----------
Total current assets................................... 415,174 363,588
Property, plant and equipment, net.......................... 514,464 574,692
Investment in and advances to unconsolidated subsidiaries... 128,735 129,065
Deferred income taxes....................................... 118,094 115,822
Other assets and deferred charges........................... 10,744 12,273
---------- ----------
Total Assets.............................................. $1,187,211 $1,195,440
========== ==========
Liabilities:
Current liabilities:
Current portion of long term debt obligations............. $ -- $ 84,044
Payables.................................................. 142,930 120,811
Employment costs.......................................... 81,689 63,941
Other current liabilities................................. 31,005 25,674
---------- ----------
Total current liabilities.............................. 255,624 294,470
Long term debt obligations.................................. 304,768 304,626
Long term pension obligations............................... 91,295 81,908
Postretirement benefits other than pensions................. 327,664 337,441
Other long term liabilities................................. 30,886 33,214
---------- ----------
Total Liabilities...................................... 1,010,237 1,051,659
Redeemable Stock............................................ 22,973 22,238
Stockholders' Equity:
Common stock, $0.01 par value; 50,000,000 shares authorized;
43,499,363 and 43,178,134 shares issued................... 435 432
Additional paid-in capital.................................. 458,249 457,851
Retained earnings (deficit)................................. (298,194) (329,141)
Other stockholders' equity.................................. (6,489) (7,599)
---------- ----------
Total Stockholders' Equity............................. 154,001 121,543
---------- ----------
Total Liabilities, Redeemable Stock and Stockholders'
Equity................................................. $1,187,211 $1,195,440
========== ==========
</TABLE>
S-3
<PAGE> 30
WEIRTON STEEL CORPORATION
CONDENSED PARENT COMPANY STATEMENTS OF CASH FLOWS
SCHEDULE I
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. $ 69,659 $ 18,188 $ 53,800
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Proceeds from sale of investment, net.................... 170,117 -- --
Investment in unconsolidated subsidiaries................ (3,769) 24,531 10,347
Capital spending......................................... (21,614) (48,691) (60,070)
-------- -------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES........... 144,734 (24,160) (49,723)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Repayment of debt obligations............................ (84,233) (42,831) --
Common shares issuable................................... (101) 532 664
Purchase of common shares for treasury................... -- (6,283) --
Deferred financing costs................................. (700) -- --
-------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES........... (85,034) (48,582) 664
NET CHANGE IN CASH AND EQUIVALENTS......................... 129,359 (54,554) 4,741
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD................ 53,063 107,617 102,876
-------- -------- --------
CASH AND EQUIVALENTS AT END OF PERIOD...................... $182,422 $ 53,063 $107,617
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of capitalized interest............... $ 46,147 $ 45,953 $ 48,489
Income taxes paid (refunded), net........................ (3,191) 7,803 (2,556)
Dividends from Weirton Receivables, Inc.................. 921 2,971 4,232
</TABLE>
S-4
<PAGE> 31
WEIRTON STEEL CORPORATION AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO BALANCE AT
BEGINNING OF COST AND END OF
DESCRIPTION YEAR PERIOD EXPENSE DEDUCTIONS PERIOD
----------- ---- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts, 1999 $ 8,574 $30,747 $30,019 $ 9,302
discounts, claims and allowances........
1998 9,853 32,001 33,280 8,574
1997 $ 7,684 $30,865 $28,696 $ 9,853
Valuation allowance for deferred tax 1999 $46,868 $14,218 $21,374 $39,712
assets..................................
1998 45,547 1,321 -- 46,868
1997 $41,249 $ 4,298 $ -- $45,547
</TABLE>
S-5
<PAGE> 1
Exhibit 10.4
AMENDED AND RESTATED RECEIVABLES PARTICIPATION AGREEMENT
dated as of March 26, 1999
among
WEIRTON RECEIVABLES, INC.
WEIRTON STEEL CORPORATION
THE FINANCIAL INSTITUTIONS PARTIES HERETO
and
PNC BANK, NATIONAL ASSOCIATION
<PAGE> 2
This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Agreement") is
entered into as of March 26, 1999, among WEIRTON RECEIVABLES, INC., a Delaware
corporation, as seller (the "Seller"), WEIRTON STEEL CORPORATION, a Delaware
corporation ("Weirton"), as initial servicer (in such capacity, together with
its successors and permitted assigns in such capacity, the "Servicer"), THE
FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (the "Banks"), and
PNC BANK, NATIONAL ASSOCIATION, a national banking association ("PNC"), as
facility agent for the Banks (in such capacity, together with its successors and
assigns in such capacity, the "Facility Agent").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I. References in the Exhibits
hereto to "the Agreement" refer to this Agreement, as amended, supplemented or
otherwise modified from time to time.
1. The Seller, the Facility Agent and certain other financial
institutions are parties to the Receivables Participation Agreement dated as of
August 24, 1993, as heretofore amended (the "Original Agreement").
2. The parties desire to amend and restate the Original Agreement as
hereinafter set forth.
3. The Seller desires to sell, transfer and assign an undivided
percentage ownership interest in a pool of receivables, and the Banks desire to
acquire such undivided variable percentage interest, as such percentage interest
shall be adjusted from time to time based upon, in part, reinvestment payments
that are made by the Banks.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) On the terms and conditions
hereinafter set forth, each Bank hereby severally agrees to purchase, and make
reinvestments of, its Pro Rata Share of undivided percentage ownership interests
with regard to the Purchased Interest from the Seller from time to time from the
date hereof to the Facility Termination Date. Under no circumstances shall such
Bank make any such purchase or reinvestment if, after giving effect to such
purchase or reinvestment (i) the aggregate outstanding amount of the Capital
funded by such Bank shall exceed (A) the Commitment set forth opposite its name
on the signature page hereto, as the same may be reduced from time to time
pursuant to Section 1.1(b), minus (B) such Bank's Pro Rata Share of the face
amount of any outstanding Letters of Credit, (ii) the aggregate outstanding
Capital plus the L/C Participation Amount would exceed the Purchase Limit or
(iii) the Purchased Interest would exceed 100% as determined by reference to the
most recent Daily Report delivered by the Servicer to the Facility Agent in
accordance with Article IV hereof.
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<PAGE> 3
(b) The Seller may, upon at least 3 days' written notice to the
Facility Agent, terminate the purchase facility provided in this Section in
whole or, upon at least 3 days' written notice to the Facility Agent, from time
to time, irrevocably reduce in part the unused portion of the Purchase Limit
which shall cause a corresponding reduction in the Commitments; provided, that
each partial reduction shall be in the amount of at least $5,000,000, or an
integral multiple of $1,000,000 in excess thereof, and that, unless terminated
in whole, the Purchase Limit shall in no event be reduced below $35,000,000.
Each reduction in the Commitments hereunder shall be made ratably among the
Banks in accordance with their respective Pro Rata Shares. The Facility Agent
shall promptly advise the Banks of any notice pursuant to this Section 1.1(b).
Section 1.2. Making Purchases. (a) Each Funded Purchase (but not
reinvestment) of undivided percentage ownership interests with regard to the
Purchased Interest hereunder shall be made upon the Seller's irrevocable written
notice in the form of Annex B delivered to the Facility Agent in accordance with
Section 5.2 (which notice must be received by the Facility Agent before 11:00
a.m., New York City time): (i) at least three Business Days before the requested
purchase date, in the case of a Funded Purchase to be funded at the Yield Rate
and based upon the Euro-Rate, and (ii) at least one Business Day before the
requested purchase date, in the case of a Funded Purchase to be funded at the
Yield Rate and based upon the Base Rate, which notice shall specify: (A) the
amount requested to be paid to the Seller (such amount, which shall not be less
than $1,000,000 and anything in excess of $1,000,000 shall be an integral
multiple of $100,000), being the Capital relating to the undivided percentage
ownership interest then being purchased), (B) the date of such Funded Purchase
(which shall be a Business Day), (C) the desired funding basis and Yield Period
for such Funded Purchase (which shall be based upon the Euro-Rate or the Base
Rate) and (D) a Daily Report after giving effect to the increase in Capital.
Each Funded Purchase described above shall be made by the Banks ratably in
accordance with their Pro Rata Shares; provided, however that the failure of any
Bank to make a Funded Purchase hereunder shall not in itself relieve any other
Bank of its obligation to make any Funded Purchase hereunder (it being
understood that no Bank shall be responsible for the failure of any other Bank
to make any Funded Purchase required by such other Bank hereunder).
(b) On the date of each Funded Purchase (but not reinvestment) of
undivided percentage ownership interests with regard to the Purchased Interest
hereunder, each Bank shall, upon satisfaction of the applicable conditions set
forth in Exhibit II, make available to the Facility Agent who will make
available to the Seller in same day funds, at PNC, account number 1000310054,
ABA 043000096 (or such other account as may be so designated in writing by the
Seller to the Facility Agent) an amount equal to such Bank's pro rata portion of
the Capital relating to the undivided percentage ownership interest then being
purchased ratably, according to such Bank's Pro Rata Share.
(c) Effective on the date of each purchase pursuant to this Section and
each reinvestment pursuant to Section 1.4, the Seller hereby sells and assigns
to the Facility Agent for the benefit of the Banks (ratably according to their
Pro Rata Shares) an undivided percentage ownership interest in: (i) each Pool
Receivable then existing, (ii) all Related Security with respect to such Pool
Receivables and (iii) all Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security.
2
<PAGE> 4
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or
indirect, absolute or contingent, the Seller hereby grants to the Collateral
Agent (for the benefit of the Banks) a security interest in all of the Seller's
right, title and interest (including any undivided interest of the Seller) in,
to and under all of the following, whether now or hereafter owned, existing or
arising: (i) all Pool Receivables, (ii) all Related Security with respect to
such Pool Receivables, (iii) all Collections with respect to such Pool
Receivables, (iv) the Lock-Box Accounts and Collection Account and all amounts
on deposit therein, and all certificates and instruments, if any, from time to
time evidencing such Lock-Box Accounts and Collection Account and amounts on
deposit therein, (v) all rights (but none of the obligations) of the Seller
under the Sale Agreement, and (vi) all proceeds of, and all amounts received or
receivable under any or all of, the foregoing (collectively, the "Pool Assets").
The Collateral Agent (on behalf of the Banks) shall have, with respect to the
Pool Assets, and in addition to all the other rights and remedies available to
the Collateral Agent (on behalf of the Banks), all the rights and remedies of a
secured party under any applicable UCC.
(e) Whenever the Banks issue a Letter of Credit pursuant to Section
1.15 hereof, the Banks shall, automatically and without further action of any
kind upon the effective date of issuance of such Letter of Credit, have
irrevocably deemed to make a Funded Purchase hereunder in the event that such
Letter of Credit is subsequently drawn and such drawn amount shall not have been
reimbursed pursuant to Section 1.18 upon such draw. All such Funded Purchases
shall comprise Base Rate Portions of Capital in an amount equal to the amount of
such draw (without regard to the numerical requirements set forth in Section
1.2(a)), shall be made ratably by the Banks according to their Pro Rata Shares,
shall accrue Discount, and may be converted, continued, or repaid according to
Section 1.7. In the event that any Letter of Credit expires or is surrendered
without being drawn (in whole or in part) then, in such event, the foregoing
commitment to make Funded Purchases shall expire and the L/C Participation
Amount shall automatically reduce by the amount of the Letter of Credit which is
no longer outstanding.
Section 1.3. Purchased Interest Computation. The Purchased Interest
shall be initially computed on the date of the initial purchase hereunder.
Thereafter, until the Facility Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day other
than a Termination Day. The Purchased Interest as computed (or deemed
recomputed) as of the day before the Facility Termination Date shall thereafter
remain constant. The Purchased Interest shall become zero when the Capital
thereof and Discount thereon shall have been paid in full, the L/C Participation
Amount has been cash collateralized in full, all the amounts owed by the Seller
and the Servicer hereunder to the Banks, the Facility Agent and any other
Indemnified Party or Affected Person are paid in full, and the Servicer shall
have received the accrued Servicing Fee thereon.
Section 1.4. Settlement Procedures. (a) The collection and distribution
of the Pool Receivables shall be administered by the Collateral Agent in
accordance with this Agreement.
(b) The Collateral Agent shall, on each day on which Collections of
Pool Receivables are deposited into the Collection Account:
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<PAGE> 5
(i) set aside and hold in trust (and shall, at the request of
the Facility Agent, segregate in a separate account approved by the
Facility Agent) for the Banks, out of the Banks' Share of such
Collections, first, an amount equal to the Discount accrued through
such day for each Portion of Capital and not previously set aside,
second, an amount equal to the fees set forth in the Fee Letter accrued
and unpaid through such day, and third, to the extent funds are
available therefor, an amount equal to the Banks' Share of the
Servicing Fee accrued through such day and not previously set aside,
(ii) subject to Section 1.4(f), if such day is not a
Termination Day, remit to the Seller, on behalf of the Banks, the
remainder of the Banks' Share of such Collections; such remainder shall
be automatically reinvested in Pool Receivables, and in the Related
Security, Collections and other proceeds with respect thereto;
provided, however, that if after giving effect to such reinvestment the
Purchased Interest would exceed 100%, then the Collateral Agent shall
not remit such remainder to the Seller, but shall set aside and hold in
trust for the Banks (and shall, at the request of the Facility Agent,
segregate in a separate account approved by the Facility Agent) a
portion of such Collections that, together with the other Collections
set aside pursuant to this paragraph, shall equal the amount necessary
to reduce the Purchased Interest to 100%,
(iii) if such day is a Termination Day, set aside, segregate
and hold in trust (and shall, at the request of the Facility Agent,
segregate in a separate account approved by the Facility Agent) for the
Banks the entire remainder of the Banks' Share of the Collections;
provided, that if amounts are set aside and held in trust on any
Termination Day of the type described in clause (a) of the definition
of "Termination Day" and, thereafter, the events giving rise to such
Termination Day are satisfied or waived by the Facility Agent (or (x)
in the case of proceedings giving rise to an Event of Bankruptcy as
described in clause (a)(i) of the definition of "Termination Day", such
proceedings are dismissed or (y) in the case of one or more notices of
lien filed by either the Internal Revenue Service or the Pension
Benefit Guaranty Corporation as described in clause (a)(iii) of the
definition of "Termination Day", such lien or liens are released and
Standard & Poor's has received satisfactory evidence of such release),
such previously set aside amounts shall be reinvested in accordance
with clause (ii) of this Section 1.4(b) on the day of such subsequent
satisfaction, waiver or dismissal, and
(iv) remit to the Seller (subject to Section 1.4(f)) for its
own account any Collections in excess of: (a) amounts required to be
reinvested in accordance with clause (ii) or the proviso to clause
(iii) of this Section 1.4(b) plus (b) the amounts that are required to
be set aside pursuant to clause (i), the proviso to clause (ii) and
clause (iii) of this Section 1.4(b) plus (c) the Seller's Share of the
Servicing Fee accrued and unpaid through such day and all reasonable
and appropriate out-of-pocket costs and expenses of the Servicer for
servicing, collecting and administering the Pool Receivables plus (d)
all other amounts owed by the Seller under this Agreement to any Bank,
the Facility Agent, the Collateral Agent and any other Indemnified
Party or Affected Person.
(c) The Collateral Agent shall deposit into the Administration Account
(or such other account designated by the Facility Agent), on the last day of
each Yield Period (or in the case of
4
<PAGE> 6
clauses second and third of Section 1.4(b)(i), on the last day of each calendar
quarter) Collections held for the Banks pursuant to clause (b)(i) or (f) of this
Section plus the amount of Collections then held for the Banks pursuant to
clauses (b)(ii) and (iii) of this Section 1.4. On the last day of each Yield
Period, the Facility Agent will notify the Seller and the Servicer by facsimile
of the amount of Discount accrued with respect to each Portion of Capital during
such Yield Period or portion thereof.
(d) Upon receipt of funds deposited into the Administration Account
pursuant to clause (c) of this Section, the Facility Agent shall cause such
funds to be distributed as follows:
(i) if such distribution occurs on a day that is not a
Termination Day and the Purchased Interest does not exceed 100%, first
to the Banks ratably, in accordance with their Pro Rata Shares, in
payment in full of all accrued Discount and fees (other than Servicing
Fees) with respect to each Portion of Capital, and second, to the
Servicer (payable in arrears on the last day of each calendar quarter)
in payment in full of the Banks' Share of accrued Servicing Fees, and
(ii) if such distribution occurs on a Termination Day or on a
day when the Purchased Interest exceeds 100%, first, if Weirton or an
Affiliate thereof is not the Servicer, to the Servicer in payment in
full of all accrued Servicing Fees; provided, however, that if the
Servicing Fee ceases to be calculated pursuant to Section 4.6(a), then
the excess, if any of such Servicing Fee over an amount determined in
accordance with Section 4.6(a) shall not be distributed pursuant to
this clause first, but shall be distributed with the distributions made
in clause fifth, below, second, to the Banks ratably, in accordance
with their Pro Rata Shares, in payment in full of all accrued Discount
with respect to each Portion of Capital; provided, however, that the
Termination Fee, if any, included in the calculation of Discount shall
not be distributed in accordance with this clause second, but shall be
distributed with the distributions made in clause fifth below, third,
to the Banks ratably in accordance with their Pro Rata Shares, in
payment in full of Capital (or, if such day is not a Termination Day,
the amount necessary to reduce the Purchased Interest to 100%), fourth,
to the L/C Collateral Account for the benefit of the Banks, the amount
necessary to cash collateralize the L/C Participation Amount until the
amount of cash collateral held in such L/C Collateral Account equals
the aggregate outstanding amount of the L/C Participation Amount,
fifth, if the Capital and accrued Discount with respect to each Portion
of Capital have been reduced to zero, and all accrued Servicing Fees
payable to the Servicer (if other than Weirton or an Affiliate thereof)
have been paid in full, to the Banks ratably, in accordance with their
Pro Rata Shares, the Facility Agent and any other Indemnified Party or
Affected Person in payment in full of any other amounts owed thereto by
the Seller hereunder and, sixth, to the Servicer (if the Servicer is
Weirton or an Affiliate thereof) in payment in full of the Banks' Share
of all accrued Servicing Fees.
After the Capital, Discount, fees payable pursuant to the Fee Letter and
Servicing Fees with respect to the Purchased Interest, and any other amounts
payable by the Seller and the Servicer to the Banks, the Facility Agent or any
other Indemnified Party or Affected Person hereunder, have been paid in full,
and (on and after a Termination Day) after the L/C Participation Amount has
5
<PAGE> 7
been cash collateralized in full, all additional Collections with respect to the
Purchased Interest shall be paid to the Seller for its own account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed goods or services, or any
revision, cancellation, allowance, discount or other adjustment made by
the Servicer, the Seller or any Affiliate of the Seller (other than as
a result of (x) having been written off the Seller's books as
uncollectible due to credit reasons of an Obligor or (y) a discharge in
bankruptcy of an Obligor), or any setoff or dispute between the Seller
or any Affiliate of the Seller and an Obligor, the Seller shall be
deemed to have received on such day a Collection of such Pool
Receivable in the amount of such reduction or adjustment;
(ii) if on any day any of the representations or warranties in
Section 1(g) or, on the date of purchase or reinvestment, (m) of
Exhibit III is not true with respect to any Pool Receivable, the Seller
shall be deemed to have received on such day a Collection of such Pool
Receivable in full;
(iii) except as required by applicable law or the relevant
Contract, all Collections received from an Obligor of any Receivable
shall be applied to the Receivables of such Obligor in the order of the
age of such Receivables, starting with the oldest such Receivable,
unless such Obligor designates in writing its payment for application
to specific Receivables; and
(iv) if and to the extent the Facility Agent or any Bank shall
be required for any reason to pay over to an Obligor (or any trustee,
receiver, custodian or similar official in any Insolvency Proceeding)
any amount received by it hereunder, such amount shall be deemed not to
have been so received by the Facility Agent or such Bank but rather to
have been retained by the Seller and, accordingly, the Facility Agent
or such Bank, as the case may be, shall have a claim against the Seller
for such amount, payable when and to the extent that any distribution
from or on behalf of such Obligor is made in respect thereof.
(f) If at any time the Seller shall wish to cause the reduction of
Capital, the Seller may do so as follows:
(i) the Seller shall give the Agents and the Servicer at least
two Business Days' prior written notice thereof, which notice shall
include the amount of such proposed reduction and the proposed date on
which such reduction will commence;
(ii) on the proposed date of commencement of such reduction
and on each day thereafter, the Collateral Agent shall cause
Collections not to be remitted to the Seller for reinvestment until the
amount thereof not so remitted shall equal the desired amount of
reduction; and
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<PAGE> 8
(iii) the Collateral Agent shall account for such Collections
and make payment to the Facility Agent on the last day of the current
Yield Period and Capital shall be deemed reduced in the amount to be
paid to the Facility Agent only when in fact finally so paid;
provided, that:
(A) the amount of any such reduction shall be in an integral
multiple of $1,000,000 (unless Capital shall have been reduced to
zero); and
(B) the Seller shall choose a reduction amount, and the date
of commencement thereof, so that to the extent practicable such
reduction shall commence and conclude in the same Yield Period.
Section 1.5. Fees. (a) The Seller shall pay to the Facility Agent, for
the benefit of the Banks, the fees described hereinbelow:
(i) A commitment fee (the "Commitment Fee") for the period
from and including the Closing Date until the later of the Facility
Termination Date, the date on which the outstanding Capital shall have
been paid in full and the date the L/C Participation Amount is cash
collateralized in full, equal to one-half of one percent (0.5%) per
annum times the excess, if any, of (A) the Purchase Limit over (B) the
sum of the aggregate outstanding Capital and the L/C Participation
Amount, computed on the basis of the actual number of days elapsed
(including the first but excluding the day of payment) over a year of
365 or 366 days, as the case may be.
(ii) A program fee (the "Program Fee") for the period from and
including the Closing Date until the later of the Facility Termination
Date, the date on which the outstanding Capital shall have been paid in
full and the date the L/C Participation Amount is cash collateralized
in full, equal to three-quarters of one percent (0.75%) per annum (the
"Program Fee Rate") on the sum of the outstanding face amount of each
Letter of Credit plus the average daily Capital outstanding, computed
on the basis of actual days elapsed (including the first but excluding
the day of payment), over a year of 360 days.
All of the foregoing specified fees shall be payable quarterly in arrears on the
last day of each calendar quarter and shall be forwarded by the Facility Agent
ratably to the Banks according to their Pro Rata Shares.
(b) The Seller shall pay to PNC, for its own account in its capacities
as the Facility Agent and the Collateral Agent, such other fees not described
above as are specified in that certain letter from PNC to the Seller dated March
26, 1999 (the "Fee Letter"). Such fees shall include the annual agents' fees
described therein (the "Agent Fee") and shall be due and payable at the times
specified in such letter.
(c) The Seller shall pay to each Bank administrative fees in connection
with the issuance, amendment, draw or transfer of any Letter of Credit, which
fees shall, for each Bank, equal $50 for each amendment or issuance of a Letter
of Credit and $150 for each draw or
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<PAGE> 9
transfer. Each such fee shall be due and payable concurrently with such
issuance, amendment, draw or transfer, as the case may be, of such Letter of
Credit.
Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid
or deposited by the Seller or the Servicer hereunder shall be made without
reduction for offset or counterclaim and shall be paid or deposited no later
than 2:00 p.m. (New York City time) on the day when due in same day funds to the
Administration Account. All amounts received after 2:00 p.m. (New York City
time) will be deemed to have been received on the next Business Day.
(b) The Seller or the Servicer, as the case may be, shall, to the
extent permitted by law, pay interest on any amount not paid or deposited by the
Seller or the Servicer, as the case may be, when due hereunder, at an interest
rate equal to 2.0% per annum above the Base Rate, payable on demand.
(c) All computations of interest under clause (b) and all computations
of Discount, fees and other amounts hereunder shall be made on the basis of a
year of 360 (or 365 or 366, as applicable, with respect to Discount or other
amounts calculated by reference to the Base Rate) days for the actual number of
days elapsed. Whenever any payment or deposit to be made hereunder shall be due
on a day other than a Business Day, such payment or deposit shall be made on the
next Business Day and such extension of time shall be included in the
computation of such payment or deposit.
Section 1.7. Conversion and Continuation of Portions of Capital. (a)
Subject to the terms and conditions set forth in this paragraph, Seller shall
have the option: (i) on any Business Day, to convert all or part of a Base Rate
Portion of Capital to a Euro-Rate Portion of Capital and (ii) on the last day of
any Yield Period of a Euro-Rate Portion of Capital, to convert all or any part
of such Euro-Rate Portion of Capital to a Base Rate Portion of Capital and/or to
continue all or any part of such Euro-Rate Portion of Capital as a new Euro-Rate
Portion of Capital, the Yield Period for which shall commence on the last day of
such prior Yield Period; provided, however, that:
(i) each conversion or continuation shall be made ratably
among the Banks in accordance with the respective amounts of the Funded
Purchases comprising the converted or continued Portion of Capital;
(ii) if less than all the outstanding amount of any Portion of
Capital shall be converted or continued, the aggregate amount of such
Portion of Capital converted or continued shall be in an integral
multiple of $1,000,000 and, for any Euro-Rate Portion of Capital, in a
minimum amount of $5,000,000;
(iii) no outstanding Euro-Rate Portion of Capital may be
continued as a Euro-Rate Portion of Capital, and no outstanding Base
Rate Portion of Capital may be converted into a Euro-Rate Portion of
Capital, at any time that a Termination Event or Unmatured Termination
Event has occurred and is continuing; and
(iv) there shall not be more than eight (8) separate Euro-Rate
Portions of Capital outstanding at any one time.
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<PAGE> 10
(b) Whenever the Seller wishes to convert and/or continue a
Portion of Capital under Section 1.7(a) Seller shall give the Facility Agent
written or telecopy notice (or telephone notice promptly confirmed in writing or
by telecopy) (a) in the case of a conversion to a Base Rate Portion of Capital,
not later than 11:00 a.m., New York City time, one Business Day prior to the
proposed Conversion/Continuation Date, and (b) in the case of a conversion to or
continuation of a Euro-Rate Portion of Capital, not later than 11:00 a.m., New
York City time, three Business Days before such proposed Conversion/Continuation
Date. Each such notice ("Notice of Conversion/Continuation") shall be
irrevocable and shall refer to this Agreement and specify (i) the identity and
amount of the Portion of Capital that the Seller requests be converted or
continued, (ii) whether such Portion of Capital is to be converted to or
continued as a Euro-Rate Portion of Capital or a Base Rate Portion of Capital,
(iii) the proposed Conversion/Continuation Date (which shall be a Business Day)
and (iv) if such Portion of Capital is to be converted to or continued as a
Euro-Rate Portion of Capital, the Yield Period with respect thereto. If no Yield
Period is specified in any such notice with respect to any conversion to or
continuation as a Euro-Rate Portion of Capital, the Seller shall be deemed to
have selected a Yield Period of one month's duration. If the Seller shall not
have delivered a timely Notice of Conversion/Continuation in accordance with
this paragraph (b) with respect to any Portion of Capital, such Portion of
Capital shall, at the end of the Yield Period applicable thereto (unless repaid
pursuant to the terms hereof), automatically be converted into or continued as a
Base Rate Portion of Capital. The Facility Agent shall promptly advise the other
Banks of any notice given pursuant to this paragraph (b) and of each Bank's
portion of any converted or continued Portion of Capital.
Section 1.8. Increased Costs. (a) If the Facility Agent, any Bank or
any of their respective Affiliates (each an "Affected Person") shall reasonably
determine that the adoption after the date hereof of any law, rule or regulation
regarding capital adequacy or capital maintenance, or any change after the date
hereof in any of the foregoing or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Affected
Person (or any lending office of such Affected Person) with any request or
directive regarding capital adequacy or capital maintenance (whether or not
having the force of law) or any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Affected Person's capital as a consequence of this Agreement, the purchases made
by such Bank pursuant hereto or the Letters of Credit issued by any Bank to a
level below that which such Affected Person could have achieved but for such
adoption, change or compliance (taking into consideration such Affected Person's
policies with respect to capital adequacy), then upon demand by such Affected
Person, Seller shall promptly pay to such Affected Person such additional amount
or amounts as will compensate such Affected Person for such reduction. A
certificate as to the amount of any such additional amount or amounts, submitted
to Seller and the Facility Agent by such Affected Person, shall, except for
demonstrable error, be final conclusive and binding for all purposes.
(b) If, subsequent to the execution of this Agreement, due to either:
(i) the introduction of or any change in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to any Bank of agreeing to
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purchase or purchasing, or maintaining the ownership of, the Purchased Interest
(or its portion thereof) in respect of which Discount is computed by reference
to the Euro-Rate, then, upon demand by such Bank, the Seller shall promptly pay
to such Bank, from time to time as specified by such Bank, additional amounts
sufficient to compensate such Bank for such increased costs. A certificate as to
such amounts submitted to the Seller and the Facility Agent by such Bank shall
be conclusive and binding for all purposes, absent manifest error.
(c) If such increased costs affect the related Affected Person's
portfolio of financing transactions, such Affected Person shall use reasonable
averaging and attribution methods to allocate such increased costs to the
transactions contemplated by this Agreement.
Section 1.9. Requirements of Law. If any Affected Person reasonably
determines that the existence of or compliance with: (a) any law or regulation
or any change therein or in the interpretation or application thereof, in each
case adopted, issued or occurring after the date hereof, or (b) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement:
(i) does or shall subject such Affected Person to any tax of
any kind whatsoever with respect to this Agreement, any increase in the
Purchased Interest (or its portion thereof) or in the amount of Capital
relating thereto, or does or shall change the basis of taxation of
payments to such Affected Person on account of Collections, Discount or
any other amounts payable hereunder (excluding taxes imposed on the
overall pre-tax net income of such Affected Person, and franchise taxes
imposed on such Affected Person, by the jurisdiction under the laws of
which such Affected Person is organized or a political subdivision
thereof), or
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, purchases, advances or loans by, or other credit extended
by, or any other acquisition of funds by, any office of such Affected
Person that are not otherwise included in the determination of the
Euro-Rate or the Base Rate hereunder,
and the result of any of the foregoing is: (A) to increase the cost to such
Affected Person, or of agreeing to purchase or purchasing or maintaining the
ownership of undivided percentage ownership interests with regard to the
Purchased Interest (or interests therein) or any Portion of Capital, or (B) to
reduce any amount receivable hereunder (whether directly or indirectly), then,
in any such case, upon demand by such Affected Person, the Seller shall promptly
pay to such Affected Person additional amounts necessary to compensate such
Affected Person for such additional cost or reduced amount receivable. All such
amounts shall be payable as incurred. A certificate from such Affected Person to
the Seller and the Facility Agent certifying, in reasonably specific detail, the
basis for, calculation of, and amount of such additional costs or reduced amount
receivable shall be conclusive and binding for all purposes, absent manifest
error; provided, however, that no Affected Person shall be required to disclose
any confidential or tax planning information in any such certificate.
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Section 1.10. Inability to Determine Euro-Rate. (a) If the Facility
Agent determines before the first day of any Yield Period (which determination
shall be final and conclusive) that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in dollars (in the relevant
amounts for such Yield Period) are not being offered to banks in the interbank
eurodollar market for such Yield Period, or adequate means do not exist for
ascertaining the Euro-Rate for such Yield Period, then the Facility Agent shall
give notice thereof to the Seller. Thereafter, until the Facility Agent notifies
the Seller that the circumstances giving rise to such suspension no longer
exist, (i) no Portions of Capital shall be Euro-Rate Portions of Capital and
(ii) the Discount for any outstanding Portions of Capital that are Euro-Rate
Portions of Capital shall, on the last day of the then current Yield Period, be
converted to Base Rate Portions of Capital.
(b) If, on or before the first day of any Yield Period, the Facility
Agent shall have been notified by any Bank (an "Affected Bank") that, such
Affected Bank has determined (which determination shall be final and conclusive)
that, any enactment, promulgation or adoption of or any change in any applicable
law, rule or regulation, or any change in the interpretation or administration
thereof by a governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by such
Affected Bank with any guideline, request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for such Affected Bank to fund or maintain any
Euro-Rate Portion of Capital, the Facility Agent shall notify the Seller
thereof. Upon receipt of such notice, until the Facility Agent notifies the
Seller that the circumstances giving rise to such determination no longer apply,
the obligation of such Affected Bank to make or maintain its Pro Rata Share of
any Euro-Rate Portion of Capital, during any such period shall be terminated at
the earlier of the termination of the Yield Period then in effect for each
Euro-Rate Portion of Capital or when required by law and the Seller shall, no
later than the termination of the Yield Period in effect at the time any such
determination pursuant to this Section 1.10(a) is made or earlier, when required
by law, convert such Affected Bank's Pro Rata Share of any outstanding Euro-Rate
Portions of Capital into Base Rate Portions of Capital.
Section 1.11. Funding Losses. The Seller shall compensate each Bank,
upon written request by that Bank (which request shall set forth in reasonable
detail the basis for requesting such amounts) for all reasonable losses,
expenses and liabilities (including any interest paid by the Bank to lenders of
funds borrowed by it to make Purchases which are funded at the Yield Rate
determined by reference to the Euro-Rate and any loss sustained by that Bank in
connection with the re-employment of such funds but excluding taxes, which are
not covered by this Section 1.11), which that Bank may sustain with respect to
making such purchase at the Euro-Rate: (a) if for any reason (other than a
default or error by that Bank) a purchase funded at the Yield Rate determined by
reference to the Euro-Rate does not occur on a date specified therefor in the
related Notice of Purchase or (b) if any payment or conversion including under
Section 1.7(b) hereof, of any such Bank's Euro-Rate purchase occurs on a date
which is not the last day of the Yield Period applicable to such purchase or on
any date specified in a notice of payment give by the Seller.
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Section 1.12. Termination, Reduction and Renewal of Commitments. (a)
The Commitments shall be automatically and permanently terminated on the
Facility Termination Date.
(b) Unless earlier terminated pursuant to paragraph (a), the agreement
of the Banks to make purchases hereunder shall be effective from the Closing
Date through the Scheduled Commitment Termination Date. No more than ninety days
and no less than sixty days prior to the first anniversary of the Closing Date,
or no more than ninety days and no less than sixty days prior to any successive
anniversary of the Closing Date, the Seller may notify the Facility Agent and
the Banks in writing of its request (each such request an "Extension Request")
to extend the Scheduled Commitment Termination Date by one additional year, and
each Bank shall notify the Seller in writing whether it agrees to such extension
not later than sixty days after the receipt of such Extension Request. In
connection with any Extension Request, the Facility Agent may request that the
Seller provide to the Banks a letter from Standard & Poor's reconfirming the
rating with respect to the Facility of not less than AAA as a condition of
granting such Extension Request. If (i) the Required Banks give written notice
of such agreement on or before the anniversary of the Closing Date following
such Extension Request and (ii) the aggregate Commitments of the Banks agreeing
to such extension is not less than $42,500,000, then the Scheduled Commitment
Termination Date shall be so extended; provided, however, that (1) the failure
of any Bank to respond to an Extension Request shall be deemed to constitute
such Bank's denial of such Extension Request; and (2) no Bank which has denied
its consent to an Extension Request (each such Bank, a "Dissenting Bank") shall
be bound by the Required Banks' approval of such Extension Request and the
Commitment of each Dissenting Bank shall expire on the Scheduled Commitment
Termination Date which was applicable hereunder at the time of such Bank's
receipt of the Extension Request.
(c) The Seller shall have the right, at any time, to replace a
Dissenting Bank in accordance with the provisions of this paragraph (c). First,
the Seller may request that one or more of the Banks, in their sole discretion,
assume the Commitment of the applicable Dissenting Bank in accordance with the
provisions of Section 1.14 hereof. In the event that a sufficient number of the
Banks have not so agreed within sixty (60) days of a written request from the
Seller, the Seller shall have the right, at any time, to replace such Dissenting
Bank with an Eligible Assignee reasonably acceptable to the Facility Agent in
accordance with the provisions of Section 1.14 hereof. In the event that any
Dissenting Bank is not so replaced prior to the expiration of such Dissenting
Bank's Commitment, (i) five (5) Business Days prior to the time such Commitment
expires, the Seller shall pay to each such Dissenting Bank its Pro Rata Share of
the outstanding Capital of the Purchased Interest, all accrued Discount thereon
and all amounts due and owing to such Dissenting Bank hereunder or under any
other Transaction Document and (ii) at the time such Commitment expires, (1) the
Purchase Limit and the aggregate amount of the Commitments shall be reduced by
the aggregate amount of the expiring Commitments of all such Dissenting Banks
not so replaced, (2) each remaining Bank's Pro Rata Share shall be adjusted
accordingly, and (3) the Seller shall have, with respect to any outstanding
Letters of Credit, provided the Facility Agent, on behalf of such Dissenting
Bank, with cash collateral for such Dissenting Bank's Pro Rata Share thereof, or
arranged for surrender or replacement of such Letter of Credit or made such
other arrangements in respect thereof as shall be mutually satisfactory to the
Seller, such Dissenting Bank and the Facility Agent.
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Upon the replacement of a Dissenting Bank or upon the expiration of such
Dissenting Bank's Commitment and payment of the amounts described above, such
Dissenting Bank shall cease to be a party hereto.
Section 1.13. Additional Banks; Increase in Purchase Limit. From time
to time, the Seller shall have the right, subject to the terms set forth herein,
to request an increase in the Purchase Limit (i) by the agreement of one or more
Banks, in their sole discretion, to increase their Commitments in an aggregate
amount equal to the requested increase in the Purchase Limit, or (ii) in the
event that a sufficient number of the Banks do not so agree to the proposed
increase within sixty (60) days of the written request of the Seller, by the
inclusion of an additional financial institution as a Bank in the Facility which
Bank is reasonably acceptable to the Facility Agent and is an Eligible Assignee;
provided, that (i) the Purchase Limit shall in no event be increased to an
amount in excess of $120,000,000 and (ii) any increase in the Purchase Limit
shall be subject to the prior written confirmation by Standard & Poor's that
such increase will not cause Standard & Poor's rating of the Facility to be
reduced or withdrawn. Upon receipt of such confirmation, the Facility Agent
shall promptly notify the Banks and the Collateral Agent of the increase in the
Purchase Limit and the Seller, the Facility Agent, the Collateral Agent, the
original Banks and the additional Bank(s), if any, shall enter into an amendment
to this Agreement and the other applicable Transaction Documents which shall
effectuate such increase and, if applicable, incorporate an additional Bank as a
Bank for all purposes of the Transaction Documents and evidence such additional
Bank's purchase of its Pro Rata Share of the Purchased Interest and pursuant to
which such additional Bank shall purchase from each other Bank a participation
interest in such Bank's Letters of Credit then outstanding, which participation
interest shall be in a percentage equal to such additional Bank's Pro Rata Share
(as calculated below). Immediately upon the effectiveness of such amendment, (i)
the Purchase Limit shall be increased by the amount of the requested increase
(which increase shall be in a minimum amount of $5,000,000); (ii) the respective
Pro Rata Shares of the Banks (including the additional Bank, if applicable)
shall be recalculated accordingly; and (iii) any additional Bank or any Bank
increasing its Commitment shall (a) purchase, by wire transfer of immediately
available funds, its Pro Rata Share of all outstanding Funded Purchases made by
the other Banks and (b) shall purchase from each other Bank a participation
interest in the Letters of Credit, in each case in an amount necessary so that
the Funded Purchases of all the Banks (including if applicable, any additional
Bank) and each Bank's obligations in respect of the Letters of Credit shall be
outstanding according to their respective Pro Rata Shares as the same have been
recalculated pursuant to the preceding provisions of this Section 1.13.
Section 1.14. Replacement of Certain Banks. In the event that any Bank
(i) has denied its consent to an Extension Request pursuant to Section 1.12(b)
hereof, which has been consented to by the Required Banks, or (ii) requested
compensation from Seller pursuant to Section 1.8 or 1.9 hereof to recover
additional costs incurred by such Bank which are not being incurred generally by
the other Banks, or (iii) delivered a notice pursuant to Section 1.10 hereof
claiming that such Bank is unable to make Funded Purchases determined by
reference to the Euro-Rate for reasons not generally applicable to the other
Banks, then, in any such case, Seller or the Facility Agent may make written
demand on such Bank (each such Bank, a "Departing Bank") (with a copy to the
Facility Agent in the case of a demand by Seller and a copy to Seller in the
case of a demand by the Facility Agent) for such Departing Bank to assign all of
its
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Funded Purchases and all of its other rights and obligations under this
Agreement to the remaining Banks (in an amount for each such Bank as agreed to
by such Bank) or, in the event the remaining Banks do not agree within sixty
(60) days of such request to assume the entire Commitment of the Departing Bank,
to one or more Eligible Assignees which are reasonably acceptable to Seller and
to the Facility Agent and which Seller and/or the Facility Agent, as the case
may be, shall have engaged for such purpose (each such new financial
institution, a "Replacement Bank"). Each such assignment shall be executed
pursuant to one or more duly executed Assignments and Acceptances in the form of
Annex D, shall be consummated within ten (10) Business Days after the date of
such demand for assignment as described above at a purchase price equal to the
sum of such Departing Bank's Pro Rata Share of the outstanding Capital of the
Purchased Interest, all accrued Discount thereon and all amounts due and owing
to such Departing Bank hereunder or under any other Transaction Document.
Immediately upon the effectiveness of such assignment, the Banks assuming such
Commitment or the Replacement Banks, as the case may be, shall have assumed the
Departing Bank's obligations in respect of the Letters of Credit and each such
Departing Bank shall be concurrently released from its obligations under each
Letter of Credit then outstanding, pursuant to such documentation as shall be
mutually satisfactory to Seller, the Facility Agent, such Departing Bank and
such purchasing Banks or such Replacement Banks, as the case may be. Upon the
replacement of a Departing Bank as described above, such Departing Bank shall
cease to be a party hereto. The Facility Agent is hereby authorized to execute
one or more Assignment and Acceptances as attorney-in-fact for any Departing
Bank failing to execute and deliver the same within five (5) Business Days after
the date on which the Departing Bank was tendered the purchase price and was
required to execute such Assignment and Acceptance in accordance with the
foregoing provisions of this Section 1.14.
Section 1.15. Obligation to Issue; Renewal of L/C Facility. (a) Subject
to the terms and conditions of this Agreement, and in reliance upon the
representations and warranties set forth herein, each Bank hereby severally
agrees to issue for the account of Seller through such Bank's branches or
agencies as it and Seller may jointly agree, one or more Letters of Credit in
accordance with the terms hereof, from time to time during the period commencing
on the Closing Date and ending on the Facility Termination Date.
(b) No Bank shall have any obligation to issue any Letter of Credit at
any time if:
(i) such Bank's Pro Rata Share of the aggregate maximum amount
then available for drawing under the Letters of Credit, after giving
effect to the issuance of the requested Letter of Credit, shall exceed
any limit imposed by law or regulation upon such Bank, written notice
of which limit has been given by such Bank to Seller and the Facility
Agent in accordance with Section 1.20;
(ii) after giving effect to the issuance of the requested
Letter of Credit, either: (A) the L/C Participation Amount would exceed
the L/C Facility Sub-Amount, (B) the Purchased Interest would exceed
100%; or (C) the sum of the aggregate outstanding Capital and L/C
Participation Amount would exceed the Purchase Limit;
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(iii) such Letter of Credit has an expiration date (A) more
than one year after the date of issuance (subject to renewal for an
additional year unless earlier terminated by sixty (60) days prior
written notice from the Facility Agent) or (B) later than three (3)
Business Days prior to the Facility Termination Date; or
(iv) such Letter of Credit has an aggregate face amount of
less than $500,000.
Section 1.16. Conditions to Issuance. In addition to being subject to
the satisfaction of the conditions contained in Exhibit II, the obligation of
the Banks to issue any Letter of Credit is subject to the satisfaction in full
of the following conditions:
(i) The Seller shall have timely delivered to the Facility
Agent and to each Bank at such times and in such manner as such Bank
may prescribe a Letter of Credit application as described below in
Section 1.17 and such other documents and materials as may be required
pursuant to the terms thereof, and the terms of the proposed Letter of
Credit shall be reasonably satisfactory to each Bank as to form and
content; and
(ii) as of the date of issuance no order, judgment or
decree of any court, arbitrator or Governmental Authority shall purport
by its terms to enjoin or restrain any Bank from issuing such Letter of
Credit and no law, rule or regulation applicable to any Bank and no
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over any Bank shall prohibit
or request that such Bank refrain from the issuance of letters of
credit generally or the issuance of that Letter of Credit.
Section 1.17. Issuance of Letters of Credit.
(a) Request For Issuance. The Seller shall give the Facility Agent at
least ten (10) Business Days' prior written notice of any requested issuance of
a Letter of Credit under this Agreement (except that, in lieu of such written
notice, the Seller may give telephonic notice of such request if confirmed
promptly in writing). Each such notice shall be in the form of a Letter of
Credit application attached hereto as Exhibit 1.17, shall be irrevocable and
shall specify the stated amount of the Letter of Credit requested, the effective
date (which day shall be a Business Day) of issuance of such requested Letter of
Credit, the date on which such requested Letter of Credit is to be delivered (if
different from the effective date), the date on which such requested Letter of
Credit is to expire, the purpose for which such Letter of Credit is to be
issued, the Person for whose benefit the requested Letter of Credit is to be
issued, and, if available, a copy of the form of the Letter of Credit that the
applicable beneficiary has requested. Such notice, to be effective, must be
received by the Facility Agent not later than 11:00 a.m. (New York City time) on
the last Business Day on which notice can be given under the first sentence of
this paragraph (a). Prior to the close of business on the Business Day following
the Business Day on which the Facility Agent makes the determination described
below pursuant to Section 1.17(b), the Facility Agent shall confirm to the
Seller by written notice, or telephonic notice confirmed promptly thereafter in
writing, whether the Banks are authorized to issue the requested Letter of
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Credit in accordance with Section 1.17(b), and, if they are so authorized, shall
promptly advise the Banks of such issuance and of each Bank's portion thereof.
(b) Responsibilities of the Facility Agent; Issuance. The Facility
Agent shall determine, as of the close of business on the third Business Day
immediately preceding the requested issuance date, each of (1) the excess of the
L/C Facility Sub-Amount over the L/C Participation Amount, and (2) the excess of
the Purchase Limit over the sum of the aggregate outstanding balance of the
Capital plus the L/C Participation Amount. If, and only if, the stated amount of
the requested Letter of Credit is less than or equal to the amount of each such
excess and subject to the satisfaction of the conditions set forth in Exhibit II
hereof, the Facility Agent shall authorize the Banks to issue the requested
Letter of Credit. Subject to the terms and conditions herein, the Banks shall,
on the requested date, issue such Letter of Credit on behalf of the Seller. In
this connection, the Facility Agent and each Bank may conclusively assume that
the applicable conditions set forth in Exhibit II hereof have been satisfied
unless the Facility Agent or such Bank, as the case may be, has knowledge to the
contrary or unless the Facility Agent or such Bank, as the case may be, shall
have received written notice to the contrary from the Facility Agent or a Bank.
(c) Form of Letter of Credit. Each Letter of Credit shall consist of a
single letter of credit issued on the same day by the Banks in counterpart form
ratably in accordance with their respective Pro Rata Shares. Promptly following
the Facility Agent's receipt of a request for issuance of a Letter of Credit
pursuant to Section 1.17(a) above, the Facility Agent shall prepare a form of
the Letter of Credit on the basis of the information provided in the request for
issuance and which is otherwise substantially in the form of Exhibit 1.17(c) and
shall cause execution copies of such Letter of Credit to be delivered to each
Bank. Each Bank shall promptly advise the Facility Agent of any objections it
has to the form of the proposed Letter of Credit. Each Bank shall, not later
than two (2) Business Days prior to the date of issuance of such Letter of
Credit, deliver to the Facility Agent a counterpart of such Letter of Credit,
duly executed by such Bank. After the Facility Agent's receipt of a counterpart
of such Letter of Credit from each Bank, but only if the Facility Agent shall
have received such counterparts from all Banks, and upon fulfillment of the
applicable conditions set forth in this Agreement, the Facility Agent shall make
such Letter of Credit available to the Seller on the requested issuance date.
The Seller agrees that, if any Letter of Credit is not issued on account of the
failure of a Bank to forward its counterpart, then no other Bank shall have any
liability on account of such failure or non-issuance.
(d) Notice of Issuance. The Facility Agent shall give each Bank written
notice, or telephonic notice confirmed promptly thereafter in writing, of the
issuance and delivery of a Letter of Credit, together with a copy of each such
Letter of Credit, as executed by all of the Banks.
(e) No Extension or Amendment. The Banks shall not extend any Letter of
Credit or amend any Letter of Credit to increase the face amount thereof unless
the requirements of this Section 1.17 are met as though a new Letter of Credit
was being requested and issued. If a Letter of Credit contains provisions for
renewal absent written notice from the Facility Agent, the Facility Agent shall
determine, as of the close of business on the third Business Day prior to
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<PAGE> 18
the last Business Day on which the Facility Agent is entitled to give such
notice of non-renewal, whether extension of the Letter of Credit would be
authorized in accordance with the foregoing sentence. The Facility Agent shall
not be required to give any such notice of non-renewal under this Section
1.17(e) and shall be entitled to assume that the applicable conditions set forth
in Exhibit II have been satisfied unless it has knowledge to the contrary or
unless it shall have received notice to the contrary from a Bank on or before
the third Business Day prior to the last Business Day on which the Facility
Agent is entitled to give such notice of non-renewal. In the event a Letter of
Credit contains provisions for renewal as described above, and the Facility
Termination Date has occurred, the Facility Agent shall give any required notice
of non-renewal at the earliest possible date on which the Facility Agent is
entitled to give such notice.
Section 1.18. Reimbursement Obligations.
(a) Reimbursement. Notwithstanding any provisions elsewhere to the
contrary, (i) the Seller shall reimburse each Bank for drawings under any Letter
of Credit unless and until such reimbursement obligations are extinguished as
provided below, (ii) such reimbursement obligations for drawings under a Letter
of Credit shall bear interest from the date of the relevant drawing until the
date of the Funded Purchase described in Section 1.2(e) at the same rate at
which Discount would then accrue for any Base Rate Portion of Capital hereunder
and (iii) the Seller's obligations to reimburse the Banks for the principal
amount of all drawings under a Letter of Credit shall be extinguished upon the
making of any Funded Purchases described in Section 1.2(e) or of payment of such
amount in full in cash.
(b) Duties of the Banks. Any action taken or omitted to be taken by the
Facility Agent or any Bank under or in connection with any Letter of Credit, if
taken or omitted in the absence of willful misconduct or gross negligence, shall
not put the Facility Agent or such Bank under any resulting liability to any
other Bank, or (assuming that the Facility Agent has complied with the
procedures specified in Section 1.16) relieve any Bank of its obligations
hereunder in respect of such Letter of Credit. In determining whether to
authorize payment under any Letter of Credit, the Facility Agent shall have no
obligation relative to the Banks or to the Seller other than to provide notice
as described in Section 1.19 and to confirm that any documents required to have
been delivered under such Letter of Credit appear to comply on their face with
the requirements of such Letter of Credit.
(c) Notwithstanding anything elsewhere to the contrary, (i) except as
otherwise provided in Section 1.18(a), all of the Seller's payment obligations
to the Banks in respect of the Letters of Credit (including any obligations to
reimburse the Banks for the outstanding amount of any drawings made thereunder)
shall constitute recourse obligations under this Agreement which are secured by
the Security Agreement; and (ii) none of the Seller's payment obligations with
respect to the Letters of Credit shall be guaranteed by Weirton.
Section 1.19. Payments under the Letters of Credit.
(a) Sharing of Letter of Credit Payments. In the event that the
Facility Agent receives a request for draw under any Letter of Credit, then,
unless the Seller shall have made available to the Facility Agent the amount of
such payment, the Facility Agent shall promptly notify each Bank of the amount
of such requested draw and shall promptly
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forward to each Bank a copy of all documents accompanying such requested draw.
Each Bank shall, no later than 11:00 a.m. (New York City time) on the third
Business Day following the Facility Agent's receipt of such request for draw,
either (i) notify the Facility Agent that it will dishonor such request and the
reason for such dishonor or (ii) unconditionally pay to the Facility Agent the
amount of such Bank's Pro Rata Share of such payment in U.S. dollars and in same
day funds. The Facility Agent shall promptly pay such amount, and any other
amounts received by the Facility Agent pursuant to this Section 1.19(a), to the
beneficiary thereof, or to the extent that the Banks or any Bank has refused to
forward funds, shall dishonor such request. Each such payment by the Banks to or
for the benefit of the beneficiary shall constitute a Funded Purchase under this
Agreement in accordance with Section 1.2(e) and shall cause a corresponding
reduction in the L/C Participation Amount. If the Facility Agent so notifies
such Bank prior to 11:00 a.m. (New York City time) on any Business Day, such
Bank shall make available to the Facility Agent its Pro Rata Share of the amount
of such payment on such Business Day in same day funds. The Facility Agent may
(but shall not be required to) assume that each Bank has made its Pro Rata Share
of the amount of such payment available to the Facility Agent and the Facility
Agent may (but shall not be required to) make available to the beneficiary of
the Letter of Credit a corresponding amount in reliance upon such assumption. If
and to the extent that any Bank shall not have made its portion of such payment
available to the Facility Agent and the Facility Agent has made available a
corresponding amount to the applicable beneficiary, such Bank and the Seller
each severally agree to repay to the Facility Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Seller until the date such amount is repaid
to the Facility Agent at (i) in the case of the Seller, at the Base Rate and
(ii) in the case of such Bank, at the Federal Funds Rate plus two percent (2%).
If such Bank shall repay to the Facility Agent such corresponding amount, such
amount shall constitute a Funded Purchase in accordance with the terms of this
Section 1.19 and Section 1.2(e).
(b) Sharing of Reimbursement Obligation Payments. If any Bank receives
a payment on account of a draw under a Letter of Credit, including any interest
thereon, as to which the Facility Agent has received any payments from the Banks
pursuant to this Section 1.19, such Bank shall promptly pay to the Facility
Agent and the Facility Agent shall promptly pay to each Bank, in U.S. dollars
and in the kind of funds so received, an amount equal to such Bank's Pro Rata
Share thereof. Each such payment shall be made by the Facility Agent on the
Business Day on which the Facility Agent receives the funds paid to it pursuant
to the preceding sentence, if received prior to 2:00 p.m. (New York City time)
on such Business Day and otherwise on the next succeeding Business Day, and each
such payment, when received, shall be applied by the Banks against the
outstanding Capital.
(c) Obligations Irrevocable. The obligations of a Bank to make payments
to the Facility Agent with respect to a Letter of Credit shall be irrevocable,
not subject to any qualification or exception whatsoever and shall be made in
accordance with, but not subject to, the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
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(i) any lack of validity or enforceability of this Agreement
or any of the other Transaction Documents;
(ii) the existence of any claim, setoff, defense or other
right which the Seller or Weirton may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter
of Credit (or any Person for whom any such transferee may be acting),
the Facility Agent, the Collateral Agent, any Bank, or any other
Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transactions between the Seller
or any other party and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Transaction
Documents; or
(v) the occurrence of any Termination Event or Unmatured
Termination Event.
Section 1.20. Indemnification; Exoneration.
(a) Indemnification. In addition to amounts payable as elsewhere
provided in this Agreement (including Article III), the Seller hereby agrees,
subject to Section 1.20(d), to protect, indemnify, pay and save the Facility
Agent, the Collateral Agent and each Bank harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) which the Facility Agent, the Collateral
Agent or such Bank may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit.
(b) Assumption of Risk by the Seller. As between the Seller, the Banks
the Facility Agent and the Collateral Agent, the Seller assumes all risks of the
acts and omissions of, or misuse of the Letters of Credit by, the respective
beneficiaries of the Letters of Credit. In furtherance and not in limitation of
the foregoing, subject to the provisions of the Letter of Credit applications,
the Facility Agent, the Collateral Agent and the Banks shall not be responsible:
(i) for the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for
and issuance of the Letters of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) for failure of the beneficiary of a
Letter of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telephone, facsimile or
otherwise;
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(v) for errors in interpretation of technical terms; (vi) for any loss or delay
in the transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of a Letter of Credit of the proceeds of any
drawing under such Letter of Credit; and (viii) for any consequences arising
from causes beyond the control of the Facility Agent, the Collateral Agent and
the Banks including, without limitation, any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto governmental
authority. None of the above shall affect, impair, or prevent the vesting of any
of the Banks' rights or powers under this Section 1.20.
(c) Exoneration. In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or omitted by
the Banks under or in connection with the Letters of Credit or any related
certificates, if taken or omitted in good faith, shall not put the Banks, the
Facility Agent or the Collateral Agent under any resulting liability to the
Seller or relieve the Seller of any of its obligations hereunder to any such
Person.
(d) Exceptions to Indemnity. Notwithstanding anything to the contrary
contained in this Section 1.20, the Seller shall have no obligation to indemnify
any Person under this Section 1.20 in respect of any liability arising primarily
out of the gross negligence or willful misconduct of such Person, as determined
by a court of competent jurisdiction and the Seller shall have no obligation to
indemnify any Bank under this Section 1.20 for any liability arising out of the
wrongful dishonor by such Bank of a proper demand for payment made under a
Letter of Credit.
Section 1.21. Taxes. The Seller agrees that:
(i) Any and all payments by the Seller under this Agreement shall be
made free and clear of and without deduction for any and all current or future
taxes, stamp or other taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on the net income of, franchise taxes imposed on, and taxes (other than
withholding taxes) imposed on the gross receipts or gross income of the Facility
Agent, the Collateral Agent or any Bank by the United States or by any
jurisdiction under whose laws the Facility Agent, the Collateral Agent or any
such Bank is organized or in which the office through which it makes its Funded
Purchases or issues Letters of Credit is located or any political subdivision of
any such jurisdiction (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Seller shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder to any Bank, the Collateral Agent or the Facility
Agent, then the sum payable shall be increased by the amount necessary to yield
to the Facility Agent, the Collateral Agent or such Bank (after payment of all
Taxes) an amount equal to the sum it would have received had no such deductions
been made.
(ii) Whenever any Taxes are payable by the Seller, as promptly as
possible thereafter, the Seller shall send to the Facility Agent for its own
account or for the account of any Bank or the Collateral Agent, as the case may
be, a certified copy of an original official receipt showing payment thereof or
such other evidence of such payment as may be available to the Seller and
acceptable to the taxing authorities having jurisdiction over such Agent or such
Bank,
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as applicable. If the Seller fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Facility Agent the
required receipts or other required documentary evidence, the Seller shall
indemnify the Agents and/or any other Bank, as applicable, for any incremental
taxes, interest or penalties that may become payable by such party as a result
of any such failure.
(iii) Unless the requirements of this Section 1.21(iii) are already
otherwise satisfied pursuant to the terms of the Original Agreement, on or
before the date it becomes a party to this Agreement and on any extension of its
Commitment, each Bank (and, to the extent applicable, any Agent) that is
organized under the laws of a jurisdiction outside the United States shall
deliver to the Seller such certificates, documents or other evidence, as
required by the Internal Revenue Code or Treasury Regulations issued pursuant
thereto, including (i) two original copies of Internal Revenue Service Form 1001
or Form 4224 or successor applicable form, properly completed and duly executed
by such Bank certifying in each case that such party is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, and (ii) an original copy of Internal Revenue
Service Form W-8 or W-9 (or applicable successor form) properly completed and
duly executed by such party.
(iv) the Seller shall not be required to pay any additional amounts to
any Bank or any Agent in respect of United States Federal withholding tax
pursuant to this Section 1.21 to the extent that the obligation to pay such
additional amounts would not have arisen but for a failure by such party to
comply with the provisions of paragraph (iii).
(v) Any Bank (or as applicable, any Agent) claiming any additional
amounts payable pursuant to this Section 1.21 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to take any action to avoid
or minimize any amounts that otherwise may be payable by the Seller pursuant to
this Section 1.21, including filing any certificate or document or changing the
jurisdiction of its applicable office from which it funds any Funded Purchases,
provided that such action would not, in the good faith determination of the
applicable affected party, be materially disadvantageous to it (it being
understood that materiality for these purposes shall be determined by reference
to the benefits received by such party under this Agreement). The Seller shall,
upon written request by any such Bank or Agent (which written request shall set
forth in reasonable detail the basis for requesting such amounts) promptly
compensate such Bank or Agent for any reasonable out of pocket costs incurred by
such Bank or Agent in undertaking any actions taken pursuant to this Section
1.21(v).
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the
Seller, Weirton and the Servicer hereby makes the representations and
warranties, and hereby agrees to perform and observe the covenants, applicable
to it set forth in Exhibits III and IV, respectively.
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Section 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit V shall occur, the Facility Agent may by notice to the Seller,
declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred); provided, that
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in paragraph (f) of Exhibit
V, the Facility Termination Date shall occur. Upon any such declaration,
occurrence or deemed occurrence of the Facility Termination Date, the Banks and
the Facility Agent shall have, in addition to the rights and remedies that they
may have under this Agreement, all other rights and remedies provided after
default under the New York UCC and under other applicable law, which rights and
remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other
rights that the Facility Agent, the Collateral Agent, any Bank, or any of their
respective Affiliates, employees, officers, directors, agents, counsel,
successors, transferees or assigns (each, an "Indemnified Party") may have
hereunder or under applicable law, the Seller hereby agrees to indemnify each
Indemnified Party from and against any and all claims, damages, expenses, costs,
losses and liabilities (including Attorney Costs) (all of the foregoing being
collectively referred to as "Indemnified Amounts"), which may be asserted
against or incurred by any of them, arising out of or resulting from this
Agreement (whether directly or indirectly), the use of proceeds of purchases or
reinvestments, the ownership of the Purchased Interest, or any interest therein,
or in respect of any Receivable, Related Security or Contract, excluding,
however: (a) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of such Indemnified Party or its officers,
directors, agents or counsel, (b) recourse (except as otherwise specifically
provided in this Agreement) for uncollectible Receivables, (c) any overall net
income taxes or franchise taxes imposed on such Indemnified Party by the
jurisdiction under the laws of which such Indemnified Party is organized or any
political subdivision thereof or (d) any lost profits, consequential, special or
punitive damages. Without limiting or being limited by the foregoing, and
subject to the exclusions set forth in the preceding sentence, the Seller shall
pay on demand (which demand shall be accompanied by documentation of the
Indemnified Amounts, in reasonable detail) to each Indemnified Party any and all
amounts necessary to indemnify such Indemnified Party from and against any and
all Indemnified Amounts relating to or resulting from any of the following:
(i) the failure of any Receivable included in the calculation
of the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in any
Settlement Statement or Daily Report to be true and correct, or the
failure of any other information provided to any Bank or the Facility
Agent with respect to Receivables or this Agreement to be true and
correct,
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(ii) the failure of any representation, warranty or
certification made or deemed made by the Seller (or any of its
officers) under or in connection with this Agreement to have been true
and correct as of the date made or deemed made in all respects when
made,
(iii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the
related Contract, or the failure of any Pool Receivable or the related
Contract to conform to any such applicable law, rule or regulation,
(iv) the failure to vest in the Facility Agent (on behalf of
the Banks) a valid and enforceable: (A) perfected undivided percentage
ownership or security interest, to the extent of the Purchased
Interest, in the Receivables in, or purporting to be in, the
Receivables Pool and the other Pool Assets, or (B) first priority
perfected security interest in the Pool Assets, in each case, free and
clear of any Adverse Claim,
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables in, or purporting to be in, the Receivables
Pool and the other Pool Assets, whether at the time of any purchase or
reinvestment or at any subsequent time,
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable in, or purporting to be in, the Receivables Pool
(including a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other
claim resulting from the sale of the goods or services related to such
Receivable or the furnishing or failure to furnish such goods or
services or relating to collection activities with respect to such
Receivable,
(vii) any failure of the Seller to perform its duties or
obligations in accordance with the provisions hereof,
(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, insurance or services that are the subject of any
Contract,
(ix) the commingling of Collections at any time with other
funds,
(x) the use of proceeds of purchases or reinvestments, or
(xi) any reduction in Capital as a result of the distribution
of Collections pursuant to Section 1.4(d), if all or a portion of such
distributions shall thereafter be rescinded or otherwise must be
returned for any reason.
Section 3.2. Indemnities by the Servicer. Without limiting any other
rights that the Facility Agent, the Collateral Agent, the Banks or any other
Indemnified Party may have
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hereunder or under applicable law, the Servicer hereby agrees to indemnify each
Indemnified Party from and against any and all Indemnified Amounts arising out
of or resulting from (whether directly or indirectly): (a) the failure of any
information contained in any Settlement Statement or Daily Report to be true and
correct, or the failure of any other information provided to any Bank or the
Facility Agent by, or on behalf of, the Servicer to be true and correct, (b) the
failure of any representation, warranty or statement made or deemed made by the
Servicer (or any of its officers) under or in connection with this Agreement to
have been true and correct as of the date made or deemed made in all respects
when made, (c) the failure by the Servicer to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related Contract,
(d) any dispute, claim, offset or defense of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool resulting from or
related to the collection activities with respect to such Receivable, or (e) any
failure of the Servicer to perform its duties or obligations in accordance with
the provisions hereof.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. (a) The servicing,
administering and collection of the Pool Receivables shall be conducted by the
Person so designated from time to time as the Servicer in accordance with this
Section. Until the Facility Agent gives notice to Weirton (in accordance with
this Section) of the designation of a new Servicer, Weirton is hereby designated
as, and hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms hereof. Upon the occurrence of a Termination Event, the
Facility Agent may designate as Servicer any Person (including itself) to
succeed Weirton or any successor Servicer, on the condition in each case that
any such Person so designated shall agree to perform the duties and obligations
of the Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in clause
(a), Weirton agrees that it will terminate its activities as Servicer hereunder
in a manner that the Facility Agent determines will facilitate the transition of
the performance of such activities to the new Servicer, and Weirton shall
cooperate with and assist such new Servicer. Such cooperation shall include,
upon reasonable notice and during regular business hours, access to and transfer
of related records and use by the new Servicer of all licenses, hardware or
software necessary or desirable to collect the Pool Receivables and the Related
Security.
(c) Weirton acknowledges that, in making their decision to execute and
deliver this Agreement, the Facility Agent and the Banks have relied on
Weirton's agreement to act as Servicer hereunder. Accordingly, Weirton agrees
that it will not voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each a "Sub-Servicer"); provided, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable for the performance of the duties and obligations
so delegated, (iii) the Seller, the Facility Agent and the Banks shall have the
right to
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look solely to the Servicer for performance and (iv) the terms of any agreement
with any Sub-Servicer shall provide that the Facility Agent may terminate such
agreement upon the termination of the Servicer hereunder by giving notice of its
desire to terminate such agreement to the Servicer (and the Servicer shall
provide appropriate notice to each such Sub-Servicer); provided, however, that
if any such delegation is to any Person other than an Affiliate of the Servicer,
the Facility Agent shall have consented (which consent shall not be unreasonably
withheld) in writing in advance to such delegation.
Section 4.2. Duties of the Servicer. (a) The Servicer shall take or
cause to be taken all such action as may be necessary or advisable to administer
and collect each Pool Receivable from time to time, all in accordance with this
Agreement and all applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection Policies. The
Servicer may, in accordance with the applicable Credit and Collection Policy,
extend the maturity of any Pool Receivable (but not beyond 30 days) and extend
the maturity or adjust the Outstanding Balance of any Defaulted Receivable as
the Servicer may determine to be appropriate to maximize Collections thereof;
provided, however, that: (i) such extension or adjustment shall not alter the
status of such Pool Receivable as a Delinquent Receivable or a Defaulted
Receivable or limit the rights of the Banks or the Facility Agent under this
Agreement and (ii) if a Termination Event has occurred and Weirton or an
Affiliate thereof is serving as the Servicer, Weirton or such Affiliate may make
such extension or adjustment to an Eligible Receivable only upon the prior
written approval of the Facility Agent. The Seller shall deliver to the Servicer
and the Servicer shall hold for the benefit of the Seller and the Facility Agent
(for the benefit of the Banks and individually), in accordance with their
respective interests, all records and documents (including computer tapes or
disks) with respect to each Pool Receivable. Notwithstanding anything to the
contrary contained herein, the Facility Agent may, so long as the Purchased
Interest is greater than or equal to 50%, following the occurrence and during
the continuation of a Termination Event, direct the Servicer (whether the
Servicer is Weirton or any other Person) to commence or settle any legal action
to enforce collection of any Pool Receivable or to foreclose upon or repossess
any Related Security.
(b) The Servicer's obligations hereunder shall terminate on the latest
of the Facility Termination Date, the date on which no Capital of or Discount in
respect of the Purchased Interest shall be outstanding, the date the L/C
Participation Amount is cash collateralized in full or the date all other
amounts owed by the Seller under the Agreement to any Bank, the Facility Agent
and any other Indemnified Party or Affected Person shall be paid in full.
After such termination, if Weirton or an Affiliate thereof was not the
Servicer on the date of such termination, the Servicer shall promptly deliver to
the Seller all books, records and related materials that the Seller previously
provided to the Servicer, or that have been obtained by the Servicer, in
connection with this Agreement.
Section 4.3. Lock-Box Arrangements and Collection Account Arrangements.
Prior to the initial purchase hereunder the Seller shall have transferred to the
Collateral Agent for the benefit of the Banks and the Agents the exclusive
ownership and control of the Lock-Box Accounts and all related lock-boxes owned
by the Seller. Each Lock-Box Bank has been and shall continue to be instructed
to remit, on a daily basis, via overnight or same day transfer, all amounts
deposited
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in its Lock-Box Accounts to a segregated trust account maintained with and under
the exclusive control of the Collateral Agent for the benefit of the Banks (the
"Collection Account") in accordance with the terms of a Lock-Box Agreement
substantially in the form of Exhibit 9.01 to the Original Agreement. The Seller
shall have no legal ownership of or control over the Collection Account and no
rights of withdrawals therefrom except for the right to receive distributions
pursuant to Section 1.4 of this Agreement. The Servicer shall advise the Seller
and the Agents daily of the amount of Collections to be received into the
Collection Account on each Business Day with respect to the Receivables and the
Facility Agent shall advise the Seller, the Servicer and the Collateral Agent as
to the amounts of such Collections which constitute Collections in excess of the
amounts described in Section 1.4(b)(iv). If the Seller, the Servicer or their
respective agents or representatives shall at any time receive any cash, checks
or other instruments constituting Collections, such recipient shall segregate
such payment and hold such payment in trust for and in a manner acceptable to
the Agents, and shall, promptly upon identification of any such payment (and in
any event within one Business Day following such identification), remit all such
cash, checks and instruments, duly endorsed or with duly executed instruments of
transfer, to a Lock-Box Account or the Collection Account.
Section 4.4. Enforcement Rights. (a) At any time following the
occurrence of a Termination Event:
(i) with contemporaneous notice to the Seller, the Facility
Agent may notify any or all of the Obligors of the Banks' interest in
the Pool Receivables and may direct any or all of the Obligors of Pool
Receivables to pay all amounts payable under any such Receivables
directly to the Collateral Agent or its designee;
(ii) at the Facility Agent's request and at the Seller's
expense, the Seller shall give notice of the Banks' interest in the
Pool Receivables to each Obligor and direct that payments be made
directly to the Collateral Agent or its designee;
(iii) the Seller shall assemble all books and records
necessary or desirable to collect the Pool Receivables and Related
Security, and make the same available to the Collateral Agent at a
place selected by the Collateral Agent or its designee; and
(iv) the Collateral Agent may enforce the Sale Agreement
against the parties thereto and shall have the right to give or
withhold any or all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect thereto, to the
same extent as the Seller would otherwise be entitled to do.
(b) The Seller hereby authorizes the Banks, and gives to the Banks its
irrevocable power of attorney, which shall be coupled with an interest, and the
Banks hereby designate the Collateral Agent to exercise such authorization and
power of attorney, to take any and all steps in the name of the Seller, which
steps are necessary or desirable, in the reasonable determination of the
Collateral Agent, to collect all amounts due under the Pool Receivables and
Related Security, including, without limitation, endorsing the Seller's name on
checks and other instruments representing Collections and, upon the occurrence
and during the continuance of a Termination Event, enforcing such Receivables
and the related Contracts. Notwithstanding anything to the
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contrary contained in this subsection, none of the powers conferred upon such
attorney-in-fact pursuant to the preceding sentence shall subject such
attorney-in-fact to any liability if any action taken by it shall prove to be
inadequate or invalid, nor shall they confer any obligations upon such
attorney-in-fact in any manner whatsoever.
(c) The Servicer shall, following notification that collections of any
receivable or other intangible owed to Weirton or an Affiliate thereof, which is
not a Pool Receivable, have been deposited into the Lock-Box Accounts, or the
Collection Account, request the Collateral Agent to segregate such collections.
Promptly after such misapplied collections have been reasonably identified to
the Collateral Agent, the Collateral Agent shall turn over to Weirton or such
Affiliate, as applicable, all such collections less all reasonable and
appropriate out-of-pocket costs and expenses, if any, incurred by the Collateral
Agent in identifying and collecting such receivables.
Section 4.5. Responsibilities of the Seller. (a) Anything herein to the
contrary notwithstanding, the Seller shall (directly or indirectly by causing
the Originator to): (i) perform all of its obligations, if any, under the
Contracts related to the Pool Receivables to the same extent as if interests in
such Pool Receivables had not been transferred hereunder, and the exercise by
the Facility Agent or any Bank of their respective rights hereunder shall not
relieve the Seller from such obligations, and (ii) pay when due any taxes,
including any sales taxes payable in connection with the Pool Receivables and
their creation and satisfaction. The Facility Agent and the Banks shall not have
any obligation or liability with respect to any Pool Asset, nor shall any of
them be obligated to perform any of the obligations of the Seller, Weirton or
the Originator thereunder.
(b) Weirton hereby irrevocably agrees that if at any time it shall
cease to be the Servicer hereunder, it shall act (if the then-current Servicer
so requests) as the data-processing agent of the Servicer and, in such capacity,
Weirton shall conduct the data-processing functions of the administration of the
Receivables and the Collections thereon in substantially the same way that
Weirton conducted such data-processing functions while it acted as the Servicer.
Section 4.6. Servicing Fee. (a) Subject to clause (b), the Servicer
shall be paid a fee equal to 0.25% per annum (the "Servicing Fee Rate") of the
daily average aggregate Outstanding Balance of the Pool Receivables. The Banks'
Share of such fee shall be paid through the distributions contemplated by
Section 1.4(d), and the Seller's Share of such fee shall be paid by the Seller.
(b) If the Servicer ceases to be Weirton or an Affiliate thereof, the
servicing fee shall be the greater of: (i) the amount calculated pursuant to
clause (a) and (ii) an alternative amount specified by the successor Servicer
not to exceed 110% of the aggregate reasonable costs and expenses incurred by
such successor Servicer in connection with the performance of its obligations as
Servicer.
Section 4.7. Authorization and Action of the Agents. Each Bank hereby
accepts the appointment of and irrevocably authorizes each of the Agents to take
such action as agent on its behalf and to exercise such powers as are delegated
to such Agent by the terms hereof, together
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with such powers as are reasonably incidental thereto. Neither Agent shall be
required to take any action which exposes such Agent to personal liability or
which is contrary to this Agreement or applicable law. Except where this
Agreement expressly provides otherwise, each Agent agrees to give to the other
Agent and to each Bank prompt notice of each notice given to it by the Seller or
Servicer pursuant to the terms of this Agreement. The appointment and authority
of the Agents hereunder shall terminate at the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding, the date the L/C Participation Amount
is cash collateralized in full or the date all other amounts owed by the Seller
under the Agreement to any Bank, the Facility Agent and any other Indemnified
Party or Affected Person shall be paid in full.
Section 4.8. Nature of Agents' Duties. The Agents shall have no duties
or responsibilities except those expressly set forth in this Agreement or in the
other Transaction Documents. The duties of the Agents shall be mechanical and
administrative in nature. Neither Agent shall have by reason of this Agreement a
fiduciary relationship in respect of the other Agent or any Bank. Nothing in
this Agreement or any of the Transaction Documents, express or implied, is
intended to or shall be construed to impose upon either Agent any obligations in
respect of this Agreement or any of the Transaction Documents except as
expressly set forth herein or therein. Neither Agent shall have any duty or
responsibility, either initially or on a continuing basis, to provide any Bank
or the other Agent with any credit or other information with respect to the
Seller or the Servicer, whether coming into its possession before the date
hereof or at any time or times thereafter. If either Agent seeks the consent or
approval of the Banks to the taking or refraining from taking any action
hereunder, such Agent shall send notice thereof to each Bank. The Agents shall
promptly notify each Bank any time that the Banks have instructed the Agents to
act or refrain from acting pursuant hereto.
Section 4.9. UCC Filings. Each of the Seller and the Banks expressly
recognizes and agrees that the Collateral Agent may be listed as the assignee or
secured party of record on the various UCC filings required to be made hereunder
in order to perfect the transfer of the Purchased Interest from the Seller to
the Banks, that such listing shall be for administrative convenience only in
creating a record or nominee owner to take certain actions hereunder on behalf
of the Banks and that such listing will not affect in any way the status of the
Banks as the beneficial owners of the Purchased Interest. In addition, such
listing shall impose no duties on the Collateral Agent other than those
expressly and specifically undertaken in accordance with this Section 4.9. In
furtherance of the foregoing, each Bank shall be entitled to enforce its rights
created under this Agreement without the need to conduct such enforcement
through the Facility Agent or the Collateral Agent except as provided herein.
Section 4.10. Agent's Reliance, Etc. Neither of the Agents nor any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them as Agent under or in
connection with this Agreement (including, without limitation, such Agent's
servicing, administering or collecting Receivables as Collection Agent) except
for its or their own gross negligence or willful misconduct. Without limiting
the foregoing, each Agent: (i) may consult with legal counsel (including counsel
for the Seller), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants
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or experts; (ii) makes no warranty or representation to the other Agent or to
any Bank and shall not be responsible to the other Agent or any Bank for any
statements, warranties or representations made in or in connection with this
Agreement; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Seller or to inspect the property (including the
books and records) of the Seller; (iv) shall not be responsible to the other
Agent or to any Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency, or value of this Agreement, or any other instrument or
document furnished pursuant hereto; and (v) shall incur no liability under or in
respect of this Agreement by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be by
telex) believed by it to be genuine and signed or sent by the proper party or
parties. Each Agent may at any time request instructions from the Banks with
respect to any actions or approvals which by the terms of this Agreement or of
any of the other Transaction Documents such Agent is permitted or required to
take or to grant, and if such instructions are promptly requested, such Agent
shall be absolutely entitled to refrain from taking any action or to withhold
any approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the
Transaction Documents until it shall have received such instructions from the
Majority Banks (or, where expressly required hereunder, from the Required Banks
or all of the Banks). Without limiting the foregoing, no Bank shall have any
right of action whatsoever against either Agent as a result of such Agent acting
or refraining from acting under this Agreement or any of the other Transaction
Documents in accordance with the instructions of the Majority Banks (or, where
expressly required hereunder, the Required Banks or all of the Banks).
Section 4.11. Agent and Affiliates. To the extent that the Agents or
any of their Affiliates are or shall become Banks hereunder, such Agent or such
Affiliate, in such capacity, shall have the same rights and powers under this
Agreement as would any other Bank hereunder and may exercise the same as though
it were not an Agent. Each Agent and its Affiliates may generally engage in any
kind of business with the Seller, Weirton or the Servicer, any of their
respective Affiliates and any Person who may do business with or own securities
of the Seller, Weirton or the Servicer or any of their respective Affiliates,
all as if it were not an Agent hereunder and without any duty to account
therefor to the other Agent or the Banks.
Section 4.12. Purchase Decision. Each Bank acknowledges that it has,
independently and without reliance upon either Agent or any other Bank and based
on such documents and information as it has deemed appropriate, made its own
evaluation and decision to enter into this Agreement and, to the extent it so
determines, to issue Letters of Credit and/or to purchase an undivided ownership
interest in Receivables hereunder. Each Bank also acknowledges that it will,
independently and without reliance upon either Agent or any other Bank, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own decisions in taking or not taking action under
this Agreement.
Section 4.13. Indemnification. Each Bank agrees to indemnify the Agents
(to the extent not reimbursed by the Seller), ratably according to its Pro Rata
Share, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or
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asserted against the Agents in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agents under this Agreement;
provided, however, that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements resulting from such Agent's gross negligence
or willful misconduct. Without limiting the generality of the foregoing, each
Bank agrees to reimburse the Agents, ratably according to their Pro Rata Shares,
promptly upon demand, for any out-of-pocket expenses (including reasonable
counsel fees) incurred by the Agents in connection with the administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of their rights or
responsibilities under, this Agreement.
Section 4.14. Successor Agent. Either Agent may resign at any time by
giving thirty days' notice thereof to the other Agent, the Banks, the Seller and
the Collection Agent. The Required Banks may remove an Agent for cause. Upon any
such resignation or removal, the Majority Banks shall have the right to appoint
a successor Agent approved by the Seller (which approval will not be
unreasonably withheld or delayed). If no successor Agent shall have been so
appointed and accepted such appointment within 30 days after the retiring
Agent's giving of notice of resignation, then the retiring or removed Agent may,
on behalf of the Banks appoint a successor Agent approved by the Seller (which
approval will not be unreasonably withheld or delayed), which successor Agent
shall be (a) either (i) a commercial bank having a combined capital and surplus
of at least $500,000,000 or (ii) an Affiliate of such an institution and (b)
experienced in the types of transactions contemplated by this Agreement. In
addition, any successor Collateral Agent must be authorized under United States
law to maintain and operate the Collection Account. Upon the acceptance of any
appointment as an Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Section 4.14 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was an Agent under this Agreement.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. No amendment to or waiver of any
provision of this Agreement or the other Transaction Documents, nor consent to
any departure by Seller therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Seller, the Servicer, the Facility
Agent and the Majority Banks; provided, however, that no such amendment shall
(i) decrease the outstanding amount of, or extend the repayment of or any
scheduled payment date for the payment of, any Discount in respect of any
Portion of Capital or any fees owed to a Bank without the prior written consent
of such Bank; (ii) forgive or waive or
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otherwise excuse any repayment of Capital without the prior written consent of
each Bank affected thereby; (iii) increase the Commitment of any Bank without
its prior written consent; (iv) amend or modify the Pro Rata Share of any Bank
without its prior written consent; (v) amend or modify the provisions of this
Section 5.1 or the definition of "Majority Banks" or "Required Banks" without
the prior written consent of all Banks; (vi) waive any Termination Event arising
from an Event of Bankruptcy with respect to Seller or Weirton; (vii) without the
prior written consent of all Banks, waive, amend or otherwise modify the
definition of Facility Termination Date; (viii) amend, modify or otherwise
affect the rights or duties of the Facility Agent, or the Collateral Agent
hereunder without the prior written consent of the Facility Agent or the
Collateral Agent, as applicable; and (ix) amend, waive or modify any definition
or provision expressly requiring the consent of the Required Banks without the
prior written consent of the Required Banks. Any such waiver, consent or
approval shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on Seller in any case shall
entitle Seller to any other or further notice or demand in the same, similar or
other circumstances. Notwithstanding anything to the contrary in this Section
5.1, no material amendment of any provision of this Agreement or any other
Transaction Document shall be effective unless the Rating Agency Condition has
been satisfied.
Section 5.2. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party hereto
at its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent (and shall be followed by hard copy sent by first class mail), and
notices and communications sent by other means shall be effective when received.
Section 5.3 Successors and Assigns; Assignment; Participations. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
all covenants, promises and agreements by or on behalf of any parties hereto
that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and assigns. The Seller may not assign or transfer
any of its rights or obligations hereunder without the written consent of the
Facility Agent and the Required Banks. Each of the Banks, with the prior written
consent of the Facility Agent and of the Seller (such consent not to be
unreasonably withheld), may assign any of its interests, rights and obligations
hereunder or any of its Pro Rata Share of the Purchased Interest to an Eligible
Assignee; provided, that (i) the Commitment amount to be assigned hereunder
shall not be less than $5,000,000 and (ii) prior to the effective date of any
such assignment, the assignee and assignor shall have executed and delivered to
the Facility Agent and to the Seller an Assignment and Acceptance substantially
in the form of Annex D hereto. Upon the effectiveness of any such permitted
assignment, (i) the assignee thereunder shall, to the extent of the interests
assigned to it, be entitled to the interests, rights and obligations of a Bank
under this Agreement and (ii) the assigning Bank shall, to the extent of the
interest assigned, be released from its obligations under this Agreement.
(b) Notwithstanding anything contained in paragraph (a) of this Section
5.3, (i) each Bank may at any time pledge or assign all or any portions of its
interests and rights under this
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Agreement to a Federal Reserve Bank, and (ii) each Bank may sell participations
in all or any part of any Funded Purchase or Funded Purchases made by such Bank
to another Bank or other entity so long as (A) no such grant of a participation
shall, without the consent of the Seller, require the Seller to file a
registration statement with the Securities and Exchange Commission and (B) no
holder of any such participation shall be entitled to require such Bank to take
or omit to take any action hereunder except that such Bank may agree with such
participant that, without such participant's consent, such Bank will not consent
to an amendment, modification or waiver referred to in clauses (i) through (vi)
of Section 5.1. Any such participant shall not have any rights hereunder or
under the Transaction Documents except that such participant shall have rights
under Sections 1.8, 1.9 and 1.11 hereunder as if it were a Bank; provided that
no such participant shall be entitled to receive any payment pursuant to such
sections which is greater in amount than the payment which the transferor Bank
would have otherwise been entitled to receive in respect of the participation
interest so sold.
(c) This Agreement and the rights and obligations of the Facility Agent
hereunder shall be assignable, in whole or in part, by the Facility Agent and
its successors and assigns; provided, that, unless: (i) such assignment is to an
Affiliate of PNC, (ii) it becomes unlawful for PNC to serve as the Facility
Agent or (iii) a Termination Event exists, the Seller has consented to such
assignment, which consent shall not be unreasonably withheld.
(d) Without limiting any other rights that may be available under
applicable law, the rights of each Bank may be enforced through it or by its
agents.
Section 5.4 Costs, Expenses and Taxes. (a) In addition to the
indemnification provisions set forth in Sections 1.20 and 3.1, the Seller shall
pay on demand (i) all reasonable out-of-pocket fees and expenses (including
reasonable attorneys fees and expenses) of the Agents incurred in connection
with the preparation, execution, delivery, administration, amendment,
modification and waiver of this Agreement and the other Transaction Documents
and the making and repayment of the Funded Purchases and (ii) all reasonable
out-of-pocket fees and expenses of the Agents and the Banks (including
reasonable attorneys' fees and expenses of a set of counsel for the Banks)
incurred from and after a Termination Event in connection with the enforcement
of this Agreement and the other Transaction Documents against the Seller and
Weirton, including, without limitation, any Servicer fees paid to any third
party other than the Seller or Weirton for services rendered to the Banks and
the Agents in collecting the Receivables and the other Related Security.
(b) In addition, the Seller will pay any and all stamp and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery, filing, recording or enforcement of this Agreement or the other
Transaction Documents, and hereby indemnifies and saves the Agents and the Banks
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
Section 5.5 Confidentiality. Each of the Facility Agent and the Banks
(i) acknowledges that certain information it may receive pursuant hereto is
information which is subject to the confidentiality restrictions set forth in
Section 7.07 of the Sale Agreement; and (ii) agrees, for the
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benefit of WRI and Weirton, to use such information in accordance with such
Section 7.07 and not to take any action that causes a violation of such Section
7.07.
Section 5.6 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF PENNSYLVANIA OR OF THE UNITED STATES
FEDERAL COURT SITTING IN PITTSBURGH, PENNSYLVANIA; AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED
BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY APPLICABLE LAW.
Section 5.7 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
Section 5.8 Survival of Termination. The provisions of Sections 1.8,
1.9, 1.20, 3.1, 3.2, 5.4, 5.5, 5.6, and 5.9 shall survive any termination of
this Agreement.
Section 5.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO
AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO
FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION,
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COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT.
Section 5.10 Entire Agreement. This Agreement and the other Transaction
Documents embody the entire agreement and understanding between the parties
hereto, and supersede all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof.
Section 5.11 Headings. The captions and headings of this Agreement and
in any Exhibit, Schedule or Annex hereto are for convenience of reference only
and shall not affect the interpretation hereof or thereof.
Section 5.12 No Proceedings. Each of the Facility Agent, the Collateral
Agent and each Bank, hereby agrees that it will not institute against the Seller
any involuntary proceeding of the type described in the definition of
"Insolvency Proceeding" as set forth in Exhibit I hereto so long as this
Agreement remains in full force and effect and for at least one year and one day
following the termination of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
WEIRTON RECEIVABLES, INC.
By: /s/ Narendra M. Pathipati
Name: Narendra M. Pathipati
Title: President & Treasurer
Address:
400 Three Springs Drive
Weirton, WV 26062-4989
Attention:
Telephone No.: (304) 797-2226
Facsimile No.: (304) 797-2048
WEIRTON STEEL CORPORATION
By: /s/ Narendra M. Pathipati
Name: Narendra M. Pathipati
Title: Sr. Vice-President, Corporate
Development & Strategy
Address:
400 Three Springs Drive
Weirton, WV 26062-4989
Attention:
Telephone No.: (304) 797-2226
Facsimile No.: (304) 797-2048
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PNC BANK, NATIONAL ASSOCIATION,
as Facility Agent and Collateral
Agent
By: /s/ Mark W. Rutherford
Name: Mark W. Rutherford
Title: Senior Vice President
Address:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Attention: Mark Rutherford
Telephone No.: (412) 762-6278
Facsimile No.: (412) 705-3232
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THE BANKS:
$35,000,000 PNC BANK, NATIONAL ASSOCIATION,
as a Bank
By: /s/ Mark W. Rutherford
Name: Mark W. Rutherford
Title: Senior Vice President
Address:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Attention: Mark Rutherford
Telephone No.: (412) 762-6278
Facsimile No.: (412) 705-3232
$15,000,000 NATIONAL CITY BANK OF PENNSYLVANIA
By: /s/ John E. Ciccolella
Name: John E. Ciccolella
Title: Vice President
Address:
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National City Bank of Pennsylvania
20 Stanwix Street
Pittsburgh, Pennsylvania 15220-4802
Attention: John E. Ciccolella
Telephone No.: (412) 644-6075
Facsimile No.: (412) 471-4883
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$30,000,000 BANCO DI NAPOLI
By: /s/ Claude P. Mapes
Name: Claude P. Mapes
Title: First Vice President
By: /s/ Francesco Di Mario
Name: Francesco Di Mario
Title: Vice President
Address:
Banco di Napoli
New York Branch
4 East 54th Street
New York, New York 10022
Attention: Francesco di Mario
Telephone No.: (212) 872-2415
Facsimile No.: (212) 872-2428
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EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules and
Annexes), the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule
references in this Exhibit are to Sections of and Annexes, Exhibits and
Schedules to the Agreement.
"Administration Account" means the account (account number
196030010890) of the Facility Agent maintained at the office of PNC at One PNC
Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15220-2707, or such other
account as may be so designated in writing by the Facility Agent to the
Servicer.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being understood
that any thereof in favor of the Seller as against the Originator or in favor of
the Facility Agent (for the benefit of the Banks) shall not constitute an
Adverse Claim.
"Affected Bank" has the meaning set forth in Section 1.10(b) of the
Agreement.
"Affected Person" has the meaning set forth in Section 1.8 of the
Agreement.
"Affiliate" means, as to any Person: (a) any Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (b) who is a director or officer: (i) of such Person or (ii) of
any Person described in clause (a). For purposes of this definition, control of
a Person shall mean the power, direct or indirect: (x) to vote more than 50% of
the securities having ordinary voting power for the election of directors of
such Person or (y) to direct or cause the direction of the management and
policies of such Person, in either case whether by ownership of securities,
contract, proxy or otherwise.
"Agent Fee" has the meaning set forth in Section 1.5 of the Agreement.
"Agents" means the Collateral Agent and the Facility Agent.
"Agreement" has the meaning set forth in the preamble to the Agreement.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel and all reasonable
disbursements of internal counsel.
"Ball Receivable" means a Receivable, the Obligor of which is Ball
Corporation or any Affiliate or Subsidiary of Ball Corporation
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"Bank" has the meaning set forth in the preamble to the Agreement.
"Banks' Share" of any amount means such amount multiplied by the
Purchased Interest at the time of determination.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C. Section 101, et seq.), as amended from time to time.
"Base Rate" means for any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal to
the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by PNC in Pittsburgh, Pennsylvania as its
"prime rate." Such "prime rate" is set by PNC based upon various
factors, including PNC's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such
announced rate, and
(b) 0.50% per annum above the latest Federal Funds Rate.
"Base Rate Portion of Capital" shall mean a Portion of Capital the
Discount on which is calculated at a per annum rate based on the Yield Rate
determined by reference to the Base Rate.
"BBA" means the British Bankers' Association.
"Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, the Originator, Weirton or
any ERISA Affiliate is, or at any time during the immediately preceding six
years was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day (other than a Saturday or Sunday) on
which: (a) banks are not authorized or required to close in New York, New York
or Pittsburgh, Pennsylvania, and (b) if this definition of "Business Day" is
utilized in connection with the Euro-Rate, dealings are carried out in the
London interbank market.
"Capital" means the aggregate amounts paid to the Seller in connection
with Funded Purchases in respect of the Purchased Interest by the Banks pursuant
to Section 1.2 of the Agreement, as reduced from time to time by Collections
distributed and applied on account of such Capital pursuant to Section 1.4(d) of
the Agreement; provided, that if such Capital shall have been reduced by any
distribution and thereafter all or a portion of such distribution is rescinded
or must otherwise be returned for any reason, such Capital shall be increased by
the amount of such rescinded or returned distribution as though it had not been
made.
"Cash Discount Ratio" means the ratio (expressed as a percentage and
rounded to the nearest 1/100th of 1%) computed as of the last day of each
calendar month by dividing: (a) the aggregate amount of cash discounts taken
against amounts owed on Pool Receivables during such month, by (b) the aggregate
credit sales made by the Originator during the calendar month that is one
calendar month prior to such calendar month.
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"Cash Discount Reserve" means, on any day, an amount equal to: (a) the
sum of the Capital and the L/C Participation Amount at the close of business of
the Servicer on such date, multiplied by (b) (i) the Cash Discount Reserve
Percentage on such date, divided by (ii) 1 minus the Cash Discount Reserve
Percentage on such date.
"Cash Discount Reserve Percentage" means, as of any date, the greater
of (a) 2.0% and (b) the Cash Discount Ratio.
"Change in Control" means that Weirton ceases to own, directly or
indirectly, 100% of the capital stock of the Seller free and clear of all
Adverse Claims (other than Adverse Claims in favor of any lender to Weirton
which (x) has acknowledged that such Adverse Claims do not extend to the assets
of the Seller, (y) otherwise acknowledges the corporate separateness of the
Seller on terms reasonably satisfactory to the Facility Agent and (z) has
entered into an intercreditor agreement with the Facility Agent, the terms and
conditions of which are reasonably satisfactory to the Facility Agent).
"Closing Date" means March 26, 1999.
"Collateral Agent" means PNC, as Collateral Agent under the Security
Agreement.
"Collections" means, with respect to any Pool Receivable: (a) all funds
that are received by the Originator, Weirton, the Seller or the Servicer in
payment of any amounts owed in respect of such Receivable (including purchase
price, finance charges, interest and all other charges), or applied to amounts
owed in respect of such Receivable (including insurance payments and net
proceeds of the sale or other disposition of repossessed goods or other
collateral or property of the related Obligor or any other Person directly or
indirectly liable for the payment of such Pool Receivable and available to be
applied thereon), (b) all Collections deemed to have been received pursuant to
Section 1.4(e) of the Agreement and (c) all other proceeds of such Pool
Receivable.
"Collection Account" means account number 1000310054 maintained at PNC.
"Collection Account Agreement" means an agreement among the Seller, the
Collateral Agent and a Collection Account Bank.
"Collection Account Bank" means PNC in its capacity as Collection
Account Bank.
"Commitment Fee" has the meaning set forth in Section 1.5 of the
Agreement.
"Commitment" shall mean, as to any Bank, its commitment to make Funded
Purchases and to issue Letters of Credit up to that dollar amount set forth
opposite its name on the signature pages to the Agreement, (or, as applicable,
set forth in any amendment thereto or set forth in any Assignment and Acceptance
entered into pursuant to Section 1.14 as such dollar amount may be reduced
pursuant to Section 1.1(b) of the Agreement, and "Commitments" shall mean the
aggregate commitments of the Banks to make purchases and to issue Letters of
Credit up to the Purchase Limit (or, if less, the amount permitted under Section
1.1(a)).
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"Company Note" means the Short-Term Note provided for in Section
2.02(e) of the Sale Agreement.
"Concentration Percentage" means: (a) for any Group A Obligor, 15%, (b)
for any Group B Obligor, 7.5%, (c) for any Group C Obligor, 5% and (d) for any
Group D Obligor, 4%; provided, however, that the Facility Agent may if the
Rating Agency Condition is satisfied, approve higher Concentration Percentages
for selected Obligors.
"Contract" means, with respect to any Receivable, any and all
contracts, instruments, agreements, leases, invoices, notes or other writings
pursuant to which such Receivable arises or that evidence such Receivable or
under which an Obligor becomes or is obligated to make payment in respect of
such Receivable.
"Conversion/Continuation Date" shall mean, as to any Portion of
Capital, the date on which such Portion of Capital is converted from a Euro-Rate
Portion of Capital or Base Rate Portion of Capital to a Base Rate Portion of
Capital or Euro-Rate Portion of Capital, respectively or continued as the
Euro-Rate Portion of Capital or Base Rate Portion of Capital as applicable
pursuant to Section 1.7(b) of the Agreement.
"Credit and Collection Policy" means, those receivables credit and
collection policies and practices of the Originator in effect on the date of the
Agreement and described in Schedule I to the Agreement, as modified in
compliance with the Agreement.
"Daily Report" shall mean the Daily Report substantially in the form of
Exhibit D-1 or Exhibit D-2 to the Sale Agreement (as applicable) delivered by
the Servicer on each Business Day as required by Section 5.03(b) of the Sale
Agreement.
"Debt" means: (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services
(exclusive of trade payables incurred in the ordinary course of business and
payables according to ordinary business terms), (d) obligations as lessee under
leases that shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, and (e) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (a) through (d).
"Defaulted Receivable" means a Receivable:
---------------------
(a) as to which any payment, or part thereof, remains unpaid
for more than 90 days from the original due date for such payment, or
(b) without duplication, (i) as to which an Event of
Bankruptcy shall have occurred with respect to the Obligor thereof or
any other Person obligated thereon or owning any Related Security with
respect thereto and (ii) that has been written off the Seller's books
as uncollectible.
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"Default Ratio" means the ratio, (expressed as a percentage and rounded
to the nearest 1/100 of 1%) computed as of the last day of each calendar month
by dividing: (a) the aggregate Outstanding Balance (excluding credit balances)
of all Pool Receivables that became Defaulted Receivables during such calendar
month, by (b) the aggregate credit sales made by the Originator during the
calendar month that is four calendar months before such calendar month.
"Delinquency Ratio" means the ratio (expressed as a percentage and
rounded to the nearest 1/100 of 1%) computed as of the last day of each calendar
month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables
that were Delinquent Receivables on such day by (b) the aggregate Outstanding
Balance of all Pool Receivables on such day.
"Delinquent Receivable" means a Receivable as to which any payment, or
part thereof, remains unpaid for more than 60 days from the original due date
for such payment.
"Departing Bank" shall have the meaning set forth in Section 1.14 of
the Agreement.
"Dilution Horizon" means, for any calendar month, the ratio (expressed
as a percentage and rounded to the nearest 1/100th of 1%) computed as of the
last day of such calendar month of: (a) the aggregate credit sales made by the
Originator during the most recent two calendar months (it being understood that
upon reasonable prior notice to the Facility Agent and Standard & Poor's, such
number of months may be reduced to any number (or fraction of a number) below
two, that is supported by analysis which is acceptable to the Facility Agent and
Standard & Poor's performed by the Seller (or the Servicer on behalf of the
Seller) and delivered with such prior notice to the Facility Agent and Standard
& Poor's), to (b) the Net Receivables Pool Balance at the last day of such
calendar month.
"Dilution Ratio" means the ratio (expressed as a percentage and rounded
to the nearest 1/100th of 1%), computed as of the last day of each calendar
month by dividing: (a) the aggregate amount of payments made or owed by the
Seller pursuant to Section 1.4(e)(i) of the Agreement (other than cash
discounts) during such calendar month by (b) the aggregate credit sales made by
the Originator during the calendar month that is two calendar months prior to
such calendar month.
"Dilution Reserve Percentage" means, as of any date, the sum of (a) the
product of (i) the Dilution Horizon, multiplied by (ii) the Dilution Reserve
Factor, plus (b) the Dilution Spike Factor.
"Dilution Reserve Factor" means a percentage equal to: (a) 2.3
multiplied by (b) the average of the Dilution Ratios for the twelve most recent
calendar months.
"Dilution Spike Factor" means, for any calendar month, the product of
(a) the positive difference, if any, between: (i) the highest average of the
Dilution Ratios for any three consecutive calendar months during the twelve most
recent calendar months and (ii) the arithmetic average of the Dilution Ratios
for such twelve months and (b) (i) the highest average of the Dilution Ratios
for any three consecutive calendar months during the twelve most recent calendar
months, divided by (ii) the arithmetic average of the Dilution Ratios for such
twelve months.
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"Discount" means for a Portion of Capital for any Yield Period:
(YR + PFR) x C x ED/Year + TF
where:
YR = the Yield Rate for the Portion of Capital for such
Yield Period,
C = the Capital relating to the Portion of Capital during
such Yield Period,
ED = the actual number of days during such Yield Period,
PFR = the Program Fee Rate for the Portion of Capital for
such Yield Period
Year = if such Portion of Capital is a: (i) Euro-Rate Portion
of Capital, 360 days, and (ii) Base Rate Portion of
Capital, 365 or 366 days, as applicable, and
TF = the Termination Fee, if any, for the Portion of Capital
for such Yield Period;
provided, that no provision of the Agreement shall require the payment or permit
the collection of Discount in excess of the maximum permitted by applicable law;
and provided, further, that Discount for the Portion of Capital shall not be
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
"Dissenting Bank" shall have the meaning set forth in Section 1.12(b)
of the Agreement.
"Eligible Assignee" shall mean any commercial bank with a combined
capital and surplus of at least $500,000,000.
"Eligible Receivable" means, at any time, a Pool Receivable:
(a) the Obligor of which is (i) (A) a United States resident
or (B) not a United States resident if and only if the payment of such
Obligor's otherwise Eligible Receivables is supported by a letter of
credit (x) issued or confirmed by a domestic bank or the domestic
branch of a foreign bank, in either case rated at least "A" by Standard
& Poor's and (y) either in the possession of the Collateral Agent or
which names the Collateral Agent as beneficiary; provided, however,
that up to 4% of the Net Receivables Pool Balance may consist of
otherwise Eligible Receivables which are Foreign Receivables and which
are not supported by a letter of credit (it being understood that no
more than 2% of the Net Receivables Pool Balance may consist of
otherwise Eligible Receivables which are Foreign Receivables and which
are not supported by a letter of credit, the Obligors of which are from
the same foreign country); provided, further,
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<PAGE> 47
however, that in the case of Obligors that are residents of Canada, the
percentage of otherwise Eligible Receivables that may be included in
the Net Receivables Pool Balance at any time, is (x) if Canada's
foreign currency rating is greater than or equal to AA-, 100%, (y) if
Canada's foreign currency rating is greater than or equal to A- but
less than or equal to A+, 20%, or (z) if Canada's foreign currency
rating is less than A-, 4%, (ii) not a government or a governmental
subdivision, affiliate or agency, (iii) not subject to any action of
the type described in paragraph (f) of Exhibit V to the Agreement and
(iv) not an Affiliate of Weirton or the Originator,
(b) that is denominated and payable only in U.S. dollars in
the United States,
(c) that has a stated maturity that is not more than 60 days
after the original invoice date of such Receivable; provided, however
that up to 2% of the Net Receivables Pool Balance may consist of
otherwise Eligible Receivables, the stated maturity of which exceeds 60
days (but not more than 120 days) after the original invoice date of
such Receivables,
(d) that arises under a duly authorized Contract for the sale
and delivery of goods and services in the ordinary course of the
Originator's business,
(e) that arises under a duly authorized Contract that is in
full force and effect and that is a legal, valid and binding obligation
of the related Obligor, enforceable against such Obligor in accordance
with its terms,
(f) that conforms in all material respects with all applicable
laws, rulings and regulations in effect,
(g) that is not the subject of any asserted dispute, offset,
hold back defense, Adverse Claim or other claim,
(h) that satisfies all applicable requirements of the
applicable Credit and Collection Policy,
(i) that has not been modified, waived or restructured since
its creation, except as permitted pursuant to Section 4.2 of the
Agreement,
(j) in which the Seller owns good and marketable title, free
and clear of any Adverse Claims, and that is freely assignable by the
Seller (including without any consent of the related Obligor),
(k) for which the Facility Agent (on behalf of the Banks)
shall have a valid and enforceable undivided percentage ownership or
security interest, to the extent of the Purchased Interest, and a valid
and enforceable first priority perfected security interest therein and
in the Related Security and Collections with respect thereto, in each
case free and clear of any Adverse Claim,
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<PAGE> 48
(l) that constitutes an account or general intangible as
defined in the UCC, and that is not evidenced by instruments or chattel
paper,
(m) that is neither a Defaulted Receivable nor a Delinquent
Receivable,
(n) for which neither the Originator thereof, the Seller nor
the Servicer has established any offset arrangements with the related
Obligor,
(o) for which Defaulted Receivables of the related Obligor do
not exceed 50% of the Outstanding Balance of all such Obligor's
Receivables, and
(p) that represents amounts earned and payable by the Obligor
that are not subject to the performance of additional services by the
Originator thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"ERISA Affiliate" means: (a) any corporation that is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Seller, the Originator or Weirton, (b) a trade
or business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Internal Revenue Code) with the Seller, the
Originator or Weirton, or (c) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Internal Revenue Code) as the
Seller, the Originator, Weirton, any corporation described in clause (a) or any
trade or business described in clause (b).
"Euro-Rate" means with respect to any Yield Period the interest rate
per annum determined by the Facility Agent by dividing (the resulting quotient
rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the
rate of interest determined by the Facility Agent in accordance with its usual
procedures (which determination shall be conclusive absent manifest error) to be
the average of the London interbank market offered rates for U.S. dollars quoted
by the British Bankers' Association ("BBA") as set forth on Dow Jones Markets
Service (formerly known as Telerate) (or appropriate successor or, if BBA or its
successor ceases to provide display page 3750 (or such other display page on the
Dow Jones Markets Service system as may replace display page 3750) at or about
11:00 a.m. (London time) on the Business Day which is two (2) Business Days
prior to the first day of such Yield Period for an amount comparable to the
Euro-Rate Portion of Capital during such Yield Period by (ii) a number equal to
1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed
by the following formula:
Average of London interbank offered rates quoted by
BBA as shown on Dow Jones Markets Service display
page 3750 or appropriate successor
Euro-Rate =
-----------------------------------------------------
1.00 - Euro-Rate Reserve Percentage
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<PAGE> 49
where "Euro-Rate Reserve Percentage" means, the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including without limitation, supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities"). The Euro-Rate shall be adjusted with respect to any
Euro-Rate Portion of Capital that is outstanding on the effective date of any
change in the Euro-Rate Reserve Percentage as of such effective date. The
Facility Agent shall give prompt notice to the Seller of the Euro-Rate as
determined or adjusted in accordance herewith (which determination shall be
conclusive absent manifest error).
"Euro-Rate Portion of Capital" shall mean a Portion of Capital the
Discount on which is calculated at a per annum rate based on the Yield Rate
determined by reference to the Euro-Rate.
"Event of Bankruptcy" means (a) any case, action or proceeding before
any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors or (b) any general assignment for the benefit of creditors
of a Person composition, marshalling of assets for creditors of a Person, or
other similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; in each of cases (a) and (b) undertaken
under U.S. Federal, state or foreign law, including the U.S. Bankruptcy Code.
"Excess Concentration" means the sum of the amounts by which the
Outstanding Balance of Eligible Receivables of each Obligor then in the
Receivables Pool exceeds an amount equal to: (a) the Concentration Percentage
for such Obligor multiplied by (b) the Outstanding Balance of all Eligible
Receivables then in the Receivables Pool.
"Extension Request" shall have the meaning set forth in Section 1.12(b)
of the Agreement.
"Facility" shall mean the facility under the Agreement for revolving
purchases of undivided interests in the Receivables by the Banks and for the
issuance of Letters of Credit by the Banks.
"Facility Agent" has the meaning set forth in the preamble to the
Agreement.
"Facility Termination Date" means the earliest to occur of: (a) the
Scheduled Commitment Termination Date, (b) the date determined pursuant to
Section 2.2 of the Agreement, and (c) the date the Purchase Limit reduces to
zero pursuant to Section 1.1(b) of the Agreement.
"Federal Funds Rate" means, for any day, the per annum rate set forth
in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor,
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<PAGE> 50
the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal
Funds Effective Rate." If on any relevant day the appropriate rate is not yet
published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate
for such day will be the arithmetic mean as determined by the Facility Agent of
the rates for the last transaction in overnight Federal funds arranged before
9:00 a.m. (New York time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by the Facility Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal functions.
"Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.
"Foreign Receivables" means any Pool Receivable the Obligor of which is
not a resident of the United States or Canada.
"Funded Purchase" shall mean a purchase of undivided interests under
the Agreement which is paid for in cash (other than through reinvestment of
Collections) pursuant to Section 1.4(b) of the Agreement.
"GAAP" shall mean generally accepted accounting principles as set forth
from time to time in the opinions and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by significant segments of the accounting profession.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any court, and any Person owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Group A Obligor" means any Obligor (or the corporate parent of such
Obligor) with a short-term rating (or shadow rating) of at least: "A-1" by
Standard & Poor's, or if such Obligor (or, if applicable, its corporate parent)
does not have a short-term rating from Standard & Poor's, a rating (or shadow
rating) of "A+" or better by Standard & Poor's on its long-term senior unsecured
and uncredit-enhanced debt securities.
"Group B Obligor" means an Obligor (or the corporate parent of such
Obligor), not a Group A Obligor, with a short-term rating (or shadow rating) of
at least: "A-2" by Standard & Poor's, or if such Obligor (or, if applicable, its
corporate parent) does not have a short-term rating from Standard & Poor's, a
rating (or shadow rating) of not lower than "BBB+" by Standard & Poor's on its
long-term senior unsecured and uncredit-enhanced debt securities.
"Group C Obligor" means an Obligor (or the corporate parent of such
Obligor), not a Group A Obligor or a Group B Obligor, with a short-term rating
(or shadow rating) of at least: "A-3" by Standard & Poor's, or if such Obligor
(or, if applicable, its corporate parent) does not have a short-term rating from
Standard & Poor's, a rating (or shadow rating) of not lower than
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<PAGE> 51
"BBB-" by Standard & Poor's on its long-term senior unsecured and
uncredit-enhanced debt securities.
"Group D Obligor" means any Obligor (or the corporate parent of such
Obligor) that is not a Group A Obligor, Group B Obligor or Group C Obligor.
"Indemnified Amounts" has the meaning set forth in Section 3.1 of the
Agreement.
"Indemnified Party" has the meaning set forth in Section 3.1 of the
Agreement.
"Independent Director" has the meaning set forth in Section 3(c) of
Exhibit IV to the Agreement.
"Insolvency Proceeding" means: (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidations, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, in each case undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code also refer to any successor
sections.
"L/C Collateral Account" means the account designated as the L/C
Collateral Account established by the Facility Agent (for the benefit of the
Banks), or such other account as may be so designated in writing by the Facility
Agent to the Servicer.
"L/C Facility Sub-Amount" shall mean $25,000,000.
"L/C Note" means a L/C Note issued by the Seller in favor of Weirton
pursuant to Section 2.02(d) of the Sale Agreement.
"L/C Participation Amount" shall mean, at any time, the then aggregate
outstanding face amount of the Letters of Credit.
"Letter of Credit" shall mean any letter of credit issued by the Banks
for the account of the Seller pursuant to Section 1.15 of the Agreement.
"Lock-Box Account" means an account maintained at a bank or other
financial institution for the purpose of receiving Collections.
"Lock-Box Agreement" means an agreement among the Seller, the
Collateral Agent and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.
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"Loss Horizon" means, on any date, the number of months calculated as
the sum of (i) two, plus (ii) the most recently calculated Weighted Average
Payment Terms Factor.
"Loss and Dilution Reserve" means, on any date, an amount equal to: (a)
the sum of (i) the Capital and (ii) the L/C Participation Amount in each case at
the close of business of the Servicer on such date multiplied by (b)(i) the sum
of the Loss Reserve Percentage plus the Dilution Reserve Percentage on such date
divided by (ii) 1 minus the sum of the Loss Reserve Percentage plus the Dilution
Reserve Percentage on such date.
"Loss Reserve Percentage" means, on any date, a percentage (calculated
as of the end of each calendar month) equal to 2.5 times the product of (i) the
highest average of the Default Ratios for any three consecutive calendar months
during the twelve most recent calendar months multiplied by (ii) the aggregate
credit sales made during the Loss Horizon divided by the Net Receivables Pool as
of such date.
"Majority Banks" shall mean Banks whose Pro Rata Shares aggregate more
than 51%.
"Material Adverse Change" means any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of the Agreement or any
other Transaction Document, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Seller, Servicer or the Originator or
any of their successors or assigns (the "Seller Parties"), (c) impairs
materially or could reasonably be expected to impair materially the ability of
the Seller Parties to duly and punctually pay or perform their respective
obligations under the Agreement or any other Transaction Document, or (d)
impairs materially or could reasonably be expected to impair materially the
ability of the Facility Agent, or any Bank, to the extent permitted, to enforce
their legal remedies pursuant to the Agreement or any other Transaction
Document.
"Material Adverse Effect" means, relative to any Person with respect to
any event or circumstance, a material adverse effect on:
(a) the assets, operations, business or financial condition of
such Person,
(b) the ability of any of such Person to perform its
obligations under the Agreement or any other Transaction Document to
which it is a party,
(c) the validity or enforceability of any other Transaction
Document, or the validity, enforceability or collectibility of a
material portion of the Pool Receivables or
(d) the status, perfection, enforceability or priority of the
Facility Agent's (on behalf of the Bank) or the Seller's interest in
the Pool Assets.
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<PAGE> 53
"Minimum Reserve" means, or any date, an amount equal to: (a) the sum
of (i) the Capital and (ii) the L/C Participation Amount in each case at the
close of business of the Servicer on such date, multiplied by (b) the Minimum
Reserve Percentage on such date.
"Minimum Reserve Percentage" means on any date a percentage equal to
0.92 times (a) the sum of (i) 20%, plus (ii) the product of (A) the Dilution
Ratio, times (B) the Dilution Horizon, plus (iii) the Cash Discount Ratio,
divided by (b) one, minus the sum of (i) 20%, plus (ii) the product of (A) the
Dilution Ratio, times (B) the Dilution Horizon, plus (iii) the Cash Discount
Ratio.
"Monthly Settlement Date" means the 10th day of each calendar month or,
if such day is not a Business Day, the next succeeding Business Day.
"Net Receivables Pool Balance" means, at any time: (a) the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus (b) the
Excess Concentration.
"Notice of Conversion/Continuation" shall mean a "Notice of
Conversion/Continuation" described in Section 1.7(b)of the Agreement.
"Obligor" means, with respect to any Receivable, the Person obligated
to make payments pursuant to the Contract relating to such Receivable.
"Originator" has the meaning set forth in the Sale Agreement.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"PNC" has the meaning set forth in the preamble to the Agreement.
"Pool Assets" has the meaning set forth in Section 1.2(d) of the
Agreement.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Portion of Capital" shall mean a portion of the outstanding Capital
which accrues Discount according to the same Yield Rate and as to which a single
Yield Period is in effect.
"Pro Rata Share" shall mean, as to any Bank, a fraction, the numerator
of which equals the Commitment of such Bank and the denominator of which equals
the Purchase Limit.
"Program Fee" has the meaning set forth in Section 1.5 of the
Agreement.
"Program Fee Rate" has the meaning set forth in Section 1.5 of the
Agreement.
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"Purchase Limit" means $80,000,000, as such amount may be reduced
pursuant to Section 1.1(b) of the Agreement. References to the unused portion of
the Purchase Limit shall mean, at any time, the Purchase Limit minus the sum of
the then aggregate outstanding Capital plus the L/C Participation Amount.
"Purchased Interest" means, at any time, the undivided percentage
ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, other than any Pool Receivable that arises on or after the
Facility Termination Date, (b) all Related Security with respect to such Pool
Receivables and (c) all Collections with respect to, and other proceeds of, such
Pool Receivables and Related Security. Such undivided percentage interest shall
be computed as:
Capital + L/C Participation Amount + Total Reserves
---------------------------------------------------
Net Receivables Pool Balance
The Purchased Interest shall be determined from time to time pursuant to Section
1.3 of the Agreement.
"Rating Agency Condition" means, with respect to any event or
occurrence, receipt by the Facility Agent of written confirmation from Standard
& Poor's that such event or occurrence shall not cause the rating on the
Facility to be downgraded or withdrawn.
"Receivable" means any indebtedness and other obligations owed to the
Seller or the Originator by, or any right of the Seller or the Originator to
payment from or on behalf of, an Obligor, whether constituting an account,
chattel paper, instrument or general intangible, arising in connection with the
sale of goods or the rendering of services by the Originator, and includes the
obligation to pay any finance charges, fees and other charges with respect
thereto. Indebtedness and other obligations arising from any one transaction,
including indebtedness and other obligations represented by an individual
invoice or agreement, shall constitute a Receivable separate from a Receivable
consisting of the indebtedness and other obligations arising from any other
transaction; provided, however, that from and after the date the Facility Agent
receives written notice from the Seller that the Ball Receivables and/or Foreign
Receivables are being removed from the Receivables Pool, then so long as such
removal would not cause a Termination Event or Unmatured Termination Event, the
term Receivable shall not include any Ball Receivables or any Foreign
Receivables, as applicable.
"Receivables Pool" means, at any time, all of the then outstanding
Receivables purchased by the Seller pursuant to the Sale Agreement.
"Reference Bank" means PNC.
"Related Security" means, with respect to any Receivable:
(a) all of the Seller's and the Originator thereof's residual
interest in any goods (including returned goods), and documentation of
title evidencing the shipment or storage
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of any goods (including returned goods), relating to any sale giving
rise to such Receivable,
(b) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all UCC financing statements or similar
filings relating thereto, and
(c) all of the Seller's and Originator's rights, interests and
claims under the Contracts and all guaranties, indemnities, insurance
and other agreements (including the related Contract) or arrangements
of whatever character from time to time supporting or securing payment
of such Receivable or otherwise relating to such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise.
"Replacement Bank" shall have the meaning set forth in Section 1.14 of
the Agreement.
"Required Banks" shall mean Banks whose Pro Rata Shares aggregate more
than 66 2/3%.
"Sale Agreement" means the Receivables Purchase and Sale Agreement,
dated as of August 24, 1993, among the Seller, Servicer and the Originator, as
amended through the date hereof and as such agreement may be amended, amended
and restated, supplemented or otherwise modified from time to time.
"Scheduled Commitment Termination Date" means with respect to each Bank
March 26, 2004, as such date may be extended pursuant to Section 1.12 of the
Agreement.
"Security Agreement" shall mean that certain Security Agreement dated
as of August 24, 1993 executed by the Seller in favor of the Collateral Agent,
as amended through the date hereof and as the same may be amended, restated or
otherwise modified from time to time.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller Party" means any of the Seller, Servicer or the Originator or
any of their respective successors or assigns.
"Seller's Share" of any amount means the greater of: (a) $0 and (b)
such amount minus the Banks' Share.
"Servicer" has the meaning set forth in the preamble to the Agreement.
"Servicing Fee" shall mean the fee referred to in Section 4.6 of the
Agreement.
"Servicing Fee Rate" shall mean the rate referred to in Section 4.6 of
the Agreement.
"Servicing Fee Reserve" for the Purchased Interest at any time means
the sum of (i) the unpaid Servicing Fee accrued to such time, plus (ii) the
product of (a) the Outstanding Balance
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<PAGE> 56
of Pool Receivables at the time of computation, multiplied by (b) the Servicing
Fee Rate, multiplied by (c) a fraction having 2 times the Turnover Rate as its
numerator and 12 as its denominator.
"Settlement Statement" shall mean a report prepared by the Servicer
pursuant to Section 5.02(c) of the Sale Agreement and signed by officers of the
Seller and of the Servicer certifying that no Termination Event or Unmatured
Termination Event has occurred and is continuing, or, if any such Termination
Event or Unmatured Termination Event has occurred and is continuing, describing
such event and the steps, if any, which are being taken in respect thereof. Each
Settlement Statement shall be in substantially the form of Exhibit E-1 or
Exhibit E-2, as applicable, to the Sale Agreement.
"Solvent" means, with respect to any Person at any time, a condition
under which:
(i) the fair value and present fair saleable value of such
Person's total assets is, on the date of determination, greater than
such Person's total liabilities (including contingent and unliquidated
liabilities) at such time;
(ii) the fair value and present fair saleable value of such
Person's assets is greater than the amount that will be required to pay
such Person's probable liability on its existing debts as they become
absolute and matured ("debts," for this purpose, includes all legal
liabilities, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed, or contingent);
(iii) such Person is and shall continue to be able to
pay all of its liabilities as such liabilities mature; and
(iv) such Person does not have unreasonably small capital with
which to engage in its current and in its anticipated business.
For purposes of this definition:
(A) the amount of a Person's contingent or unliquidated
liabilities at any time shall be that amount which, in light of all the
facts and circumstances then existing, represents the amount which can
reasonably be expected to become an actual or matured liability;
(B) the "fair value" of an asset shall be the amount which may
be realized within a reasonable time either through collection or sale
of such asset at its regular market value;
(C) the "regular market value" of an asset shall be the amount
which a capable and diligent business person could obtain for such
asset from an interested buyer who is willing to Purchase such asset
under ordinary selling conditions; and
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(D) the "present fair saleable value" of an asset means the
amount which can be obtained if such asset is sold with reasonable
promptness in an arm's-length transaction in an existing and not
theoretical market.
"Standard & Poor's" means Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
"Subsidiary" means, as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock of each class
or other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a contingency) to
elect a majority of the Board of Directors or other managers of such entity are
at the time owned, or management of which is otherwise controlled: (a) by such
Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and
one or more Subsidiaries of such Person.
"Termination Day" means: (a) each day that occurs on or after (i) the
occurrence of an Event of Bankruptcy with respect to Weirton, (ii) the
occurrence of a Termination Event described in paragraph (e) of Exhibit V to the
Agreement or (iii) the date when either the Internal Revenue Service or the
Pension Benefit Guaranty Corporation shall have filed one or more notices of
lien asserting a claim or claims pursuant to the Internal Revenue Code, or
ERISA, as applicable, against the assets of Seller, the Originator, Weirton or
any ERISA Affiliate and such lien or liens shall not have been released or (b)
each day that occurs on or after the Facility Termination Date.
"Termination Event" has the meaning specified in Exhibit V to the
Agreement.
"Termination Fee" means, for any Yield Period during which a
Termination Day occurs, the amount, if any, by which: (a) the additional
Discount (calculated without taking into account any Termination Fee or any
shortened duration of such Yield Period pursuant to the definition thereof) that
would have accrued during such Yield Period on the reductions of Capital
relating to such Yield Period had such reductions not been made, exceeds (b) the
income, if any, received by the Banks (or the Facility Agent on behalf of the
Banks) from investing the proceeds of such reductions of Capital, as determined
by the Facility Agent, which determination shall be binding and conclusive for
all purposes, absent manifest error.
"Total Dilution Ratio" means, on any date, the sum of (i) the Dilution
Ratio and (ii) the Cash Discount Ratio on such date.
"Total Reserves" means, at any time the sum of: (a) the Yield Reserve,
plus (b) Servicing Fee Reserve, plus (c) the greatest of (i) the sum of (A) the
Loss and Dilution Reserve, plus (B) the Cash Discount Reserve, or (ii) the
Minimum Reserve.
"Transaction Documents" means the Agreement, the Lock-Box Agreements,
the Collection Account Agreement, the Fee Letter, the Sale Agreement and all
other certificates, instruments, UCC financing statements, reports, notices,
agreements and documents executed or delivered under or in connection with the
Agreement, in each case as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the Agreement.
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"Turnover Rate" means, for any calendar month: (a) the Outstanding
Balance of all Pool Receivables at the end of such calendar month divided by
(b)(i) the aggregate credit sales made by the Originator during the three
calendar months then ending divided by (ii) 3.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"Unmatured Termination Event" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event.
"Weighted Average Payment Terms Factor" means a number, calculated by
the Servicer once every three months, equal to the weighted average payment
terms (of the Eligible Receivables), in days, divided by 30.
"Weirton" has the meaning set forth in the preamble.
"Yield Period" shall mean:
(i) for each Euro-Rate Portion of Capital, the period
commencing on the date of the initial funding of such Portion of
Capital or the Conversion/Continuation Date of such Portion of Capital,
as applicable, and ending on the last day of the period selected by the
Seller pursuant to the terms of the Agreement, which period shall be 1,
2 or 3 months; and
(ii) for each Base Rate Portion of Capital, a period
commencing on the date of the initial funding of such Portion of
Capital or the Conversion/Continuation Date of such Portion of Capital
and ending on the immediately following Monthly Settlement Date, and
thereafter commencing on each Monthly Settlement Date and ending on the
immediately following Monthly Settlement Date.
provided, however, that (i) if any Yield Period would otherwise end on a day
that shall not be a Business Day, such Yield Period shall end on the next
succeeding Business Day (unless, with respect to any Euro-Rate Portion of
Capital, such next succeeding Business Day would fall in the next calendar
month, in which case such Yield Period shall end on the next preceding Business
Day) and (ii) if any Yield Period with respect to a Euro-Rate Portion of Capital
would otherwise end on a calendar day for which there is no corresponding
calendar day in the applicable subsequent calendar month, such Yield Period
shall expire on the last Business Day of such applicable subsequent calendar
month, and (iii) no Yield Period with respect to any Portion of Capital shall
end on a date later than the Facility Termination Date.
"Yield Rate" for any Yield Period for any Portion of Capital of the
Purchased Interest means an interest rate per annum equal to, at the Seller's
option: (a) the Euro-Rate for such Yield Period, or (b) the Base Rate for such
Yield Period; provided, however, that in the case of:
(i) any Yield Period on or before the first day of which the
Facility Agent shall have been notified by any Bank that the
introduction of or any change in or in the
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interpretation of any law or regulation makes it unlawful, or any
central bank or other Governmental Authority asserts that it is
unlawful, for such Bank, to fund any Euro-Rate Portion of Capital (and
such Bank shall not have subsequently notified the Facility Agent that
such circumstances no longer exist),
(ii) any Yield Period of one to (and including) 30 days,
(iii) any Yield Period as to which the Facility Agent does not
receive notice before noon (New York City time) on the third Business
Day preceding the first day of such Yield Period that the Seller
desires that the related Portion of Capital be a Euro-Rate Portion of
Capital, or
(iv) any Yield Period relating to a Portion of Capital that is
less than $5,000,000,
the "Yield Rate" for each such Yield Period shall be an interest rate per annum
equal to the Base Rate in effect on each day of such Yield Period. The "Yield
Rate" for any day while a Termination Event exists shall be an interest rate
equal to 2% per annum above the Base Rate in effect on such day.
"Yield Reserve" means, at any time:
(1.5 BR + PFR x 2(TR) x Capital)
-------------
12
where:
BR = the Base Rate in effect at such time
TR = the Turnover Rate
PFR = the Program Fee Rate
Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of Connecticut, and not
specifically defined herein, are used herein as defined in such Article 9.
Unless the context otherwise requires, "or" means "and/or," and "including" (and
with correlative meaning "include" and "includes") means including without
limiting the generality of any description preceding such term.
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EXHIBIT II
CONDITIONS PRECEDENT
1. Conditions Precedent to Effectiveness. The effectiveness of this
Agreement is subject to the conditions precedent that the Facility Agent shall
have received on or before the Closing Date the following, each in form and
substance (including the date thereof) satisfactory to the Facility Agent:
(a) A counterpart of the Agreement and the other Transaction Documents
executed by the parties thereto.
(b) Certified copies of: (i) all documents evidencing necessary
governmental approvals, if any, with respect to the Agreement and the other
Transaction Documents and (ii) the certificate of incorporation and by-laws of
each of the Seller and the Originator.
(c) A certificate of the Secretary or Assistant Secretary of each of
the Seller, the Originator and Weirton certifying the names and true signatures
of its officers who are authorized to sign the Agreement and the other
Transaction Documents. Until the Facility Agent receives a subsequent incumbency
certificate from the Seller, Originator or Weirton, as the case may be, the
Facility Agent shall be entitled to rely on the last such certificate delivered
to it by the Seller, Originator or Weirton, as the case may be.
(d) Evidence that the proper financing statements, under the UCC of all
relevant jurisdictions necessary or desirable in order to perfect the interests
of the Seller and the Facility Agent (on behalf of the Banks) contemplated by
the Agreement and the Sale Agreement continue to be effective.
(e) Completed UCC search reports, dated on or shortly before the date
of the initial purchase hereunder, listing the financing statements filed in all
applicable jurisdictions that name the Originator or the Seller as debtor,
together with copies of such other financing statements, and similar search
reports with respect to judgment liens, federal tax liens and liens of the
Pension Benefit Guaranty Corporation in such jurisdictions, as the Facility
Agent may request, showing no Adverse Claims on any Pool Assets.
(f) Favorable opinions, in form and substance reasonably satisfactory
to the Facility Agent, of Sidley & Austin and William R. Kiefer, each as counsel
for the Seller, the Originators and the Servicer.
(g) Satisfactory results of a review and audit (performed by
representatives of the Facility Agent) of the Servicer's collection, operating
and reporting systems, the Credit and Collection Policy of the Originator,
historical receivables data and accounts, including satisfactory results of a
review of the Servicer's operating location(s) and satisfactory review and
approval of the Eligible Receivables in existence on the date of the initial
purchase under the Agreement.
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(h) A pro forma Settlement Statement representing the performance of
the Receivables Pool for the calendar month before closing and a pro forma Daily
Report as of such closing date.
(i) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, including any such costs, fees
and expenses arising under or referenced in Section 5.4 of the Agreement and the
Fee Letter.
(j) The Fee Letter duly executed by the Seller and the Servicer.
(k) Good standing certificates with respect to each of the Seller, the
Originator and the Servicer issued by the Secretaries of State (or similar
official) of the states of each such Person's organization and principal place
of business.
(l) A letter from Standard & Poor's indicating a rating with respect to
the Facility of not less that AAA.
(m) A computer file containing all information with respect to the
Receivables as the Facility Agent may reasonably request.
(n) Such other approvals, opinions or documents as the Facility Agent
may reasonably request.
2. Conditions Precedent to All Funded Purchases and Issuance of Letters
of Credit. Each Funded Purchase including the initial Funded Purchase) and the
issuance of any Letters of Credit shall be subject to the further conditions
precedent that:
(a) in the case of each Funded Purchase and the issuance of any Letter
of Credit, the Servicer shall have delivered to the Facility Agent on or before
such purchase, the Daily Report for such day, and
(b) on the date of such Funded Purchase or issuance the following
statements shall be true (and acceptance of the proceeds of such Funded Purchase
or the request for issuance shall be deemed a representation and warranty by the
Seller that such statements are then true):
(i) the representations and warranties contained in Exhibit
III to the Agreement are true and correct in all material respects on
and as of the date of such Funded Purchase or issuance as though made
on and as of such date; and
(ii) no event has occurred and is continuing, or would result
from such Funded Purchase or issuance, that constitutes a Termination
Event or an Unmatured Termination Event.
(iii) the L/C Participation Amount, after giving effect to the
issuance of any such Letter of Credit, shall not be greater than the
L/C Facility Sub-Amount; and
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(iv) the sum of the Capital and the L/C Participation Amount,
after giving effect to any such Funded Purchase or the issuance of any
such Letter of Credit, shall not be greater than the Purchase Limit.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents
and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and is duly qualified
to do business, and is in good standing, as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect.
(b) The execution, delivery and performance by the Seller of the
Agreement and the other Transaction Documents to which it is a party, including
its use of the proceeds of purchases and reinvestments: (i) are within its
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) do not contravene or result in a default under or conflict with:
(A) its charter or by-laws, (B) any law, rule or regulation applicable to it,
(C) any contractual restriction binding on or affecting it or any of its
property or (D) any order, writ, judgment, award, injunction or decree binding
on or affecting it or any of its property, and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its properties.
The Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for its due
execution, delivery and performance by the Seller of the Agreement or any other
Transaction Document to which it is a party, other than the Uniform Commercial
Code filings referred to in Exhibit II to the Agreement.
(d) Assuming its enforceability against each of the other parties
thereto, each of the Agreement and the other Transaction Documents to which the
Seller is a party constitutes its legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) There is no pending or, to Seller's actual knowledge, threatened
action or proceeding affecting Seller or any of its properties before any
Governmental Authority or arbitrator which, if decided adversely would have a
Material Adverse Effect.
(f) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
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(g) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security, free and clear of any Adverse Claim. Upon each
purchase or reinvestment, the Banks shall acquire ratably in accordance with
other Pro Rata Shares a valid and enforceable perfected undivided percentage
ownership or security interest, to the extent of the Purchased Interest, in each
Pool Receivable then existing or thereafter arising and in the Related Security,
Collections and other proceeds with respect thereto, free and clear of any
Adverse Claim. The Agreement creates a security interest in favor of the
Facility Agent (on behalf of the Banks) in the Pool Assets, and the Facility
Agent (on behalf of the Banks) has a first priority perfected security interest
in the Pool Assets, free and clear of any Adverse Claims. No effective financing
statement or other instrument similar in effect covering any Pool Asset is on
file in any recording office, except those filed in favor of the Seller pursuant
to the Sale Agreement and the Facility Agent (on behalf of the Banks) relating
to the Agreement.
(h) Each Settlement Statement, Daily Report, information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished at any time by or on behalf of the Seller to the Facility Agent in
connection with the Agreement or any other Transaction Document to which it is a
party is or will be complete and accurate in all material respects as of its
date or (except as otherwise disclosed to the Facility Agent at such time) as of
the date so furnished.
(i) The Seller's principal place of business and chief executive office
(as such terms are used in the UCC) and the office where it keeps its records
concerning the Receivables are located at the address referred to in Section
1(b) of Exhibit IV to the Agreement.
(j) The names and addresses of all the Lock-Box Banks and the
Collection Account Bank together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks and the Collection Account at the Collection
Account Bank, are specified in Schedule II to the Agreement (or at such other
Lock-Box Banks and/or with such other Lock-Box Accounts or at such other
Collection Account Bank and/or with such other Collection Account as have been
notified to the Facility Agent in accordance with the Agreement) and all
Lock-Box Accounts and the Collection Account are subject to Lock-Box Agreements
and a Collection Account Agreement, respectively.
(k) The Seller is not in violation of any order of any court,
arbitrator or Governmental Authority that is likely to have a Material Adverse
Effect.
(l) No proceeds of any purchase or reinvestment will be used for any
purpose that violates any applicable law, rule or regulation, including
Regulation U of the Federal Reserve Board.
(m) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance is an Eligible Receivable.
(n) No event has occurred and is continuing, or would result from a
purchase in respect of the Purchased Interest or from the application of the
proceeds therefrom, that constitutes a Termination Event or an Unmatured
Termination Event.
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(o) The Seller has complied in all material respects with the Credit
and Collection Policy of the Originator with regard to each Receivable
originated by the Originator.
(p) The Seller has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
(q) The Seller's complete corporate name is set forth in the preamble
to the Agreement, and it does not use and has not during the last six years used
any other corporate name, trade name, doing-business name or fictitious name,
except as set forth on Schedule III to the Agreement and except for names first
used after the date of the Agreement and set forth in a notice delivered to the
Facility Agent pursuant to the Agreement.
(r) The Seller is not an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended. In addition, the Seller is not a "holding
company," a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(s) The Seller has reviewed and is reviewing the areas within its
business and operations which could be adversely affected by, and has developed,
is developing or will develop a program to address on a timely basis, the risk
that certain computer applications used by the Seller may be unable to recognize
and perform properly date-sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not
result in any Material Adverse Change.
2. Representations and Warranties of Weirton (in its capacity as the
Servicer). Weirton, in its capacity as the Servicer, represents and warrants as
follows:
(a) Weirton is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and is duly qualified to
do business, and is in good standing, as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect.
(b) The execution, delivery and performance by Weirton of the Agreement
and the other Transaction Documents to which it is a party, including the
Servicer's use of the proceeds of purchases and reinvestments: (i) are within
its corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) do not contravene or result in a default under or conflict with:
(A) its charter or by-laws, (B) any law, rule or regulation applicable to it,
(C) any contractual restriction binding on or affecting it or any of its
property or (D) any order, writ, judgment, award, injunction or decree binding
on or affecting it or any of its property, and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its properties.
The Agreement and the other Transaction Documents to which Weirton is a party
have been duly executed and delivered by Weirton.
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(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the due
execution, delivery and performance by Weirton of the Agreement or any other
Transaction Document to which it is a party, other than the filing of UCC-1
financing statements.
(d) Assuming its enforceability against each of the other parties
thereto, each of the Agreement and the other Transaction Documents to which
Weirton is a party constitutes the legal, valid and binding obligation of
Weirton enforceable against Weirton in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) The balance sheets of Weirton Corporation and its consolidated
Subsidiaries as at December 31, 1998, and the related statements of income and
retained earnings for the fiscal year then ended, copies of which have been
furnished to the Facility Agent, fairly present the financial condition of
Weirton and its consolidated Subsidiaries as at such date and the results of the
operations of Weirton and its Subsidiaries for the period ended on such date,
all in accordance with generally accepted accounting principles consistently
applied.
(f) There are no actions, suits or proceedings pending, or to the
knowledge of Weirton threatened, against it or affecting it or its property in
any court, or before any arbitrator of any kind, or before or by any
Governmental Authority, which (i) challenge the validity, legality or
enforceability of this Agreement or any of the other Transaction Documents, or
(ii) could reasonably be expected to have a Material Adverse Effect of the types
described in clauses (b) through (d) in the definition thereof.
(g) Each Settlement Statement, Daily Report, information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished at any time by or on behalf of the Servicer to the Facility Agent in
connection with the Agreement is or will be complete and accurate in all
material respects as of its date or (except as otherwise disclosed to the
Facility Agent at such time) as of the date so furnished.
(h) Weirton is not in violation of any order of any court, arbitrator
or Governmental Authority, which could have a Material Adverse Effect.
(i) The Servicer has complied in all material respects with the Credit
and Collection Policy of the Originator with regard to each Receivable
originated by the Originator.
(j) Weirton has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
(k) Weirton is not an "investment company," or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended. In addition, Weirton is not a "holding company," a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a
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"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(l) The Servicer has reviewed and is reviewing the areas within its
business and operations which could be adversely affected by, and has developed,
is developing or will develop a program to address on a timely basis, the risk
that certain computer applications used by the Servicer may be unable to
recognize and perform properly date-sensitive functions involving dates prior to
and after December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem
will not result in any Material Adverse Change.
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EXHIBIT IV
COVENANTS
1. Covenants of the Seller. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding, the date the L/C Participation Amount
is cash collateralized in full or the date all other amounts owed by the Seller
under the Agreement to any Bank, the Facility Agent and any other Indemnified
Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges, except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such rights,
franchises, qualifications and privileges would not have a Material Adverse
Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall
keep its principal place of business and chief executive office (as such terms
or similar terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Seller set forth under its name
on the signature page to the Agreement or at any other locations in
jurisdictions where all actions reasonably requested by the Facility Agent to
protect and perfect the interest of the Facility Agent (on behalf of the Banks)
in the Receivables and related items (including the Pool Assets) have been taken
and completed and (ii) shall provide the Facility Agent with at least 30 days'
written notice before making any change in the Seller's name or making any other
change in the Seller's identity or corporate structure that could render any UCC
financing statement filed in connection with this Agreement "seriously
misleading" as such term (or similar term) is used in the UCC; each notice to
the Facility Agent pursuant to this sentence shall set forth the applicable
change and the effective date thereof. The Seller also will maintain and
implement (or cause the Servicer to maintain and implement) administrative and
operating procedures (including an ability to recreate records evidencing
Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain (or cause the Servicer to keep and
maintain) all documents, books, records, computer tapes and disks and other
information reasonably necessary or advisable for the collection of all
Receivables (including records adequate to permit the daily identification of
each Receivable and all Collections of and adjustments to each existing
Receivable).
(c) Ownership Interest, Etc. The Seller shall (and shall cause the
Servicer to), at its expense, take all action necessary or desirable to
establish and maintain a valid and enforceable undivided percentage ownership or
security interest, to the extent of the Purchased Interest, in the Pool
Receivables, the Related Security and Collections with respect thereto, and a
first priority perfected security interest in the Pool Assets, in each case free
and clear of any Adverse Claim, in favor of the Facility Agent (on behalf of the
Banks), including taking such action to perfect, protect or more fully evidence
the interest of the Facility Agent (on behalf of the Banks) as the Facility
Agent (on behalf of the Banks), may reasonably request.
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(d) Sales, Liens, Etc. The Seller shall not sell, assign (by operation
of law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, any or all of its right, title or
interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent), or
assign any right to receive income in respect of any items contemplated by this
paragraph.
(e) Extension or Amendment of Receivables. Except as otherwise provided
in the Agreement, the Seller shall not, and shall not permit the Servicer to,
extend the maturity or adjust the Outstanding Balance or otherwise modify the
terms of any Pool Receivable, or amend, modify or waive any term or condition of
any related Contract.
(f) Change in Business or Credit and Collection Policy. The Seller
shall not make any material change in the character of its business or in the
Credit and Collection Policy without the prior written consent of the Facility
Agent, or any change in the Credit and Collection Policy that would have a
Material Adverse Effect with respect to the Receivables. The Seller shall not
make (or permit the Originator to make) any other change in the Credit and
Collection Policy without giving prior written notice thereof to the Facility
Agent and Standard & Poor's.
(g) Audits. (i) The Seller shall (and shall cause the Originator to),
from time to time during regular business hours as reasonably requested in
advance by the Facility Agent, permit the Facility Agent, or its agents or
representatives: (A) to examine and make copies of and abstracts from all books,
records and documents (including computer tapes and disks) in the possession or
under the control of the Seller (or the Originator) relating to Receivables and
the Related Security, including the related Contracts, and (B) to visit the
offices and properties of the Seller and the Originator for the purpose of
examining such materials described in clause (A) above, and to discuss matters
relating to Receivables and the Related Security or the Seller's, Weirton's or
the Originator's performance under the Transaction Documents or under the
Contracts with any of the officers, employees or outside accountants of the
Seller, Weirton or the Originator having knowledge of such matters and (ii)
without limiting the provisions of clause (i) above, from time to time during
regular business hours, upon two Business Days prior written notice from the
Facility Agent, but (unless a Termination Event or Unmatured Termination Event
has occurred and is continuing) in any event no more frequently than twice per
calendar year, permit certified public accountants or other auditors acceptable
to the Facility Agent to conduct a review of its books and records with respect
to the Receivables. The costs and expenses of the first such review in any
calendar year shall be borne by the Servicer as part of its duties which are
compensated by the Servicer Fee and the costs and expenses of the second such
review in any calendar year shall be borne by the Banks ratably in accordance
with their Pro Rata Shares; provided that after the occurrence and during the
continuation of a Termination Event or an Unmatured Termination Event, all such
reviews shall be borne by the Servicer as part of its duties which are
compensated by the Servicer Fee.
(h) Change in Lock-Box Banks or the Collection Account Bank, Lock-Box
Accounts or the Collection Account and Payment Instructions to Obligors. The
Seller shall not, and shall not permit the Servicer or Originator to, add or
terminate any bank as a Lock-Box Bank or
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Collection Account Bank or any account as a Lock-Box Account or the Collection
Account from those listed in Schedule II to the Agreement, or make any change in
its instructions to Obligors regarding payments to be made to the Seller, the
Originator, the Servicer or any Lock-Box Account (or related post office box),
unless the Facility Agent shall have consented thereto in writing and the
Facility Agent shall have received copies of all agreements and documents
(including Lock-Box Agreements and a Collection Account Agreement, as
applicable) that it may request in connection therewith.
(i) Deposits to Lock-Box Accounts and the Collection Account. The
Seller shall (or shall cause the Servicer to): (i) instruct all Obligors to make
payments of all Receivables to one or more Lock-Box Accounts or to post office
boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box
Banks to cause all items and amounts relating to such Receivables received in
such post office boxes to be removed and deposited into a Lock-Box Account on a
daily basis), and (ii) deposit, or cause to be deposited, any Collections
received by it, the Servicer or the Originator into Lock-Box Accounts or the
Collection Account not later than one Business Day after receipt thereof. Each
Lock-Box Account shall at all times be subject to a Lock-Box Agreement. The
Collection Account shall at all times be subject to the Collection Account
Agreement. The Seller will not (and will not permit the Servicer to) deposit or
otherwise credit, or cause or permit to be so deposited or credited, to any
Lock-Box Account or the Collection Account cash or cash proceeds other than
Collections.
(j) Marking of Records. At its expense, the Seller shall: (i) mark (or
cause the Servicer to mark) its master data processing records relating to Pool
Receivables and related Contracts, including with a legend evidencing that the
undivided percentage ownership interests with regard to the Purchased Interest
related to such Receivables and related Contracts have been sold in accordance
with the Agreement, and (ii) cause the Originator so to mark their master data
processing records pursuant to the Sale Agreement.
(k) Reporting Requirements. The Seller will provide to the Facility
Agent (in multiple copies sufficient for each Bank, if requested by the Facility
Agent) the following:
(i) as soon as available and in any event within 105 days
after the end of each fiscal year of the Seller, a copy of the annual
report for such year for the Seller, containing unaudited financial
statements for such year certified as to accuracy by the senior
financial officer or treasurer of the Seller;
(ii) as soon as possible and in any event within five days
after becoming aware of the occurrence of each Termination Event or
Unmatured Termination Event, a statement of the senior financial
officer of the Seller setting forth details of such Termination Event
or Unmatured Termination Event and the action that the Seller has taken
and proposes to take with respect thereto;
(iii) promptly after the filing or receiving thereof, copies
of all reports and notices that the Seller or any ERISA Affiliate files
under ERISA with the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or that the Seller
or any Affiliate receives from any of the foregoing or from any
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multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA)
to which the Seller or any of its Affiliates is or was, within the
preceding five years, a contributing employer, in each case in respect
of any Reportable Event (as defined in ERISA) that could, in the
aggregate, result in the imposition of liability on the Seller and/or
any such Affiliate;
(iv) promptly after the Seller obtains knowledge thereof,
notice of any: (A) litigation, investigation or proceeding that may
exist at any time between the Seller and any Person or (B) litigation
or proceeding relating to any Transaction Document; and
(v) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Seller or any
of its Affiliates as the Facility Agent may from time to time
reasonably request.
(l) Certain Agreements. Without the prior written consent of the
Facility Agent, the Seller will not (and will not permit the Originator to)
amend, modify, waive, revoke or terminate any Transaction Document to which it
is a party or any provision of Seller's certificate of incorporation or by-laws
which requires the consent of the "Independent Director" (as defined in the
Seller's Certificate of Incorporation).
(m) [Reserved]
(n) Other Business. The Seller will not: (i) engage in any business
other than the transactions contemplated by the Transaction Documents, (ii)
create, incur or permit to exist any Debt of any kind (or cause or permit to be
issued for its account any letters of credit or bankers' acceptances) other than
pursuant to this Agreement or the Company Note, or (iii) form any Subsidiary or
make any investments in any other Person; provided, however, that the Seller
shall be permitted to incur minimal obligations to the extent necessary for the
day-to-day operations of the Seller (such as expenses for stationery, audits,
maintenance of legal status, etc.).
(o) Use of Seller's Share of Collections. The Seller shall apply the
Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable to
the Banks and the Facility Agent under the Agreement and under the Fee Letter),
(ii) the payment of accrued and unpaid interest on the Company Note and the L/C
Note and (iii) other legal and valid corporate purposes.
(p) Tangible Net Worth. The Seller will not permit its tangible net
worth, at any time, to be less than $5,000,000.
2. Covenants of the Servicer. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding, the date the L/C Participation Amount
is cash collateralized in full or the date all other amounts owed by the Seller
under the Agreement to the Banks, the Facility Agent and any other Indemnified
Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Servicer shall comply in all
material respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate
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existence, rights, franchises, qualifications and privileges, except to the
extent that the failure so to comply with such laws, rules and regulations or
the failure so to preserve and maintain such existence, rights, franchises,
qualifications and privileges would not have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Servicer shall keep
its principal place of business and chief executive office (as such terms or
similar terms are used in the applicable UCC) and the office where it keeps its
records concerning the Receivables at the address of the Servicer set forth
under its name on the signature page to the Agreement or, upon at least 30 days'
prior written notice of a proposed change to the Facility Agent, at any other
locations in jurisdictions where all actions reasonably requested by the
Facility Agent to protect and perfect the interest of the Facility Agent (on
behalf of the Banks) in the Receivables and related items (including the Pool
Assets) have been taken and completed. The Servicer also will maintain and
implement administrative and operating procedures (including an ability to
recreate records evidencing Receivables and related Contracts in the event of
the destruction of the originals thereof), and keep and maintain all documents,
books, records, computer tapes and disks and other information reasonably
necessary or advisable for the collection of all Receivables (including records
adequate to permit the daily identification of each Receivable and all
Collections of and adjustments to each existing Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Servicer shall at its expense, timely and fully perform and comply
with all material provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables, and timely and
fully comply in all material respects with the Credit and Collection Policy with
regard to each Receivable and the related Contract.
(d) Extension or Amendment of Receivables. Except as otherwise provided
in the Agreement, the Servicer shall not extend the maturity or adjust the
Outstanding Balance or otherwise modify the terms of any Pool Receivable, or
amend, modify or waive any term or condition of any related Contract.
(e) Change in Business or Credit and Collection Policy. The Servicer
shall not make any material change in the Credit and Collection Policy without
the prior written consent of the Facility Agent, or any change in the Credit and
Collection Policy that would have a Material Adverse Effect. The Servicer shall
not make any other change in the Credit and Collection Policy without giving
prior written notice thereof to the Facility Agent and Standard & Poor's.
(f) Audits. (i) The Servicer shall, from time to time during regular
business hours as reasonably requested in advance by the Facility Agent, permit
the Facility Agent, or its agents or representatives: (A) to examine and make
copies of and abstracts from all books, records and documents (including
computer tapes and disks) in its possession or under its control relating to
Receivables and the Related Security, including the related Contracts, and (B)
to visit its offices and properties for the purpose of examining such materials
described in clause (A) above, and to discuss matters relating to Receivables
and the Related Security or its performance hereunder or under the Contracts
with any of its officers, employees or outside accountants having knowledge of
such matters and (ii) without limiting the provisions of clause (i) above, from
time to time
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during regular business hours, upon two Business Days prior written notice from
the Facility Agent, but (unless a Termination Event or Unmatured Termination
Event has occurred and is continuing) in any event no more than twice per
calendar year permit certified public accountants or other auditors acceptable
to the Facility Agent to conduct, a review of its books and records with respect
to the Receivables. The costs and expenses of the first such review in any
calendar year shall be borne by the Servicer as part of its duties which are
compensated by the Servicer Fee and the costs and expenses of the second such
review in any calendar year shall be borne by the Banks ratably in accordance
with their Pro Rata Shares; provided that after the occurrence and during the
continuation of a Termination Event or an Unmatured Termination Event, all such
reviews shall be borne by the Servicer as part of its duties which are
compensated by the Servicer Fee.
(g) Change in Lock-Box Banks or the Collection Account Bank, Lock-Box
Accounts or the Collection Account and Payment Instructions to Obligors. The
Servicer shall not, and shall not permit the Originator to, add or terminate any
bank as a Lock-Box Bank or Collection Account Bank or any account as a Lock-Box
Account or the Collection Account from those listed in Schedule II to the
Agreement, or make any change in its instructions to Obligors regarding payments
to be made to the Originator, the Servicer or any Lock-Box Account (or related
post office box), unless the Facility Agent shall have consented thereto in
writing and the Facility Agent shall have received copies of all agreements and
documents (including Lock-Box Agreements and a Collection Account Agreement, as
applicable) that it may request in connection therewith.
(h) Deposits to Lock-Box Accounts and the Collection Account. The
Servicer shall: (i) instruct all Obligors to make payments of all Receivables to
one or more Lock-Box Accounts or to post office boxes to which only Lock-Box
Banks have access (and shall instruct the Lock-Box Banks to cause all items and
amounts relating to such Receivables received in such post office boxes to be
removed and deposited into a Lock-Box Account on a daily basis), and (ii)
deposit, or cause to be deposited, any Collections received by it or the
Originator into Lock-Box Accounts or the Collection Account not later than one
Business Day after receipt thereof. Each Lock-Box Account shall at all times be
subject to a Lock-Box Agreement. The Collection Account shall at all times be
subject to the Collection Account Agreement. The Servicer will not deposit or
otherwise credit, or cause or permit to be so deposited or credited, to any
Lock-Box Account or the Collection Account cash or cash proceeds other than
Collections.
(i) Marking of Records. At its expense, the Servicer shall mark its
master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided percentage
ownership interests with regard to the Purchased Interest related to such
Receivables and related Contracts have been sold in accordance with the
Agreement.
(j) Reporting Requirements. Weirton shall provide to the Facility Agent
(in multiple copies, if requested by the Facility Agent) the following:
(i) as soon as available and in any event within 60 days after
the end of the first three quarters of each fiscal year of Weirton,
balance sheets of Weirton and its
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consolidated Subsidiaries as of the end of such quarter and statements
of income, retained earnings and cash flow of Weirton and its
consolidated Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, certified
by the senior financial officer of such Person;
(ii) as soon as available and in any event within 105 days
after the end of each fiscal year of such Person, a copy of the annual
report for such year for such Person and its consolidated Subsidiaries,
containing financial statements for such year audited by independent
certified public accountants of nationally recognized standing;
(iii) as to the Servicer only, (i) on each Business Day, the
Daily Report for such day prepared by the Servicer pursuant to Section
5.03(b) of the Sale Agreement and (ii) as soon as available and in any
event not later than the tenth day following the last day of each
calendar month, a Settlement Statement as of the last day of such
calendar month prepared by the Servicer pursuant to Section 5.03(b) of
the Sale Agreement;
(iv) as soon as possible and in any event within five days
after becoming aware of the occurrence of each Termination Event or
Unmatured Termination Event, a statement of the senior financial
officer of Weirton setting forth details of such Termination Event or
Unmatured Termination Event and the action that such Person has taken
and proposes to take with respect thereto;
(v) promptly after the sending or filing thereof, copies of
all reports that Weirton sends to any of its security holders, and
copies of all 10-Qs and 10-Ks that Weirton or any Subsidiary files with
the Securities and Exchange Commission or any national securities
exchange;
(vi) promptly after the filing or receiving thereof, copies of
all reports and notices that Weirton or any of its ERISA Affiliate
files under ERISA with the Internal Revenue Service, the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor or that
such Person or any of its Affiliate receives from any of the foregoing
or from any multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA) to which such Person or any of its Affiliate is or
was, within the preceding five years, a contributing employer, in each
case in respect of any Reportable Event (as defined in ERISA) that
could, in the aggregate, result in the imposition of liability on
Weirton and/or any such Affiliate;
(vii) at least thirty days before any change in Weirton's or
the Originator's name or any other change requiring the amendment of
UCC financing statements, a notice setting forth such changes and the
effective date thereof;
(viii) promptly after Weirton obtains knowledge thereof,
notice of any: (A) litigation, investigation or proceeding that may
exist at any time between Weirton or any of its Subsidiaries and any
Governmental Authority that, if not cured or if adversely determined,
as the case may be, would have a Material Adverse Effect, (B)
litigation or proceeding adversely affecting such Person or any of its
Subsidiaries in which the
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amount involved is $5,000,000 or more or in which injunctive or similar
relief is sought, or (C) litigation or proceeding relating to any
Transaction Document; and
(ix) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of Weirton or any of
its Affiliates as the Facility Agent may from time to time reasonably
request.
3. Separate Existence. Each of the Seller and Weirton hereby
acknowledges that the Banks and the Facility Agent are entering into the
transactions contemplated by this Agreement and the other Transaction Documents
in reliance upon the Seller's identity as a legal entity separate from Weirton
and its Affiliates. Therefore, from and after the date hereof, each of the
Seller and Weirton shall take all steps specifically required by the Agreement
or reasonably required by the Facility Agent to continue the Seller's identity
as a separate legal entity and to make it apparent to third Persons that the
Seller is an entity with assets and liabilities distinct from those of Weirton
and any other Person, and is not a division of Weirton, its Affiliates or any
other Person. Without limiting the generality of the foregoing and in addition
to and consistent with the other covenants set forth herein, each of the Seller
and Weirton shall take such actions as shall be required in order that:
(a) The Seller will be a limited purpose corporation whose
primary activities are restricted in its certificate of incorporation
to: (i) purchasing or otherwise acquiring from the Originator, owning,
holding, granting security interests or selling interests in Pool
Assets, (ii) entering into agreements for the selling and servicing of
the Receivables Pool, and (iii) conducting such other activities as it
deems necessary or appropriate to carry out its primary activities;
(b) The Seller shall not engage in any business or activity,
or incur any indebtedness or liability, other than as expressly
permitted by the Transaction Documents;
(c) Not less than one member of the Seller's Board of
Directors (the "Independent Director") shall be an individual who is
not a direct, indirect or beneficial stockholder, officer, director,
employee, affiliate, associate or supplier of Weirton or any of its
Affiliates. The certificate of incorporation of the Seller shall
provide that: (i) the Seller's Board of Directors shall not approve, or
take any other action to cause the filing of, a voluntary bankruptcy
petition with respect to the Seller unless the Independent Director
shall approve the taking of such action in writing before the taking of
such action, and (ii) such provision cannot be amended without the
prior written consent of the Independent Director;
(d) The Independent Director shall not at any time serve as a
trustee in bankruptcy for the Seller, Weirton or any Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will be
compensated from the Seller's funds for services provided to the
Seller. The Seller will not engage any agents other than its attorneys,
auditors and other professionals, and a servicer and any other
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agent contemplated by the Transaction Documents for the Receivables
Pool, which servicer will be fully compensated for its services by
payment of the Servicing Fee, and a manager, which manager will be
fully compensated from the Seller's funds;
(f) The Seller will contract with the Servicer to perform for
the Seller all operations required on a daily basis to service the
Receivables Pool. The Seller will pay the Servicer the Servicing Fee
pursuant hereto. The Seller will not incur any material indirect or
overhead expenses for items shared with Weirton (or any other Affiliate
thereof) that are not reflected in the Servicing Fee. To the extent, if
any, that the Seller (or any Affiliate thereof) shares items of
expenses not reflected in the Servicing Fee or the manager's fee, such
as legal, auditing and other professional services, such expenses will
be allocated to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis reasonably related
to the actual use or the value of services rendered; it being
understood that Weirton shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Transaction
Documents, including legal, agency and other fees;
(g) The Seller's operating expenses will not be paid by
Weirton or any other Affiliate thereof;
(h) The Seller will have its own separate stationery;
(i) The Seller's books and records will be maintained
separately from those of Weirton and any other Affiliate thereof;
(j) All financial statements of Weirton or any Affiliate
thereof that are consolidated to include Seller will contain detailed
notes clearly stating that: (i) a special purpose corporation exists as
a Subsidiary of Weirton, and (ii) the Originator has sold receivables
and other related assets to such special purpose Subsidiary that, in
turn, has sold undivided interests therein to certain financial
institutions and other entities;
(k) The Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of Weirton
or any Affiliate thereof;
(l) The Seller will strictly observe corporate formalities in
its dealings with Weirton or any Affiliate thereof, and funds or other
assets of the Seller will not be commingled with those of Weirton or
any Affiliate thereof except as permitted by the Agreement in
connection with servicing the Pool Receivables. The Seller shall not
maintain joint bank accounts or other depository accounts to which
Weirton or any Affiliate thereof (other than Weirton in its capacity as
the Servicer) has independent access. The Seller is not named, and has
not entered into any agreement to be named, directly or indirectly, as
a direct or contingent beneficiary or loss payee on any insurance
policy with respect to any loss relating to the property of Weirton or
any Subsidiary or other Affiliate of Weirton. The Seller will pay to
the appropriate Affiliate the marginal increase or, in the absence of
such increase, the market amount of its portion of the
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premium payable with respect to any insurance policy that covers the
Seller and such Affiliate; and
(m) The Seller will maintain arm's-length relationships with
Weirton (and any Affiliate thereof). Any Person that renders or
otherwise furnishes services to the Seller will be compensated by the
Seller at market rates for such services it renders or otherwise
furnishes to the Seller. Neither the Seller nor Weirton will be or will
hold itself out to be responsible for the debts of the other or the
decisions or actions respecting the daily business and affairs of the
other. The Seller and Weirton will immediately correct any known
misrepresentation with respect to the foregoing, and they will not
operate or purport to operate as an integrated single economic unit
with respect to each other or in their dealing with any other entity.
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EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a)(i) the Seller, Weirton, the Originator or the Servicer (if Weirton
or any of its Affiliates) shall fail to perform or observe any term, covenant or
agreement under the Agreement or any other Transaction Document and, except as
otherwise provided herein, such failure shall continue for 30 days after
knowledge or written notice thereof, (ii) the Seller or the Servicer shall fail
to make when due any payment or deposit to be made by it under the Agreement and
such failure shall continue unremedied for three Business Days (or in the case
of a non-scheduled payment, five Business Days) or (iii) Weirton shall resign as
Servicer, and no successor Servicer reasonably satisfactory to the Facility
Agent shall have been appointed;
(b) Weirton(or any Affiliate thereof) shall fail to transfer to any
successor Servicer when required any rights pursuant to the Agreement that
Weirton (or such Affiliate) then has as Servicer;
(c) any representation or warranty made or deemed made by the Seller,
Weirton or the Originator (or any of their respective officers) under or in
connection with the Agreement or any other Transaction Document, or any
information or report delivered by the Seller, Weirton or the Originator or the
Servicer pursuant to the Agreement or any other Transaction Document, shall
prove to have been incorrect or untrue in any material respect when made or
deemed made or delivered; provided, however, if the violation of this paragraph
(c) by the Seller or the Servicer may be cured without any potential or actual
detriment to any Bank, or the Facility Agent, the Seller or the Servicer, as
applicable, shall have five days from the earlier of (i) such Person's actual
knowledge of such failure and (ii) written notice to such Person of such failure
to so cure any such violation before a Termination Event shall occur so long as
such Person is diligently attempting to effect such cure.
(d) (i) the Seller or the Servicer shall fail to deliver the Daily
Report pursuant to the Agreement, and such failure shall remain unremedied for
five days and (ii) the Seller or the Servicer shall fail to deliver the
Settlement Statement pursuant to the Agreement, and such failure shall remain
unremedied for five days;
(e) the Agreement or any purchase or reinvestment pursuant to the
Agreement shall for any reason: (i) cease to create, or the Purchased Interest
shall for any reason cease to be, a valid and enforceable first priority
perfected undivided percentage ownership or security interest to the extent of
the Purchased Interest in each Pool Receivable, the Related Security and
Collections with respect thereto, free and clear of any Adverse Claim, or (ii)
cease to create with respect to the Pool Assets, or the interest of the Facility
Agent (for the benefit of the Banks) with respect to such Pool Assets shall
cease to be, a valid and enforceable first priority perfected security interest,
free and clear of any Adverse Claim;
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(f) the Seller, Weirton or the Originator shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against the Seller, Weirton or the Originator seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 60 days, or any of the actions
sought in such proceeding (including the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or the Seller,
Weirton or the Originator shall take any corporate action to authorize any of
the actions set forth above in this paragraph;
(g) the average for three consecutive calendar months of: (A) the
Default Ratio shall exceed 3.0%, (B) the Delinquency Ratio shall exceed 15%, or
(C) the Dilution Ratio shall exceed 12%;
(h) a Change in Control shall occur;
(i) the Purchased Interest shall exceed 100% and such circumstance
shall not have been cured within five Business Days;
(j) Weirton or any of its Subsidiaries shall fail to pay any principal
of or premium or interest on any of its Debt that is outstanding in a principal
amount of at least $25,000,000 in the aggregate when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement, mortgage, indenture or instrument
relating to such Debt (and shall have not been waived); or any other event shall
occur or condition shall exist under any agreement, mortgage, indenture or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement, mortgage, indenture or
instrument (and shall have not been waived), if, in either case: (a) the effect
of such non-payment, event or condition is to give the applicable debtholders
the right (whether acted upon or not) to accelerate the maturity of such Debt,
or (b) any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to repay, redeem, purchase or defease such
Debt shall be required to be made, in each case before the stated maturity
thereof;
(k) either the Internal Revenue Service or the Pension Benefit Guaranty
Corporation shall have filed one or more notices of lien asserting a claim or
claims pursuant to the Internal Revenue Code, or ERISA, as applicable, against
the assets of Seller, the Originator, Weirton or any ERISA Affiliate in an
aggregate amount exceeding $2,000,000 unless such amounts (i) are (in the
opinion of Standard & Poor's) adequately bonded by Weirton or (ii) relate to
taxes in an aggregate amount not exceeding $12,000,000 which are contested in
good faith by appropriate proceedings and with respect to which adequate
reserves are being maintained under GAAP.
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(l) the Seller, Weirton or the Originator shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally as such debts become due.
79
<PAGE> 1
Exhibit 10.11
SEPTEMBER 29, 1999
WEIRTON STEEL CORPORATION
EXECUTIVE HEALTHCARE PROGRAM
EFFECTIVE JULY 1, 1999
<PAGE> 2
PREAMBLE
In 1997, the Management Development and Compensation Committee of the
Board of Directors of Weirton Steel Corporation (the "Employer") recognized that
the Employer needed a vehicle to provide post-termination health care insurance
coverage to continue to attract and retain key, mid-career executives and senior
managers. The Employer's retiree health care program effectively has excluded
most recruits over the age of 50 from ever achieving post-termination health
care insurance coverage. On the other hand, other employers appeared to have the
ability to offer such a benefit as an inducement to the Employer's senior
managers to leave the employ of the Employer. Therefore, the Committee
authorized the development and implementation of this Program, to be effective
on the Effective Date (as defined herein).
The Program is intended to be an extension of the Employer-funded
Healthcare plan available for active and retired employees of the Employer.
<PAGE> 3
SECTION 1
DEFINITIONS
When used in this Program, unless the context clearly indicates
otherwise, the terms set forth below shall be defined as follows:
1.01 "Change in Control" has the definition set forth in Section 5.01
hereof.
1.02 "Committee" means the persons named under Section 6 to administer the
Program.
1.03 "Comparable Position" means any employment, including self-employment,
of a former Employee within 12 months following the Employee's
Termination of Employment, which employment provides comprehensive
healthcare benefits and in which the former Employee's annualized base
compensation exceeds 85% of his final base compensation with the
Employer.
1.04 "Dependent" shall mean a dependent as defined under an applicable
Healthcare Plan.
/1
<PAGE> 4
1.05 "Effective Date" means July 1, 1999.
1.06 "Eligible Employee" means an Employee who has satisfied the eligibility
criteria set forth in Section 2.
1.07 "Employee" means any individual who is, or was, employed by the
Employer at the date of Termination of Employment in at least salary
grade 56 or a similar position as determined by the Committee.
1.08 "Employer" means Weirton Steel Corporation, a Delaware corporation, any
Subsidiary of the Employer to whose Employees the Program is made
available by action of the Committee, and any successor in interest
thereto.
1.09 "For Just Cause" means a Termination of Employment for one or more of
the following reasons: (a) conviction of a felony punishable by a
prison sentence of more than one year; (b) habitual use of drugs
without a prescription or habitual, excessive use of alcohol to the
extent that any of such uses materially interferes with the Employee's
performance of his duties; or (c) refusal or failure, after written
notice, by the Employee to perform or discharge duties and
responsibilities appropriate to his position which are properly
assigned to him, which refusal or failure amounts to an extended and
gross neglect of his duties to the Employer.
/2
<PAGE> 5
1.10 "Healthcare Plan" means one or more applicable healthcare benefit plan
as sponsored and maintained by the Employer from time to time for its
nonrepresented active or retired salaried employees, (including both
pre- and post-Medicare coverages).
1.11 "Initial Group of Employees" means those Employees initially approved
for inclusion in this Plan as listed in Appendix A attached hereto.
1.12 "Organization" means any corporation, partnership, limited liability
company, business trust or other legal entity not included in the
controlled group of businesses of which the Employer is a member.
1.13 "Participant" means an Eligible Employee who has completed, signed and
returned to the Committee the applicable
enrollment/election/re-enrollment forms required to participate in the
Program. To the extent provided in Section 4.01, the term shall also
include eligible Dependents.
1.14 "Program" means the Weirton Steel Corporation Executive Healthcare
Program, as set forth in this document and as may be amended from time
to time hereafter.
/3
<PAGE> 6
1.15 "Service" means:
(a) With respect to the Initial Group of Employees, Service as
defined under the Weirton Steel Corporation Retirement Plan
No. 001, ("Plan No. 001") and
(b) With respect to all other Eligible Employees, continuous
employment with the Employer determined in accordance with the
definition of Year of Service under Plan No. 001, but
excluding periods of non-active service such as, but not
limited to, authorized absences in which the Employee receives
sickness and accident benefits, long-term disability leave or
leave with (or without) pay from the Employer, unless such
periods are required to be included under applicable federal
or state law determined to be applicable to the Program.
Non-active service and the duration thereof shall be
determined by the Committee in its sole discretion, based on
rules uniformly applied.
1.16 "Termination of Employment" means a Break in Service as set forth in
the terms of the Weirton Steel Corporation Retirement Plan ("Plan No.
001").
/4
<PAGE> 7
SECTION 2
PARTICIPATION
2.01 ELIGIBILITY
Subject to Sections 2.02 and 2.03 hereof, the following conditions must
be satisfied to participate in the Program:
(a) The Employee: (i) is included in the Initial Group of
Employees, or is designated subsequently for inclusion in the
Program by the Committee; and (ii) attains age 55 with at
least five years of Service, or attains 15 years of Service;
and (iii) attains five years of Service in the salary grade 56
position (or a position similar thereto as determined by the
Committee).
(b) The Employee, at the time of Termination of Employment, is not
eligible to receive a retirement benefit from Plan 001, other
than a deferred vested benefit, or if entitled to a pension
benefit is otherwise not eligible to participate in the
Healthcare Plan;
(c) The Employee's Termination of Employment is not For Just Cause
or was not voluntary on the part of the Employee, except as a
result of the Employer's breach of an employment, severance or
similar agreement with the Employee or as a result of the
Employee's retirement; and
(d) The Employee furnishes the Committee with evidence reasonably
required by the Committee to ascertain that the Employee is
not being or has not been employed in a Comparable Position.
/5
<PAGE> 8
2.02 PARTICIPATION
(a) Subject to Section 2.03, an Eligible Employee may elect,
within sixty (60) days of Termination of Employment, to
participate or defer participation in the Program in the
Program in accordance with the terms of the Healthcare Plan in
effect at that time.
(b) Each Eligible Employee may elect to participate by executing
and delivering an enrollment/election/re-enrollment form to
the Committee. An Eligible Employee who elects to defer
Program participation or who initially does not elect to
participate may enroll/re-enroll in the Program at any time so
long as the Employee remains an Eligible Employee.
(c) A Participant under the Program may elect to suspend
participation at anytime, and may re-enroll in the Program at
any time so long as, at the end of the suspension, none of the
termination events set forth in Section 2.03 has occurred and
the Employee otherwise remains an Eligible Employee.
(4) Any election to participate in the Program shall be
retroactive to the first day of the calendar month in which
the election is made.
2.03 TERMINATION OF PARTICIPATION
(a) Participation in the Program shall terminate upon the earliest
of:
(1) The death of the last of the Participant and his
eligible Dependents;
(2) A determination that the Participant has violated any
applicable noncompete and/or confidentiality
agreement with the Employer;
/6
<PAGE> 9
(3) The Participant's failure to provide documentation
required by the Committee to conclude that the
Participant remains an Eligible Employee.
(4) Subject to (d) below, if a Participant's
participation in the Program is terminated as a
result of working in a Comparable Position then such
Employee shall forever be ineligible to participate
in the Program.
(b) An Eligible Employee's decision to participate, defer or
suspend participation under the Program shall be binding on
any eligible Dependents. Any circumstance other than the
Participant's death which results in termination of
participation in the Program for the Participant shall also
result in termination of coverage for the Participant's
eligible Dependents.
(c) If an Eligible Employee has a Termination of Employment and is
re-employed by the Employer, the terms and conditions of any
intervening employment shall not affect adversely any
determination concerning the Employee's eligibility or rights
to participate in the Program following any subsequent
Termination of Employment.
/7
<PAGE> 10
SECTION 3
PAYMENT FOR COVERAGE
3.01 PARTICIPANT PREMIUM PAYMENTS
Each Participant shall pay the premiums for the coverage provided to
the Participant (including Dependent coverage) under the applicable Healthcare
Plan. In so far as practicable, the amount of the premiums will be based on the
Employer's average cost of providing the Healthcare Plan coverage to other
similarly situated retired or active employees of the Employer in the calendar
quarter last preceding the calendar quarter of coverage. The Employer shall take
into consideration all elements of cost, including but not limited to, pre- and
post-Medicare (age 65) coverage, retiree claims experience, marital and
dependency status, in establishing the premium cost.
3.02 EMPLOYER PAYMENTS
(a) Except as provided in Section 3.02(b), the Employer will pay
to or on behalf of each Participant an amount equal to the
premium payments required to be paid by the Participant an
amount that will provide the coverage under the applicable
Healthcare Plan on the same basis as the Participant would
have received the coverage had he remained an active employee,
or received retirement coverage as applicable. Employer
payments may be paid quarterly, but shall be paid no less
frequently than annually. The Employer payments are expected
to be taxable income to the Participant, and the Participant
shall be advised of these circumstances in connection with any
application to participate.
(b) If the applicable Healthcare Plan requires participants
generally to make premium payments to maintain coverage, the
Participant will be required to make payments of like amount
without corresponding Employer payments.
/8
<PAGE> 11
SECTION 4
BENEFITS
4.01 TYPE OF BENEFITS
(a) Each Participant shall be entitled to receive coverage under
the applicable Healthcare Plan made available from time to
time by the Employer to its similarly situated active or
retired Employees.
(1) A Participant who is eligible for Medicare shall
receive Employer selected Healthcare Plan coverage
then available to the Employer's retirees under any
Healthcare Plan.
(2) A Participant who is not eligible for Medicare shall
receive Employer selected Healthcare Plan coverage
then available to the Employer's active employees
under any Healthcare Plan.
(b) Participants shall be entitled to elect either "self" or "self
plus Dependent" coverage under the applicable Healthcare Plan,
if available.
(c) The benefits provided under a Healthcare Plan will be subject
to the terms and conditions of that Healthcare Plan. No fixed
or minimum level of benefits is provided under the Program.
(d) A Healthcare Plan may be amended, modified or terminated
unilaterally by the Employer at any time and without the
consent of any Participant; provided, that there shall be no
discrimination against Participants as compared to similarly
classified Employees participating in a Healthcare Plan; and
provided further, that no amendment, modification or
termination shall adversely affect any Participant's rights
arising as a result of the operation of Section 7.01 and
Section 7.02.
/9
<PAGE> 12
4.02 COORDINATION OF BENEFITS
In the event a Participant has coverage available under another
healthcare plan, the standard coordination of benefit provisions being applied
by the Employer generally will apply to determine which plan provides the
Participant's primary coverage.
4.03 APPLICATION AND CLAIMS PROCEDURE
(a) The Committee shall establish reasonable procedures under
which a Participant may present a claim for benefits under the
Program (including under any applicable Healthcare Plan).
(b) If a claim for benefits properly submitted in accordance with
the procedures established pursuant to subsection (a) of this
Section is not allowed in full, the claims and review
procedure provided under the applicable Healthcare Plan shall
apply, and the Participant shall comply with that procedure in
requesting any review of the claim for benefits.
/10
<PAGE> 13
SECTION 5
CHANGE IN CONTROL
5.01 DEFINITION OF CHANGE IN CONTROL
The term "Change in Control" means the occurrence of one or more of the
following events:
(a) The acquisition in one or more transactions by any individual,
entity or group within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") of
beneficial ownership within the meaning of Rule 13d-3 under
the Exchange Act of what would amount to 30 % or more of the
combined voting power of all outstanding voting securities of
the Employer entitled to vote generally on matters submitted
to stockholders ("Employer Voting Securities") without giving
effect to any limitation in voting power imposed on a
"Significant Stockholder" as defined in, and pursuant to,
Article Eleventh of the Employer's Restated Certificate of
Incorporation (the "Charter"); provided, however, that the
following events, in and of themselves, shall not constitute a
Change in Control under this subsection (a):
(1) Any acquisition of Voting Securities by the Employer,
any wholly owned subsidiary of the Employer or any
employee benefit plan (or related trust) sponsored or
maintained by the Employer or any such subsidiary; or
(2) Any acquisition of Voting Securities by a corporation
with respect to which, following such acquisition,
not less than 80% of the then outstanding voting
power of the then outstanding voting securities of
such corporation entitled to vote generally on
matters submitted to stockholders is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Employer Voting Securities immediately prior to such
acquisition and in substantially the same proportion
as
/11
<PAGE> 14
their ownership, immediately prior to such
acquisition, of the Employer Voting Securities.
(b) Individuals who constitute the incumbent Board of Directors of
the Employer at the Effective Date cease for any reason to
constitute at least two thirds of the Board of Directors of
the Employer and, within 12 months of the occurrence of such
event, the individual serving as the CEO at the time of such
event ceases to serve as CEO; provided, however, that any
individual becoming a director subsequent to the Effective
Date who was elected by a vote of at least a majority of the
then remaining incumbent directors or whose nomination for
election was approved by the vote of at least a majority of
the then remaining incumbent directors and who was
subsequently elected by the stockholders, as the case may be,
shall be considered as though such individual were a member of
the incumbent Board of Directors;
(c) Individuals who constitute the incumbent Board of Directors of
the Employer at the Effective Date cease for any reason to
constitute at least a majority of the Board of Directors of
the Employer; provided, however, that any individual becoming
a director subsequent to the Effective Date who was elected by
a vote of at least a majority of the then remaining incumbent
directors or whose nomination for election was approved by the
vote of at least a majority of the then remaining incumbent
directors and who was subsequently elected by the
stockholders, as the case may be, shall be considered as
though such individual were a member of the incumbent Board of
Directors;
(d) Any amendment to Article Tenth of the Charter reducing the
level of approval required for the Employer to engage in any
transaction specified in, or governed by, such Article, or
removing any such transaction from the scope of such Article,
in each case as in existence on the Effective Date, is duly
approved by the requisite vote of stockholders of the
Employer, and, within 12 months of any such approval, (i) any
transaction which was
/12
<PAGE> 15
removed from the scope of Article Tenth or whose level of
approval was reduced by the amendment is approved by the
stockholders of the Employer or, if no such approval is then
required, such transaction is effected, or (ii) the individual
serving as the CEO at the time of such approval ceases to
serve as CEO;
(e) The stockholders of the Employer duly approve by the requisite
vote any transaction specified by Article Tenth of the Charter
as in existence on the Effective Date, excluding any
transaction with a "Significant Stockholder" (as defined in
the Charter on the Effective Date) specified in exclusion for
"minor" interested transactions, unless, (i) notwithstanding
such approval, the transaction is abandoned as permitted by
applicable law, or (ii) the approval relates to a transaction
involving a merger, consolidation or disposition of
substantially all assets by the Employer, immediately
following which all, or substantially all, the individuals and
entities who were the beneficial owners of the Employer Voting
Securities immediately prior to such transaction beneficially
own, directly or indirectly, not less than 80% of the then
outstanding voting securities entitled to vote generally in
the election of directors of the corporation surviving or
resulting from such transaction, or acquiring the assets of
the Employer in such transaction, as the case may be, and in
substantially the same proportion as their ownership of the
Employer Voting Securities immediately prior to such
transaction; or
(f) A "change in control" or "change of control" (or substantially
similarly worded term), as defined in any instrument of
indebtedness of the Employer, whether now existing or
hereafter incurred, has occurred.
5.02 EFFECT OF CHANGE IN CONTROL
Notwithstanding any other provision of this Plan, immediately and
automatically upon a Change in Control, the following shall apply:
/13
<PAGE> 16
(a) Each Employee in the Initial Group of Employees, and each
Employee subsequently designated by the Committee for
inclusion in the Program prior to the Change in Control, shall
be deemed conclusively to have satisfied all age and/or
service requirements under Section 2.01(a)(i)(ii) and (b).
(b) Each Employee who would otherwise be an Eligible Employee,
except for the Years of Service requirements under Section
2.01(a) and whose Termination of Employment occurs within two
years after the Change in Control shall be deemed to have met
all requirements under Section 2.01 at the time of
termination.
SECTION 6
PLAN ADMINISTRATION
6.01 COMMITTEE
Unless specifically provided otherwise in the Program, the Program is
to be administered exclusively by the Committee on behalf of the Employer.
Members of the Committee shall not be deemed to be individual fiduciaries or to
have liability as individuals for their service to, or actions as members of,
the Committee.
6.02 APPOINTMENT OF COMMITTEE
(a) The Chief Executive Officer of the Employer (the "CEO") shall
appoint three or more individuals (who may include Employees)
to constitute the Committee. An individual appointed a member
of the Committee shall signify acceptance in writing and shall
serve on the Committee as provided in the Program.
/14
<PAGE> 17
(b) The CEO may remove or replace a member of the Committee at any
time, with or without or without reason, and any member may
resign at any time by delivering the member's written
resignation to the CEO. A resignation shall be effective upon
its delivery or at any later date specified therein. If at any
time there is a vacancy on the Committee, the remaining
members may continue to act in accordance with the Program
until such vacancy is filled.
(c) If, for any reason, the CEO fails to appoint or maintain a
Committee, the Board of Directors of the Employer shall
appoint or maintain the Committee or perform its duties.
6.03 COMMITTEE PROCEDURES
(a) Actions of the Committee under the Program shall be by vote of
a majority of its members at a meeting held upon due notice at
which a quorum of members is present, or by written consent
without a meeting signed by all members. No member of the
Committee may vote on or otherwise act on any matter which
affects the member's singular interest under the Program.
(b) The Committee may allocate among its members specific powers,
duties, and responsibilities as it deems advisable.
(c) The Committee may delegate to its appointed assistants,
representatives, or agents, specific powers, duties, and
responsibilities as it deems advisable.
(d) A member of the Committee shall receive compensation and
reimbursement for expenses solely as determined by the
Employer; provided that, in no event, shall a full-time
employee of the Employer be entitled to compensation for
services rendered.
6.04 COMMITTEE POWERS AND DUTIES
In addition to powers and duties specifically granted to it elsewhere
in the Program, the Committee shall have the following exclusive powers and
duties:
/15
<PAGE> 18
(a) To make and enforce such rules and regulations as it deems
necessary, appropriate, or desirable for the administration of
the Program;
(b) To interpret the Program, including the right to clarify and
correct possible ambiguities, inconsistencies, or omissions;
(c) To maintain all necessary records for the administration of
the Program;
(d) To investigate and decide all questions and facts related to
participation in the Program, the determination of eligibility
for, duration and type of benefits under the Program; and
(e) To prescribe procedures for, filing and contents of,
applications for benefits under the Program.
All determinations, actions and decisions made by the Committee concerning the
powers and duties granted to it or the administration of the Program shall be
binding on Eligible Employees, Participants, Dependents and all other parties
and shall be final and conclusive, subject only to the claims procedures
contained in Section 4.03, provided that such determinations, actions and
decisions are not arbitrary or capricious.
6.05 INFORMATION FROM EMPLOYEES
Each Employee shall furnish the Committee in the form prescribed by it,
and at its request, such personal data, affidavits, consents, authorizations to
obtain information and other information (including copies of state and/or
federal income tax returns) as the Committee deems necessary or desirable for
the administration of the Program, all in a timely manner as communicated to the
Employee by the Committee.
6.06 INCOMPETENCY
If a Participant to whom an amount or benefit is due under this Program
is declared legally incompetent by proper judicial authority, the Committee may
cause payment of such amount to be made to the guardian or other legal
representative of the individual. A payment, to the extent made, will operate
/16
<PAGE> 19
as a valid and complete discharge of any liability therefor under the Program or
any applicable Healthcare Plan.
6.07 INDEMNIFICATION
(a) The Employer shall indemnify and hold harmless, subject to any
limitations imposed by law, all directors, officers, employees
and agents of the Employer and its affiliates, and members of
the Committee to the extent not otherwise comprehended within
the foregoing, whether or not any such persons are determined
to be fiduciaries, against any and all liability, loss, or
cost such persons may incur in the exercise of their duties
and powers under the Program or such persons may otherwise
incur as a result of the Employer's sponsorship of the Program
(b) The Employer shall also assume, and pay for the defense of, or
reimburse the expenses reasonably incurred by the defense of,
any and all claims, actions, suits, or proceedings arising
under, or as a result of, the Program which are brought
against any person referred to in subsection (a).
6.08 EXPENSES
All expenses incurred in establishing, administering, and maintaining
the Program shall be paid by the Employer.
/17
<PAGE> 20
SECTION 7
MISCELLANEOUS PROVISIONS
7.01 PROGRAM NOT CONTRACT OF EMPLOYMENT
The existence of the Program shall not create a contract of employment,
express or implied, between the Employer and its employees nor shall it alter or
amend any existing contract of employment, and shall not affect the Employer's
right to take any action with respect to its employees, including terminating
their employment at any time, subject only to the terms and conditions imposed
by contracts of employment and the requirements of law.
7.02 AMENDMENT OR TERMINATION
This Program may not be amended in any manner, including any suspension
or termination, so as to reduce at any time, whether or not following a Change
in Control (i) the future entitlement to coverage for any Eligible Employee at
the time of a Change in Control (including Employees who become Eligible
Employees by reason of the operation of subsection (a) or (b) of this Section
5.02), or (ii) the entitlement to continuing coverage for each Participant
receiving coverage at the time of a Change in Control and for each Eligible
Employee referred to in the immediately preceding clause (i).
7.03 NUMBER AND GENDER
In this Program, the use of singular shall be interpreted to include
the plural and the plural the singular, as the context shall require. The use of
the masculine, feminine, or neuter shall be interpreted to include the
masculine, feminine, or neuter, as the context shall require.
/18
<PAGE> 21
7.04 WHEN PROGRAM PROVISIONS CONTROL
In the event of any conflict between the provisions of the Program and
the provisions of a summary or description of the Program or the terms of any
agreement, contract, or instrument related to the Program, the provisions of the
Program shall control. Notwithstanding the previous sentence, the provisions of
an applicable Healthcare Plan shall control the scope of the healthcare benefits
which the Participant is entitled to receive under the Program.
7.05 GOVERNING LAW
To the extent not preempted by federal law, the provisions of the
Program shall be governed and construed under the internal laws of the State of
West Virginia, without giving effect to any conflicts of law principles.
7.06 TAXES
Participants are responsible for the payment of all taxes on any income
resulting from payments made to them under the Program to pay benefit premiums.
The Employer shall be responsible for issuing on a timely basis appropriate tax
reporting forms to Participants for each preceding calendar year.
7.07 RETIREMENT PROGRAMS
Participation in the Program shall not entitle a Participant to accrue
any additional benefits under any retirement plan or any other employee benefit
plan sponsored by the Employer.
7.08 SPENDTHRIFT
To the maximum extent permitted by law, benefits and interests in the
Program and/or any applicable Healthcare Plan shall not be anticipated,
assigned, alienated, subject to attachment, garnishment, levy, execution or
other legal or equitable process, or otherwise be subject to the claims of
creditors of Participants, Eligible Employees or Dependents.
/19
<PAGE> 22
7.09 BINDING ON SUCCESSORS, PURCHASERS, TRANSFEREES AND ASSIGNS
This Program shall be binding upon any successor or successors of the
Employer, whether by merger, consolidation, reorganization, purchase, transfer,
assignment or otherwise. In any such circumstance, and as a condition thereto,
the Employer shall provide for the explicit assumption of the Employer's
obligations under this Program by any such successor.
/20
<PAGE> 23
The Employer has caused this Program to be executed this 1st day of
July, 1999.
ATTEST:
WEIRTON STEEL CORPORATION
By: /s/ WILLIAM R. KIEFER
Its: Secretary
<PAGE> 24
WEIRTON STEEL CORPORATION
EXECUTIVE HEALTHCARE PROGRAM
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1 - DEFINITIONS
1.01 Change in Control...............................................................................1
1.02 Committee.......................................................................................1
1.03 Comparable Position.............................................................................1
1.04 Dependent.......................................................................................1
1.05 Effective Date..................................................................................2
1.06 Eligible Employee...............................................................................2
1.07 Employee........................................................................................2
1.08 Employer........................................................................................2
1.09 For Just Cause..................................................................................2
1.10 Healthcare Plan.................................................................................3
1.11 Initial Group of Employees......................................................................3
1.12 Organization....................................................................................3
1.13 Participant.....................................................................................3
1.14 Program.........................................................................................3
1.15 Service.........................................................................................4
1.16 Termination of Employment.......................................................................4
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C>
SECTION 2 - PARTICIPATION
2.01 Eligibility.....................................................................................5
2.02 Participation ..................................................................................6
2.03 Termination of Participation ...................................................................6
SECTION 3 - PAYMENT FOR COVERAGE
3.01 Participant Premium Payments....................................................................8
3.02 Employer Payments...............................................................................8
SECTION 4 - BENEFITS
4.01 Type of Benefits................................................................................9
4.02 Coordination of Benefits.......................................................................10
4.03 Application and Claims Procedure...............................................................10
SECTION 5 - Change in Control
5.01 Definition of Change in Control................................................................11
5.02 Effect of Change in Control....................................................................13
SECTION 6 - PLAN ADMINISTRATION
6.01 Committee......................................................................................14
6.02 Appointment of Committee.......................................................................14
6.03 Committee Procedures...........................................................................15
6.04 Committee Powers and Duties....................................................................15
6.05 Information From Employees.....................................................................16
6.06 Incompetency...................................................................................16
6.07 Indemnification................................................................................17
6.08 Expenses.......................................................................................17
SECTION 7 - MISCELLANEOUS PROVISIONS
7.01 Program Not Contract of Employment.............................................................18
7.02 Amendment or Termination.......................................................................18
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C>
7.03 Number and Gender..............................................................................18
7.04 When Program Provisions Control................................................................19
7.05 Governing Law..................................................................................19
7.06 Taxes..........................................................................................19
7.07 Retirement Programs............................................................................19
7.08 Spendthrift....................................................................................19
7.09 Binding on Successors, Purchasers, Transferees and Assigns ....................................20
EXECUTION PAGE
</TABLE>
<PAGE> 1
Exhibit 13.1
1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The following should be read in conjunction with, and is qualified in its
entirety by reference to the Consolidated Financial Statements of Weirton Steel
Corporation (the "Company" or "Weirton") including the notes thereto, which
begin on page 11.
OVERVIEW
The Company is a major integrated producer of flat rolled carbon steels with
major product lines consisting of sheet and tin mill product. Sheet product
includes hot and cold rolled and both hot-dipped and electrolytic galvanized
steels. Tin mill product includes tin-plate, chrome coated and black plate.
In 1999 the Company and other domestic producers suffered from the worst
market conditions for steel products since the 1980s. Beginning in the second
half of 1998 and continuing through 1999, imported steel, some of which was
dumped in violation of United States trade laws, adversely affected product
prices in the United States and tonnages sold by domestic producers. In 1999
foreign producers exported 35.6 million tons of steel to the United States. This
was the second highest import level in history surpassed only by the 41.4
million tons imported into the United States in 1998.
The Company and other domestic producers have sought and continue to seek
legal remedies to stop the flow of illegally dumped steel imported into the
United States.
During the fourth quarter of 1998, the Company filed dumping suits against
Brazil, Japan and Russia, seeking the imposition of duties on certain hot rolled
carbon steel products. Those suits were ruled on favorably by the International
Trade Commission (ITC) and significant duties were assessed. In addition, there
has been a significant increase in imported cold rolled and tin mill product. In
response, the Company filed cold rolled trade cases on June 2, 1999. On March 3,
2000, the ITC ruled that low-priced cold rolled imports from six countries,
including Japan and Brazil, were not a threat to the U.S. steel industry,
dropping cases that would have led to antidumping duties as high as 80%. On
October 28, 1999, the Company filed a trade case against Japan for allegedly
setting illegal prices on its tin mill products sold in American markets. The
ITC preliminarily ruled on December 13, 1999 that tin mill products imported
from Japan harmed the domestic industry. The Commerce Department is required to
assess preliminary duties on these imports by April 15, 2000.
While the efforts of the Company and other domestic steel producers and labor
organizations have had some impact on import levels, the import surge in the
second half of 1998 continued to adversely affect the domestic steel market in
1999.
Though the Company's operating results were adversely affected by the illegal
dumping of steel by foreign producers, the Company's 1999 net income reflects
the benefit of the sale of a portion of its investment in MetalSite, a business
to business e-commerce company that sells metal products over the internet.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
1999 Compared to 1998
Net income for 1999 was $30.9 million or $0.71 per diluted share compared to a
net loss of $6.1 million or $0.15 per diluted share in 1998. The results for
1999 include a net pretax gain of $170.1 million related to the sale of a
portion of the Company's investment in MetalSite and a non-cash pretax asset
impairment charge of $22.5 million associated with the write down of a
long-lived asset to fair value. The results for 1998 include a pretax
restructuring charge of $2.9 million associated with an employee reduction
program. Excluding the effects of these non-recurring items, profit sharing, and
the resulting impact on income taxes, the net loss for 1999 would have been
$76.4 million or $1.84 per diluted share compared to a net loss for 1998 of $3.8
million or $0.09 per diluted share.
Total shipments in 1999 were 2,514 thousand tons compared to 2,575 thousand
tons in 1998. Net sales were $1,091.7 million in 1999 compared to $1,254.8
million in 1998.
Sheet product shipments in 1999 were 1,743 thousand tons compared to 1,771
thousand tons in 1998, a decrease of 2%. Sheet mill product shipments resulted
in net sales of $642.6 million in 1999, a decrease of $112.7 million compared to
1998. The decrease in net sales is primarily attributable to a decrease in
average selling prices.
Tin mill product shipments in 1999 were 771 thousand tons compared to 804
thousand tons in 1998, a decrease of 4%. Tin mill product shipments resulted in
net sales of $448.2 million in 1999, a decrease of $51.3 million compared to
1998. The decrease in net sales is primarily attributable to the decrease in tin
mill product selling prices and shipments.
6 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 2
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
Overall, lower shipments and selling prices were the result of unfairly
priced imports which drastically weakened domestic steel pricing beginning in
the second half of 1998 and continuing throughout 1999.
Cost of sales per ton decreased approximately $21 per ton from $434 per ton
in 1998 to $413 per ton in 1999 due to the benefit of purchasing slabs in the
open market to meet incremental requirements and a reduction in employee benefit
costs.
Selling, general and administrative expenses in 1999 were $44.8 million
compared to $39.2 million in 1998. The increase is primarily attributable to
costs incurred by MetalSite during its first full year of operation. MetalSite's
results of operations were consolidated through December 29, 1999.
During 1998, the Company initiated a special voluntary retirement window for
certain supervisory and managerial employees. As a result of the retirement
window, the Company recorded a restructuring charge of $2.9 million, consisting
of early retirement benefits.
During 1999, the Company recognized an asset impairment charge of $22.5
million associated with the write down of a slab sizing press to fair value.
In 1999, the Company recorded a provision for profit sharing of $15.5 million
pursuant to the company wide Profit Sharing Plan.
1998 Compared to 1997
The net loss for 1998 was $6.1 million or $0.15 per diluted share compared to a
net loss of $17.7 million or $0.42 per diluted share in 1997. The results for
1998 and 1997 included pretax restructuring charges of $2.9 million and $17.0
million, respectively, associated with employee reduction programs. Excluding
the effect of this non-recurring item, and the resulting impact on income taxes,
the net loss for 1998 would have been $3.8 million or $0.09 per diluted share
compared to a net loss for 1997 of $4.1 million or $0.10 per diluted share.
Total shipments in 1998 were 2,575 thousand tons compared to 2,772 thousand
tons in 1997. Net sales were $1,254.8 million in 1998 compared to $1,397.2
million in 1997.
Sheet product shipments in 1998 were 1,771 thousand tons compared to 1,918
thousand tons in 1997; a decrease of 8%. Sheet mill product shipments resulted
in net sales of $755.3 million in 1998, a decrease of $107.3 million compared to
1997. The decrease in net sales is attributable to reduced shipments and a
decrease in average selling price. The lower shipments and selling prices were
the result of unfairly priced imports which drastically weakened the domestic
steel market in the second half of 1998.
Tin mill product shipments in 1998 were 804 thousand tons compared to 854
thousand tons in 1997; a decrease of 6%. Tin mill product shipments resulted in
net sales of $499.5 million in 1998, a decrease of $35.1 million compared to
1997. The decrease in net sales is primarily attributable to the decrease in tin
mill product shipments.
Cost of sales per ton decreased approximately $20 per ton from $454 per ton
in 1997 to $434 per ton in 1998. The decrease resulted primarily from a full
year's benefit of the rebuild of the No. 1 Blast Furnace, lower raw material and
employment costs and continued benefits of the Company's cost reduction
programs.
Selling, general and administrative expenses in 1998 were $39.2 million
compared to $36.3 million in 1997. The increase is primarily attributable to
costs incurred in the start-up of MetalSite.
During 1998, the Company initiated a special voluntary retirement window for
certain supervisory and managerial employees. As a result of the retirement
window, the Company recorded a restructuring charge of $2.9 million, consisting
of early retirement benefits.
During 1997, the Company finalized its labor agreements with its principal
union. The new contracts, among other things, provided for a retirement window
for represented retirement eligible employees. As a result of the retirement
window, the Company recorded a restructuring charge of $17.0 million in 1997.
The restructuring charge consisted of the recognition of special retirement
benefits and a lump sum payment for those choosing to retire during the window.
Interest expense was $44.3 million in 1998, a decrease of $4.3 million from
1997. The decrease resulted from lower outstanding debt due to the repayment of
$42.2 million in senior debt in March 1998.
7
<PAGE> 3
1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company had cash and equivalents of $209.3 million
compared to $68.4 million as of December 31, 1998. The Company's liquidity
requirements arise primarily from working capital requirements, debt service and
capital investments. The Company's statements of cash flows for the years
indicated are summarized below:
(DOLLARS IN THOUSANDS) 1999 1998
Net cash provided by operating activities $ 80,589 $ 50,224
Net cash provided (used) by
investing activities 145,325 (57,943)
Net cash used by financing activities (85,033) (48,582)
--------- ---------
Increase (decrease) in cash $ 140,881 $ (56,301)
========= =========
The increase in cash flow from operating activities is primarily due to a
significant reduction in inventory as a result of the Company's inventory
reduction programs.
Net cash provided by investing activities includes a gain on the sale of an
investment, capital spending and loans to unconsolidated subsidiaries. The
increase in cash flow from investing activities is due to the sale of a portion
of the Company's investment in MetalSite. The Company's investing activities
also included capital spending for property, plant and equipment of $21.6
million and $50.4 million in 1999 and 1998, respectively. The Company used these
expenditures to purchase, modernize or upgrade production equipment and business
systems, maintain facilities and comply with environmental regulations. The
Company's planned capital expenditures for 2000 are approximately $31.0 million
which include approximately $2.3 million for environmental control projects. In
addition, investing activities included investments in and loans to
unconsolidated subsidiaries of $3.2 million and $7.8 million in 1999 and 1998,
respectively.
Net cash flows used by financing activities were $85.0 million for 1999
compared to $48.6 million in 1998. The Company repaid $84.0 million and $42.2
million of senior notes in 1999 and 1998, respectively. The Company also
purchased $6.3 million of its common stock in 1998 which is being held as
treasury stock.
Through a wholly-owned subsidiary, Weirton Receivables Inc. ("WRI"), the
Company has two receivables participation agreements with a group of three
banks. The WRI Receivables Participation Agreement, as amended, which is AAA
rated by Standard & Poor's Rating Service, provides for a total commitment by
the banks of up to $80.0 million, including a letter of credit subfacility of up
to $25.0 million. The WRI Receivables Participation Agreement makes the facility
available to WRI through March 2004. As of December 31, 1999, $35.0 million of
funded participation interest had been sold to the banks and $12.7 million in
letters of credit under the subfacility was outstanding. Subsequent to December
31, 1999, the $35 million of funded participation interest was no longer
outstanding.
On August 9, 1999, WRI and one of the participating banks agreed to a second
receivable facility ("Additional Receivable Facility") based on the receivables
of a major customer of the Company. As of December 31, 1999, the Additional
Receivable Facility provided for a total commitment by the participating bank of
up to $15.0 million, and no funded participation interest had been sold under
the Additional Receivable Facility.
The base amount available for cash sale under both receivable facilities was
approximately $21.1 million on December 31, 1999 and approximately $79.4 million
on March 10, 2000.
In November 1999, the Company and a bank agreed to a new working capital
facility of up to $100.0 million secured by a first priority lien on the
Company's inventory (the "Inventory Facility"). Borrowings under the Inventory
Facility are based upon the levels and composition of the Company's inventory
and generally are available on a revolving basis through October 2004. The
agreement establishing the Inventory Facility contains a number of restrictive
financial and other covenants typical of facilities of this kind and
substantially similar to those in the Company's current senior note indentures.
As of December 31, 1999, no amounts were outstanding under the Inventory
Facility, and $93.7 million was available for borrowing.
The Company's net deferred tax assets were $151.6 million as of December 31,
1999, 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 1999 and 1998, and may be
required in future periods, to make cash payments for income taxes under federal
alternative minimum tax regulations.
8 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 4
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
As of December 31, 1999 and 1998, the Company had pension funding credits of
approximately $80.8 million and $83.2 million, respectively. Accordingly, the
Company is not required to contribute to its pension plan in 2000, nor was the
Company required to contribute to its pension plan in 1999 or 1998. However,
during 1998, the Company did contribute $43.0 million to its pension fund.
Based upon available cash on hand and the amount of cash expected to be
generated from operating activities, the Company expects to have sufficient cash
to meet its short term needs, including the completion of the 2000 capital
spending plan.
To the extent that cash on hand and cash generated from operating activities
do not generate an adequate amount of cash, the Company expects that cash
requirements can be met by the Inventory Facility or the WRI Receivables
Participation Agreements.
- --------------------------------------------------------------------------------
YEAR 2000
The Company suffered no significant impacts from the changing of the calendar
year to the Year 2000. Other than scheduled idle time, the Company's operations
were not interrupted. The Company has continued to produce and sell goods and
process necessary business transactions with no noticeable difficulty since the
beginning of the calendar year 2000. While effects of the Year 2000 may not be
noticed until a later time, the Company believes that it has taken appropriate
measures to mitigate any future risk. The Company also believes there are no
significant continuing contingencies related to major customers or vendors.
As part of its capital plan, the Company replaced certain business systems
dealing with financial reporting and human resources. The planned replacement of
these systems was accelerated to achieve Year 2000 readiness. Through December
31, 1999, the Company spent $16.7 million on these projects. The Company spent
$5.9 million on these projects during 1999.
In addition to the replacement of the financial reporting and human resources
systems, the Company spent a total of $6.5 million in remediation costs to
achieve Year 2000 readiness. The Company spent $2.7 million on remediation costs
during 1999. All such remediation costs have been expensed as incurred in the
Company's consolidated statements of income.
ENVIRONMENTAL MATTERS
The Company continued its environmental remediation and regulatory compliance
activities required under its 1996 consent decree with federal and state
environmental authorities that had settled certain water discharge, air
emissions and waste handling enforcement issues. Under the consent decree, the
Company committed to undertake environmental upgrade and modification projects
totaling approximately $19.8 million, of which $15.3 million had been spent
through December 31, 1999.
As part of a related corrective action order, the Company also continued its
investigative activities and interim corrective measures aimed at determining
the nature and extent of hazardous substances which might be located on its
property. These activities are being accomplished on an area by area basis and
generally are at an early stage. Because the Company does not know the nature
and extent of hazardous substances which may be located on its properties, it is
not possible at this time to estimate the ultimate cost to comply with the
corrective action order.
At December 31, 1999, the Company had accrued approximately $9.0 million
related to the consent decree, the corrective action order, and other
environmental liabilities.
Depending on the circumstances, the Company, according to the purchase
agreements by which it purchased its facilities in 1984, may be entitled to
indemnification from National Steel Corporation for portions of the costs
incurred in complying with the corrective action order.
- --------------------------------------------------------------------------------
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The fair values of cash and cash equivalents, receivables and accounts payable
approximate carrying values and were relatively insensitive to changes in
interest rates at December 31, 1999 due to the short term maturity of these
instruments.
The Company's market risk strategy has generally been to obtain competitive
prices for its products and services and allow operating results to reflect
market price movements dictated by supply and demand for the Company's products.
9
<PAGE> 5
1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
In the normal course of business, the Company is exposed to market risk or
price fluctuations on purchases of scrap, tin, zinc, oxygen, nitrogen, natural
gas, power and other raw materials and utility requirements. As part of its
market risk strategy, the Company has entered into fixed price, multiple year
contracts, for its iron ore pellet, oxygen, electric power and nitrogen
requirements. The Company has entered into a contract to purchase the greater of
850,000 tons of blast furnace coke annually or 80% of its actual annual coke
requirements. Under the contract, the price of coke fluctuates with the market,
subject to a ceiling and floor. The remaining 20% of the Company's coke
requirements are sourced from the open market and are subject to market risk.
Scrap, tin, zinc and other raw materials are generally purchased in the open
market and are subject to price fluctuation. As of December 31, 1999, the
Company had no significant derivative financial instruments or derivative
commodity instruments outstanding.
The Company's 50% owned unconsolidated subsidiary, WeBCo, utilizes forward
contracts to mitigate its exposure to changes in foreign currency exchange
rates. At December 31, 1999, WeBCo had four outstanding forward contracts to
sell foreign currencies. A hypothetical 10% change in the applicable 1999 year
end spot rates would result in a change in WeBCo's pretax income ranging from
approximately $1.1 million to $(0.7) million.
As of December 31, 1999, the Company had the following financial liabilities
where the fair value differed from the carrying value:
CARRYING VALUE FAIR VALUE
Long term debt $304,768 $302,957
Series A Redeemable Preferred Stock $ 22,990 $ 10,819
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement 133"). The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. In June 1999, the FASB issued Statement No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133," which amends Statement 133 to be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. Management
has not yet determined how Statement 133 will impact the Company's financial
statements.
On December 3, 1999, the SEC staff released Staff Accounting Bulletin No.
101, "Revenue Recognition" ("SAB No. 101") to provide guidance on the
recognition, presentation and disclosure of revenue in financial statements. SAB
No. 101 does not change existing literature on revenue recognition, but rather
it clarifies the staff's position on pre-existing literature. The new standard
did not require management to change existing revenue recognition policies and
therefore had no impact on the Company's reported financial position or results
of operations at December 31, 1999.
- --------------------------------------------------------------------------------
FORWARD LOOKING STATEMENTS
This annual report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
based on assumptions and expectations, which may not be realized and are
inherently subject to risk and uncertainties, many of which cannot be predicted
with accuracy. Future events and actual results, financial and otherwise, may
differ from the results discussed in the forward-looking statements. Although
the Company believes that its assumptions made in connection with
forward-looking statements are reasonable, there are no assurances that the
assumptions and expectations will prove to have been correct due to the
foregoing and other factors. Such forward-looking statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The Company is under no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
10 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 6
WEIRTON
STEEL CORPORATION
1999
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997
<S> <C> <C> <C>
NET SALES $ 1,091,697 $ 1,254,796 $ 1,397,204
Operating costs:
Cost of sales 1,037,342 1,117,465 1,258,035
Selling, general and administrative expense 44,806 39,219 36,308
Depreciation 60,866 60,822 60,855
Restructuring charge -- 2,871 17,000
Asset impairment 22,522 -- --
Profit sharing provision 15,473 -- --
----------- ----------- -----------
TOTAL OPERATING COSTS 1,181,009 1,220,377 1,372,198
----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (89,312) 34,419 25,006
Gain on sale of investment, net 170,117 -- --
Income (loss) from unconsolidated subsidiaries (1,105) 34 (12)
Interest expense (44,223) (44,338) (48,683)
Other income, net 2,198 4,684 4,259
ESOP contribution (1,305) (2,610) (2,610)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 36,370 (7,811) (22,040)
Income tax provision (benefit) 8,227 (1,391) (4,298)
----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST 28,143 (6,420) (17,742)
Minority interest in loss of subsidiary 2,804 293 --
----------- ----------- -----------
NET INCOME (LOSS) $ 30,947 $ (6,127) $ (17,742)
=========== =========== ===========
PER SHARE DATA:
Weighted average number of common shares (in thousands):
Basic 41,600 41,924 42,622
Diluted 43,299 41,924 42,622
Net income (loss) per share:
Basic $ 0.74 $ (0.15) $ (0.42)
Diluted $ 0.71 $ (0.15) $ (0.42)
</TABLE>
The accompanying notes are an integral part of these statements.
11
<PAGE> 7
WEIRTON
STEEL CORPORATION
1999
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and equivalents, including restricted cash of $810 and $1,275, respectively $ 209,270 $ 68,389
Receivables, less allowances of $9,302 and $8,574, respectively 104,647 112,278
Inventories 186,710 259,332
Deferred income taxes 42,517 43,254
Other current assets 3,167 7,634
----------- -----------
TOTAL CURRENT ASSETS 546,311 490,887
Property, plant and equipment, net 514,464 576,238
Investment in unconsolidated subsidiaries 6,833 7,938
Deferred income taxes 109,110 108,220
Other assets and deferred charges 10,804 12,416
----------- -----------
TOTAL ASSETS $ 1,187,522 $ 1,195,699
=========== ===========
LIABILITIES:
CURRENT LIABILITIES:
Current portion of long term debt obligations $ -- $ 84,044
Payables 142,930 120,697
Employment costs 81,688 63,966
Taxes other than income taxes 13,805 15,060
Other current liabilities 17,511 10,957
----------- -----------
TOTAL CURRENT LIABILITIES 255,934 294,724
Long term debt obligations 304,768 304,626
Long term pension obligation 91,295 81,908
Postretirement benefits other than pensions 327,665 337,443
Other long term liabilities 30,886 33,217
----------- -----------
TOTAL LIABILITIES 1,010,548 1,051,918
REDEEMABLE STOCK:
Preferred stock, Series A, $0.10 par value; 1,664,469 and 1,694,636
shares authorized and issued; 1,647,214 and 1,678,576 subject to put 23,147 23,852
Less: Preferred treasury stock, Series A, at cost, 12,207 and 21,454 shares (174) (309)
Deferred ESOP compensation -- (1,305)
----------- -----------
TOTAL REDEEMABLE STOCK 22,973 22,238
Stockholders' equity:
Preferred stock, Series A, $0.10 par value; 17,255 and 16,060 shares not subject to put 250 233
Common stock, $0.01 par value; 50,000,000 shares authorized;
43,499,363 and 43,178,134 shares issued 435 432
Additional paid-in capital 458,249 457,851
Common stock issuable, 304,113 and 383,562 shares 431 532
Deferred compensation -- (492)
Retained earnings (deficit) (298,194) (329,141)
Less: Common treasury stock, at cost, 1,885,682 and 1,983,561 shares (7,170) (7,872)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 154,001 121,543
----------- -----------
TOTAL LIABILITIES, REDEEMABLE STOCK
AND STOCKHOLDERS' EQUITY $ 1,187,522 $ 1,195,699
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
12 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 8
WEIRTON
STEEL CORPORATION
1999
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 30,947 $ (6,127) $ (17,742)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation 60,866 60,822 60,855
Amortization of deferred financing costs 1,899 1,662 1,836
Restructuring charge -- 2,871 17,000
Asset impairment 22,522 -- --
ESOP contribution 1,305 2,610 2,610
Deferred income taxes (153) (5,889) (1,742)
Cash provided (used) by working capital items:
Receivables 7,631 28,565 13,583
Inventories 72,622 1,601 (1,794)
Other current assets 6,716 (2,831) 1,606
Payables 22,233 (11,969) (16,932)
Other current liabilities 20,772 (6,805) 838
Long term pension obligation 9,387 (17,713) 368
Proceeds from sale of investment, net (170,117) -- --
Other (6,041) 3,427 11,618
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 80,589 50,224 72,104
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment, net 170,117 -- --
Loan to unconsolidated subsidiary (3,178) -- --
Investment in unconsolidated subsidiaries -- (7,561) (100)
Capital spending (21,614) (50,382) (60,070)
--------- --------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 145,325 (57,943) (60,170)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt obligations (84,232) (42,831) --
Purchase of treasury stock -- (6,283) --
Common shares issuable (101) 532 664
Deferred financing costs (700) -- --
--------- --------- ---------
NETCASH PROVIDED (USED) BY FINANCING ACTIVITIES (85,033) (48,582) 664
--------- --------- ---------
NET CHANGE IN CASH AND EQUIVALENTS 140,881 (56,301) 12,598
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 68,389 124,690 112,092
--------- --------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 209,270 $ 68,389 $ 124,690
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of capitalized interest $ 46,147 $ 45,953 $ 48,489
Income taxes paid (refunded), net (3,191) 7,803 (2,556)
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE> 9
1999
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
------------------------ ADDITIONAL
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) SHARES AMOUNT PAID-IN CAPITAL
<S> <C> <C> <C>
STOCKHOLDERS EQUITY CONSOLIDATED AT DECEMBER 31, 1996 42,592,850 $426 $455,311
Net loss -- -- --
Conversion of preferred stock 24,560 -- 356
Exercise of preferred stock put options -- -- 77
Purchase of treasury stock -- -- 1
Reclassification of preferred Series A not subject to put -- -- --
Employee stock purchase plan:
Shares issued 228,774 2 679
Shares issuable -- -- --
Board of Directors deferred compensation plan:
Shares issued -- -- (45)
Shares issuable -- -- --
Deferred compensation -- -- --
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS EQUITY CONSOLIDATED AT DECEMBER 31, 1997 42,846,184 428 456,379
Net loss -- -- --
Conversion of preferred stock 43,527 2 631
Exercise of preferred stock put options -- -- 177
Purchase of treasury stock -- -- 2
Reclassification of preferred Series A not subject to put -- -- --
Employee stock purchase plan:
Shares issued 247,865 2 564
Shares issuable -- -- --
Board of Directors deferred compensation plan:
Shares issued 40,558 -- 98
Shares issuable -- -- --
Deferred compensation -- -- --
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS EQUITY CONSOLIDATED AT DECEMBER 31, 1998 43,178,134 432 457,851
Net income -- -- --
Conversion of preferred stock 30,167 -- 437
Exercise of preferred stock put options -- -- 124
Purchase of treasury stock -- -- 2
Reclassification of preferred Series A not subject to put -- -- --
Employee stock purchase plan:
Shares issued 285,430 3 376
Shares issuable -- -- --
Board of Directors compensation plans:
Shares issued 5,632 -- (541)
Shares issuable -- -- --
Deferred compensation -- -- --
Change in deferred compensation liability -- -- --
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS EQUITY CONSOLIDATED AT DECEMBER 31, 1999 43,499,363 $435 $458,249
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
14 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 10
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON COMMON PREFERRED SERIES A
SHARES ISSUABLE RETAINED TREASURY STOCK NOT SUBJECT TO PUT
-------------------- DEFERRED EARNINGS --------------------- ------------------- STOCKHOLDERS'
SHARES AMOUNT COMPENSATION (DEFICIT) SHARES AMOUNT SHARES AMOUNT EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
259,177 $ 773 $ (385) $ (305,272) 239,648 $(1,723) 5,074 $ 74 $149,204
-- -- -- (17,742) -- -- -- -- (17,742)
-- -- -- -- -- -- (542) (8) 348
-- -- -- -- -- -- -- -- 77
-- -- -- -- 269 (1) -- -- --
-- -- -- -- -- -- 4,306 62 62
(228,774) (681) -- -- -- -- -- -- --
247,865 566 -- -- -- -- -- -- 566
(30,403) (92) -- -- (30,403) 137 -- -- --
40,558 98 (98) -- -- -- -- -- --
-- -- 12 -- -- -- -- -- 12
- ------------------------------------------------------------------------------------------------------------------------------------
288,423 664 (471) (323,014) 209,514 128 132,527
-- -- -- (6,127) -- -- -- -- (6,127)
-- -- -- -- -- -- (491) (7) 626
-- -- -- -- -- -- -- -- 177
-- -- -- -- 1,774,047 (6,285) -- -- (6,283)
-- -- -- -- -- -- 7,713 112 112
(247,865) (566) -- -- -- -- -- -- --
285,430 379 -- -- -- -- -- -- 379
(40,558) (98) -- -- -- -- -- -- --
98,132 153 (153) -- -- -- -- -- --
-- -- 132 -- -- -- -- -- 132
- ------------------------------------------------------------------------------------------------------------------------------------
383,562 532 (492) (329,141) 1,983,561 (7,872) 16,060 233 121,543
-- -- -- 30,947 -- -- -- -- 30,947
-- -- -- -- -- -- (5,080) (74) 363
-- -- -- -- -- -- -- -- 124
-- -- -- -- 253 -- -- -- 2
-- -- -- -- -- -- 6,275 91 91
(285,430) (379) -- -- -- -- -- -- --
167,475 231 -- -- -- -- -- -- 231
(98,132) (153) -- -- (98,132) 702 -- -- 8
136,638 200 (200) -- -- -- -- -- --
-- -- 9 -- -- -- -- -- 9
-- -- 683 -- -- -- -- -- 683
- ------------------------------------------------------------------------------------------------------------------------------------
304,113 $ 431 $ -- $ (298,194) 1,885,682 $(7,170) 17,255 $ 250 $154,001
====================================================================================================================================
</TABLE>
15
<PAGE> 11
1999
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
The financial statements herein include the accounts of Weirton Steel
Corporation and its consolidated subsidiaries. Entities of which the Company
owns a majority interest are consolidated; entities of which the Company owns a
less than majority interest are not consolidated and are reflected in the
consolidated financial statements using the equity method of accounting. All
intercompany accounts and transactions with consolidated subsidiaries have been
eliminated in consolidation. Weirton Steel Corporation and/or Weirton Steel
Corporation together with its consolidated subsidiaries are hereafter referred
to as the "Company."
In the Company's consolidated balance sheets, MetalSite is consolidated as of
December 31, 1998, and is accounted for under the equity method as of December
31, 1999. MetalSite's results of operations are consolidated with the Company's
results through December 29, 1999, and are reported under the equity method
thereafter.
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 reclassifications have been made to prior year amounts to conform
with current year presentation.
- --------------------------------------------------------------------------------
NOTE 2
ORGANIZATION AND BACKGROUND
The Company and its predecessor companies have been in the business of making
and finishing steel products for over 90 years. From November 1929 to January
1984, the Company's business was operated as either a subsidiary 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 in January 1984.
The Company's authorized capital consists of 50.0 million shares of Common
Stock, par value $0.01 per share, and 7.5 million shares of Preferred Stock, par
value $0.10 per share, issuable in series, as designated by the Company's Board
of Directors.
Prior to 1989, the Company was owned entirely by its employees through an
Employee Stock Ownership Plan (the "1984 ESOP"). In June 1989, the Company's
Common Stock commenced trading publicly on the New York Stock Exchange following
an underwritten secondary offering from the 1984 ESOP. In connection with that
offering, the Company established a second Employee Stock Ownership Plan (the
"1989 ESOP") and funded it with 1.8 million shares of Convertible Voting
Preferred Stock, Series A (the "Series A Preferred").
Substantially all of the Company's employees participate in the 1984 ESOP and
the 1989 ESOP which owned approximately 23.4% of the issued and outstanding
common shares and substantially all the preferred shares of the Company as of
December 31, 1999. The common and preferred shares held by the 1984 ESOP and the
1989 ESOP collectively represent 46.7% of the voting power of the Company's
voting stock as of December 31, 1999.
Approximately 83% of the Company's workforce is covered under collective
bargaining agreements with the Independent Steelworkers' Union (the "ISU") and
Independent Guard Union (the "IGU"). In 1997, the Company reached agreements
with the ISU and IGU which extend into 2001.
- --------------------------------------------------------------------------------
NOTE 3
SIGNIFICANT ACCOUNTING POLICIES
Cash
The liability representing outstanding checks drawn against a zero-balance
general disbursement bank account is included in accounts payable for financial
statement presentation. Such amounts were $12.4 million and $0.8 million as of
December 31, 1999 and 1998, 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.
16 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 12
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
Inventories
Inventories are stated at the lower of cost or market, cost being determined by
the first-in, first-out 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.
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 ESOP 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 1999 of $15.5 million for employee profit sharing is
calculated in accordance with the Profit Sharing Plan as amended in 1994. There
were no provisions for employee profit sharing in 1998 and 1997.
Research and Development
The Company incurs research and development costs to improve existing products,
develop new products and develop more efficient operating techniques. The costs
are charged to expense as incurred and totaled $2.0 million, $5.9 million and
$4.1 million in 1999, 1998 and 1997, respectively.
Derivative Instruments
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement 133"). The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. In June 1999, the FASB issued Statement No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133," which amends Statement 133 to be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. Management
has not yet determined how Statement 133 will impact the Company's financial
statements.
Revenue Recognition
On December 3, 1999, the SEC staff released Staff Accounting Bulletin No. 101,
"Revenue Recognition" ("SAB No. 101") to provide guidance on the recognition,
presentation and disclosure of revenue in financial statements. SAB No. 101 does
not change existing literature on revenue recognition, but rather it clarifies
the staff's position on pre-existing literature. The new standard did not
require management to change existing revenue recognition policies and therefore
had no impact on the Company's reported financial position or results of
operations as of December 31, 1999.
- --------------------------------------------------------------------------------
NOTE 4
INVENTORIES
Inventories consisted of the following:
DECEMBER 31, 1999 1998
Raw materials $ 61,254 $ 84,274
Work-in-process 41,044 82,331
Finished goods 84,412 92,727
-------- --------
$186,710 $259,332
======== ========
17
<PAGE> 13
1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
- --------------------------------------------------------------------------------
NOTE 5
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
DECEMBER 31, 1999 1998
Land $ 1,129 $ 1,119
Buildings 9,409 9,327
Machinery, equipment and other 973,651 963,852
Construction-in-progress 6,285 41,392
----------- -----------
990,474 1,015,690
Less: Allowances for depreciation (476,010) (439,452)
----------- -----------
$ 514,464 $ 576,238
=========== ===========
During the fourth quarter of 1999, the Company recognized an asset impairment
charge of $22.5 million related to a slab sizing press. The service potential of
the asset was impaired as a result of changes in world slab markets and the
Company's decision to restart the No. 4 Blast Furnace. Further, the Company
terminated discussions with an entity concerning a strategic combination, which
if consummated would have provided support for the viability of the asset. Given
existing facts and circumstances pertaining to the slab sizing press, the
Company has no plans to utilize the asset. In the event those facts and
circumstances change significantly, the Company may reconsider its decision.
The fair value was determined based upon the value of individual components
and the absence of opportunities to sell the slab sizing press.
There was no capitalized interest applicable to facilities under construction
for the year ended December 31, 1999. Capitalized interest applicable to
facilities under construction for the years ended December 31, 1998 and 1997,
amounted to $0.4 million and $0.5 million, respectively.
NOTE 6
FINANCING ARRANGEMENTS
Debt Obligations
DECEMBER 31, 1999 1998
10-7/8% Senior Notes due 10/15/99 $ -- $ 84,044
11-3/8% Senior Notes due 7/1/04 124,930 125,000
10-3/4% Senior Notes due 6/1/05 124,882 125,000
8-5/8% Pollution Control Bonds
due 11/1/14 56,300 56,300
--------- ---------
306,112 390,344
Less: Unamortized debt discount (1,344) (1,674)
--------- ---------
Total debt obligations 304,768 388,670
Less: Current portion of
long term debt obligations -- (84,044)
--------- ---------
$ 304,768 $ 304,626
========= =========
During 1999, the Company paid off the remaining $84.0 million outstanding on
its 10-7/8% Senior Notes at maturity.
During 1998, the Company made principal payments of $42.2 million to repay
the 11-1/2% Senior Notes at maturity.
The indentures governing the senior notes are substantially similar and
contain covenants that limit, among other things, the incurrence of additional
indebtedness, the declaration and payment of dividends and 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, 1999, pursuant to this
covenant, the Company's ability to pay dividends on its common stock was limited
to $132.7 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 has $124.9 million in principal payments due in 2004 and $181.2
million due thereafter.
18 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 14
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
Receivables Participation Agreements
On March 29, 1999, through its wholly-owned subsidiary, Weirton Receivables Inc.
("WRI"), the Company amended its existing receivables facility with a group of
three banks (the "WRI Amended Receivables Facility"). The WRI Amended
Receivables Facility provides for a total commitment by the banks of up to $80.0
million, including a letter of credit subfacility of up to $25.0 million. The
Company sells substantially all of its accounts receivable as they are
generated, to its wholly-owned subsidiary, Weirton Receivables Inc. ("WRI").
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. The financial tests that were applicable to the receivable facility
prior to March 29, 1999 were amended so that, in most cases, the amount of
participation interest available for cash sale to the banks is greater under the
WRI Amended Receivables Facility than under the pre-existing facility. The March
29, 1999 amendment also modified the events and circumstances that would cause
the termination of the facility. The other terms and conditions of the WRI
Amended Receivables Facility are substantially the same as those of the pre-
existing facility.
Funded purchases of participation interests by the banks under the WRI
Amended Receivables Facility are generally available on a revolving basis for
three years, subject to extension as agreed to by the banks. In 1999, the
facility was extended through March 2004. 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, 1999, WRI was
in compliance with these requirements. 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.
Because the WRI Amended Receivables Facility contains concentration
limitation provisions, from time to time, receivables from one of the Company's
major customers were ineligible to be considered in the calculation of
participation interest available for cash sale to the banks. As a result, on
August 9, 1999, WRI and one of the participating banks agreed to a second
receivable facility ("Additional Receivable Facility") based on the receivables
of the aforementioned major customer of the Company.
The Additional Receivable Facility originally provided for a total commitment
by the participating bank of up to $20.0 million. Pursuant to the Additional
Receivable Facility agreement, the total commitment was reduced to $15.0 million
as of December 31, 1999. The amount of participation interest in the accounts
receivable from the major customer available for sale to the bank fluctuates
depending upon the nature and amount of receivables from the customer generated
by the Company which are sold into the program and certain financial tests
applicable to them. Events that would cause the termination of the Additional
Receivable Facility are similar to those that exist under the WRI Amended
Receivables Facility.
As of December 31, 1999, $35.0 million of funded participation interest had
been sold to the banks under the WRI Amended Receivables Facility. The Company
recognized $0.6 million in discount expense from the sale of the funded
participation interest. Discount expense was recorded as a reduction to other
income for financial reporting purposes. $12.7 million in letters of credit
under the subfacility was in place, and no funded participation under the
Additional Receivable Facility had been sold. After sale of funded participation
interests and amounts in place under the letter of credit subfacility, the base
amount available for cash sale under both facilities was approximately $21.1
million at December 31, 1999.
19
<PAGE> 15
1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
- --------------------------------------------------------------------------------
Inventory Facility
In November 1999, the Company and a bank agreed to a new working capital
facility of up to $100.0 million secured by a first priority lien on the
Company's inventory (the "Inventory Facility"). Borrowings under the Inventory
Facility are based upon the levels and composition of the Company's inventory
and generally are available on a revolving basis through October 2004. At the
option of the Company, the Inventory Facility bears interest at a prime or LIBOR
rate. Based upon the amount outstanding, basis points ranging from 0.00% to
2.50% are added to the prime or LIBOR rate. The agreement establishing the
facility contains a number of restrictive financial and other covenants typical
of facilities of this kind and substantially similar to those in the Company's
current senior note indentures. As of December 31, 1999, no amounts were
outstanding under the Inventory Facility, and $93.7 million was available for
borrowing.
Leases
The Company uses certain lease arrangements to supplement its financing
activities.
Rental expense under operating leases was $7.8 million, $8.0 million and $6.4
million for the years ended December 31, 1999, 1998, and 1997, respectively. The
minimum future lease payments under noncancelable operating leases are $7.5
million, $7.2 million, $6.2 million, $4.9 million and $3.9 million for the years
ending 2000 through 2004, respectively, and $1.0 million thereafter.
NOTE 7
EMPLOYEE RETIREMENT BENEFITS
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits." SFAS No. 132 establishes amended
standards for pension and other postretirement benefits disclosures. The
standard disclosures established in SFAS No. 132 are included herein.
Pensions
The Company has a noncontributory defined benefit pension plan which covers
substantially all employees (the "Pension Plan"). 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. There were no employer contributions to the Pension Plan during
1999. During the years ended December 31, 1998 and 1997, the Company contributed
$43.0 million and $41.1 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.
Benefits Other Than Pensions
The Company provides healthcare and life insurance benefits to substantially all
of the Company's retirees and their dependents. The healthcare plans contain
cost-sharing features including co-payments, deductibles and lifetime maximums.
The life insurance benefits provided to retirees are generally based upon annual
base pay at retirement for salaried employees and specific amounts for
represented employees.
20 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 16
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
The funded status and amounts recognized in the Company's consolidated
financial statements related to employee retirement benefits are set forth in
the following table (in thousands):
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------------ ------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 772,167 $ 754,445 $ 336,857 $ 338,050
Service cost 15,894 15,704 5,696 5,462
Interest cost 49,926 48,902 21,245 24,136
Plan amendments -- -- -- (33,189)
Actuarial (gain) loss (85,363) (4,593) (31,796) 24,702
Special termination benefits -- 2,079 -- --
Benefits paid (53,505) (44,370) (23,201) (22,304)
--------- --------- --------- ---------
Benefit obligation at end of year $ 699,119 $ 772,167 $ 308,801 $ 336,857
========= ========= ========= =========
Change in plan assets:
Fair value of plan assets at beginning of year $ 687,537 $ 588,303 $ -- $ --
Actual return on plan assets 153,082 100,644 -- --
Employer contributions -- 42,960 23,201 22,304
Benefits paid (53,505) (44,370) (23,201) (22,304)
--------- --------- --------- ---------
Fair value of plan assets at end of year $ 787,114 $ 687,537 $ -- $ --
========= ========= ========= =========
Reconciliation of funded status:
Accumulated benefit obligation $ 635,029 $ 684,938
Effect of projected compensation increases 64,090 87,229
--------- ---------
Actuarial present value of projected benefit obligation 699,119 772,167 $ 308,801 $ 336,857
Plan assets at fair value 787,114 687,537 -- --
--------- --------- --------- ---------
Projected benefit obligation greater than (less than)
plan assets (87,995) 84,630 308,801 336,857
Items not yet recognized:
Prior service cost (70,777) (79,866) 42,092 52,609
Actuarial gains (losses) 273,639 108,106 1,773 (30,023)
Remaining net obligation at transition (23,572) (30,962) -- --
--------- --------- --------- ---------
Accrued benefit obligation $ 91,295 $ 81,908 $ 352,666 $ 359,443
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------------------------ -------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER, 31,
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 15,894 $ 15,704 $ 18,629 $ 5,696 $ 5,462 $ 6,852
Interest cost 49,926 48,902 53,935 21,245 24,136 25,917
Expected return on plan assets (69,810) (54,471) (47,591) -- -- --
Amortization of transition amount 7,390 7,390 7,390 -- -- --
Amortization of prior service cost 9,089 9,089 9,085 (10,517) (4,325) (4,325)
Recognized net actuarial (gain) loss (3,102) (1,367) -- -- -- --
-------- -------- -------- -------- -------- --------
Net periodic benefit cost $ 9,387 $ 25,247 $ 41,448 $ 16,424 $ 25,273 $ 28,444
======== ======== ======== ======== ======== ========
Weighted-average assumptions
as of end of year:
Discount rate 8.00% 6.75% 7.00% 8.00% 6.75% 7.00%
Expected return on plan assets 10.50% 9.25% 9.25% -- -- --
Assumed increase in compensation
levels 2% for 2% for 2% for 2% for 2% for 2% for
1 year 2 years 3 years 1 year 2 years 3 years
and 3% and 3% and 3% and 3% and 3% and 3%
thereafter thereafter thereafter thereafter thereafter thereafter
</TABLE>
21
<PAGE> 17
1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
- --------------------------------------------------------------------------------
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, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
FOR RETIREES WHO HAVE FOR RETIREES WHO ARE
NOT YET REACHED AGE 65 AGE 65 AND OLDER
-------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Base medical cost trend:
Rate in first year 6.50% 7.25% 8.00% 5.75% 6.50% 7.25%
Ultimate rate 5.00% 4.00% 4.25% 5.00% 4.00% 4.25%
Year in which ultimate rate is reached 2003 2003 2003 2003 2003 2003
Major medical cost trend:
Rate in first year 7.50% 8.50% 9.50% -- -- --
Ultimate rate 5.00% 4.00% 4.25% -- -- --
Year in which ultimate rate is reached 2003 2003 2003 -- -- --
Administrative expense trend 5.00% 4.00% 4.25% 5.00% 4.00% 4.25%
</TABLE>
A one-percentage-point change in the assumed health care cost trend rates
would have the following effects:
<TABLE>
<CAPTION>
ONE PERCENTAGE POINT INCREASE ONE PERCENTAGE POINT DECREASE
<S> <C> <C>
Effect on total of service and interest cost components for 1999 $ 1,557 $ (1,735)
Effect on 1999 accumulated postretirement benefit obligation $13,591 $(14,420)
</TABLE>
During 1998, the Company amended its retiree healthcare plans to provide
eligible retirees an option to elect coverage under a Medicare Plus Choice
Program (the "Program"). For participants in the Program, medicare, major
medical coverage and the Company's medical benefits coverage are replaced by a
single insurance plan. Rather than funding coverage under the current
supplemental plan, the Company pays a portion of the Program premiums totaling
$60 per participant per month. The amendment resulted in a $33.2 million
decrease in the Company's accumulated postretirement benefit obligation for
1998.
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 subsequently became active
employees of the Company.
- --------------------------------------------------------------------------------
NOTE 8
POSTEMPLOYMENT BENEFITS
The components comprising the Company's obligations for postemployment benefits
are (i) workers' compensation; (ii) severance programs which include medical
coverage continuation; and (iii) sickness and accident protection, which
includes medical and life insurance benefits.
Actuarial assumptions and demographic data, as applicable, that were used to
measure the postemployment benefit obligation as of December 31, 1999 and 1998,
were consistent with those used to measure pension and other postretirement
benefit obligations for each respective year. As of December 31, 1999 and 1998,
the Company had accrued $27.4 million and $27.6 million, respectively, for
postemployment benefit obligations.
- --------------------------------------------------------------------------------
NOTE 9
RESTRUCTURING CHARGES
In 1998, the Company recognized a $2.9 million restructuring charge stemming
from a special voluntary retirement window offered to certain supervisory and
managerial employees. The charge related to early retirement benefits.
22 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 18
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
In 1997, the Company recognized a $17.0 million restructuring charge stemming
from a voluntary retirement window offered to its represented employees as a
result of a collective bargaining agreement. Approximately $10.4 million of the
restructuring charge related to pension benefits with the remainder resulting
from other separation benefits for employees retiring during the retirement
window.
The 1998 restructuring charge consisted of a $2.1 million charge to the
Company's accrued pension cost and a $0.8 million charge to other long term
liabilities. In 1999, the Company paid $0.2 million related to the other long
term liability component of the 1998 restructuring charge, leaving a remaining
liability associated with the other long term portion of the charge of $0.6
million. The Company made no pension contributions in 1999. The liability
associated with the accrued pension portion of the 1998 restructuring charge was
included in the Company's total accrued pension cost as of December 31, 1999.
- --------------------------------------------------------------------------------
NOTE 10
INCOME TAXES
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:
DECEMBER 31, 1999 1998
Deferred tax assets:
Net operating loss and tax credit
carryforwards $ 89,240 $ 103,625
Deductible temporary differences:
Allowance for doubtful accounts 2,973 2,407
Inventories 17,691 17,262
Pensions 35,605 31,909
Workers' compensation 10,673 10,050
Postretirement benefits other
than pensions 138,544 140,923
Other deductible temporary
differences 16,822 16,978
Valuation allowance (39,712) (46,868)
--------- ---------
271,836 276,286
Deferred tax liabilities:
Accumulated depreciation (120,209) (124,812)
--------- ---------
Net deferred tax asset $ 151,627 $ 151,474
========= =========
As of December 31, 1999, the Company had available, for federal and state
income tax purposes, regular net operating loss carryforwards of approximately
$141.0 million expiring in 2007 through 2011; an alternative minimum tax credit
of approximately $25.8 million; and general business tax credits of
approximately $8.4 million expiring in 2000 to 2005.
In 1999, 1998 and 1997, as a result of its deferred tax attributes, the
Company did not generate any liability for regular federal income tax purposes.
The Company recognized a liability for alternative minimum tax of $8.4 million,
$3.3 million and $2.2 million in 1999, 1998 and 1997, respectively.
The Company has recognized that it is more likely than not that certain
future tax benefits will be realized as a result of current and future income.
Accordingly, the valuation allowance has been reduced in the current year to
reflect greater anticipated net deferred tax asset utilization.
At December 31, 1999, the deferred tax asset related to postretirement
benefits other than pensions was $138.5 million. Based upon the length of the
period during which this 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
postretirement benefits other than pension 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 leaseback arrangements, could
be employed to avoid expiration of the attributes. Notwithstanding the Company's
belief that it will be able to utilize its deferred tax assets, the Company has
recorded a valuation allowance of $39.7 million against its deferred tax assets.
23
<PAGE> 19
1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
- --------------------------------------------------------------------------------
The elements of the Company's deferred income taxes associated with its
results for the years ended December 31, 1999, 1998 and 1997, respectively, are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Current income tax provision (benefit):
Federal $ 8,381 $ 3,265 $(2,556)
Deferred income tax
provision (benefit) 7,002 (5,977) (6,040)
Valuation allowance (7,156) 1,321 4,298
------- ------- -------
Total income tax
provision (benefit) $ 8,227 $(1,391) $(4,298)
======= ======= =======
</TABLE>
The total income tax provision (benefit) recognized by the Company for the
years ended December 31, 1999, 1998 and 1997, reconciled to that computed under
the federal statutory corporate rate as follows:
1999 1998 1997
Tax provision (benefit) at
federal statutory rate $ 13,711 $ (2,631) $ (7,714)
State income taxes,
net of federal 1,567 (301) (882)
Other 105 220 --
Change in valuation
allowance (7,156) 1,321 4,298
-------- -------- --------
Income tax provision
(benefit) $ 8,227 $ (1,391) $ (4,298)
======== ======== ========
- --------------------------------------------------------------------------------
NOTE 11
REDEEMABLE STOCK
In June 1989, the Company sold 1.8 million shares of the Series A Preferred to
the 1989 ESOP which has since allocated those shares to participants. 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 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. In 1994, the 1989 ESOP was amended to provide for
recontribution to the plan of shares of Series A Preferred re-acquired by the
Company and their allocation 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.
- --------------------------------------------------------------------------------
NOTE 12
STOCK PLANS
The Company has two stock option plans (the "1987 Stock Option Plan" and the
"1998 Stock Option Plan"), an employee stock purchase plan (the "1994 Employee
Stock Purchase Plan") and deferred and stock compensation plans for nonemployee
members of the board of directors (the "Directors' Deferred Compensation Plan"
and the "Directors' Stock Compensation Policy").
1987 and 1998 Stock Option Plans
The Company may grant options for up to 750,000 shares under the 1987 Stock
Option Plan as amended. Under the plan, the option exercise price equals the
stock's market price on the date of grant. Generally, the options granted under
the 1987 Stock Option Plan vest in one-third increments beginning on the date of
grant, with the remaining two-thirds becoming exercisable after the second and
third years. The options expire approximately 10 years from the date of grant.
Under the 1998 Stock Option Plan, the Company may grant options for up to
3,250,000 shares. The option price and vesting requirements are determined by a
Stock Option Committee appointed by the board of directors. All options granted
and outstanding will vest on June 23, 2002. The options expire the following
day. The options are subject to accelerated vesting based on the attainment of
certain market prices for the Company's common stock. The stock prices range
from $3.88 to $8.00, and the price must be maintained for 30 consecutive trading
days for accelerated vesting to occur. The options that vest pursuant to the
accelerated provision will expire on June 24, 2002. As of December 31, 1999,
none of the options had vested.
24 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 20
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
The following is a summary of stock option activity under the 1987 and 1998
Stock Option Plans:
<TABLE>
<CAPTION>
1987 STOCK OPTION PLAN 1998 STOCK OPTION PLAN
----------------------------- ------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
<S> <C> <C> <C> <C>
Balance Dec. 31, 1996 750,000 $ 7.84 -- $ --
Granted -- -- -- --
Exercised -- -- -- --
Repurchased/Forfeited (168,334) 8.30 -- --
-------- ---------
Balance Dec. 31, 1997 581,666 7.71 -- --
Granted 173,000 3.13 2,875,000 3.88
Exercised -- -- -- --
Repurchased/Forfeited (169,666) 8.53 -- --
-------- ---------
Balance Dec. 31, 1998 585,000 6.12 2,875,000 3.88
Granted 178,750 1.75 99,750 3.88
Exercised (1,834) 2.50 -- --
Repurchased/Forfeited (62,500) 7.32 (201,250) 3.88
-------- ---------
Balance Dec. 31, 1999 699,416 $ 4.91 2,773,500 $ 3.88
</TABLE>
The following table represents additional information with regard to the 1987
Stock Option Plan at December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------------------- ------------------------------
WEIGHTED WEIGHTED AVERAGE WEIGHTED
RANGE OF NUMBER OF AVERAGE REMAINING NUMBER OF AVERAGE
EXERCISE PRICES SHARES EXERCISE PRICE CONTRACTUAL LIFE SHARES EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$1.75-4.375 435,416 $2.60 8.14 years 265,383 $2.87
$8.69-8.89 264,000 $8.70 4.89 years 264,000 $8.70
</TABLE>
The fair value of each stock option grant is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 1999 and 1998. There were no option grants in
1997.
1999 1998
1987 Stock Option Plan:
Fair value of option granted $1.08 $1.90
Average risk free interest rate 5.35% 5.53%
Expected dividend yield 0% 0%
Expected life of options 7 years 7 years
Expected volatility rate 0.55 0.53
1998 Stock Option Plan:
Fair value of option granted $1.91 $0.70
Average risk free interest rate 6.25% 6.30%
Expected dividend yield 0% 0%
Expected life of options 2.5 years 5 years
Expected volatility rate 0.76 0.39
1994 Employee Stock Purchase Plan
In October 1994, the Company registered 5.0 million shares of its common stock
to be offered over a five-year period beginning January 1, 1995, to eligible
employees under its 1994 Employee Stock Purchase Plan. The 1994 Employee Stock
Purchase Plan provided 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
each year. As of December 31, 1999, 167,475 shares valued at approximately $0.2
million were issuable in accordance with the 1994 Employee Stock Purchase Plan.
25
<PAGE> 21
1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
- --------------------------------------------------------------------------------
Directors' Deferred Compensation Plan
During 1991, the Company adopted a deferred compensation plan (the "Directors'
Deferred Compensation Plan") to permit nonemployee 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 Company reserved 445,000 shares for
issuance under the Directors' Deferred Compensation Plan. Shares to directors
are issued to a non-qualified trust until such time as the shares are
distributed to the directors. The cost of the shares held in the trust are
accounted for as a reduction to equity. The liability to compensate the
directors is retained until such time as the shares are issued from the trust.
The Directors' 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,
1999, 127,919 shares valued at $0.2 million were issuable to the directors who
selected deferred compensation for 1999, and a total of 210,591 shares with a
cost of $0.7 million were held by the trust for future distribution.
Directors' Stock Compensation Policy
Under a stock compensation policy initiated in 1998, the Company's non-employee
directors received a portion of their annual retainers payable in shares of the
Company's common stock. As of December 31, 1999, 8,719 shares were issuable to
non-employee directors. The directors may elect to defer all or a portion of the
shares to the trust under the Directors' Deferred Compensation Plan.
NOTE 13
STOCK BASED COMPENSATION
The Company accounts for its stock plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," under which
compensation costs, if applicable, have been determined. Had compensation costs
for these plans been determined consistent with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation," (SFAS
No. 123), net income (loss) and earnings per share would have been reduced to
the following:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net income (loss):
As reported $ 30,947 $ (6,127) $ (17,742)
Pro forma 30,549 (6,598) (18,041)
Basic income (loss) per share:
As reported $ 0.74 $ (0.15) $ (0.42)
Pro forma 0.73 (0.16) (0.42)
Diluted income (loss) per share:
As reported $ 0.71 $ (0.15) $ (0.42)
Pro forma 0.71 (0.16) (0.42)
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation costs may
not be representative of that expected in future years.
- --------------------------------------------------------------------------------
NOTE 14
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. As of December 31, 1999, 1,622,033
shares of Series A Preferred were allocated to participants of the 1989 ESOP.
26 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 22
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
NOTE 15
PURCHASES OF COMMON STOCK FOR TREASURY
During April 1998, the Company announced that it had been authorized by the
board of directors to repurchase up to 10%, or approximately 4.2 million shares,
of its outstanding common stock (the "Board Resolution"). During 1998, the
Company paid $6.3 million to repurchase approximately 1.8 million shares of its
outstanding common stock at prices ranging from $1.75 to $4.50 per share. There
were no repurchases of outstanding common stock during 1999 pursuant to the
Board Resolution. Repurchased shares of common stock are held in the Company's
treasury.
NOTE 16
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
SFAS No. 128 differs from prior accounting guidance in that earnings per share
is classified as basic earnings per share and diluted earnings per share,
compared to primary earnings per share and fully diluted earnings per share
under current standards. Basic earnings per share differs from primary earnings
per share in that it includes only the weighted average common shares
outstanding and does not include any dilutive common stock equivalents in the
calculation. Diluted earnings per share under the new standard differs in
certain calculations compared to fully diluted earnings per share under the
existing standards. For the years ended December 31, 1998 and 1997, basic and
diluted earnings per share were the same; however, securities totaling 1,725,548
shares and 1,760,090 shares, respectively, were excluded from the diluted
earnings per share calculation due to their anti-dilutive effect. The following
represents a reconciliation between basic earnings per share and diluted
earnings per share for the year ended December 31, 1999.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED INCOME
DECEMBER 31, 1999 INCOME SHARES PER SHARE
<S> <C> <C> <C>
Basic earnings per share:
Net income $ 30,947 41,600,077 $ 0.74
Effect of dilutive securities:
Series A Preferred -- 1,669,869 --
Stock options -- 28,736 --
---------- ---------- --------
Diluted earnings per share:
Net income $ 30,947 43,298,682 $ 0.71
========== ========== ========
</TABLE>
NOTE 17
ENVIRONMENTAL COMPLIANCE, LEGAL PROCEEDINGS AND COMMITMENTS AND CONTINGENCIES
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 emissions and waste disposal. The
Company spent approximately $0.8 million for pollution control capital projects
in 1999.
The Company continued its environmental remediation and regulatory compliance
activities required under its 1996 consent decree with federal and state
environmental authorities that had settled certain water discharge, air
emissions and waste handling enforcement issues. Under the consent decree, the
Company committed to undertake environmental upgrade and modification projects
totaling approximately $19.8 million, of which $15.3 million had been spent
through December 31, 1999.
As part of a related corrective action order, the Company also continued its
investigative activities and interim corrective measures aimed at determining
the nature and extent of hazardous substances which might be located on its
property. These activities are being accomplished on an area by area basis and
generally are at an early stage. Because the Company does not know the nature
and extent of hazardous substances which may be located on its properties, it is
not possible at this time to estimate the ultimate cost to comply with the
corrective action order.
At December 31, 1999, the Company had accrued approximately $9.0 million
related to the consent decree, the corrective action order, and other
environmental liabilities.
The Company believes that NSC is obligated to reimburse the Company for a
portion of the costs that have been and may be incurred by the Company to comply
with the corrective action order. Pursuant to the agreement whereby the Company
purchased the former Weirton Steel Division of NSC in 1984, NSC retained
liability for cleanup costs related to solid or hazardous waste facilities,
areas or equipment as long as such were not used by the Company in its
operations subsequent to the acquisition. As potentially reimbursable costs are
incurred, the Company has been and may continue to be reimbursed by NSC. In
1999, the Company received $2.2 million from NSC for remediation costs that were
subject to the indemnification.
27
<PAGE> 23
1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
- --------------------------------------------------------------------------------
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. On a quarterly and
annual basis, management establishes or adjusts financial provisions and
reserves for contingencies in accordance with SFAS No.
5, "Accounting for Contingencies."
Commitments and Contingencies
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 2006.
The Company has a 15-year agreement expiring in 2011 to purchase 100% of its
oxygen and nitrogen requirements from an independent party. The contract
specifies that the Company will pay a base monthly charge that is adjusted
annually based upon a percentage of the change in the producers price index for
industrial commodities.
In 1996, the Company entered into an agreement commencing on January 1, 1997
through December 31, 2001, with USX Corporation to purchase blast furnace coke.
The agreement provides for the purchase of the greater of 850,000 tons of blast
furnace coke annually, or 80% of the actual annual requirement of the Company.
Such quantities are subject to adjustment based upon changes in the Company's
operating levels. The price is to be the prevailing market price (subject to a
ceiling and floor) for blast furnace coke.
The Company has guaranteed certain debt repayment obligations of GalvPro. The
Company has a partner loan facility with MetalSite whereby the Company funded a
significant portion of MetalSite's operations in 1999. The Company expects to
continue to fund a portion of MetalSite's operations in 2000. The Company's
ownership percentage in MetalSite may be decreased by interests granted in
accordance with MetalSite's Management Ownership Plan (see Note 20 "Subsidiaries
and Joint Ventures") and by options which may be exercised by Internet Capital
Group, Inc. (see Note 21 "Sale of MetalSite Investment").
NOTE 18
OPERATING SEGMENT INFORMATION
In June of 1997, the FASB issued SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way public companies report information about operating segments and it
establishes standards for related disclosures about products, services,
geographic areas and major customers.
The Company operates a single segment, the making and finishing of carbon
steel products including sheet and tin mill products.
- --------------------------------------------------------------------------------
NOTE 19
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, 1999 and 1998.
Long Term Debt Obligations
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, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Cash and equivalents $209,270 $209,270 $ 68,389 $ 68,389
Redeemable
Preferred stock 22,990 10,819 23,543 2,651
Long term debt
obligations 304,768 302,957 304,626 277,925
</TABLE>
28 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 24
WEIRTON
STEEL CORPORATION
- --------------------------------------------------------------------------------
Significant Group Concentrations of Credit Risk
One customer accounted for 11%, 12% and 11% of net sales in 1999, 1998 and 1997,
respectively. One customer accounted for 10% of trade receivables as of December
31, 1999.
As of December 31, 1998, the Company had trade receivables outstanding of
$12.8 million from customers who had been acquired in leveraged transactions.
These amounts were immaterial as of December 31, 1999.
- --------------------------------------------------------------------------------
NOTE 20
SUBSIDIARIES AND JOINT VENTURES
The Company currently has investments in four joint ventures which the Company
accounts for using the equity method of accounting at December 31, 1999:
MetalSite
MetalSite General Partner, LLC and MetalSite L.P. (collectively "MetalSite")
were formed in the fourth quarter of 1998 as partnership ventures. MetalSite
offers a secure Web-based marketplace for the online purchase of metal products
from various suppliers and provides the latest industry news and information. At
December 31, 1999, the partnership included the Company, Internet Capital Group,
Inc., LTV Corporation, Steel Dynamics Inc., Bethlehem Steel Corporation and
Ryerson Tull, Inc. (the "Partnership").
Summarized consolidated financial information for MetalSite General Partner,
LLC follows:
1999 1998
Income data(1)
Revenues $ 1,575 $ 1
Operating loss (7,674) (120)
Net loss (5,889) (73)
Balance sheet data
Current assets 921 1,132
Noncurrent assets 1,096 1,616
Current liabilities 2,500 944
Noncurrent liabilities $ 5,415 $1,827
(1) Income data is presented for the year ended December 31, 1999 and for the
period from MetalSite's inception (November 15, 1998) through December 31,
1998.
Prior to the formation of the Partnership on November 15, 1998, for the
period from January 1, 1998 through November 15, 1998, and for the year ended
December 31, 1997, the Company incurred research and development expenditures
related to the creation of the infrastructure of MetalSite of $3.0 million and
$1.0 million, respectively.
On December 29, 1999, the Company sold a portion of its investment to
Internet Capital Group, Inc. (See Note 21 "Sale of MetalSite Investment.") As of
December 31, 1999, the Company owned approximately 24% of MetalSite and the net
carrying amount of the Company's investment in MetalSite was $(0.1) million.
WeBCo
WeBCo International LLC("WeBCo) was formed in 1997 with the Balli Group, plc.
The primary function of WeBCo is to market and sell the Company's products
globally. As of December 31, 1999, the Company owned 50% of WeBCo, and the
carrying amount of the Company's investment in WeBCo was $1.7 million.
WeBCo has receivables due from major foreign customers denominated in Pound
Sterling and the German Deutsche Mark. WeBCo utilizes forward contracts to
mitigate the risk associated with fluctuations in foreign currency exchange
rates that would affect the amounts ultimately collectible from these
receivables. These contracts mature on or before January 31, 2000. WeBCo's net
realized gain resulting from the forward contracts as of December 31, 1999 was
$1.1 million. The Company recognizes its percentage of unrealized and realized
gains and losses related to these contracts based on the equity method of
accounting.
GalvPro
GalvPro LP ("GalvPro" formerly "Galvstar LP") was formed in 1997 with affiliates
of Dutch steelmaker Koninklijke Hoogovens (now a unit of Corus Group plc) for
the purpose of constructing and operating a 300,000 ton hot-dipped galvanizing
line. Construction of GalvPro's Indiana facility continued through 1999, with
initial production commencing in the fourth quarter. No investments in GalvPro
were made in 1999. During 1998, the Company invested $6.9 million in GalvPro. As
of December 31, 1999, the Company owned 45% of GalvPro, and the carrying amount
of the Company's investment in GalvPro was $4.4 million.
Construction of GalvPro's facility was being financed primarily through a ten
year loan of up to $49.0 million secured by GalvPro's assets. In connection with
the initial funding of the loan, the Company, jointly and severally with
affiliates of Corus, agreed to prepay a total of up to $6.0 million of the loan
if GalvPro's facility failed to attain certain defined efficiency standards
within an allowed period of time after operations commenced. The Company
29
<PAGE> 25
1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED)
- --------------------------------------------------------------------------------
and Corus affiliates have each secured their respective obligation to the other
by pledging their interest in GalvPro. GalvPro successfully commenced operations
in October 1999, and the Company's management believes that the likelihood that
GalvPro will fail to meet the minimum operating performance level is remote.
Notwithstanding management's belief, GalvPro, together with the project lender
is loss payee under a policy of efficacy insurance carried by the project's
general contractor providing up to $4.0 million if GalvPro fails to attain the
defined production standards in a timely manner.
W&A
W&A Manufacturing LLC ("W&A") was formed in 1998 with ATAS International for the
purpose of manufacturing steel roofing products. No investments in W&A were made
in 1999. During 1998, the Company invested $0.9 million in W&A. As of December
31, 1999, the Company owned 50% of W&A, and the carrying amount of the Company's
investment in W&A was $0.7 million.
Related Party Transactions
The Company's purchases from unconsolidated subsidiaries totaled $62.6 million
and $27.7 million in 1999 and 1998, respectively. The Company's sales of steel
to unconsolidated subsidiaries totaled $36.0 million and $6.0 million in 1999
and 1998, respectively. These transactions arose in the ordinary course of
business and were transacted at arms-length. The Company had no purchases from
or sales to unconsolidated subsidiaries in 1997. Pursuant to certain service
agreements, the Company provides services to unconsolidated subsidiaries. The
Company billed the unconsolidated subsidiary for the service at amounts
approximating the cost to provide the service. Such amounts totaled $0.4 million
in 1999, $0.4 million in 1998 and $0.1 million in 1997. At December 31, 1999 and
1998, the Company had outstanding receivables from unconsolidated subsidiaries
of $15.9 million and $1.7 million, respectively. At December 31, 1999, the
Company had a $5.0 million note receivable and loan facility with MetalSite. A
portion of this amount relates to loans to MetalSite in 1998 for $1.8 million at
an 8% fixed interest rate. The remaining $3.2 million represents amounts
borrowed by MetalSite in 1999 under its partner loan facility at the PNC Bank
prime interest rate plus 1%. The Company's equity in MetalSite's losses has been
netted against the note receivable and loan facility. There were no dividends or
partnership distributions received from equity affiliates in 1999, 1998, or
1997.
NOTE 21
SALE OF METALSITE INVESTMENT
Prior to December 29, 1999, the Company had a majority interest in MetalSite. On
December 29, 1999, the Company sold a portion of its investment in MetalSite to
Internet Capital Group, Inc. ("ICG") resulting in a net pretax gain of $170.1
million. MetalSite's results of operations are consolidated with the Company's
results through December 29, 1999, and are reported under the equity method
thereafter.
Pursuant to the purchase agreement, ICG has been granted options to purchase
an additional interest in MetalSite upon the occurrence of certain events,
including completion of an underwritten public offering of equity securities by
MetalSite (a"MetalSite Public Offering"). After a MetalSite Public Offering, ICG
will have a 30 day option exercise period commencing 30 days after any period of
time during which the Company, pursuant to a "lock-up" agreement, is restricted
from disposing of equity securities of MetalSite. ICG's option would enable them
to purchase an additional 10% equity interest (determined on a pre-offering
basis) in MetalSite at an average market price based upon the trading prices of
MetalSite's equity securities during a ten-day period prior to notice of
exercise of such option. Pursuant to this option, MetalSite, at its discretion,
can sell shares equivalent to such 10% interest to ICG. If MetalSite decides not
to or fails to sell shares equivalent to such additional 10% interest to ICG,
then the Company is obligated to sell the portion of its equity securities of
MetalSite to ICG that would be equivalent to a 10% interest in MetalSite.
ICG has also been granted options to purchase any or all of the Company's
remaining interest in MetalSite in the event of a change in control of the
Company as defined in the purchase agreement. In the event of a change in
control of the Company prior to the completion of a MetalSite Public Offering,
ICG will have the option to purchase any or all of the Company's remaining
interest in MetalSite at a mutually agreed fair market value price or, in the
absence of agreement, an independently appraised fair market value price. In the
event of a change in control of the Company after completion of a MetalSite
Public Offering, ICG will have the option to purchase any or all of the
Company's remaining interest in MetalSite at an average market price based upon
trading prices of MetalSite's equity securities during the ten-day period prior
to notice of exercise of such an option.
30 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 26
MANAGEMENT'S RESPONSIBILITY STATEMENT
- --------------------------------------------------------------------------------
The accompanying consolidated financial statements of the Company are the
responsibility of its management and have been prepared in conformity with
generally accepted accounting principles.
The Company has a system of internal controls, including a Code of Ethics,
designed to provide reasonable assurance that assets are safeguarded, financial
statements are reliable and a high standard of business conduct is maintained.
Management monitors the system for compliance, and internal auditors
independently measure its effectiveness.
The Company's independent public accountants, Arthur Andersen LLP, audit its
financial statements in accordance with generally accepted auditing standards.
The report of the independent public accountants is included in this report.
The Board of Directors pursues its oversight role for the financial
statements through its Audit Committee. The Audit Committee continued its
practice of meeting regularly to review the financial affairs of the Company and
to interface with the internal audit staff and independent public accountants.
Both the independent public accountants and the internal auditors have full and
free access to the Audit Committee.
Management believes that the existing system of internal controls, the
independent audit and the Audit Committee provide reasonable assurance that the
Company's financial accounting system adequately maintains accountability for
assets, assures the integrity of financial statements and maintains its
commitment to a high standard of business conduct.
/s/ Richard K. Riederer
- -----------------------
Richard K. Riederer
Chief Executive Officer
/s/ Mark E. Kaplan
- -----------------------
Mark E. Kaplan
Principal Accounting Officer
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 subsidiaries as of December 31, 1999
and 1998, 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, 1999. 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 auditing standards generally
accepted in the United States. 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 subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
January 25, 2000
31
<PAGE> 27
SELECTED FINANCIAL AND STATISTICAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales $ 1,092 $ 1,255 $ 1,397 $ 1,383 $ 1,352
Operating costs 1,181 1,220 1,372 1,397 1,252
Depreciation 61 61 61 58 55
Asset impairment 23 -- -- -- --
Income taxes (benefit) 8 (1) (4) (11) 13
Profit sharing 16 -- -- -- 24.2
Contribution to ESOP 1 3 3 3 3
Gain on sale of investment 170 -- -- -- --
Net income (loss) 31 (6) (18) (50) 48
Net income (loss) per diluted share 0.71 (0.15) (0.42) (1.18) 1.10
Total assets 1,188 1,196 1,283 1,301 1,314
Additions to property, plant and equipment 22 50 45 83 52
Long term debt obligations 305 305 389 431 408
Redeemable preferred stock, net 23 22 21 18 16
Working capital $ 290 $ 196 $ 294 $ 291 $ 340
Number of common shares
outstanding at year end, (in thousands) 41,614 41,195 42,637 42,353 42,014
Number of preferred shares
outstanding at year end, (in thousands) 1,652 1,657 1,727 1,748 1,729
Stockholders' equity $ 154 $ 122 $ 133 $ 149 $ 199
Stockholders' equity per common share $ 3.70 $ 2.95 $ 3.12 $ 3.52 $ 4.73
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERLY PERIODS IN 1999 QUARTERLY PERIODS IN 1998
(DOLLARS IN MILLIONS, -------------------------------------------- -----------------------------------------------
EXCEPT PER SHARE DATA) 4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 280 $ 280 $ 267 $ 265 $ 262 $ 315 $ 336 $ 341
Gross profit 9 17 25 3 18 33 45 42
Operating income (loss) (62)(1) (6) 0.1 (22) (6) 10 16 14
Net income (loss) 82 (2) (14) (9) (28) (13) (1) 5 2
Basic earnings per share $1.96 $(0.33) $(0.22) $(0.67) $(0.32) $(0.01) $ 0.12 $ 0.05
Diluted earnings per share $1.88 $(0.33) $(0.22) $(0.67) $(0.32) $(0.01) $ 0.12 $ 0.05
</TABLE>
(1) Includes an asset impairment charge of $22.5 million and a profit
sharing provision of $15.5 million.
(2) Includes gain on sale of investment of $170.1 million.
32 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 28
WEIRTON STEEL CORPORATION
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
Richard R. Burt, Chairman(A, B, D)
Chairman
IEP Advisors, Inc.
Washington, DC
Michael Bozic(B, C, E)
Vice Chairman
Kmart Corporation
Troy, Michigan
Craig T. Costello(B)
Executive Vice President
Weirton Steel Corporation
Weirton, West Virginia
Retiring effective April 1, 2000
Earl E. Davis, Jr.(B, D)
Executive Vice President
Commercial
Weirton Steel Corporation
Weirton, West Virginia
Robert J. D'Anniballe, Jr.(A, D)
Managing Attorney
Marshall, Dennehey, Warner,
Coleman and Goggin
Weirton, West Virginia
George E. Doty, Jr.(B, D)
Managing Director
Bear, Stearns & Co. Inc.
New York, New York
Mark G. Glyptis(B, D, E)
President
Independent Steelworkers Union
Weirton, West Virginia
Ralph E. Reins(A, B)
Chairman and CEO
Qualitor, Inc.
Southfield, Michigan
Robert S. Reitman(B, C)
Principal
Riverbend Advisors
Gates Mills, Ohio
Richard K. Riederer(E)
Chief Executive Officer
Weirton Steel Corporation
Weirton, West Virginia
Richard F. Schubert(C, D)
Chairman Emeritus
International Youth Foundation
Washington, DC
Thomas R. Sturges(A, D)
Executive Vice President and
Chief Financial Officer
Hawkeye Communications, Inc.
New York, New York
Ronald C. Whitaker(B, C, E)
Former President and CEO
Johnson Worldwide Associates
Sturtevant, Wisconsin
D. Leonard Wise(A, B, C, D, E)
Former President and CEO
Carolina Steel Corp.
Greensboro, North Carolina
EXECUTIVE OFFICERS OF THE COMPANY
Richard K. Riederer
Chief Executive Officer
John H. Walker
President and Chief Operating Officer
Effective March 21, 2000
Craig T. Costello
Executive Vice President
Retiring effective April 1, 2000
Earl E. Davis, Jr.
Executive Vice President - Commercial
David L. Robertson
Executive Vice President
Human Resources and Corporate Law
Narendra M. Pathipati
Senior Vice President
Corporate Development and Strategy
Thomas W. Evans
Vice President
Materials Management
William R.Kiefer
Vice President - Law and Secretary
Frank G. Tluchowski
Vice President
Engineering and Technology
Mark E. Kaplan
Vice President - Information Technology
Controller
Richard W. Garan
Assistant Treasurer
A Member of Audit Committee
B Member of Finance and Strategic Planning Committee
C Member of Management Development and Compensation Committee
D Member of Corporate Responsibility Committee
E Member of Nominating Committee
33
<PAGE> 29
WEIRTON STEEL CORPORATION
- --------------------------------------------------------------------------------
ENVIRONMENTAL MISSION STATEMENT
Protection of the environment, employees and the community is a basic commitment
in both the day-to-day operations and long-term planning of Weirton Steel
Corporation. The company is committed to devote the personnel and capital
resources necessary to achieve these objectives and is further committed to:
1. Continually review and, as appropriate, take steps to further enhance
environmental quality and to achieve and maintain compliance with relevant
federal, state and local environmental requirements;
2. Develop and/or evaluate waste prevention, waste minimization, reuse and
recycling efforts to conserve energy and natural resources;
3. Communicate this Environmental Mission Statement to Weirton Steel personnel;
and
4. Develop and revise, as necessary, objectives, targets and/or other indicators
to measure Weirton Steel's success in fulfilling these commitments.
STOCKHOLDER INFORMATION
Additional financial information including this Annual Report or reports filed
with the Securities and Exchange Commission, and the Company's news and earnings
releases can be obtained by accessing our Internet World Wide Web site at
http://www.weirton.com and clicking on Investor Relations. Requests can also be
submitted by writing to:
Investor Relations
Weirton Steel Corporation
400 Three Springs Drive
Weirton, West Virginia 26062-4989
Telephone (304) 797-2728.
NOTICE OF ANNUAL MEETING
A notice of the annual meeting and proxy statement and a proxy voting card as
well as a copy of the current Annual Report will be mailed to each stockholder
prior to the meeting.
ESOP INFORMATION
Inquiries about Employee Stock Ownership Plan accounts should be directed to the
Weirton Steel Corporation ESOP Administrator at the Executive Offices.
EXECUTIVE OFFICES
Weirton Steel Corporation
400 Three Springs Drive
Weirton, West Virginia 26062-4989
Telephone (304) 797-2000
STOCK TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for its common stock is Harris Trust
and Savings Bank. Stockholders wishing to transfer their shares of the Company's
common stock to someone else or to change the name on a stock certificate should
contact the Shareholder Communications Department, Harris Trust and Savings
Bank, P.O. Box 1878, Chicago, Illinois 60690-9312, Telephone (800) 942-5908 for
assistance.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, Pennsylvania 15222
Design: BD&E Pittsburgh, Pennsylvania
34 WEIRTON STEEL CORPORATION ANNUAL REPORT
<PAGE> 1
Exhibit 22.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
SUBSIDIARY PERCENTAGE OWNED BY REGISTRANT STATE OF INCORPORATION
- ---------- ------------------------------ ----------------------
<S> <C> <C>
Weirton Receivables, Inc. ................... 100% Delaware
Weirton Venture Holdings Corp. .............. 100% Delaware
Weirton Coatings L.L.C. ..................... 100% Delaware
W&A Manufacturing LLC ....................... 50% Delaware
MetalSite General Partner, LLC .............. 25.39% Delaware
MetalSite, L.P. ............................. 23.87% Delaware
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statement on Form S-8, File No. 333-84943,
relating to the Company's 1994 Employee Stock Purchase Plan, Deferred
Compensation Plan and Stock Compensation Policy for Directors, 1987 Stock Option
Plan, 1998 Stock Option Plan and Amended Performance Incentive Plan.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 209,270
<SECURITIES> 0
<RECEIVABLES> 113,949
<ALLOWANCES> 9,302
<INVENTORY> 186,710
<CURRENT-ASSETS> 546,311
<PP&E> 990,474
<DEPRECIATION> 476,010
<TOTAL-ASSETS> 1,187,522
<CURRENT-LIABILITIES> 255,934
<BONDS> 304,768
22,973
250
<COMMON> 435
<OTHER-SE> 153,316
<TOTAL-LIABILITY-AND-EQUITY> 1,187,522
<SALES> 1,091,697
<TOTAL-REVENUES> 1,091,697
<CGS> 1,037,342
<TOTAL-COSTS> 1,181,009
<OTHER-EXPENSES> 212
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,223
<INCOME-PRETAX> 36,370
<INCOME-TAX> 8,227
<INCOME-CONTINUING> 30,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,947
<EPS-BASIC> 0.74
<EPS-DILUTED> 0.71
</TABLE>
