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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________________
Commission file number 1-10319
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RMI TITANIUM COMPANY
______________________________________________________
(Exact name of registrant as specified in its charter)
Ohio 31-0875005
_______________________________ ____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Warren Avenue, Niles, Ohio 44446
________________________________________
(Address of principal executive offices)
(216) 544-7700
____________________________________________________
(Registrant's telephone number, including area code)
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
-------- --------
At August 10, 1994, 15,250,342 shares of common stock of the registrant were
outstanding.
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<TABLE>
RMI TITANIUM COMPANY
FORM 10-Q
QUARTER ENDED JUNE 30, 1994
<CAPTION>
INDEX
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Introduction to Financial Statements........ 2
Consolidated Statement of Operations........ 3
Consolidated Balance Sheet.................. 4
Consolidated Statement of Cash Flows........ 5
Consolidated Statement of Shareholders'
Equity...................................... 6
Selected Notes to Financial Statements...... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................. 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....... 15
Signatures...................................... 16
</TABLE>
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PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- ------- --------------------
INTRODUCTION TO FINANCIAL STATEMENTS
------------------------------------
The consolidated financial statements included herein have been prepared by RMI
Titanium Company (the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial
information presented reflects all adjustments, consisting only of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented. The results
for the interim periods are not necessarily indicative of the results to be
expected for the year.
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<TABLE>
RMI TITANIUM COMPANY
Consolidated Statement of Operations
(Unaudited)
(Dollars in thousands)
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ -----------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales............................. $ 35,337 $ 30,730 $ 71,697 $ 62,864
Operating costs:
Cost of sales..................... 34,644 30,026 70,477 61,798
Selling, general and
administrative expenses......... 2,317 2,590 4,723 4,928
Research, technical and product
development expenses............ 393 395 730 778
--------- --------- --------- ----------
Total operating costs...... 37,354 33,011 75,930 67,504
Operating loss.................... (2,017) (2,281) (4,233) (4,640)
Other income (expense)-net........ (14) 51 1 124
Interest expense.................. (992) (633) (1,720) (1,243)
--------- --------- --------- ----------
Loss before income taxes
and cumulative effect of
change in accounting principle.. (3,023) (2,863) (5,952) (5,759)
Provision for income taxes........ -- 4 -- 5
--------- --------- --------- ----------
Loss before cumulative effect of
change in accounting principle.. (3,023) (2,867) (5,952) (5,764)
Cumulative effect of change
in accounting principle......... -- -- (1,202) (16,938)
--------- --------- -------- ----------
Net loss.......................... $ (3,023) $ (2,867) $ (7,154) $ (22,702)
========= ========= ========= =========
Net loss per common share-(Note 3):
Before cumulative effect of
change in accounting principle. $ (2.05) $ (1.95) $ (4.04) $ (3.93)
Cumulative effect of change in
accounting principle........... -- -- (0.81) $ (11.56)
--------- --------- --------- ---------
Net loss................ $ (2.05) $ (1.95) $ (4.85) $ (15.49)
========= ========= ========= =========
Weighted average shares
outstanding.................... 1,475,285 1,470,342 1,475,168 1,465,417
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
3
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<TABLE>
RMI TITANIUM COMPANY
Consolidated Balance Sheet
(Dollars in Thousands)
<CAPTION>
(Unaudited)
June 30 December 31
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 314 $ 293
Receivables - less allowance for doubtful accounts of
$1,542 and $940..................................... 26,088 29,940
Inventories............................................. 62,212 57,492
Other current assets.................................... 1,457 1,540
Total current assets.................................. 90,071 89,265
Property, plant and equipment, net of accumulated
depreciation.......................................... 52,021 54,956
Other noncurrent assets................................. 9,173 8,250
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Total assets......................................... $151,265 $152,471
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt...................... $ 120 $ 120
Accounts payable....................................... 15,355 11,770
Accrued wages and other employee costs................. 7,605 6,383
Other accrued liabilities.............................. 3,063 4,673
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Total current liabilities............................ 26,143 22,946
Long-term debt............................................ 68,000 66,660
Other employee benefit liabilities........................ 17,140 15,938
Noncurrent pension liabilities............................ 17,056 17,056
Other noncurrent liabilities.............................. 2,010 2,010
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Total liabilities.................................... 130,349 124,610
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Contingencies (see Note 5)................................
Shareholders' equity:
Preferred Stock, no par value; 5,000,000 shares
authorized; no shares outstanding....................... -- --
Common Stock, $0.01 par value, 30,000,000 shares
authorized; 2,037,821 and 15,312,995 shares issued
(Note 3)............................................... 15 153
Additional paid-in capital (Note 3)..................... 124,720 124,578
Retained deficit........................................ (93,308) (86,154)
Deferred compensation................................... -- (205)
Minimum pension liability adjustment.................... (7,520) (7,520)
Treasury Common Stock at cost 562,536 shares............ (2,991) (2,991)
------- -------
Total shareholders' equity................................ 20,916 27,861
------- -------
Total liabilities and shareholders' equity........... $151,265 $152,471
======= =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
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<TABLE>
<CAPTION>
RMI TITANIUM COMPANY
Consolidated Statement of Cash Flows
(Unaudited)
(Dollars in Thousands)
Six Months Ended
June 30
------------------------
1994 1993
---- ----
<S> <C> <C>
CASH PROVIDED FROM (USED IN)
OPERATIONS:
Net loss................................................... $(7,154) $(22,702)
Adjustment for items not affecting funds from operations:
Depreciation............................................. 3,117 3,247
Cumulative effect of change in accounting principle...... 1,202 16,938
Other-net................................................ 1,021 789
------ -------
(1,814) (1,728)
------ -------
Changes in assets and liabilities (excluding cash):
Receivables................................................ 3,219 (2,361)
Inventories................................................ (4,720) 932
Accounts payable........................................... 3,585 1,567
Other current liabilities.................................. (568) 1,480
Other assets............................................... (750) (280)
Other-net.................................................. 83 (1,434)
------ -------
849 (96)
Cash used in operating activities.................... (965) (1,824)
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of facilities......................... 59 --
Capital expenditures..................................... (241) (435)
Investment in joint venture.............................. (172) (379)
------ -------
Cash used in investing activities.................... (354) (814)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements....................... 1,400 3,000
Debt repayments.......................................... (60) (60)
Common Stock repurchased................................. -- (22)
------ -------
Cash provided from financing activities.................. 1,340 2,918
------ -------
INCREASE IN CASH AND CASH EQUIVALENTS...................... 21 280
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... $ 293 $ 270
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................. $ 314 $ 550
====== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)........ $ 1,681 $ 1,235
====== =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
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<TABLE>
RMI TITANIUM COMPANY
Consolidated Statement of Shareholders' Equity
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Minimum
Add'tl. Retained Treasury Pension
Shares Common Deferred Paid-in Earnings Common Liability
Outstanding Stock Compensation Capital (Deficit) Stock Adjustment
----------- ------ ------------ ------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 14,604,384 $ 152 $(249) $124,306 $(57,261) $(2,969) $ (677)
Compensation expense recognized -- -- 245 -- -- -- --
Shares issued for Restricted
Stock Award Plans 122,700 1 (201) 200 -- -- --
Shares issued in lieu of
Directors' compensation 35,439 -- -- 72 -- -- --
Treasury common stock
purchases-at cost (12,064) -- -- -- -- (22) --
Minimum pension liability
adjustment -- -- -- -- -- -- (6,843)
Net loss -- -- -- -- (28,893) -- --
--------- ---- ---- -------- ------- ------ ------
Balance at December 31, 1993 14,750,459 153 (205) 124,578 (86,154) (2,991) (7,520)
Compensation expense recognized -- -- 205 -- -- -- --
One-for-ten reverse stock split
effective March 31, 1994
(Note 3) (13,275,414) (138) -- 138 -- -- --
Shares issued for Restricted
Stock Award Plans 240 -- -- 4 -- -- --
Net loss -- -- -- -- (7,154) -- --
--------- ---- ---- ------- ------- ------ ------
Balance at June 30, 1994 1,475,285 $ 15 $ -- $124,720 $(93,308) $(2,991) $(7,520)
========= ==== ==== ======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
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RMI TITANIUM COMPANY
SELECTED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--GENERAL
The consolidated financial statements include the accounts of RMI Titanium
Company and its majority-owned subsidiaries. All significant intercompany
transactions are eliminated. The Company's operations are conducted primarily in
one business segment, the production and marketing of titanium metal and related
products.
NOTE 2--ORGANIZATION
On April 20, 1990, Quantum Chemical Corporation ("Quantum") and USX
Corporation ("USX") transferred their 50% partnership interests in RMI Company
(the immediate predecessor of the Company) to the Company in exchange for shares
of the Company's common stock (the "Reorganization"). Concurrent with the
Reorganization, Quantum completed a sale of its shares of the Company's common
stock to the public. USX has retained its shares of the Company's common stock.
At June 30, 1994, approximately 51% of the Company's outstanding common stock
was owned by USX (see also Note 7).
NOTE 3--REVERSE STOCK SPLIT
At its Annual Meeting held on March 31, 1994, the Company's shareholders
approved an amendment to the Articles of Incorporation of the Company effecting
a one-for-ten reverse stock split. A Certificate of Amendment to the Articles of
Incorporation was filed with the Ohio Secretary of State on March 31, 1994, and
the reverse split became effective on that date. Pursuant to the reverse split,
each certificate representing shares of common stock outstanding immediately
prior to the reverse split is deemed to represent one-tenth the number of shares
of common stock after the reverse split. Per share and weighted average share
amounts reported herein have been retroactively restated to reflect the reverse
split. Common Stock and additional paid-in capital have also been adjusted at
June 30, 1994 to reflect the reverse split. Treasury Common Stock was not
affected by the reverse split.
NOTE 4--NEW ACCOUNTING STANDARDS
Effective January 1, 1994 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 ("SFAS 112"), "Employer's Accounting
for Postemployment Benefits." The results for the six months ended June 30, 1994
reflect a one-time charge of $1.2 million representing the cumulative effect of
adopting the new standard. The liabilities recorded pursuant to SFAS 112 relate
principally to workers compensation and had no effect on cash flow. Effective
January 1, 1993 the Company adopted the provisions of Statement of Financial
Accounting Standards No. 106 ("SFAS 106") "Employers' Accounting for
Postretirement Benefits Other than Pensions." The results for the six months
ended June 30, 1993 reflect a one-time charge of $16.9 million representing the
cumulative effect of recognizing the entire SFAS 106 transition obligation.
Additionally, effective January 1, 1993 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes." Prior to the adoption of SFAS 109, income tax expense was
determined under Statement of Financial Accounting Standards No. 96 ("SFAS 96"),
"Accounting for Income Taxes." Under the provisions of SFAS 109 and SFAS 96, no
tax benefits were recognized for the 1994 and 1993 pretax losses. The provisions
for income taxes in the second quarter of 1993 and the six months ended June 30,
1993 result from certain state income taxes.
NOTE 5--CONTINGENCIES:
The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including a
Superfund site. Given the status of the proceedings with respect to these sites,
ultimate investigative and remediation costs cannot presently be accurately
predicted, but could, in the aggregate, be material. Based on the information
available regarding the current ranges of estimated
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remediation costs at currently active sites, and what the Company believes will
be its ultimate share of such costs, provisions for environmental-related costs
have been recorded. These provisions are in addition to amounts which have
previously been accrued for the Company's share of environmental study costs. At
June 30, 1994, the amount accrued for future environmental-related costs was
$2.7 million. Based on available information, RMI believes its share of
potential environmental-related costs, before expected contributions from third
parties, will be in the range of $4.2 to $6.1 million, in the aggregate. The
amount accrued is net of expected contributions from third parties (other than
insurers) of approximately $1.6 million, which the Company believes are
probable. The Company has been receiving contributions from such third parties
for a number of years as partial reimbursement for costs incurred by the
Company. As these proceedings continue toward final resolution, amounts in
excess of those already provided may be necessary to discharge the Company from
its obligations for these projects.
The Company is also the subject of, or a party to, a number of other
pending or threatened legal actions involving a variety of matters.
The ultimate resolution of these foregoing contingencies could,
individually or in the aggregate, be material to the consolidated financial
statements. However, management believes that the Company will remain a viable
and competitive enterprise even though it is possible that these matters could
be resolved unfavorably.
NOTE 6--INVENTORIES:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
DECEMBER
JUNE 30, 1994 31,
(UNAUDITED) 1993
------------- -----------
<S> <C> <C>
Raw material and supplies..................................... $ 13,587 $ 18,366
Work-in-process and finished goods............................ 61,555 52,151
Adjustments to LIFO values.................................... (12,930) (13,025)
------------- -----------
$ 62,212 $ 57,492
============ ============
</TABLE>
Inventories are valued at cost as determined by the last-in, first-out
(LIFO) method which, in the aggregate, is lower than market. Inventory costs
generally include materials, labor costs and manufacturing overhead (including
depreciation).
Included in work-in-process are costs relating to a drilling riser
contract, which is being accounted for as a long-term contract. Contract costs,
plus estimated earnings, less progress billings at June 30, 1994 and December
31, 1993 amounted to $5.6 million and $1.3 million, respectively.
NOTE 7--SUBSEQUENT EVENT
In order to supplement its liquidity requirements and provide financing for
the development of new titanium market opportunities, the Board of Directors
determined that the Company should seek to raise up to $30 million by means of a
rights offering. Each record holder of common stock at the close of business on
June 24, 1994 received five transferable rights for each share of Common Stock
held of record on the record date. Each right entitled the holder to purchase
two shares of RMI Common Stock for a price of $2.00 per share. The rights
expired on July 22, 1994. Approximately 93% of the total number of rights
distributed were exercised, resulting in the issuance of 13,775,057 new shares
of the Company's common stock. Gross proceeds from the offering were $27.6
million. Net proceeds are expected to be approximately $26.6 million and will be
an addition to Shareholders' Equity. As a result of the rights offering, USX
Corporation beneficially owns, as of August 4, 1994, approximately 54% of the
Company's common stock. However, effective as of August 4, 1994, in accordance
with the provisions of a voting trust agreement, USX has placed 1,319,175 shares
of RMI stock into a voting trust. As a result, the number of shares of stock
held by USX outside the trust is one less than the number of shares held by all
other holders other than USX and its affiliates. This arrangement results in USX
having a direct voting interest in RMI of approximately 46%. Shares deposited in
the voting trust are not voted with respect to any election of directors. With
respect to each other matter on which the common
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stock votes, the Trustee is required to cause the shares deposited in the voting
trust to be voted "for," "against," or to abstain from voting, in the same
proportion as all shares of common stock, other than the shares deposited in the
voting trust, are validly voted "for," "against," or abstain, as the case may
be, with respect to such matter.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in connection with the Consolidated
Financial Statements and Selected Notes to Financial Statements.
NET SALES
Net sales increased by $4.6 million, or 15%, for the three months ended
June 30, 1994 compared to the corresponding 1993 period. Sales for the six
months ended June 30, 1994 increased to $71.7 million from $62.9 million from
the same period in 1993, an increase of 14%. These increases are due primarily
to the recognition in 1994 of $2.3 million and $5.0 million in revenue under the
titanium drilling riser contract for the three and six month periods ended June
30, 1994, respectively. Additionally, revenues under the Department of Energy
("DOE") remediation and restoration contract increased by $.4 million to $2.3
million in the second quarter of 1994 and $1.5 million to $5.0 million in the
first six months of 1994 from the same periods in 1993. Shipments of titanium
mill products in the three and six months ended June 30, 1994 increased slightly
from comparable 1993 shipments. Because of a less favorable product mix and a
continuation of intense price competition, average selling prices of mill
products in the first six months of 1994 decreased by approximately 5% from
average 1993 levels. Overall demand and pricing for titanium mill products
remains weak.
GROSS PROFIT
Gross profit amounted to $.7 million for each of the quarters ended June
30, 1994 and 1993. For the six months ended June 30, 1994 gross profit amounted
to $1.2 million compared to $1.1 in 1993. The 1994 results have been favorably
impacted by the titanium drilling riser contract.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $2.3 million for
the quarter ended June 30, 1994 compared to $2.6 million in the second quarter
of 1993. Selling, general and administrative expenses for the six months ended
June 30, 1994 amounted to $4.7 million compared to $4.9 million in 1993.
Research, technical and product development expenses amounted to $.4 million in
the second quarter in each of 1994 and 1993. Research, technical and product
development expensed for the six months ended June 30, 1994 amounted to $.7
million compared to $.8 million in 1993.
OPERATING LOSS
The operating loss for the three months ended June 30, 1994 and 1993
amounted to $2.0 million and $2.3 million, respectively. The operating loss for
the six months ended June 30, 1994 amounted to $4.2 million compared to $4.6
million in 1993.
NET LOSS
Because of increased overall interest rates and a higher level of
borrowings, interest expense increased to $1.0 million in the second quarter of
1994 from $.6 million in 1993. Interest expense for the six months ended June
30, 1994 amounted to $1.7 million compared to $1.2 million in 1993.
Net loss for the first six months of 1994 reflects a one-time charge of
$1.2 million resulting from the cumulative effect of adopting SFAS No. 112. The
comparable 1993 period reflects a one-time charge of $16.9 million representing
the cumulative effect of SFAS No. 106.
BUSINESS OUTLOOK--BACKLOG
Including the remainder of the titanium drilling riser contract, the
Company's total order backlog as of June 30, 1994 was approximately $61 million,
compared to $71 million at December 31, 1993. As a result of soft demand and
competitive pressures, the average selling prices on incoming orders for mill
products have decreased over the last several years. The Company believes a
number of factors are responsible for this situation. Among these factors are
aggressive international competition, declining military spending, lack of
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commercial airline profits, and an uncertain world economy. Many aerospace
contractors have adopted just-in-time inventory practices or have demanded
significantly shorter lead times. Additionally, contractors are waiting until
the last minute to place orders in an effort to obtain the best possible
pricing. The titanium industry is also suffering from excess production
capacity, which has intensified price competition for available business.
LIQUIDITY AND CAPITAL RESOURCES
Working capital amounted to $63.9 million at June 30, 1994 compared to
$66.3 million at December 31, 1993.
For the quarter ended June 30, 1994, the Company's cash flow requirements
for operating losses, capital spending and working capital needs were funded
primarily through borrowings under the Company's revolving credit facility.
On June 13, 1994, the Company and the participating banks amended the
Company's $75 million revolving credit facility. The amendment establishes new
financial covenants, including a covenant to maintain a minimum balance of total
shareholders' equity beginning June 30, 1994 and at all times thereafter, equal
to an amount not less than total shareholders' equity at December 31, 1993, as
adjusted for new cash equity investments as a result of the rights offering and
certain noncash charges to equity resulting from the application of certain
mandated accounting standards and other permitted reductions. Additionally, if
USX were to cease to beneficially own at least 48% of the Company's voting
equity securities, the terms of the facility would be subject to renegotiation
and, in such event, failure by the Company and the banks to reach agreement on
appropriate amendments to the facility could constitute an event of default.
The Company also received from the banks which are parties to the amended
$75 million credit facility a separate commitment to enter into a second
revolving credit facility providing for up to $15 million of borrowings, in
addition to amounts available under the amended $75 million credit facility. The
second facility would permit borrowings up to the lesser of $15 million or an
amount determined pursuant to a borrowing base formula related to certain
collateral associated with the Company's export sales. The $15 million revolving
credit facility is conditioned upon obtaining a guarantee by the Export Import
Bank of the United States of amounts outstanding thereunder. The Company has
applied to the Export Import Bank for such a guarantee.
At June 30, 1994, the Company had borrowings of $67.0 million outstanding
under the facility, compared to $65.5 at December 31, 1993. After application of
the proceeds resulting from the rights offering referred to below, the
outstanding balance as of August 9, 1994 had been reduced to $44.5 million.
In order to adequately finance the development of new markets while meeting
its current liquidity requirements, the Board of Directors determined that the
Company should seek to raise up to $30 million, through a rights offering. In
contemplation of the rights offering, the Board of Directors of the Company
sought shareholders' approval at the Annual Meeting of Shareholders to amend the
Articles of Incorporation of the Company to effect a one-for-ten reverse stock
split.
The reverse split proposal was approved by an affirmative vote of
approximately 90% of the outstanding shares. A Certificate of Amendment to the
Articles of Incorporation was filed with the Ohio Secretary of State on March
31, 1994, and the reverse split became effective on that date. Pursuant to the
reverse split, each certificate representing shares of common stock outstanding
immediately prior to the reverse split is deemed to represent one-tenth the
number of shares of common stock after the reverse split.
Each record holder of common stock at the close of business on June 24,
1994 received five transferable rights for each share of Common Stock held of
record on the record date. Each right entitled the holder to purchase two shares
of RMI Titanium common stock for a price of $2.00 per share. The rights expired
on July 22, 1994. Approximately 93% of the total number of Rights distributed
were exercised, resulting in the issuance of 13,775,057 new shares of the
Company's common stock. Gross proceeds from the offering were $27.6 million. Net
proceeds are expected to be approximately $26.6 million and will be an addition
to Shareholders' Equity. As a result of the rights offering, USX Corporation
owns, as of August 4, 1994, approximately 54% of the Company's common stock.
However, effective as of August 4, 1994 in accordance
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with the provisions of a voting trust agreement, USX has placed 1,319,175 shares
of RMI Common Stock into a trust. As a result, the number of shares of stock
held by USX outside the voting trust is one less than the number of shares held
by all other holders other than USX and its affiliates. This arrangement results
in USX having a direct voting interest in RMI of approximately 46%. Shares
deposited in the voting trust are not voted with respect to any election of
directors. With respect to each other matter on which the common stock votes,
the Trustee is required to cause the shares deposited in the voting trust to be
voted "for," "against," or to abstain from voting, in the same proportion as all
shares of common stock, other than the shares deposited in the voting trust, are
validly voted "for," "against," or abstain, as the case may be, with respect to
such matter.
ENVIRONMENTAL MATTERS
The Company is subject to pervasive environmental laws and regulations as
well as various health and safety laws and regulations that are subject to
frequent modifications and revisions. While the costs of compliance for these
matters has not had a material adverse impact on RMI in the past, it is
impossible to predict accurately the ultimate effect these changing laws and
regulations may have on the Company in the future. During the first six months
of 1994, the Company spent approximately $.2 million for environmental-related
expenditures.
The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including a
Superfund site. Given the status of the proceedings with respect to these sites,
ultimate investigative and remediation costs cannot presently be accurately
predicted but could, in the aggregate, be material. Based on the information
available regarding the current ranges of estimated remediation costs at
currently active sites, and what the Company believes will be its ultimate share
of such costs, provisions for environmental-related costs have been recorded.
These provisions are in addition to amounts which have previously been accrued
for the Company's share of environmental study costs. At June 30, 1994, the
amount accrued for future environment-related costs was $2.7 million. Based on
available information, RMI believes that its share of potential
environmental-related costs, before expected contributions from third parties,
will be in the range of $4.2-6.1 million in the aggregate. The amount accrued is
net of expected contributions from third parties (other than insurers) of
approximately $1.6 million, which the Company believes are probable. The Company
has been receiving contributions from such third parties for a number of years
as partial reimbursement for costs incurred by the Company. As these proceedings
continue toward final resolution, amounts in excess of those already provided
may be necessary to discharge the Company from its obligations for these
projects.
In 1992, the EPA proposed a $1.4 million civil penalty for alleged failure
to comply with RCRA. The Company is contesting the complaint. Based on the
preliminary nature of the proceeding the Company is currently unable to
determine the ultimate liability, if any, that may arise from this matter.
The ultimate resolution of these environmental matters could individually
or in the aggregate, be material to the consolidated financial statements.
However, management believes that the Company will remain a viable and
competitive enterprise even though it is possible that these matters could be
resolved unfavorably.
CAPITAL EXPENDITURES AND JOINT VENTURES
Capital expenditures for the six months ended June 30, 1994 and June 30,
1993 amounted to $.2 million and $.4 million, respectively. The Company has
budgeted capital spending of approximately $1.0 million for the year 1994, which
is comparable to actual spending for the year 1993. Although reduced in order to
conserve cash, the Company's capital spending levels are adequate to maintain
its facilities while continuing to improve product quality. In addition, during
the six month periods ended June 30, 1994 and June 30, 1993, the Company
invested $.2 million and $.4 million, respectively, in its Norwegian joint
venture.
12
<PAGE> 14
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Articles of Incorporation of RMI Titanium Company, as
amended March 31, 1994.
10.1 RMI Voting Trust Agreement, dated as of August 4,
1994, between RMI Titanium Company, USX Corporation
and Mellon Bank, N.A., as Trustee.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter
ended June 30, 1994.
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RMI TITANIUM COMPANY
____________________
(Registrant)
Date: August 10, 1994 By: /s/T. G. Rupert
_________________________
T. G. Rupert
Senior Vice President and
Chief Financial Officer
14
<PAGE> 1
EXHIBIT 3.1
AMENDED ARTICLES OF INCORPORATION
OF
RMI TITANIUM COMPANY
PREVIOUSLY NAMED BONDED STATIONS, INC.
The Articles of Incorporation, as the same have been amended to date, of
Bonded Stations, Inc. are amended in their entirety to read as follows, and as
so amended the Amended Articles of Incorporation of Bonded Stations, Inc.
hereinafter set forth supersede in their entirety the existing Articles of
Incorporation of Bonded Stations, Inc. and any amendments thereto heretofore
adopted:
FIRST: The name of the Corporation shall be RMI Titanium Company.
SECOND: The principal office of the Corporation in the State of Ohio is to
be located in the City of Niles, County of Trumbull.
THIRD: The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be formed under Sections
1701.01 to 1701.98, inclusive, of the Ohio Revised Code.
FOURTH: The number of shares which the Corporation is authorized to have
outstanding is 35,000,000 shares of which 30,000,000 shall be common shares with
$.01 par value and 5,000,000 shall be preferred shares without par value.
Effective March 31, 1994 each share of common stock of the Company, par
value $.01 per share, that is issued and outstanding shall be changed, ipso
facto and without any other action on the part of the holders of such common
stock, into one-tenth (1/10) share of the common stock of the Company, par
value $.01 per share.
The express terms of the preferred shares are as follows:
(a) Shares classified and designated as preferred shares shall be
entitled to voting rights as follows:
(i) Except as otherwise required by law or the Articles of
Incorporation of the Corporation, including subparagraphs (a) through
(e) of this Article FOURTH, the holders of the preferred stock, voting
together as a class with the holders of the common stock, shall be
entitled to vote for the election of directors and all other matters.
(ii) During any period in which dividends on the preferred stock
are cumulatively in arrears in the amount of six or more full quarterly
dividends, the holders of the preferred stock, voting together as a
class, will have the right to elect two directors which two
directorships shall be in addition to that number of directors then
determined as constituting the number of members of the board of
Directors pursuant to the Regulations of the Corporation.
(b) The board of Directors is authorized, subject to any limitations
prescribed by law and to the provisions of this Article FOURTH, to adopt
amendments to these Articles of Incorporation in respect of any unissued or
treasury shares of the preferred stock and thereby to fix or change: the
division of such shares into series and the designation and authorized
number of shares of each series; the dividend or distribution rate; the
dates of payment of dividends and the dates, if any, from which they are
cumulative; liquidation price; redemption rights and price; sinking fund
requirements; conversion rights; and restrictions on the issuance of such
shares or any series thereof. In addition the Board of directors is hereby
authorized to similarly fix or change any or all other express terms in
respect of the preferred stock as may be permitted or required by law.
(c) Upon the conversion of any shares of preferred stock the stated
capital of the corporation shall be reduced or increased in such a manner
and at such a rate so that the stated capital attributable to any share
issued upon the exercise of such conversion rights shall be the same as any
other share of its class and not the stated capital of the share so
converted.
<PAGE> 2
(d) The holders of the shares of preferred stock, shall receive
dividends, when and as declared by the Board of Directors, out of funds
available for the payment of dividends, before any dividends shall be paid
on the shares of common stock. Such dividends shall be payable at the rate
per share per annum, and no more, and pursuant to the other terms as shall
have been fixed by the Board of Directors, and no dividends shall be paid
on the shares of common stock unless the current dividends, and all the
arrears of dividends, if any, on the outstanding shares of the preferred
stock shall have been made for the payment thereof.
(e) In case of the dissolution or liquidation of the Corporation,
before any payment shall be made to the holders of the common stock, the
holders of the preferred stock shall be entitled to be paid from the assets
available thereof the liquidation price fixed by the Board of Directors,
and all accrued and unpaid dividends thereon, but shall not be entitled to
participate any further in the distribution of the assets of the
corporation.
FIFTH: No holders of any class of shares of the Corporation shall have any
preemptive right to purchase or have offered to them for the purchase any shares
or other securities of the Corporation.
SIXTH: The Corporation may from time to time, pursuant to authorization by
the Directors and without action by the shareholders, purchase or otherwise
acquire shares of the Corporation of any class or classes in such manner, upon
such terms and in such amounts as the Directors shall determine; subject,
however, to such limitation or restriction, if any, as is contained in the
express terms of any class of shares of the Corporation outstanding at the time
of the purchase or acquisition in question.
SEVENTH: The approval of holders of shares representing two-thirds of the
voting power of the Corporation and, if a class vote is otherwise required by
applicable law, approval of the holders of shares representing two-thirds of the
voting power of any shares voting separately as a class, shall be required to
effect any amendment to the Amended Articles of Incorporation, a merger or
consolidation if under Ohio law such merger or consolidation would have to be
submitted to the shareholders of the Corporation for action, a sale or
disposition of all or substantially all of the assets of the Corporation or a
dissolution of the Corporation. Notwithstanding any provision of the Ohio
Revised Code now or hereafter in force requiring for any other purpose the vote,
consent, waiver or release of the holders of the shares entitling them to
exercise two thirds, or any other proportion, of the voting power of the
Corporation or any class of classes of shares thereof, any such other action,
unless otherwise expressly required by statute or by these Amended Articles of
Incorporation, may be taken by the vote, consent, waiver or release of the
holders of shares entitling them to exercise a majority of the voting power of
the Corporation or of such class or classes.
EIGHTH: The shareholders of the Corporation shall have no right to
cumulatively vote in the election of Directors of the Corporation.
NINTH: Any and every statute of the State of Ohio hereafter enacted,
whereby the rights, powers or privileges of corporations or of the shareholders
or corporations organized under the laws of the State of Ohio are increased or
diminished or in any way affected, or whereby effect is given to the action
taken by any number, less than all, of the shareholders of any such corporation,
shall apply to the Corporation and shall be binding not only upon the
Corporation but upon every shareholder of the Corporation to the same extent as
if such statute had been in force at the date of filing these Articles of
Incorporation of the Corporation in the office of the Secretary of State of
Ohio.
<PAGE> 1
EXHIBIT 10.1
RMI TITANIUM COMPANY
VOTING TRUST AGREEMENT
THIS RMI TITANIUM COMPANY VOTING TRUST AGREEMENT ("Agreement"),
made and entered into as of the 4th day of August, 1994, by and among USX
CORPORATION, a Delaware corporation ("USX"), RMI TITANIUM COMPANY, an Ohio
corporation ("RMI") and MELLON BANK, N.A., as Trustee (the "Trustee").
W I T N E S S E T H
WHEREAS, RMI is authorized to issue 30 million shares of its
common stock ("Common Stock") and five million shares of its preferred stock
("Preferred Stock") and, except as otherwise required by law or the Articles of
Incorporation of RMI, the holders of the Common Stock and the holders of the
Preferred Stock vote together as a single class for the election of directors
and on all other matters to be submitted to the shareholders of RMI (the Common
Stock and the Preferred Stock are, collectively, the "Voting Stock");
WHEREAS, RMI amended its Articles of Incorporation, effective
March 31, 1994, to change each share of Common Stock outstanding immediately
prior to the effective date of such amendment into one-tenth (1/10) of a share
of Common Stock;
WHEREAS, RMI has issued and there is outstanding, as of the date
hereof, 15,250,342 shares of Common Stock and no shares of Preferred Stock;
<PAGE> 2
WHEREAS, as of the date hereof, USX owns beneficially and of
record 8,250,000 shares of Common Stock, constituting approximately
fifty-four percent (54%) of all issued and outstanding Common Stock;
WHEREAS, USX intends, by entering into this Trust Agreement, to
subject to the voting trust created hereby sufficient shares of Voting Stock
owned beneficially by it at any time during the term hereof, so that the sum of
the number of shares of Voting Stock beneficially owned at such time (a) by USX
and not then held by the Trustee in the voting trust hereby created ("USX
Non-Trust Stock") (the number of shares so held by the Trustee at any time
shall be deemed to include any shares which, as of such time, USX is then
obligated to transfer, assign and deliver to and deposit with the Trustee
pursuant to Section 2.2(a) hereof, even though such shares shall not then have
been so transferred, assigned and delivered, and the USX Non-Trust Stock at
such time shall be deemed not to include any such shares), and (b) by any
Affiliate (as hereafter defined) of USX ("Affiliate Stock"), does not exceed
forty-nine percent (49%) of the total shares of Voting Stock outstanding at
such time and is at least one share less than the number of shares of Voting
Stock owned beneficially at such time by holders other than USX and its
Affiliates (the "Public Stock").
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<PAGE> 3
NOW, THEREFORE, in consideration of the mutual agreements, and
subject to all the conditions herein contained, and intending to be legally
bound, the parties hereto agree as follows:
1. APPOINTMENT OF TRUSTEE. Mellon Bank, N.A. is hereby
appointed as Trustee for the purposes and with the powers set forth herein, and
accepts such appointment and agrees to act as Trustee hereunder in accordance
with the terms hereof.
2. ASSIGNMENT OF COMMON STOCK TO TRUSTEE.
2.1 INITIAL COMMON STOCK. USX hereby transfers,
assigns and delivers to and deposits with the Trustee 1,319,175 shares of
Common Stock (the "Initial Common Stock") represented by Certificate No.
RMI-11254, which certificate has been duly endorsed by USX for transfer to the
Trustee, receipt of which Certificate the Trustee hereby acknowledges.
2.2 ADDITIONAL RMI VOTING STOCK.
(a) If at any time during the term of this
Agreement, (i) the sum of the number of shares of Voting Stock beneficially
owned at such time (x) by USX, including both the Trust Stock and the USX
Non-Trust Stock, and (y) by all of USX's Affiliates, increases above the sum of
the number of such shares so owned as of the date hereof by USX and all of
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<PAGE> 4
USX's Affiliates, for whatever reason, including, but not limited to
any purchases made, the exercise of any options, rights or warrants, or the
conversion of any convertible securities, or (ii) the aggregate number of
shares of Voting Stock which are outstanding decreases below the aggregate
number of such shares outstanding as of the date hereof, then in each such
event USX agrees to promptly transfer, assign and deliver to and deposit with
the Trustee such number of additional shares of Voting Stock, if any, as is
necessary to reduce the sum of the number of shares of (x) USX Non-Trust Stock,
and (y) Affiliate Stock to not more than forty-nine percent (49%) of all shares
of Voting Stock then outstanding, and at least one share less than the total
number of shares of Public Stock.
(b) In addition, USX may, but shall not be
obligated to, transfer, assign and deliver to and deposit with the Trustee,
from time to time, such number of additional shares of Common Stock, or
Preferred Stock, or both, as USX may elect to subject to this Agreement (all
such shares of additional Common and Preferred Stock, whether transferred,
assigned and delivered to and deposited pursuant to Section 2.2(a) or (b), are
referred to as the "Additional Voting Stock", and the Initial Common Stock and
the Additional Voting Stock is collectively referred to as the "Trust Stock").
(The sum of the number of shares of both the Trust Stock and the
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<PAGE> 5
USX Non-Trust Stock should, at any time, equal the total number of
shares of Voting Stock owned beneficially by USX at such time.)
2.3 If at any time during the term of this Agreement, (i) the sum
of the number of shares of Voting Stock beneficially owned at such time (x) by
USX, including both the Trust Stock and the USX Non-Trust Stock, and (y) by all
of USX's Affiliates, decreases below the sum of the number of such shares so
owned as of the date hereof by USX and all of USX's Affiliates, for whatever
reason, including, but not limited to any sales made, or (ii) the aggregate
number of shares of Voting Stock which are outstanding increases above the
aggregate number of such shares outstanding as of the date hereof, then in each
such event the Trustee shall, upon receipt of written directions from USX,
deliver to USX a certificate or certificates, duly endorsed for transfer to
USX, for such number of shares of Trust Stock, if any, as is necessary to
increase the sum of the number of shares of (x) USX Non-Trust Stock, and (y)
Affiliate Stock to not more than forty-nine percent (49%) of the total shares
of Voting Stock outstanding at such time, and at least one share less than the
total number of shares of Public Stock. USX shall specify in its written
directions the number of shares the Trustee shall so deliver to USX. In the
event there are, at any time the Trustee is obligated to so deliver a
certificate
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<PAGE> 6
to USX for any Trust Stock, two or more classes or series of Voting Stock
included in the Trust Stock, USX may designate which class or series of Voting
Stock shares of which are to be so delivered to it by the Trustee.
2.4 USX agrees to execute and deliver to the Trustee,
from time to time, such additional assignments or other instruments of
transfer as may be necessary in the reasonable opinion of the Trustee,
RMI or RMI's transfer agent to confirm and make effective any transfer,
assignment, delivery and deposit of Trust Stock to the Trustee pursuant to
this Agreement. The Trustee agrees to accept each such transfer, assignment,
delivery and deposit, and to hold all Trust Stock in accordance with and
subject to this Agreement.
2.5 All certificates for Trust Stock transferred, assigned,
delivered to and deposited with the Trustee pursuant to this Agreement shall be
promptly surrendered by the Trustee to RMI and canceled and new certificates
therefor shall be issued to the Trustee or its nominee or agent, showing the
Trustee or its nominee or agent as owner of record thereof in its capacity as
Trustee under this Agreement, and the stock transfer books and records of RMI
shall reflect such ownership.
2.6 TRUST CERTIFICATES NOT TO BE ISSUED. The Trustee shall
not issue any trust certificates in connection with this Trust.
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<PAGE> 7
3. CONCERNING THE TRUSTEE.
3.1 POWER OF TRUSTEE TO VOTE TRUST STOCK. During the
term of this Agreement, the Trustee agrees it shall take the following actions,
and shall vote the Trust Stock, in the manner, and only in the manner, herein
provided.
(a) At every meeting of the holders of Common
Stock, or Preferred Stock, or both, of which the Trustee, its nominee or agent
has notice, the Trustee shall cause all of the shares of the Common Stock, or
Preferred Stock, or both, as the case may be, included in the Trust Stock, to
be present for purposes of determining the presence of a quorum at such
meeting.
(b) Whenever any vote of the holders of Common Stock,
or Preferred Stock, or both, is conducted at such a meeting, the Trustee shall:
(i) not vote any of the Trust Stock,
with respect to any election of directors;
(ii) cause the Trust Stock to be voted at
such meeting "for," "against" or to abstain from voting with respect to each
matter on which such vote is so conducted, other than an election of directors,
in the same proportion as all shares of Common Stock, or Preferred Stock, or
both, as the case may be, other than the Trust Stock, are validly voted
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<PAGE> 8
"for," "against" or abstain from voting, as the case may be, with
respect to such matter.
(c) Whenever any consent in writing of the
holders of Common Stock, or Preferred Stock, or both, is sought with respect to
any action, the Trustee shall consent thereto with respect to such number of
shares of the Trust Stock as equals the proportion of all shares of Common
Stock, or Preferred Stock, or both, as the case may be, other than the Trust
Stock, as validly consents to such action.
(d) RMI agrees it shall permit the Trustee to
submit, in connection with any meeting of the holders of Common Stock, or
Preferred Stock, or both, or any written consent to any action of such holders,
a proxy or consent, signed by or on behalf of the Trustee, and on which the
following appears:
"The shares of Common Stock, or Preferred Stock, or
both, represented by this proxy [or written consent, as the case
may be] shall be deemed to be present, for purposes of
determining a quorum, and shall be deemed to be voted "for,"
"against" and to abstain from voting with respect to each matter
to be voted on at such meeting other than the election of
directors [or to consent with respect to such action, as the case
may be], to the extent provided in the RMI Voting Trust
Agreement, dated as of August 4, 1994."
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<PAGE> 9
RMI agrees it shall recognize any such proxy or written consent as effective
and treat all of the shares of Trust Stock as present at any such meeting for
purposes of determining a quorum and treat the Trust Stock as having been voted
with respect to each matter to be voted on at such meeting, and to have
consented to such action, in the manner and to the extent provided for in
Sections 3.1(a), (b) and (c).
(e) Except as set forth in Sections 3.1(a), (b)
and (c) above, the Trustee shall not possess or be entitled to exercise any
right or power with respect to the Trust Stock, and, in illustration and not in
limitation of the foregoing, shall have no right or power to cause such Trust
Stock to be represented at any meetings other than meetings of the holders of
Common Stock or Preferred Stock, or both, in their capacity as holders of
Common Stock, or Preferred Stock, or both; to vote such Trust Stock; to consent
in writing with respect to such Trust Stock; or otherwise, but shall instead,
with respect to all matters relating to the Trust Stock other than those
matters to which Sections 3.1(a), (b) and (c) apply, act solely as it may be
directed to act from time to time by USX in writing with respect to the Trust
Stock. In illustration, but not in limitation, of the foregoing, USX may from
time to time direct the Trustee to sell shares of Trust Stock, as provided in
Section 3.2 below; to tender shares of
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<PAGE> 10
Trust Stock in connection with any tender, exchange or other offer and
to distribute the consideration received for such shares in any such tender,
exchange or other offer directly to USX free of this Trust (unless such
consideration is shares of stock of RMI having ordinary power to vote for the
election of directors, in which case such shares shall be retained by the
Trustee and deemed to be Trust Stock to the extent provided in Section 2.2(a)
above); to register a dissent from corporate action and take all steps
necessary or desirable to perfect any dissenters' rights with respect to shares
of Trust Stock; and to exercise, or sell, for USX's benefit and as USX shall
direct, any options, rights or warrants issued to the holders of the Common
Stock, or Preferred Stock, or both, provided that USX shall make available to
the Trustee any exercise or subscription price to be paid in connection with
the exercise thereof and, provided further, that any shares of Common Stock, or
Preferred Stock, or both received in connection with the exercise thereof shall
be deemed to be Trust Stock to the extent provided in Section 2.2(a) above.
(f) In causing the Trust Stock to be present at
any meeting of the holders of Common Stock, or Preferred Stock, or both, for
purposes of determining a quorum, and in causing the Trust Stock to be voted
with respect to any matter to be voted on at such a meeting, or in consenting
to the taking of any action to be taken by the holders of the Common
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<PAGE> 11
Stock, or Preferred Stock, or both, the Trustee shall have no
discretion, and shall act solely in accordance with this Agreement. In all
other matters, the Trustee shall act in accordance with directions provided by
USX in accordance with Section 3.1(e).
3.2 SALE OF TRUST STOCK. The Trustee shall, promptly
upon written notice from USX that USX has sold, assigned or transferred some or
all of the Trust Stock, deliver to USX or to USX's order a certificate or
certificates for such shares, endorsed for transfer in such manner as USX shall
direct; provided, however, that the Trustee shall have no duty to so deliver
any certificate unless (a) such sale, assignment or transfer by USX is a BONA
FIDE sale, assignment or transfer to a person other than an Affiliate of USX,
(b) USX is not in default of any of its obligations under this Trust Agreement,
and (c) USX shall deliver to the Trustee either a certificate signed on behalf
of USX by a duly authorized officer or an opinion of counsel, in each case
satisfactory to the Trustee, certifying as to (a) and (b), above. For purposes
of this Agreement, an "Affiliate" of USX, as of any time, shall mean any person
that, as of that time, directly, or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
USX, and the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the
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<PAGE> 12
management and policies of a person, whether through ownership of
voting securities, by contract or otherwise; provided, however, that for
purposes of calculating as of any time the number of shares of Voting Stock
owned by Affiliates of USX or the number of shares of Public Stock, shares of
such stock needed by RMI in its treasury shall not be included. For purposes
of calculating the number of shares of the Initial Common Stock, as provided in
Section 2.1 above, the shares of Common Stock owned by each of the following
individuals have been aggregated with those owned by USX: Neil A. Armstrong,
Robert M. Hernandez, Charles C. Gedeon and Louis A. Valli. Such treatment of
shares owned by such individuals is solely for the purposes of calculating the
number of shares of the Initial Common Stock and does not constitute an
admission by USX or RMI that any such individual is an "Affiliate" for purposes
of this Agreement or otherwise. Any consideration received or to be received
by USX in connection with any such sale, assignment or transfer shall not be
subject to this Trust Agreement and if received by the Trustee shall promptly
be distributed to USX in accordance with Section 3.1(e). In the event of any
sale by USX of any Trust Stock which satisfies the conditions set forth in this
Section 3.2, the Trust Stock so sold shall thereafter not be subject to this
Trust in any respect and shall cease to be Trust Stock.
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<PAGE> 13
3.3 TRUSTEE TO RECEIVE AND DISTRIBUTE DIVIDENDS. The
Trustee shall receive all dividends paid upon the Trust Stock in any manner
other than in Common Stock or Preferred Stock, including, but not limited to,
cash, and promptly pay such dividends to USX. Any and all shares of the Common
Stock or Preferred Stock received by the Trustee as a dividend or distribution
on, or upon any split-up or subdivision of, any of the Trust Stock, shall be
held by the Trustee as Trust Stock to the extent provided in Section 2.2(a)
above.
3.4 ADVICE OF COUNSEL. The Trustee shall be
entitled, in connection with this Trust Agreement, to the advice of legal
counsel and may employ counsel who, in the discretion of the Trustee, may be
counsel for RMI, USX or the Trustee individually; and the Trustee may act in
relation to this Agreement upon the opinion or advice of any such legal
counsel, whether retained or selected by it, by RMI, USX or otherwise. The
Trustee shall not be responsible for any loss resulting from any action or
nonaction taken by it in good faith in accordance with any such opinion or
advice.
3.5 COSTS AND EXPENSES. The Trustee shall be
entitled to incur and pay such reasonable costs, expenses and other charges,
including, but not limited to, reasonable attorneys' fees and expenses, of
every kind and nature whatsoever as it may deem necessary or appropriate in
connection with this Trust Agreement, including, without
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<PAGE> 14
limiting the generality of the foregoing, costs, expenses and other
charges incurred in connection with administering the voting trust created
hereby and in enforcing or defending the validity of this Agreement or any part
hereof. All of such costs, expenses and other charges shall be borne and paid
by USX.
3.6 LIABILITY OF TRUSTEE. The Trustee shall not be
liable for any action taken or not taken by it in connection herewith in the
absence of its own gross negligence or willful misconduct; provided, however,
that in no event shall the Trustee be liable for any action taken or not taken
by it with the reasonable belief that USX has directed the Trustee to so act or
not act. The Trustee shall not be responsible for, or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in any officer's certificate or opinion of counsel provided to the Trustee
by USX hereunder, or otherwise reasonably believed by the Trustee to have been
made by either RMI or USX in connection with this Agreement; (ii) the
performance or observance of any of the covenants or agreements of either RMI
or USX hereunder; or (iii) the satisfaction of any condition specified herein.
The Trustee shall not incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other writing (which may be a wire,
telex or
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<PAGE> 15
similar writing) reasonably believed by it to be genuine or to be
signed by the proper party or parties.
3.7 INDEMNIFICATION. USX shall indemnify the Trustee
against any cost or expense (including counsel fees and disbursements),
reasonably incurred by it in connection herewith and any claim, demand, action,
loss or liability (collectively, "Expense") that the Trustee may suffer or
incur in connection with this Agreement or any action taken or omitted by the
Trustee hereunder, except to the extent such Expense results from the gross
negligence or willful misconduct of the Trustee.
3.8 SUCCESSOR TRUSTEE. The Trustee may resign at any
time by giving notice thereof to RMI and USX; provided, that no such
resignation shall be effective until a successor trustee shall have been
appointed and agreed to act as Trustee. Upon any such resignation, RMI shall
have the right to appoint a successor Trustee, subject to the approval of USX,
which shall not be unreasonably withheld. If no successor Trustee shall have
been so appointed by RMI and approved by USX, and shall have accepted such
appointment, within ninety (90) days after the retiring Trustee's giving of
notice of resignation, then the retiring Trustee may appoint a successor, also
subject to the reasonable approval of USX. The Trustee hereunder shall at all
times be a corporation organized and doing business under the laws of the
United
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<PAGE> 16
States or of any State or Territory thereof or of the District of
Columbia, which (a) is authorized under such laws to exercise corporate trust
powers, (b) is subject to examination or supervision by Federal, State,
Territorial or District of Columbia authority, and (c) shall have at all times
a combined capital and surplus of not less than ten million dollars
($10,000,000). In case at any time the Trustee shall cease to be eligible in
accordance with this Section 3.8, the Trustee shall resign immediately in the
manner and with the effect specified in this Section 3.8.
3.9 COMPENSATION OF THE TRUSTEE. USX covenants and
agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation, and, except as otherwise expressly
provided, USX will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable compensation, expenses and disbursements of its counsel and all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its gross negligence or intentional misconduct.
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<PAGE> 17
4.0 MISCELLANEOUS.
4.1 TERMINATION AND IRREVOCABILITY OF TRUST. This
Agreement and the voting trust hereby created shall terminate on August 4,
2004, and shall be, and are hereby expressly declared to be irrevocable, except
that this Agreement and the voting trust hereby created may be terminated at
any time (i) by USX, by written notice to the Trustee and RMI in the event (a)
the sum of the number of shares of Voting Stock beneficially owned at such time
(x) by USX, including both the Trust Stock and the USX Non-Trust Stock, and (y)
by all Affiliates of USX, is not more than forty-nine percent (49%) of all
shares of Voting Stock then outstanding, or (b) the total number of shares of
Voting Stock beneficially owned by USX, including both the Trust Stock and the
USX Non-Trust Stock, is eighty percent (80%) or more of all shares of Voting
Stock then outstanding, or (c) any person shall acquire beneficial ownership of
more than seventy-five percent (75%) of the Public Stock, and (ii) by the
Trustee in its sole and absolute discretion, by written notice to USX and RMI
in the event it determines the purpose for which this Agreement has been
entered, and such voting trust has been created, is no longer applicable and
that the continuation of the same serves no substantial purpose.
4.2 EFFECT OF TERMINATION. Upon the termination of
this Agreement and the voting trust created hereby, in any
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manner provided for herein, the Trustee shall deliver the Trust Stock
to USX, duly endorsed for transfer to USX or to USX's order. When the Trustee
shall have so distributed all the Trust Stock and paid or distributed to all
persons entitled thereto any money or other property then held by the Trustee
in its capacity as Trustee hereunder, whether or not a part of the trust, the
Trustee shall be discharged of all further obligations hereunder.
4.3 AMENDMENT OF AGREEMENT. This Agreement may be
amended at any time by USX for one or more of the following purposes:
(a) to evidence the succession of another
corporation to USX, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and obligations of USX
pursuant to this Agreement;
(b) to add to the covenants of USX such
further covenants, restrictions, conditions or provisions as USX may desire;
(c) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provision contained herein; or to make such other
provisions in regard to matters or questions arising under this Agreement; and
(d) to evidence the appointment and acceptance
of appointment of a successor trustee and to add to
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or change any of the provisions of this Agreement as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one trustee; provided that no such amendment pursuant to this Section
4.3(a), (b), (c) or (d) shall be inconsistent with the purpose of this
Agreement.
4.4 EFFECT OF PARTIAL INVALIDITY. If any one or more
provisions of this Agreement should be or become contrary to law, then such
provisions only shall be null and void and shall be deemed separable from the
remaining provisions hereof, and its or their invalidity shall not in any way
affect the validity of this Agreement as a whole or of any other provision or
portion thereof; provided however, that the Agreement as thereby modified
continues to be consistent with the original purpose hereof. In the event the
Agreement as so modified is not consistent with such purpose, the Agreement
shall be deemed rescinded or terminated at such time and in such manner or
upon such grounds, as the Trustee, acting pursuant to Section 4.1 hereof, or
a court of competent jurisdiction, may deem equitable. The Trust agrees that
if any of the provisions of Section 3.1 or 3.2 are declared contrary to law
it shall be deemed to be inconsistent with the original purpose hereof and the
Trustee shall, acting pursuant to Section 4.1, immediately terminate this
Agreement, unless USX shall otherwise direct.
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4.5 AGREEMENT MAY BE EXECUTED IN COUNTERPARTS. This
Agreement may be signed in any number of counterparts with the same force and
effect as though all of the parties hereto had signed but one instrument.
4.6 PERSONS BOUND. This Agreement shall inure to the
benefit of and bind, as the case may require, the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
4.7 ENTIRE AGREEMENT. This Agreement, in conjunction
with those additional references made herein, is intended to embody the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes any and all negotiations, prior
discussions, or prior agreements and understandings.
4.8 PARAGRAPH HEADINGS. The headings of the several
paragraphs of this Agreement are inserted solely for convenience of reference,
and are not a part of and are not intended to govern or aid in the construction
of any of the terms or provisions thereof.
4.9 APPLICABLE LAW AND VENUE. This Agreement is to
be governed by and construed in accordance with the laws of the State of Ohio.
Any suit brought hereon shall be brought in the state or federal courts sitting
in the County of Trumbull, Ohio, or the Northern District of Ohio, as the case
may be, and the parties hereby waive any claim or defense that
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such forum is not convenient or proper. Each party agrees that any
such court shall have in personam jurisdiction over it and consents to service
of process on it in any manner authorized by Ohio law.
4.10 ADDITIONAL COVENANTS OF RMI. RMI agrees to give
USX and the Trustee prompt written notice of any change in the number of shares
of each of the Common Stock and the Preferred Stock which are (a) issued and
outstanding, (b) owned by RMI, or (c) owned of record or, to the best of RMI's
knowledge, beneficially by any Affiliate of USX.
EXECUTED as of the date set forth above.
RMI TITANIUM COMPANY
s/ T. G. RUPERT
By___________________________
T. G. Rupert
Senior Vice President &
Chief Financial Officer
USX CORPORATION
s/ L. B. JONES
By___________________________
L. B. Jones
Vice President &
Comptroller
MELLON BANK, N.A.
s/ BRUCE J. KARHU
By___________________________
Assistant Vice President
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