<PAGE> 1
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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 SEPTEMBER 30, 1996
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
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)
(330) 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 October 31, 1996, 20,246,600 shares of common stock of the registrant
were outstanding.
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RMI TITANIUM COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements:
Introduction to Consolidated 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 Consolidated Financial Statements.............................. 7
Item 2. Management's Discussion and Analysis of Results of Operations and Financial
Condition........................................................................... 10
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................. 17
Signatures............................................................................ 18
</TABLE>
<PAGE> 3
PART I--FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION TO CONSOLIDATED 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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RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- ----------------------
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Sales....................................... $64,479 $42,912 $177,386 $122,636
Operating costs:
Cost of sales (Note 8)...................... 52,854 40,022 146,134 121,808
Selling, general and administrative
expenses.................................. 2,575 2,407 7,294 7,495
Research, technical and product development
expenses.................................. 390 284 1,456 1,433
------- ------- -------- --------
Total operating costs.................. 55,819 42,713 154,884 130,736
Operating income (loss)..................... 8,660 199 22,502 (8,100)
Other income (expense)-net.................. 184 66 244 (1,640)
Interest expense............................ (142) (1,232) (1,978) (3,599)
------- ------- -------- --------
Income (loss) before income taxes........... 8,702 (967) 20,768 (13,339)
Provision (credit) for income taxes (Note
4)........................................ (2,136) -- (607) --
------- ------- -------- --------
Net income (loss)........................... $10,838 $ (967) $ 21,375 $(13,339)
======= ======= ======== ========
Net income (loss) per common share(Note
3):....................................... $ 0.54 $ (0.06) $ 1.19 $ (0.87)
======= ======= ======== ========
Weighted average shares
outstanding....................... 20,133,416 15,322,209 17,930,408 15,288,824
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
3
<PAGE> 5
RMI TITANIUM COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30 DECEMBER 31
1996 1995
-------------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 723 $ 509
Receivables--less allowance for doubtful accounts of
$1,897 and $1,670.......................................... 55,309 41,251
Inventories.................................................. 94,637 74,053
Deferred tax asset........................................... 261 1,036
Other current assets......................................... 1,775 1,656
-------- ---------
Total current assets.................................... 152,705 118,505
Property, plant and equipment, net of accumulated
depreciation................................................ 38,645 39,964
Noncurrent deferred tax asset................................ 7,611 6,164
Other noncurrent assets...................................... 7,038 6,926
-------- ---------
Total assets............................................ $205,999 $ 171,559
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................ $ 120 $ 120
Accounts payable............................................. 20,413 17,646
Accrued wages and other employee costs....................... 7,787 7,237
Other accrued liabilities.................................... 8,447 6,764
-------- ---------
Total current liabilities............................... 36,767 31,767
Long-term debt (see Notes 3 and 7)................................ 6,630 64,020
Accrued postretirement benefit cost............................... 18,795 18,795
Noncurrent pension liabilities.................................... 1,135 18,078
Other noncurrent liabilities...................................... 2,010 2,010
-------- ---------
Total liabilities....................................... 65,337 134,670
-------- ---------
Contingencies (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;
20,814,398 and 15,908,091 shares issued (Note 3)............ 208 159
Additional paid-in capital (Note 3).......................... 234,655 151,715
Accumulated deficit.......................................... (82,151) (103,526)
Deferred compensation........................................ (591) --
Excess minimum pension liability............................. (8,381) (8,381)
Treasury Common Stock at cost 568,198 shares................. (3,078) (3,078)
-------- ---------
Total shareholders' equity........................................ 140,662 36,889
-------- ---------
Total liabilities and shareholders' equity.............. $205,999 $ 171,559
======== =========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
4
<PAGE> 6
RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------
1996 1995
-------- --------
<S> <C> <C>
CASH PROVIDED FROM (USED IN) OPERATIONS:
Net income (loss).................................................... $ 21,375 $(13,339)
Adjustment for items not affecting funds from operations:
Depreciation.................................................... 3,711 4,826
Deferred taxes.................................................. (607) --
Asset impairment charge......................................... -- 5,031
Write-down of joint venture investment.......................... -- 1,901
Expense for stock appreciation rights........................... -- 1,465
Other-net....................................................... 516 649
-------- --------
24,995 533
-------- --------
CHANGES IN ASSETS AND LIABILITIES (EXCLUDING CASH):
Receivables.......................................................... (14,278) (10,647)
Inventories.......................................................... (20,584) 1,117
Accounts payable..................................................... 2,767 (4,369)
Other current liabilities............................................ 1,963 2,837
Noncurrent pension liabilities....................................... (16,100) --
Other assets......................................................... (1,074) (1,061)
-------- --------
(47,306) (12,123)
-------- --------
Cash used in operating activities.......................... (22,311) (11,590)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of facilities................................ -- 130
Capital expenditures............................................ (2,392) (1,139)
-------- --------
Cash used in investing activities.......................... (2,392) (1,009)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of Employee Stock Options.............................. 1,914 --
Net proceeds from Common Stock Offering......................... 80,393 --
Borrowings under credit agreements.............................. 5,900 13,300
Debt repayments................................................. (63,290) (90)
-------- --------
Cash provided from financing activities......................... 24,917 13,210
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS................................ 214 611
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..................... $ 509 $ 385
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 723 $ 996
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized) $ 2,466 $ 3,350
======== ========
Cash paid for income taxes...................................... $ 211 $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
5
<PAGE> 7
RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EXCESS
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, 1994...... 15,271,561 $ 158 $ -- $151,058 $ (98,918) $(3,069 ) $ (6,633)
Shares issued for Directors'
Compensation.................... 4,952 -- -- 38 -- -- --
Treasury Common Stock purchased at
cost............................ (1,098) -- -- -- -- (9 ) --
Shares issued for Restricted Stock
Award Plans..................... 10,000 -- -- 71 -- -- --
Shares issued from exercise of
employee stock options.......... 54,478 1 -- 548 -- -- --
Net loss.......................... -- -- -- -- (4,608) -- --
Excess minimum pension
liability....................... -- -- -- -- -- -- (1,748)
---------- ------ ------ -------- --------- -------- ----------
Balance at December 31, 1995...... 15,339,893 $ 159 $ -- $151,715 $(103,526) $(3,078 ) $ (8,381)
Shares issued for Restricted Stock
Award Plans..................... 51,000 -- (682) 682 -- -- --
Compensation expense recognized... -- -- 91 -- -- -- --
Shares issued as result of Common
Stock Offering (Note 3)......... 4,600,000 46 -- 80,347 -- -- --
Shares issued from exercise of
employee stock options.......... 255,307 3 -- 1,911 -- -- --
Net income........................ -- -- -- -- 21,375 -- --
---------- ----- ------ -------- --------- ------- ---------
Balance at September 30, 1996..... 20,246,200 $ 208 $ (591) $234,655 $ (82,151) $(3,078) $ (8,381)
========== ===== ====== ======== ========= ======= =========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
6
<PAGE> 8
RMI TITANIUM COMPANY
SELECTED NOTES TO CONSOLIDATED 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 in one
business segment, the production and marketing of titanium metal and related
products.
NOTE 2--ORGANIZATION
The Company is a successor to entities that have been operating in the
titanium industry since 1958. In 1990, USX Corporation ("USX") and Quantum
Chemical Corporation ("Quantum") transferred their entire ownership interest in
the Company's immediate predecessor, RMI Company, an Ohio general partnership,
to the Company in exchange for shares of the Company's Common Stock (the
"Reorganization"). Quantum then sold its shares to the public. USX retained
ownership of its shares. At September 30, 1996, approximately 27% of the
outstanding common stock was owned by USX. For information on the Company's
capital structure see Note 3.
NOTE 3--COMMON STOCK OFFERING
On May 7, 1996, the Company completed a Common Stock Offering of 4,600,000
shares at a price of $18.50 per share. Net proceeds to RMI after deducting
underwriting fees and expenses amounted to $80.3 million. The proceeds were used
to repay all outstanding indebtedness under the existing bank credit facilities
amounting to $65.5 million, $10.1 million was contributed to the Company's
pension plans and the balance used for general corporate purposes. Concurrent
with the Company's Stock Offering, USX Corporation sold 2,300,000 shares of its
investment in RMI Common Stock at the same price. RMI did not receive any of the
proceeds from the sale of RMI Common Stock by USX. As a result of these
transactions, USX's percentage of ownership in RMI was reduced from
approximately 51% to approximately 27%. As of September 30, 1996, there were
20,246,200 shares of RMI Common Stock outstanding.
NOTE 4--INCOME TAXES
In the three and nine month periods ended September 30, 1996, the Company
recorded an income tax benefit of $2.1 million and $0.6 million, respectively.
These amounts are comprised of an income tax provision against pretax income for
the nine-month period of $2.0 million and the three-month period of $0.5 million
and an income tax benefit of $2.6 million for both periods, resulting from an
adjustment to the deferred tax asset valuation allowance due to changes in the
Company's expectations about the ultimate realization of its deferred tax assets
in years after 1996. No tax effect was recorded for the three months and nine
months ended September 30, 1995. Excluding the $2.6 million valuation allowance
adjustment, the effective tax rate for the three months and the nine months
ended September 30, 1996 was approximately 5.3 percent and 9.6 percent,
respectively. The difference between the statutory federal tax rate of 35
percent and the effective tax rate is principally due to an adjustment to the
deferred tax asset valuation allowance which existed at December 31, 1995 as it
related to expected 1996 results. The Company currently expects improved
profitability in 1996 compared to the expectations inherent in the December 31,
1995 deferred tax asset. The effect of this adjustment reduced the year to date
1996 tax provision by approximately $2.5 million and $5.3 million for the three
and nine month periods ended September 30, 1996, respectively. The amount of
current taxes expected to be paid in 1996 is minimal.
Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes," requires a valuation allowance when it is "more
likely than not" that some portion or all of the deferred tax assets will not be
realized. It further states that "forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years." The ultimate realization of this deferred
income tax asset depends upon the Company's ability to generate
7
<PAGE> 9
sufficient taxable income in the future prior to the expiration of its loss
carryforwards. The Company has evaluated the available evidence supporting the
realization of future taxable income and, based upon that evaluation, believes
it is more likely than not at this time that a portion of its deferred tax
assets will be realized. The remaining valuation allowance has been retained in
light of the requirement in SFAS No. 109 to give weight to objective evidence
such as recent losses and the historical titanium industry business cycle.
When preparing future periods' interim and annual financial statements, the
Company will periodically evaluate its strategic and business plans, in light of
evolving business conditions, and the valuation allowance will be adjusted for
future income expectations resulting from that process, to the extent different
from those inherent in the current valuation allowance.
As a result, the application of SFAS No. 109 valuation allowance
determination process could result in recognition of significant income tax
provisions or benefits in a single interim or annual period due to changes in
income expectations over a horizon that may span several years. Such tax
provision or benefit effect would likely be material in the context of the
specific interim or annual reporting period in which changes in judgement about
more extended future periods are reported.
If an "ownership change" were to occur within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, the utilization of net operating
loss carryforwards would be subject to an annual limitation. Should the annual
limitation apply, the Company believes that it would affect the timing of the
use of, but not the ultimate ability of the Company to use, the net operating
loss carryforwards to reduce future income tax liabilities.
NOTE 5--CONTINGENCIES
In the ordinary course of business, the Company is subject to pervasive
environmental laws and regulations concerning the production, handling, storage,
transportation, emission, and disposal of waste materials and is also subject to
other federal and state laws and regulations regarding health and safety
matters. These laws and regulations are constantly evolving, and it is not
currently possible to predict accurately the ultimate effect these laws and
regulations will have on the Company in the future.
On October 9, 1992 the U.S. Environmental Protection Agency ("EPA") filed a
complaint alleging certain violations of the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA") at the Company's now closed Sodium Plant in
Ashtabula, Ohio. The USEPA's determination is based on information gathered
during inspections of the facility in February, March and June of 1991. Under
the complaint the USEPA proposes to assess a civil penalty of approximately $1.4
million for alleged failure to comply with RCRA. The Company is contesting the
complaint. It is the Company's position that it has complied with the provisions
of RCRA and that the EPA's assessment of penalties is inappropriate. A formal
hearing has been requested and informal discussions with the EPA to settle this
matter are ongoing. Based on the nature of the proceedings, the Company is
currently unable to determine the ultimate liability, if any, that may arise
from this matter.
The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including the
Field Brooks 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.
With regard to the Fields Brook Superfund Site, the Company, together with
31 other companies, has been identified by the EPA as a potentially responsible
party ("PRP") with respect to a superfund site defined as the Fields Brook
Watershed in Ashtabula, Ohio, which includes the Company's now closed Ashtabula
facilities. The EPA's 1986 estimate of the cost of remediation of the Fields
Brook operable sediment unit was $48 million. However, recent studies show the
volume of sediment to be substantially lower than projected in
8
<PAGE> 10
1986. These studies, together with improved remediation technology and redefined
cleanup standards have resulted in a more recent estimate of the remediation
cost of approximately $25 million. The actual cost of remediation may vary from
the estimate depending upon any number of factors.
The EPA, in March 1989, ordered 22 of the PRPs to conduct a design phase
study for the sediment operable unit and a source control study, which studies
are nearly complete and are estimated to cost $22 million. The Company, working
cooperatively with fourteen others in accordance with two separate agreements,
is complying with the order. The Company has accrued and has been paying its
portion of the cost of complying with the EPA's order, which includes the
studies. It is anticipated that the studies will be completed in 1997. Actual
cleanup would not commence prior to 1998. The Company's share of the study costs
has been established at 9.95%. On June 21, 1995, the Company and twelve others
entered into a Phase 2 (actual cleanup) allocation agreement which assigns 9.44%
of the cost to the Company. However, the actual percentage may be more or less
based on contributions from other parties which are not currently participating
in the Phase 2 allocation agreement.
At September 30, 1996, the amount accrued for future environmental-related
costs was $2.4 million. Based on available information, RMI believes its share
of potential environmental-related costs, before expected contributions from
third parties, is in a range from $3.7 million to $6.3 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (which does not include any amounts from insurers) of approximately $2.1
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)
-------------------------------------
SEPTEMBER 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------------- -------------
<S> <C> <C>
Raw material and supplies............................ $ 28,596 $ 22,609
Work-in-process and finished goods................... 90,677 71,290
Adjustments to LIFO values........................... (24,636) (19,846)
--------- ---------
$ 94,637 $ 74,053
========= =========
</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 long-term contracts. Such
costs, net of amounts recognized to date, were $1.3 million at September 30,
1996 and $2.5 million at December 31, 1995.
NOTE 7--CREDIT FACILITY:
In connection with the Common Stock Offering referred to in Note 3 above,
the Company has entered into a credit agreement, dated April 15, 1996 (the
"Credit Facility"), to replace the Company's prior credit facilities. The Credit
Facility has a term of three years and permits borrowings, on a revolving basis,
of up to the lesser of $50 million or a borrowing base equal to the sum of 85%
of qualified accounts receivable and 50%
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<PAGE> 11
of qualified inventory. At September 30, 1996, $5.9 million was outstanding
under the facility. The Company had sufficient accounts receivable and inventory
at September 30, 1996 to borrow the entire $50 million.
Under the terms of the Credit Facility, the Company, at its option, is able
to borrow at (a) a base rate (which is the higher of PNC Bank's prime rate or
the Federal Funds Effective Rate plus 1/2% per annum), or (b) LIBOR or the
Federal Funds Effective Rate, plus a spread (ranging from 1/2% to 1%)
determined by the ratio of the Company's consolidated earnings before interest
and taxes to consolidated interest expense.
Borrowings under the Credit Facility will initially be secured by the
Company's accounts receivable, inventory, other personal property and cash and
cash equivalents. Borrowings will become unsecured if the Company complies with
all the financial covenants under the New Credit Facility for four consecutive
quarters, beginning with the date of the Credit Facility and expiring with the
quarter ended June 30, 1997.
An event of default under the Credit Facility shall occur if, among other
things, any person or group of persons other than USX shall have acquired
beneficial ownership of 25% or more of the voting stock of the Company. The
Credit Facility contains additional terms and financial covenants which are
typical for other similar facilities.
NOTE 8--ASSET IMPAIRMENT
The Company elected to adopt Statement of Financial Accounting Standards
No. 121 ("SFAS No. 121"), "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", effective June 30, 1995. After
completing a review of its assets, the Company impaired the value of an asset
consisting of design and engineering work for a proposed titanium tetrachloride
facility. The asset was impaired due to recent market developments, the
conclusion of certain joint venture negotiations and the determination that such
a facility was not likely to be constructed in the near future. The asset
carrying value has been reduced from $5.0 million to a nominal amount reflecting
a fair value determination under SFAS No. 121 versus a determination of ultimate
net realizable value under the Company's previous impairment approach.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the information
contained in the Consolidated Financial Statements and Selected Notes to
Consolidated Financial Statements. The following information contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are subject to the safe harbor created by
that Act. Such forward-looking statements include, without limitation,
statements regarding estimates of industry shipments, the future availability
and prices of raw materials, the availability of capital on acceptable terms,
the competitiveness of the titanium industry, potential environmental
liabilities, the Company's order backlog and the conversion of that backlog into
revenue, the Company's strategies and other statements contained herein that are
not historical facts. Because such forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, changes in general economic and business
conditions (including in the aerospace and golf club markets), the Company's
ability to recover its raw material costs in the pricing of its products, the
availability of capital on acceptable terms, actions of competitors, the extent
to which the Company is able to develop new markets for its products, the time
required for such development and the level of demand of such products, changes
in business strategies, and other factors.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
NET SALES
Net sales increased to $64.5 million, or 50% for the three months ended
September 30, 1996 compared to net sales of $42.9 million in the corresponding
1995 period. This increase resulted from increased mill product shipments and
higher average selling prices. Mill product shipments in the third quarter of
1996 increased by
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21% to 4.6 million pounds from third quarter 1995 shipment levels of 3.8 million
pounds. Average realized mill product selling prices in the third quarter of
1996 increased by approximately 19% to $12.26 per pound from 1995 third quarter
levels. Both demand and pricing on incoming orders for titanium mill products
continue to show improvement from 1995 levels. Sales related to new products and
markets amounted to $1.9 million in the third quarter of 1996 compared to $0.7
million in the third quarter of 1995. Sales of hot-formed parts and cut shapes
increased to $5.1 million in the third quarter of 1996 from $3.1 million in the
same period of 1995.
GROSS PROFIT
Gross profit amounted to $11.6 million, or 18.0% of sales for the quarter
ended September 30, 1996 compared to gross profit of $2.9 million or 6.7% of
sales for the comparable 1995 period. This improvement results primarily from
the increased shipments and selling prices for titanium mill products together
with improved margins on hot-formed parts and cut shapes.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $2.6 million for
the quarter ended September 30, 1996 compared to $2.4 million for the same
quarter in 1995. Research, technical and product development expenses amounted
to $0.4 million in the third quarter of 1996 compared to $0.3 million in the
third quarter of 1995.
OPERATING INCOME
Operating income for the three months ended September 30, 1996 amounted to
$8.7 million, or 13.4% of sales compared to $0.2 million in the same period of
1995. This improvement results primarily from significant increases in shipments
and profit margins on mill products.
INTEREST EXPENSE
Because of significantly lower borrowing levels, interest expense decreased
to $0.1 million in the third quarter of 1996 from $1.2 million in the third
quarter of 1995. For further information on borrowings see "Liquidity and
Capital Resources."
INCOME TAXES
In the third quarter of 1996, the Company recorded an income tax benefit of
$2.1 million. This amount is comprised of an income tax provision of $0.5
million against pretax income for the quarter and an income tax benefit of $2.6
million resulting from an adjustment to the deferred tax asset valuation
allowance due to changes in the Company's expectations about the ultimate
realization of its deferred tax assets in years after 1996. No tax effect was
recorded for the three months ended September 30, 1995. Excluding the $2.6
million valuation allowance adjustment, the effective tax rate for the three
months ended September 30, 1996 was approximately 5.3%. The difference between
the statutory federal tax rate of 35% and the effective tax rate is principally
due to an adjustment to the deferred tax asset valuation allowance as it relates
to expected 1996 results. The Company currently expects improved profitability
in 1996 compared to the expectations inherent in the December 31, 1995 valuation
allowance. The effect of this adjustment reduced the third quarter's 1996 tax
provision by approximately $2.5 million. The amount of current taxes expected to
be paid in 1996 is minimal.
OTHER INCOME
Other income (expense) for the third quarter of 1996 amounted to $0.2
million compared to $0.1 million in the third quarter of 1995.
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NET INCOME
The net income for the quarter ended September 30, 1996 amounted to $10.8
million or 16.8% of sales compared to a net loss of $1.0 million in the
comparable 1995 period. The 1996 results include the $2.1 million tax benefit
referred to above.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
NET SALES
Net sales for the nine months ended September 30, 1996 increased to $177.4
million from $122.6 million in the first nine months of 1995, an increase of
$54.8 million, or 45%. This increase resulted primarily from increased mill
products shipments and higher average selling prices. Mill products shipments
for the first nine months of 1996 amounted to 13.4 million pounds compared to
10.6 million pounds in the comparable period of 1995. Average realized mill
product selling prices increased to $11.71 per pound in the first nine months of
1996 compared to $10.14 per pound during the comparable period of 1995. Both
demand and pricing for titanium mill products continued to remain strong in both
commercial aerospace and industrial product markets. Sales related to new
products and markets decreased from $2.2 million in the first nine months of
1995 to $1.9 million in the first nine months of 1996. Sales of hot-formed parts
and cut shapes increased to $12.1 million in the first nine months of 1996 from
$9.6 million in the same period of 1995.
GROSS PROFIT
Gross profit for the nine months ended September 30, 1996 amounted to $31.3
million, or 17.6% of sales, compared to gross profit of $0.8 million, or 0.7% of
sales, in the first nine months of 1995. This increase results primarily from
increased shipments and selling prices for titanium mill products. Results in
1995 were adversely impacted by a $5.0 million asset impairment charge following
the adoption of SFAS No. 121 and costs associated with the cost of stock
appreciation rights amounting to $0.8 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $7.3 million for
the first nine months of 1996 compared to $7.5 million for the comparable period
in 1995. Research, technical and product development expenses amounted to $1.4
million in each of the nine month periods ended September 30, 1996 and 1995.
Selling, general and administrative expenses, together with research, technical
and product development expenses for the first nine months of 1995, include $0.6
million of costs related to stock appreciation rights.
OPERATING INCOME
Operating income for the nine months ended September 30, 1996 amounted to
$22.5 million, or 12.7% of sales compared to a loss of $8.1 million in the same
period of 1995. This improvement results primarily from significant increases in
mill product shipments and average mill product selling prices. Results for the
1995 period were adversely impacted by a $5.0 million asset impairment charge
and costs associated with stock appreciation rights referred to above.
INTEREST EXPENSE
Interest expense for the first nine months of 1996 amounted to $2.0 million
compared to $3.6 million in the same period of 1995. This improvement results
primarily from reduced levels of indebtedness during 1996. For further
information on indebtedness, see "Liquidity and Capital Resources" below.
INCOME TAXES
In the first nine months of 1996, the Company recorded an income tax
benefit of $0.6 million. This amount is comprised of an income tax provision
against pretax income for the nine-month period of $2.0 million and an income
tax benefit of $2.6 million resulting from an adjustment to the deferred tax
asset valuation allowance due to changes in the Company's expectations about the
ultimate realization of its
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deferred tax assets in years after 1996. No tax effect was recorded for the nine
months ended September 30, 1995. Excluding the $2.6 million valuation allowance
adjustment, the effective tax rate for the nine months ended September 30, 1996
was approximately 9.6%. The difference between the statutory federal tax rate of
35 percent and the effective tax rate is principally due to an adjustment to the
deferred tax asset valuation allowance which existed at December 31, 1995 as it
related to expected 1996 results. The Company currently expects improved
profitability in 1996 compared to the expectations inherent in the December 31,
1995 deferred tax asset. The effect of this adjustment reduced the year-to-date
1996 tax provision by approximately $5.3 million. The amount of current taxes
expected to be paid in 1996 is minimal.
NET INCOME
Net income for the nine months ended September 30, 1996 amounted to $21.4
million, or 12.1% of sales compared to a loss of $13.3 million in the first nine
months of 1995. Results for the 1995 period include a $5.0 million impairment
charge following the adoption of SFAS No. 121, a $1.9 million impairment of an
investment in a joint venture, and $1.5 million in costs incurred in connection
with stock appreciation rights.
OUTLOOK
The Company's total order backlog as of September 30, 1996 was
approximately $327 million, compared to $134 million at December 31, 1995 and
$134 million at September 30, 1995.
During the second half of 1995 and continuing into 1996, the Company
experienced a steady increase in order backlog. The Company estimates that as of
September 30, 1996, orders for substantially all of its anticipated 1996
shipments have been booked or shipped at average prices more than 15% higher
than its 1995 average realized mill product selling price of $10.23 per pound.
The Company's average realized mill product selling price increased to $12.26
per pound in the third quarter of 1996. The Company estimates that as of
September 30, 1996, orders for 84% of its anticipated 1997 shipments have been
booked at average prices greater than $13 per pound. The increase in demand has
been driven primarily by the recovery in the commercial aerospace market and the
emergence of the golf club market. Because of competitive factors in the
titanium industry and the cyclical nature of the aerospace industry, there can
be no assurances that prices and demand will continue to improve. The Company
intends to continue its efforts to develop new markets and products such as
seamless tubulars for oil and gas and geothermal energy production, as well as
the use of billet for golf club applications.
The increase in demand for titanium products has put upward pressure on
prices for certain raw materials used by the Company. Prices for the Company's
1996 and 1997 titanium sponge requirements have been set under long-term supply
contracts and short-term arrangements. Prices for titanium sponge in 1997 are
expected to increase over 1996 levels. Due to increased demand resulting
primarily from the emerging golf club market, current prices for titanium scrap,
which accounts for approximately 40% of the Company's raw material requirements,
have increased significantly during 1996. Prices of certain alloying agents have
also increased as a result of increased demand. The Company, and others, have
announced increased prices and surcharges to recover these increased costs.
In July 1996, the Company was notified that the Department of Commerce
released preliminary findings in a review of an existing anti-dumping order on
titanium sponge from Russia. The Department of Commerce determined that dumping
did not occur on sales made by Interlink, a major trading company for Russian-
produced titanium sponge, during the review period. A final determination
confirming the earlier finding was issued in November 1996. The final
determination can be appealed to the Court of International Trade but is
effective unless and until it is overturned. The Company purchases nearly all of
its Russian titanium sponge through Interlink. These purchases previously
carried an 84% dumping duty. The no-dumping finding eliminates this duty,
thereby allowing the Company access to lower cost sources for a significant
portion of its titanium sponge requirements.
The information included in this "Outlook" section includes
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are subject to the safe harbor created by
that Act. Such forward-looking statements include, without limitation,
statements regarding the future
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availability and prices of raw materials, the competitiveness of the titanium
industry, the Company's order backlog and the conversion of that backlog into
revenue and other statements contained herein that are not historical facts.
Because such forward-looking statements involve risks and uncertainties, there
are important factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ materially include, but are not limited to,
changes in general economic and business conditions (including in the aerospace
and golf club markets), the Company's ability to recover its raw material costs
in the pricing of its products, actions of competitors, the extent to which the
Company is able to develop new markets for its products, and other factors.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows used in operating activities totaled $22.3 million in the
first nine months of 1996 compared to $11.6 million used in operations during
the first nine months of 1995. The change in net cash flows from operating
activities in the first nine months of 1996, compared to the first nine months
of 1995, was due primarily to improved results of operations offset by an
increase in working capital. Working capital amounted to $115.9 million at
September 30, 1996, compared to $86.7 million at December 31, 1995. The increase
in working capital results primarily from increases in accounts receivable and
inventories, partially offset by increases in accounts payable and other current
liabilities. The Company's working capital ratio was 4.15 to 1 at September 30,
1996 compared to 3.73 to 1 at December 31, 1995.
On May 7, 1996, the Company completed a public offering of 4,600,000 shares
of common stock (including an underwriters' overallotment option of 600,000
shares) at a price of $18.50 per share (the "Common Stock Offering"). Net
proceeds to RMI after deducting underwriting fees and expenses amounted to $80.3
million. The net proceeds were used to repay all outstanding indebtedness
(amounting to $65.5 million) under the then existing bank credit facilities, and
to contribute $10.2 million to certain of the Company's defined benefit pension
plans, as referred to below, and the balance was used for general corporate
purposes.
In September 1996, the Company made a $16.1 million cash contribution to
certain of its defined benefit pension plans. This contribution was funded by
using $10.2 million of the net proceeds from the Common Stock Offering and $5.9
million in borrowings under the Company's credit facility referred to below.
During the first nine months of 1996, the Company's cash flow requirements
for capital expenditures were funded by internally generated funds and proceeds
from the Common Stock Offering. In the first nine months of 1995, the Company's
cash flow requirements for operating losses, capital expenditures and working
capital were funded primarily through borrowings.
The Company anticipates that it will be able to fund its 1996 working
capital requirements and its capital expenditures primarily from funds generated
by operations, proceeds from the Common Stock Offering, and, to the extent
necessary, from borrowings under its Credit Facility. The Company anticipates
that it will be able to fund its 1997 working capital requirements and its
currently expected capital expenditures primarily from funds generated by
operations and borrowings under the Credit Facility. The Company may, however,
undertake strategic initiatives and additional capital expenditures in 1997
which may require additional financing therefor. The Company's long-term
liquidity requirements, including capital expenditures, are expected to be
financed by a combination of internally generated funds, borrowings and other
sources of external financing as needed.
In connection with the Common Stock offering referred to above, the Company
has entered into a Credit Agreement, dated as of April 15, 1996 (the "Credit
Facility") to replace the prior credit facilities. The Credit Facility has a
term of three years and permits borrowings, on a revolving basis, of up to the
lesser of $50 million or a borrowing base equal to the sum of 85% of qualified
accounts receivable and 50% of qualified inventory. The Company had sufficient
accounts receivable and inventory at September 30, 1996, to borrow the entire
$50 million. At September 30, 1996, $5.9 million was outstanding under the
Credit Facility.
Under the Credit Facility, the Company, at its option, is able to borrow at
(a) a base rate (which is the higher of PNC Bank's prime rate or the Federal
Funds Effective Rate plus 1/2% per annum), or (b) LIBOR or the Federal Funds
Effective Rate, plus a spread (ranging from 1/2% to 1%) determined by the ratio
of the
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<PAGE> 16
Company's consolidated earnings before interest and taxes to consolidated
interest expense. At any time when the Company's ratio of total liabilities to
net worth is greater than or equal to 1.4 to 1, the spread for LIBOR and Federal
Fund Effective Rate borrowings will be increased by 1/2 of 1%.
Borrowings under the Credit Facility are secured by the Company's accounts
receivable, inventory, other personal property and cash and cash equivalents.
Borrowings will become unsecured if the Company complies with all the financial
covenants under the Credit Facility for four consecutive quarters. The Credit
Facility contains the following financial covenants: (1) the Company shall not
permit its consolidated net worth to be less than $36.9 million plus 50% of the
Company's consolidated net income for each fiscal quarter in which net income
was earned beginning January 1, 1996; (ii) the Company shall not permit the
ratio of consolidated earnings before interest and taxes to consolidated
interest expense to be less than 2.5 to 1.0; and (iii) capital expenditures,
including assets acquired under capitalized leases, shall not exceed $10 million
per year.
An event of default under the Credit Facility shall occur if, among other
things, any person or group of persons other than USX shall have acquired
beneficial ownership of 25% or more of the voting stock of the Company. The
Credit Facility contains additional terms, financial covenants and events of
default which are typical for other similar facilities.
Other long-term debt of $0.7 million consisted of industrial revenue bonds.
INCOME TAX CONSIDERATIONS
SECTION 382 LIMITATION. At December 31, 1995, the Company had net operating
loss carryforwards of approximately $104 million available to reduce federal
taxable income through at least 2006. If an "ownership change" were to occur,
the utilization of net operating loss carryforwards would be subject to an
annual limitation. Generally, an ownership change occurs with respect to a
corporation if shareholders who own, directly or indirectly, 5% or more of the
capital stock of the corporation increase their aggregate percentage ownership
of such stock by more than 50 percentage points over the lowest percentage of
such stock owned by such shareholders at any time during a prescribed testing
period. An ownership change could result from equity transactions such as
exercises of stock options, purchases or sales of Common Stock by certain
stockholders, including USX and other issuances of Common Stock by the Company.
If the annual limitation were to apply, the amount of the limitation would
generally equal the product of (i) the fair market value of the Company's equity
immediately prior to the ownership change, with certain adjustments, including a
possible adjustment to exclude certain capital contributions made in the two
years preceding the date of the ownership change, and (ii) a long-term tax
exempt bond rate of return published monthly by the Internal Revenue Service.
Should the annual limitation apply, the Company believes that it would not
materially affect the potential use of the net operating loss carryforwards to
reduce any future income tax liabilities over time; however, it is possible that
the Company's results in a particular year could exceed the annual limitation,
in which case such excess would not be reduced by the net operating loss
carryforward and the Company's tax liability would be correspondingly higher.
SFAS NO. 109 EFFECTS. SFAS 109 requires a valuation allowance when it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. It further states that forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years. The ultimate realization of all or part of
the Company's deferred income tax assets depends on the Company's ability to
generate sufficient taxable income in the future.
When preparing future periods' interim and annual financial statements, the
Company will periodically evaluate its strategic and business plans, in light of
evolving business conditions, and the valuation allowance will be adjusted for
future income expectations resulting from that process, to the extent different
from those inherent in the current valuation allowance. In making an assessment
of realizability at September 30, 1996, the Company considered a number of
factors including the improved profitability in 1996 as a result of increased
sales, product pricing and gross margins, when compared to expectations inherent
in the December 31, 1995 valuation allowance. Accordingly, the valuation
allowance has been adjusted by approximately $5.3 million as of September 30,
1996 for the difference between such revised future income expectations and
those inherent in the valuation allowance at December 31, 1995 as it related to
expected 1996 results.
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Additionally, the valuation allowance was adjusted by $2.6 million at September
30, 1996 because of improving expectations regarding income in years after 1996
which were not inherent in the valuation allowance at December 31, 1995. The
effect of these adjustments resulted in a tax benefit of $0.6 million for the
nine months ended September 30, 1996.
The application of SFAS No. 109 valuation allowance determination process
could result in recognition of further significant income tax provisions or
benefits in a single interim or annual period due to changes in income
expectations over a horizon that may span several years. Such tax provision or
benefit effect would likely be material in the context of the specific interim
or annual reporting period in which changes in judgement about more extended
future periods are reported. This effect is a consequence of the application of
the SFAS No. 109 valuation allowance determination process, which is a balance
sheet oriented model and which does not have periodic matching of pretax income
or loss and the related tax effects as an objective.
The Section 382 limitation described above could, if applicable, adversely
impact the income tax provision or benefit in a particular year as a result of
the application of the SFAS No. 109 valuation allowance determination process;
however, it is not expected to have an adverse impact over time.
If the Company's principal markets continue to exhibit improvement,
additional tax benefits may be reported in future periods, as the valuation
allowance is further reduced. Alternatively, to the extent that the Company's
future profit expectations remain static or are diminished tax provisions may be
charged against pretax income. In either event, such valuation allowance-related
tax provisions or benefits should not necessarily be viewed as recurring.
Further, subject to the effects, if any, of the limitation described above, the
amount of current taxes that the Company expects to pay for the foreseeable
future is minimal. The Company's carryforward tax attributes are viewed by
management as a significant competitive advantage to the extent that profits can
be sheltered effectively from tax and re-employed in the growth of the business.
ENVIRONMENTAL MATTERS
The Company is subject to 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
have 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.
At September 30, 1996, the amount accrued for future environment-related
costs was $2.4 million. Based on available information, RMI believes its share
of potential environmental-related costs, before expected contributions from
third parties, is in a range from $3.7 million to $6.3 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (which does not include any amounts from insurers) of approximately $2.1
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 filed a complaint and proposed a $1.4 million civil penalty for
alleged failure to comply with RCRA. The Company is contesting the complaint.
Based on the 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
Gross capital expenditures in the first nine months of 1996 and 1995
amounted to $2.4 million and $1.1 million, respectively. The Company has
budgeted capital spending of approximately $5.0 million in 1996. The Company
currently estimates that its 1997 capital expenditures will be approximately
$8.0 million. The Company may, however, undertake strategic initiatives and make
additional capital expenditures in 1997. See "Liquidity and Capital Resources"
above.
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PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3 Amended Code of Regulations of the Company, as amended through April
26, 1995.
10.1 Employment agreement, dated September 1, 1996, between the Company
and John H. Odle.
10.2 Employment agreement, dated September 1, 1996, between the Company
and Timothy G. Rupert.
10.3 Registration Rights Agreement dated August 21, 1996, between the
Company and USX Corporation.
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended September 30,
1996.
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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: November 13, 1996
By: /s/ T. G. RUPERT
------------------------------
T. G. Rupert
Executive Vice President & Chief
Financial Officer
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EXHIBIT INDEX
EXHIBIT
- -------
3 Amended Code of Regulations of the Company, as amended through
April 26, 1995.
10.1 Employment agreement, dated September 1, 1996, between the Company
and John H. Odle.
10.2 Employment agreement, dated September 1, 1996, between the Company
and Timothy G. Rupert.
10.3 Registration Rights Agreement dated August 21, 1996 between the
Company and USX Corporation.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3
CODE OF REGULATIONS
AS AMENDED AND RESTATED
OF
RMI TITANIUM COMPANY
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting.
The annual meeting of shareholders for the election of Directors and the
consideration of reports to be laid before such meeting shall be held at 10
o'clock A M., or at such other hour as may be designated in the notice of said
meeting, on the fourth Thursday in April in each year, if not a legal holiday,
and if a legal holiday, then on the next day not a legal holiday, or at such
other date as the Directors may from time to time determine. Upon due notice,
there may also be considered and acted upon at an annual meeting any matter
which could properly be considered and acted upon at a special meeting, in which
case and for which purpose the annual meeting shall also be considered as, and
shall be, a special meeting. When the annual meeting is not held or Directors
are not elected thereat they may be elected at a special meeting called for that
purpose.
Section 2. Special Meetings.
Special meetings of shareholders may be called by (i) the Chairman of the
Board or the President or a Vice President, (ii) the Directors by action at a
meeting, or by a majority of the Directors acting without a meeting, or (iii)
the holder or holders of fifty percent (50%) of all shares outstanding and
entitled to be voted at said meeting.
Upon request in writing delivered either in person or by registered mail to
the President or Secretary by any person or persons entitled to call a meeting
of shareholders, such officer shall forthwith cause to be given, to the
shareholders entitled thereto, notice of a meeting to be held not less than
seven nor more than 60 days after the receipt of such request, as such officer
shall fix. If such notice is not given within 20 days after the delivery or
mailing of such request, the person or persons calling the meeting may fix the
time of the meeting and give, or cause to be given, notice in the manner
hereinafter provided.
Section 3. Place of Meetings.
Any meeting of shareholders may be held either at the principal office of
the Corporation or at such other place within or without the State of Ohio as
may be designated in the notice of said meeting.
Section 4. Notice of Meetings.
Not more than 60 days nor less than seven days before the date fixed for a
meeting of shareholders, whether annual or special, written notice of the time,
place and purposes of such meeting shall be given by or at the direction of the
President, a Vice President, the Secretary or an Assistant Secretary. Such
notice shall be given either by personal delivery or by mail to each shareholder
of record entitled to notice of such meeting. If such notice is mailed, it shall
be addressed to the shareholders at their respective addresses as they appear on
the records of the Corporation, and notice shall be deemed to have been given on
the day so mailed. Notice of adjournment of a meeting need not be given if the
time and place to which it is adjourned are fixed and announced at such meeting.
Section 5. Shareholders Entitled to Notice and to Vote.
If a record date shall not be fixed pursuant to statutory authority, the
record date for the determination of shareholders who are entitled to notice of,
or who are entitled to vote at, a meeting of shareholders, shall be the close of
business on the date next preceding the day on which notice is given, or the
close of business on the date next preceding the day on which notice is given,
or the close of business on the date next preceding the day on which the meeting
is held, as the case may be.
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Section 6. Inspectors of Election; List of Shareholders.
Inspectors of election may be appointed to act at any meeting of
shareholders in accordance with the Ohio General Corporation Law.
At any meeting of shareholders, an alphabetically arranged list, or
classified lists, of the shareholders of record as of the applicable record date
who are entitled to vote, showing their respective addresses and the number and
classes of shares held by each, shall be produced on the request of any
shareholder.
Section 7. Quorum.
To constitute a quorum at any meeting of shareholders, there shall be
present in person or by proxy shareholders of record entitled to exercise not
less than a majority of the voting power of the Corporation in respect of any
one of the purposes for which the meeting is called.
The holders of a majority of the voting power represented in person or by
proxy at a meeting of shareholders, whether or not a quorum be present, may
adjourn the meeting from time to time.
Section 8. Voting.
In all cases, except as otherwise expressly required by statute, the
Articles of Incorporation of the Corporation or these Regulations, majority of
the votes cast at a meeting of shareholders shall control. An abstention shall
not represent a vote cast.
Section 9. Reports to Shareholders.
At the annual meeting, or the meeting held in lieu thereof, the officers of
the Corporation shall lay before the shareholders a financial statement as
required by the Ohio General Corporation Law.
Section 10. No Action Without a Meeting.
Any action required to be taken at any annual or special meeting of the
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of the stockholders or otherwise, may not be taken without a
meeting, prior notice and a vote, and stockholders may not act by written
consent.
Section 11. Chairman of Meeting.
The chairman of any meeting of shareholders shall be the Chairman of the
Board or, if the Directors have not elected a Chairman of the Board, the
President of the Corporation. The Chairman of the Board or, if the Directors
have not elected a Chairman of the Board or the Chairman of the Board is
unavailable to do so, the President may appoint any other officer of the
Corporation to act as chairman of any shareholders' meeting. Notwithstanding the
foregoing, the Directors may appoint any individual to act as chairman of any
shareholders' meeting.
ARTICLE II
DIRECTORS
Section 1. Election, Number and Term of Office.
(a) The Directors shall be elected at the annual meeting of shareholders,
or if not so elected, at a special meeting of shareholders called for that
purpose, and each Director shall hold office until the date fixed by (c) of this
Section, or until his earlier resignation, removal from office or death. At any
meeting of shareholders at which Directors are to be elected, only persons
nominated as candidates shall be eligible for election.
(b) The number of Directors, which shall not be less than three (unless all
of the shares of the Corporation are owned of record by one or two shareholders,
in which case the number of Directors may be less than three but not less than
the number of shareholders) or more than twelve, may be fixed or changed at a
meeting of the shareholders called for the purpose of electing Directors at
which a quorum is present, by the affirmative vote of the holders of majority of
the shares represented at the meeting and entitled to vote on such
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<PAGE> 3
proposal or by the Directors at a meeting of the Directors. No reduction in the
number of Directors shall have the effect of removing any Director prior to the
expiration of his term of office.
(c) "Each Director of the Corporation shall hold office until the next
annual meeting of the shareholders and until his successor is elected, or until
his earlier resignation, removal from office or death.
In the case of any increase in the number of Directors of the Corporation,
the additional Director or Directors shall be elected by the Board of
Directors."
(d) In the case of any vacancy in the Board of Directors through death,
resignation, disqualification or other cause, a successor to hold office for the
unexpired portion of the term of the Director whose place shall be vacant, and
until the election of his successor, shall be elected by a majority of the Board
of Directors then in office, though less than a quorum.
(e) A Director of the Corporation may be removed only for cause.
Section 2. Meetings.
Regular meetings of the Directors shall be held immediately after the
annual meeting of shareholders and at such other times and places as may be
fixed by the Directors, and such meetings may be held without further notice.
Special meetings of the Directors may be called by the Chairman of the
Board or by the President or by a Vice President or by the Secretary of the
Corporation, or by not less than one-third of the Directors. Notice of the time
and place of a special meeting shall be served upon or telephoned to each
Director at least 24 hours, or mailed, telegraphed or cabled to each Director at
least 48 hours, prior to the time of the meeting.
Section 3. Quorum and Voting.
A majority of the number of Directors then in office shall be necessary to
constitute a quorum for the transaction of business, but if at any meeting of
the Directors there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time without notice other than
announcement at the meeting until a quorum shall attend. In all cases, except as
otherwise expressly required by statute, the Articles of Incorporation of the
Corporation or these Regulations, the act of a majority of the Directors present
at a meeting at which a quorum is present is the act of the Director.
Section 4. Action Without a Meeting.
Any action which may be authorized or taken at a meeting of the Directors
may be authorized or taken without a meeting with the affirmative vote or
approval of, and in a writing or writings signed by, all of the Directors, which
writing or writings shall be filed with or entered upon the records of the
Corporation.
Section 5. Committees.
The Directors may from time to time create a committee or committees of
Directors and may delegate to such committee or committees any of the authority
of the Directors, however conferred, other than that of filling vacancies among
the Directors or in any committee of the Directors. No committee shall consist
of less than three Directors. The Directors may appoint one or more Directors as
alternate members of any such committee, who may take the place of any absent
member or members at any meeting of such committee.
In particular, the Directors may create and define the powers and duties of
an Executive Committee. Except as above provided and except to the extent that
its powers are limited by the Directors, the Executive Committee during the
intervals between meetings of the Directors shall possess and may exercise,
subject to the control and direction of the Directors, all of the power of the
Directors in the management and control of the business of the Corporation,
regardless of whether such powers are specifically conferred by these
Regulations. All actions taken by the Executive Committee shall be reported to
the Directors at their first meeting thereafter.
Unless otherwise ordered by the Directors, a majority of the members of any
committee appointed by the Directors pursuant to this section shall constitute a
quorum at any meeting thereof, and the act of a majority of
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the members present at a meeting at which a quorum is present shall be the act
of such committee. Action may be taken by any such committee without a meeting
by a writing or writings signed by all of its members. Any such committee shall
prescribe its own rules for calling and holding meeting and its method of
procedure, subject to any rules prescribed by the Directors, and shall keep a
written record of all action taken by it.
ARTICLE III
OFFICERS
Section 1. Officers.
The Corporation may have a Chairman of the Board and shall have a
President, a Secretary and a Treasurer (none of whom need to be directors). The
Corporation may also have one or more Vice Presidents and such other officers as
the Directors may deem necessary. All of the officers shall be elected by the
Directors.
Section 2. Authority and Duties of Officers.
The officers of the Corporation shall have such authority and shall perform
such duties as are customarily incident to their respective offices, or as may
be specified from time to time by the Directors, regardless of whether such
authority and duties are customarily incident to such office.
ARTICLE IV
INDEMNIFICATION AND INSURANCE
Section 1. Indemnification.
The corporation shall indemnify, to the full extent then permitted by law,
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a member of the Board of Directors of an officer of the Corporation, or is
or was serving at the request of the corporation as a director, trustee or
officer of another corporation, partnership, joint venture, trust or other
enterprise. The Corporation, shall pay, to the full extent then required by law,
expenses, including attorney's fees, incurred by a member of the Board of
Directors in defending any such action, suit or proceeding as they are incurred,
in advance of the final disposition thereof, and may pay, in the same manner and
to the full extent then permitted by law, such expenses incurred by any other
person. The indemnification and payment of expenses provided hereby shall not be
exclusive of, and shall be in addition to, any other rights granted to those
seeking indemnification under any law, the Articles of Incorporation, any
agreement, vote of shareholders or disinterested members of the Board of
Directors, or otherwise, both as to action in official capacities and as to
action in another capacity while he is a member of the Board of Directors or
officer of the Corporation and shall continue as to a person who has ceased to
be a member of the Board of Directors, trustee or officer and shall inure to the
benefit of the heirs, executors, and administrators of such a person. The
indemnification provided for herein shall not be deemed to restrict the right of
the Company to indemnify employees, agents and other to the extent not
prohibited by applicable law.
Section 2. Insurance.
The Corporation may, to the full extent then permitted by law and
authorized by the Directors, purchase and maintain insurance or furnish similar
protection, including but not limited to trust funds, letters of credit or
self-insurance, on behalf of or for any persons described in Section 1 against
any liability asserted against and incurred by any such person in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify such person against such liability. Insurance
may be purchased from or maintained with a person in which the Corporation has a
financial interest.
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Section 3. Agreements.
The Corporation, upon approval by the Board of Directors, may enter into
agreements with any persons whom the Corporation may indemnify under these
Regulations or under law and undertake thereby to indemnify such persons and to
pay the expenses incurred by them in defending any action, suit or proceeding
against them, whether or not the Corporation would have the power under these
Regulations or law to indemnify any such person.
ARTICLE V
MISCELLANEOUS
Section 1. Transfer and Registration of Certificate.
The Directors shall have authority to make such rules and regulations as
they deem expedient concerning the issuance, transfer and registration of
certificates for shares and the shares represented thereby and may appoint
transfer agents and registrars thereof.
Section 2. Voting of Shares Held by the Corporation.
Unless otherwise ordered by the Directors, any officer of the Corporation,
in person or by proxy or proxies appoint by him, shall have full power and
authority on behalf of the Corporation to vote, act and consent with respect to
any shares issued by other corporations which the Corporation may own.
Section 3. Amendments.
Shareholders may adopt, amend and repeal the regulations at any annual or
special meeting of the shareholders by an affirmative vote of two-thirds of the
shares outstanding and entitled to vote thereon, provided that notice of
intention to adopt, amend or repeal the regulations in whole or in part shall
have been included in the notice of the meeting.
Section 4. Substituted Certificates.
Any person claiming a certificate for shares to have been lost, stolen or
destroyed shall make an affidavit or affirmation of that fact, shall give the
Corporation and its registrar or registrars and its transfer agent or agents a
bond of indemnity satisfactory to the Directors or to the Executive Committee or
to the President or a Vice President and the Secretary or the Treasurer, and, if
required by the Directors or the Executive Committee or such officers, shall
advertise the same in such manner as may be required, whereupon a new
certificate may be executed and delivered of the same tenor and for the same
number of shares as the one alleged to have been lost, stolen or destroyed.
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EXHIBIT 10.1
September 1, 1996
Mr. John H. Odle
Executive Vice President
RMI Titanium Company
1000 Warren Avenue
Niles, OH 44446
Dear Mr. Odle:
This Letter Agreement sets forth the basis upon which I have been
authorized by the Board of Directors of RMI Titanium Company ("Company") to
continue your employment in the executive officer position described in
paragraph 1 below for the Employment Period (as hereinafter defined). The
"Employment Period" shall initially be the period September 1, 1996 through
August 31, 1999; provided, however, that on September 1, 1999 and each September
1 thereafter, the Employment Period shall automatically be extended for one
additional year unless, not later than the immediately preceding May 1, either
you or the Company shall have given written notice to the other that you or it
does not wish to extend the Employment Period; and provided further that the
Employment Period shall terminate automatically when you attain age 65. In the
event this Letter Agreement is terminated for any reason other than your death,
your obligations as set forth in paragraph 10 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated February
1, 1994.
1. During the Employment Period, you will serve as Executive Vice President
of the Company, in the Office of the Chairman (or on any other executive officer
position within the Company to which you may hereafter be elected by the
Company's Board of Directors), performing all duties and functions appropriate
to that office, as well as such additional duties as the Company's Chairman or
Board of Directors may, from time to time, assign to you. During the Employment
Period, you will devote your full time and best efforts to the performance of
all such duties.
2. During the Employment Period, the Company will pay you, in equal monthly
installments, as compensation for your services an annual salary of $200,000.
This annual salary may be increased from time to time in the sole discretion of
the Company, but may only be decreased by the Company with your written consent.
Such annual salary, whether increased or decreased, shall constitute your "Base
Salary." In addition, you may be awarded such bonuses as the Board of Directors
of the Company determines to be appropriate under the Company's Annual Incentive
Compensation Plan or any successor bonus plan. You will also be eligible to
participate in the Company's 1995 Stock Plan, or any successor stock plan.
3. You understand and acknowledge that: (1) under the provisions of the
United States Steel Corporation Plan for Employee Pension Benefits (Revision of
1950) your first period of employment with the former United States Steel
Corporation ("USS"), amounting to 3.58 years of service, cannot be credited as
pensionable service when you retire; and (2) under the provisions of the
Company's Pension Plan for Eligible Salaried Employees ("Pension Plan)"
applicable to you, your first period of employment with the Company (January 1,
1968 through July 27, 1973), amounting to 5.58 years of service, also cannot be
credited as pensionable service when you retire. Notwithstanding those facts, if
you continue in active employment with the Company until either age 65, i.e.,
until September 30, 2007, or such earlier date as the Company's Board of
Directors may approve, the Company, at your retirement, will, from the general
assets of the Company, pay you a one time lump sum payment of the then present
value of the 9.16 years of non-pensionable service attributable to your first
periods of employment with USS and the Company respectively, calculated pursuant
to the provisions for determining accrued pension benefits set forth in both the
Company's Pension Plan and its Supplemental Pension Program applicable to you at
date of retirement and based on your average monthly earnings(or then applicable
pensionable earnings) at such time. In addition, should you die prior to age 65
<PAGE> 2
while still actively employed by the Company, the Company will, from the general
assets of the Company, pay your surviving spouse, if any, a one time lump sum
payment of the then present value of the 9.16 years of non-pensionable service
attributable to your first periods of employment with USS and the Company
respectively, calculated pursuant to the provision for determining surviving
spouse eligibility and pension benefits set forth in both the Company's Pension
Plan and its Supplemental Pension Program applicable to you at date of death.
4. In the event of your death during the Employment Period, your right to
all compensation under this Letter Agreement allocable to days subsequent to
your death shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of your death.
5. In the event you become physically or mentally disabled, in the sole
judgment of physicians selected by the Company's Board of Directors, such that
you cannot perform the duties and functions contracted for pursuant to this
Letter Agreement, and should such disability continue for at least 180
consecutive days (or in the judgment of such physicians, be likely to continue
for at least 180 consecutive days), the Company may terminate your employment
upon written notice to you; provided, however, that such termination shall be
deemed to be a retirement authorized by the Company's Board of Directors for
purposes of paragraph 3 of this Letter Agreement. If your employment is
terminated because of physical or mental disability, your right to all
compensation under this Letter Agreement allocable to days subsequent to such
termination shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of termination.
6. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment Period for Cause, (as
Cause is defined in paragraph 8(d) below). In such event, your right to receive
continued compensation under this Letter Agreement will terminate and no further
installments will be paid to you, except for that portion, if any, of your Base
Salary that is accrued and unpaid upon the date of termination.
7. In addition to your annual Base Salary as set forth in Paragraph 2
above, you will be entitled in each calendar year to a vacation with pay in
accordance with the vacation policies of the Company. You will also be entitled
to: (1) participate in all of the Company's existing and future employee benefit
programs applicable to officers of the Company in accordance with the terms of
such benefit program plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such examination to be
conducted by the Cleveland Clinic or comparable facility and provided in
accordance with terms and conditions comparable to those applicable to medical
examinations for USX executive officers; and (3) tax preparation and financial
planning advice under terms and conditions comparable to those applicable to USX
executive management.
8. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in Control" of
the Company shall mean a change in control of a nature that would be
required to be reported by it in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Company is then subject to
such reporting requirement; provided, that, without limitation, such a
change in control shall be deemed to have occurred if:
(1) any person (within the meaning of that term as used in Sections
13(d) and 14(d) of the Exchange Act (a "Person") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the combined voting power of the Company's then
outstanding voting securities; provided, however, that for purposes of
this Agreement the term "Person" shall not include (i) the Company or
any of its majority-owned subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, (v) USX Corporation; or
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(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving on the Board of
Directors of the Company: individuals who, on the date hereof, are
serving as directors on the Board and any new director (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved, or
(3) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with any other corporation, other than a merger
or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger or
consolidation at least 50% of the combined voting power of the voting
securities of the entity surviving the merger or consolidation, (or the
parent of such surviving entity) or the shareholders of the Company
approve a plan of complete liquidation of the Company, or there is
consummated the sale or other disposition of all or substantially all of
the Corporation's assets.
(b) In the event of a Change in Control of the Company, you may, at
your sole option, terminate your employment with the Company within the
initial 90 calendar days from the occurrence of such Change in Control (a
"Sole Option" termination). If your employment is involuntarily terminated
by the Company other than for Cause within such initial 90 calendar day
period, if you elect a Sole Option termination, or if, after the first 90
calendar days following a Change in Control you terminate for Good Reason,
you shall not be required to remain in the Company's employ, and the
benefits set forth in paragraph 8(g) shall be applicable.
(c) If any of the events described above constituting a Change in
Control of the Company shall have occurred, you shall be entitled to the
benefits provided in paragraph 8(g) hereof upon the termination of your
employment during the term of this Letter Agreement unless such termination
is (i) because of your death or disability, (ii) by the Company for Cause,
(iii) by you other than for Good Reason after the first 90 calendar days
after a Change in Control has occurred, or (iv) on or after the date that
you attain age sixty-five (65). In the event your employment with the
Company is terminated for any reason prior to the occurrence of a Change in
Control, you shall not be entitled to any benefits under this paragraph 8;
provided, however, that if your employment is terminated prior to a Change
in Control without Cause at the direction of a person who has entered into
an agreement with the Company, the consummation of which will constitute a
Change in Control, your employment shall be deemed to have terminated
following a Change in Control. Your entitlement to benefits under any of
the Company's retirement plans will not adversely affect your rights to
receive payments hereunder.
(d) Termination by the Company of your employment for "Cause" shall
mean termination upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such
failure resulting from a Sole Option termination by you within the first 90
calendar days after a Change in Control has occurred or thereafter for Good
Reason), after a demand for substantial performance is delivered to you
that specifically identifies the manner in which the Company believes that
you have not substantially performed your duties, and you have failed to
resume substantial performance of your duties on a continuous basis within
fourteen (14) days of receiving such demand, (ii) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise or (iii) your conviction of any felony or
conviction of a misdemeanor which impairs your ability substantially to
perform your duties with the Company. For purposes of this paragraph, no
act, or failure to act, on your part shall be deemed "willful" unless done,
or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of the
Company.
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(e) For purposes of this Letter Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in
Control of the Company of any one or more of the following:
(1) the assignment to you of duties inconsistent with your position
immediately prior to the Change in Control;
(2) a reduction or alteration in the nature of your position,
duties, status or responsibilities from those in effect immediately
prior to the Change in Control;
(3) the failure by the Company to continue in effect any of the
Company's employee benefit plans, programs, policies, practices or
arrangements in which you participate (or substantially equivalent
successor or replacement employee benefit plans, programs, policies,
practices or arrangements) or the failure by the Company to continue
your participation therein on substantially the same basis, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed immediately
prior to the Change in Control;
(4) the failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to perform this
Letter Agreement;
(5) any purported termination by the Company of your employment
that is not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (f) below, and for purposes of this Letter
Agreement, no such purported termination shall be effective; and
(6) the Company's requiring you to be based at a location in excess
of fifty (50) miles from the location where you are based immediately
prior to the Change in Control.
(f) Any termination by the Company for Cause or by you for Sole Option
or Good Reason shall be communicated by Notice of Termination to the other
party hereto. For purposes of this Letter Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Letter Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so indicated.
(g) Following a Change in Control of the Company, as defined above,
upon termination of your employment you shall be entitled to the following
benefits:
(1) If your employment shall be terminated by the Company for Cause
or by you other than by Sole Option or Good Reason, the Company shall
pay you your full Base Salary through the date of termination at the
rate in effect at the time Notice of Termination is given, plus all
other amounts to which you are entitled under any compensation plan of
the Company at the time such payments are due, and the Company shall
have no further obligations to you under this Agreement.
(2) If your employment terminates by reason of your death or
disability, your benefits shall be determined in accordance with
paragraphs 3, 4 and 5 of this Letter Agreement and the Company's
retirement, survivor's benefits, insurance and other applicable programs
and plans, then in effect.
(3) If your employment by the Corporation shall be terminated (i)
by the Company other than for Cause, your death or disability, or (ii)
by you by Sole Option or (iii) by you for Good Reason, you shall be
entitled to the benefits (the "Severance Payments") provided in
paragraphs 8(g)(3), (i), (ii), (iii), (iv) and (v) following, which
Severance Payments shall be in lieu of and cancel any further rights you
have to receive any Base Salary that would be otherwise due under
paragraph 2 of this Letter Agreement:
(i) the Company shall pay you your full Base Salary through the
date of termination at the rate in effect at the time Notice of
Termination is given;
(ii) the Company will pay as severance benefits to you, not
later than the fifth day following the date of termination, a lump
sum severance payment (the "Severance Payment")
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equal to the product of (1) a fraction, the numerator of which is
equal to the lesser of (x) thirty-five and one-half (35 1/2) or (y)
the number of full and partial months existing between the date of
termination and your sixty-fifty (65th) birthday and the denominator
of which is equal to twelve (12), and (2) the sum of (x) your annual
Base Salary in effect immediately prior to the occurrence of the
circumstances giving rise to such termination, and (y) the amount, if
any, of the arithmetic average of the annual bonuses awarded to you
under any annual bonus plan of the Company calculated using the three
(3) years immediately preceding date of termination;
(iii) the options previously issued to you under any option or
incentive plan of the Company to purchase shares of Common Stock of
the Company (Option Shares), as well as any previously unvested
shares of Restricted Stock granted to you, shall irrevocably vest
upon any such termination and the stock options for such Option
Shares shall become thereafter uncancellable by the Company;
(iv) in the event that you become entitled to the Severance
Payments, if any of the Severance Payments or other portion of the
Total Payments (as defined below) will be subject to the tax (the
"Excise Tax") imposed by section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay to you at the
time specified below, an additional amount (the "Gross-Up Payment")
such that the net amount retained by you, after deduction of (1) any
Excise Tax on the Severance Payments and such other Total Payments,
and (2) any federal, state and local income tax, FICA-Health
Insurance tax, and Excise Tax upon the payment provided for by this
paragraph, shall be equal to the Severance Payments and such other
Total Payments. For purposes of determining whether any of the
payments will be subject to the Excise Tax and the amount of such
Excise Tax, (1) any other payments or benefits received or to be
received by you in connection with a Change in Control of the Company
or your termination of employment whether pursuant to the terms of
this Letter Agreement or any other plan, arrangement or agreement
with the Company, any person whose actions result in a Change in
Control of the Company or any person affiliated with the Company or
such person (together with the Severance Payment, the "Total
Payments") shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) shall be treated
as subject to the Excise Tax, except to the extent that in the
opinion of tax counsel selected by the Company's independent auditors
and acceptable to you such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of section 280G(b)(4)
of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the
Excise Tax, (2) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Total Payments or (B) the amount of
excess parachute payments within the meaning of section 280G(b)(1)
(after applying clause (1), above), and (3) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, you shall be deemed
to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
date of termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Company at the
time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to
the Excise Tax and federal and state and local income tax imposed on
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<PAGE> 6
the Gross-Up Payment being repaid by you if such repayment results in
a reduction in Excise Tax and/or a federal and state and local income
tax deduction) plus interest on the amount of such repayment at the
rate provided in section 1274(b)(2)(B) of the Code. In the event that
the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined.
The payments provided for in the paragraph above shall be made
not later than the fifth day following the date of termination;
provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to
you on such day an estimate as determined in good faith by the
Company of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth
day after the date of termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to
you payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code);
(v) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination of
employment (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Letter Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
(vi) for a twenty-four (24) month period after date of
termination, the Company will arrange to provide you at the Company's
expense with life, disability, accident and health insurance benefits
substantially similar to those which you were receiving immediately
prior to the Notice of Termination; but benefits otherwise receivable
by you pursuant to this paragraph shall be reduced to the extent
comparable benefits are actually received by you during the
twenty-four (24) month period following your termination, and any
such benefits actually received by you shall be reported to the
Company.
(h) You shall not be required to mitigate the amount of any
Severance Payments provided for in this paragraph 8 by seeking other
employment or otherwise, nor, except as provided in paragraph (vi)
above, shall the amount of any payment or benefit provided for in this
paragraph 8 be reduced by any compensation or benefit earned by you as
the result of employment by another employer after the date of
termination, or otherwise.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or of any
division or subsidiary thereof employing you to expressly assume and
agree to perform this Letter Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement and shall entitle
you to compensation from the Company in the same amount and on the same
terms as you would be entitled hereunder if you terminate your
employment for Good Reason.
9. This Letter Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts,
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unless otherwise provided herein, shall be paid in accordance with the terms of
this Letter Agreement, to your devisee, legatee or other designee or, if there
is not such designee, to your estate.
10. As additional consideration for the compensation and benefits provided
to you pursuant to this Letter Agreement, you agree that you will not, for a
period of 24 months after the end of the Employment Period, or the termination
of your employment with the Company (whichever first occurs), directly or
indirectly, compete with, engage in the same business as, be employed by, act a
consultant to, or be a director, officer, employee, owner or partner, or
otherwise participate in or assist (including, without limitation, by soliciting
customers for, or individuals to provide services to), any business or
organization which competes with the Company; provided, that this restriction
shall not apply if you terminate your employment with the Company by Sole Option
or for Good Reason after a Change in Control of the Company. For purposes of
this Paragraph 10, you will not be deemed to have breached your commitment
merely because you own, directly or indirectly, not more than one percent (1%)
of the outstanding common stock of such a corporation if, at the time you
acquire such stock, such stock is listed on a national securities exchange or is
regularly traded in the over-the-counter market by a member of either a national
securities exchange or the National Association of Securities Dealers, Inc. In
order to protect the interest of the Company, you will also maintain in strict
confidence and not disclose to any other person or entity any information
received from any source in the Company or developed by you in the course of
performing your duties for the Company. This obligation shall not extend to: (a)
anything you can establish as known to you from a source outside the Company,
(b) anything which has been published or becomes published hereafter other than
by you, or (c) anything which you receive from a non-Company source without
restriction on its disclosure. Should you breach or threaten to breach the
commitments in this Paragraph 10, and in recognition of the fact that the
Company would not under such circumstances be adequately compensated by money
damages, the Company shall be entitled, in addition to any other rights and
remedies available to it, to an injunction restraining you from such breach.
Further, you acknowledge and agree that the provisions of this Paragraph 10 are
necessary, reasonable, and proportionate to protect the Company during such
noncompetition period.
11. The validity, interpretation, construction and performance of this
Letter Agreement shall be governed by the laws of the State of Ohio.
If the provisions of this Letter Agreement are acceptable to you, please
sign one original copy of this Letter Agreement and return it to me. You may
retain the second signed original for your files.
Very truly yours,
RMI TITANIUM COMPANY
By /s/ R. M. HERNANDEZ
-----------------------
R. M. Hernandez
Chairman of the Board of
Directors
Confirmed:
/s/ JOHN H. ODLE
- ------------------------------------------------
John H. Odle
September 23, 1996
- ------------------------------------------------
Date
7
<PAGE> 1
EXHIBIT 10.2
September 1, 1996
Mr. Timothy G. Rupert
Executive Vice President
& Chief Financial Officer
RMI Titanium Company
1000 Warren Avenue
Niles, OH 44446
Dear Mr. Rupert:
This Letter Agreement sets forth the basis upon which I have been
authorized by the Board of Directors of RMI Titanium Company ("Company") to
continue your employment in the executive officer position described in
paragraph 1 below for the Employment Period (as hereinafter defined). The
"Employment Period" shall initially be the period September 1, 1996 through
August 31, 1999; provided, however, that on September 1, 1999 and each September
1 thereafter, the Employment Period shall automatically be extended for one
additional year unless, not later than the immediately preceding May 1, either
you or the Company shall have given written notice to the other that you or it
does not wish to extend the Employment Period; and provided further that the
Employment Period shall terminate automatically when you attain age 65. In the
event this Letter Agreement is terminated for any reason other than your death,
your obligations as set forth in paragraph 9 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated February
1, 1994.
1. During the Employment Period, you will serve as Executive Vice President
& Chief Financial Officer of the Company, in the Office of the Chairman (or on
any other executive officer position within the Company to which you may
hereafter be elected by the Company's Board of Directors), performing all duties
and functions appropriate to that office, as well as such additional duties as
the Company's Chairman or Board of Directors may, from time to time, assign to
you. During the Employment Period, you will devote your full time and best
efforts to the performance of all such duties.
2. During the Employment Period, the Company will pay you, in equal monthly
installments, as compensation for your services an annual salary of $200,000.
This annual salary may be increased from time to time in the sole discretion of
the Company, but may only be decreased by the Company with your written consent.
Such annual salary, whether increased or decreased, shall constitute your "Base
Salary." In addition, you may be awarded such bonuses as the Board of Directors
of the Company determines to be appropriate under the Company's Annual Incentive
Compensation Plan or any successor bonus plan. You will also be eligible to
participate in the Company's 1995 Stock Plan, or any successor stock plan.
3. In the event of your death during the Employment Period, your right to
all compensation under this Letter Agreement allocable to days subsequent to
your death shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of your death.
4. In the event you become physically or mentally disabled, in the sole
judgment of physicians selected by the Company's Board of Directors, such that
you cannot perform the duties and functions contracted for pursuant to this
Letter Agreement, and should such disability continue for at least 180
consecutive days (or in the judgment of such physicians, be likely to continue
for at least 180 consecutive days), the Company may terminate your employment
upon written notice to you. If your employment is terminated because of physical
or mental disability, your right to all compensation under this Letter Agreement
allocable to days subsequent to such termination shall terminate and no further
payments shall be due to you, your personal representative, or your estate,
except for that portion, if any, of your Base Salary that is accrued and unpaid
upon the date of termination.
<PAGE> 2
5. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment Period for Cause, (as
Cause is defined in paragraph 7(d) below). In such event, your right to receive
continued compensation under this Letter Agreement will terminate and no further
installments will be paid to you, except for that portion, if any, of your Base
Salary that is accrued and unpaid upon the date of termination.
6. In addition to your annual Base Salary as set forth in Paragraph 2
above, you will be entitled in each calendar year to a vacation with pay in
accordance with the vacation policies of the Company. You will also be entitled
to: (1) participate in all of the Company's existing and future employee benefit
programs applicable to officers of the Company in accordance with the terms of
such benefit program plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such examination to be
conducted by the Cleveland Clinic or comparable facility and provided in
accordance with terms and conditions comparable to those applicable to medical
examinations for USX executive officers; and (3) tax preparation and financial
planning advice under terms and conditions comparable to those applicable to USX
executive management.
7. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in Control" of
the Company shall mean a change in control of a nature that would be
required to be reported by it in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Company is then subject to
such reporting requirement; provided, that, without limitation, such a
change in control shall be deemed to have occurred if:
(1) any person (within the meaning of that term as used in Sections
13(d) and 14(d) of the Exchange Act (a "Person") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the combined voting power of the Company's then
outstanding voting securities; provided, however, that for purposes of
this Agreement the term "Person" shall not include (i) the Company or
any of its majority-owned subsidiaries , (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, (v) USX Corporation; or
(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving on the Board of
Directors of the Company: individuals who, on the date hereof, are
serving as directors on the Board and any new director (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved, or
(3) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with any other corporation, other than a merger
or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger or
consolidation at least 50% of the combined voting power of the voting
securities of the entity surviving the merger or consolidation, (or the
parent of such surviving entity) or the shareholders of the Company
approve a plan of complete liquidation of the Company, or there is
consummated the sale or other disposition of all or substantially all of
the Corporation's assets.
(b) In the event of a Change in Control of the Company, you may, at
your sole option, terminate your employment with the Company within the
initial 90 calendar days from the occurrence of such
2
<PAGE> 3
Change in Control (a "Sole Option" termination). If your employment is
involuntarily terminated by the Company other than for Cause within such
initial 90 calendar day period, if you elect a Sole Option termination, or
if, after the first 90 calendar days following a Change in Control you
terminate for Good Reason, you shall not be required to remain in the
Company's employ, and the benefits set forth in paragraph 7(g) shall be
applicable.
(c) If any of the events described above constituting a Change in
Control of the Company shall have occurred, you shall be entitled to the
benefits provided in paragraph 7(g) hereof upon the termination of your
employment during the term of this Letter Agreement unless such termination
is (i) because of your death or disability, (ii) by the Company for Cause,
(iii) by you other than for Good Reason after the first 90 calendar days
after a Change in Control has occurred, or (iv) on or after the date that
you attain age sixty-five (65). In the event your employment with the
Company is terminated for any reason prior to the occurrence of a Change in
Control, you shall not be entitled to any benefits under this paragraph 7;
provided, however, that if your employment is terminated prior to a Change
in Control without Cause at the direction of a person who has entered into
an agreement with the Company, the consummation of which will constitute a
Change in Control, your employment shall be deemed to have terminated
following a Change in Control. Your entitlement to benefits under any of
the Company's retirement plans will not adversely affect your rights to
receive payments hereunder.
(d) Termination by the Company of your employment for "Cause" shall
mean termination upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such
failure resulting from a Sole Option termination by you within the first 90
calendar days after a Change in Control has occurred or thereafter for Good
Reason), after a demand for substantial performance is delivered to you
that specifically identifies the manner in which the Company believes that
you have not substantially performed your duties, and you have failed to
resume substantial performance of your duties on a continuous basis within
fourteen (14) days of receiving such demand, (ii) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise or (iii) your conviction of any felony or
conviction of a misdemeanor which impairs your ability substantially to
perform your duties with the Company. For purposes of this paragraph, no
act, or failure to act, on your part shall be deemed "willful" unless done,
or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of the
Company.
(e) For purposes of this Letter Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in
Control of the Company of any one or more of the following:
(1) the assignment to you of duties inconsistent with your position
immediately prior to the Change in Control;
(2) a reduction or alteration in the nature of your position,
duties, status or responsibilities from those in effect immediately
prior to the Change in Control;
(3) the failure by the Company to continue in effect any of the
Company's employee benefit plans, programs, policies, practices or
arrangements in which you participate (or substantially equivalent
successor or replacement employee benefit plans, programs, policies,
practices or arrangements) or the failure by the Company to continue
your participation therein on substantially the same basis, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed immediately
prior to the Change in Control;
(4) the failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to perform this
Letter Agreement;
(5) any purported termination by the Company of your employment
that is not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (f) below, and for purposes of this Letter
Agreement, no such purported termination shall be effective; and
3
<PAGE> 4
(6) the Company's requiring you to be based at a location in excess
of fifty (50) miles from the location where you are based immediately
prior to the Change in Control.
(f) Any termination by the Company for Cause or by you for Sole Option
or Good Reason shall be communicated by Notice of Termination to the other
party hereto. For purposes of this Letter Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Letter Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so indicated.
(g) Following a Change in Control of the Company, as defined above,
upon termination of your employment you shall be entitled to the following
benefits:
(1) If your employment shall be terminated by the Company for Cause
or by you other than by Sole Option or Good Reason, the Company shall
pay you your full Base Salary through the date of termination at the
rate in effect at the time Notice of Termination is given, plus all
other amounts to which you are entitled under any compensation plan of
the Company at the time such payments are due, and the Company shall
have no further obligations to you under this Agreement.
(2) If your employment terminates by reason of your death or
disability, your benefits shall be determined in accordance with
paragraphs 3 and 4 of this Letter Agreement and the Company's
retirement, survivor's benefits, insurance and other applicable programs
and plans, then in effect.
(3) If your employment by the Corporation shall be terminated (i)
by the Company other than for Cause, your death or disability, or (ii)
by you by Sole Option or (iii) by you for Good Reason, you shall be
entitled to the benefits (the "Severance Payments") provided in
paragraphs 7(g)(3), (i), (ii), (iii), (iv) and (v) following, which
Severance Payments shall be in lieu of and cancel any further rights you
have to receive any Base Salary that would be otherwise due under
paragraph 2 of this Letter Agreement:
(i) the Company shall pay you your full Base Salary through the
date of termination at the rate in effect at the time Notice of
Termination is given;
(ii) the Company will pay as severance benefits to you, not
later than the fifth day following the date of termination, a lump
sum severance payment (the "Severance Payment") equal to the product
of (1) a fraction, the numerator of which is equal to the lesser of
(x) thirty-five and one-half (35-1/2) or (y) the number of full and
partial months existing between the date of termination and your
sixty-fifty (65th) birthday and the denominator of which is equal to
twelve (12), and (2) the sum of (x) your annual Base Salary in effect
immediately prior to the occurrence of the circumstances giving rise
to such termination, and (y) the amount, if any, of the arithmetic
average of the annual bonuses awarded to you under any annual bonus
plan of the Company calculated using the three (3) years immediately
preceding date of termination;
(iii) the options previously issued to you under any option or
incentive plan of the Company to purchase shares of Common Stock of
the Company (Option Shares), as well as any previously unvested
shares of Restricted Stock granted to you, shall irrevocably vest
upon any such termination and the stock options for such Option
Shares shall become thereafter uncancellable by the Company;
(iv) in the event that you become entitled to the Severance
Payments, if any of the Severance Payments or other portion of the
Total Payments (as defined below) will be subject to the tax (the
"Excise Tax") imposed by section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay to you at the
time specified below, an additional amount (the "Gross-Up Payment")
such that the net amount retained by you, after deduction of (1) any
Excise Tax on the Severance Payments and such other Total Payments,
and (2) any federal, state and local income tax, FICA-Health
Insurance tax, and Excise Tax
4
<PAGE> 5
upon the payment provided for by this paragraph, shall be equal to
the Severance Payments and such other Total Payments. For purposes of
determining whether any of the payments will be subject to the Excise
Tax and the amount of such Excise Tax, (1) any other payments or
benefits received or to be received by you in connection with a
Change in Control of the Company or your termination of employment
whether pursuant to the terms of this Letter Agreement or any other
plan, arrangement or agreement with the Company, any person whose
actions result in a Change in Control of the Company or any person
affiliated with the Company or such person (together with the
Severance Payment, the "Total Payments") shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of
section 280G(b)(1) shall be treated as subject to the Excise Tax,
except to the extent that in the opinion of tax counsel selected by
the Company's independent auditors and acceptable to you such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4) of the Code in
excess of the base amount within the meaning of Section 280G(b)(3) of
the Code, or are otherwise not subject to the Excise Tax, (2) the
amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of
the Total Payments or (B) the amount of excess parachute payments
within the meaning of section 280G(b)(1) (after applying clause (1),
above), and (3) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of your residence on the date of termination, net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of your
employment, you shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction (plus
the portion of the Gross-Up Payment attributable to the Excise Tax
and federal and state and local income tax imposed on the Gross-Up
Payment being repaid by you if such repayment results in a reduction
in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined.
The payments provided for in the paragraph above shall be made
not later than the fifth day following the date of termination;
provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to
you on such day an estimate as determined in good faith by the
Company of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth
day after the date of termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to
you payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code);
5
<PAGE> 6
(v) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination of
employment (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Letter Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
(vi) for a twenty-four (24) month period after date of
termination, the Company will arrange to provide you at the Company's
expense with life, disability, accident and health insurance benefits
substantially similar to those which you were receiving immediately
prior to the Notice of Termination; but benefits otherwise receivable
by you pursuant to this paragraph shall be reduced to the extent
comparable benefits are actually received by you during the
twenty-four (24) month period following your termination, and any
such benefits actually received by you shall be reported to the
Company.
(h) You shall not be required to mitigate the amount of any
Severance Payments provided for in this paragraph 7 by seeking other
employment or otherwise, nor, except as provided in paragraph (vi)
above, shall the amount of any payment or benefit provided for in this
paragraph 7 be reduced by any compensation or benefit earned by you as
the result of employment by another employer after the date of
termination, or otherwise.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or of any
division or subsidiary thereof employing you to expressly assume and
agree to perform this Letter Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement and shall entitle
you to compensation from the Company in the same amount and on the same
terms as you would be entitled hereunder if you terminate your
employment for Good Reason.
8. This Letter Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Letter Agreement, to your devisee, legatee or other
designee or, if there is not such designee, to your estate.
9. As additional consideration for the compensation and benefits provided
to you pursuant to this Letter Agreement, you agree that you will not, for a
period of 24 months after the end of the Employment Period, or the termination
of your employment with the Company (whichever first occurs), directly or
indirectly, compete with, engage in the same business as, be employed by, act a
consultant to, or be a director, officer, employee, owner or partner, or
otherwise participate in or assist (including, without limitation, by soliciting
customers for, or individuals to provide services to), any business or
organization which competes with the Company; provided, that this restriction
shall not apply if you terminate your employment with the Company by Sole Option
or for Good Reason after a Change in Control of the Company. For purposes of
this Paragraph 9, you will not be deemed to have breached your commitment merely
because you own, directly or indirectly, not more than one percent (1%) of the
outstanding common stock of such a corporation if, at the time you acquire such
stock, such stock is listed on a national securities exchange or is regularly
traded in the over-the-counter market by a member of either a national
securities exchange or the National Association of Securities Dealers, Inc. In
order to protect the interest of the Company, you will also maintain in strict
confidence and not disclose to any other person or entity any information
received from any source in the Company or developed by you in the course of
performing your duties for the Company. This obligation shall not extend to: (a)
anything you can establish as known to you from a source outside the Company,
(b) anything which has been published or becomes published hereafter other than
by you, or (c) anything which you receive from a non-Company source without
restriction on its disclosure. Should you breach or
6
<PAGE> 7
threaten to breach the commitments in this Paragraph 9, and in recognition of
the fact that the Company would not under such circumstances be adequately
compensated by money damages, the Company shall be entitled, in addition to any
other rights and remedies available to it, to an injunction restraining you from
such breach. Further, you acknowledge and agree that the provisions of this
Paragraph 9 are necessary, reasonable, and proportionate to protect the Company
during such noncompetition period.
10. The validity, interpretation, construction and performance of this
Letter Agreement shall be governed by the laws of the State of Ohio.
If the provisions of this Letter Agreement are acceptable to you, please
sign one original copy of this Letter Agreement and return it to me. You may
retain the second signed original for your files.
Very truly yours,
RMI TITANIUM COMPANY
By /s/ R. M. HERNANDEZ
----------------------
R. M. Hernandez
Chairman of the Board of
Directors
Confirmed:
/s/ T. G. RUPERT
- ------------------------------------------------
Timothy G. Rupert
September 1, 1996
- ------------------------------------------------
Date
7
<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
this 21st day of August, 1996, by and between RMI Titanium Company, an Ohio
corporation (the "Company"), and USX Corporation, a Delaware corporation (the
"Shareholder").
WHEREAS, the Company desires to increase the float in the Common Stock, par
value $.01 per share (the "Common Stock"), of the Company;
WHEREAS, to induce the Shareholder to agree to the resale restrictions of
the Shareholder contained in this Agreement, the Company has determined to
provide the registration rights set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. As used herein, the following terms shall have the
following respective meanings:
"Designated Transferee" shall have the meaning set forth in Section 11
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holders" shall mean the Shareholder and any Designated Transferees
who are holders of record of any Registrable Shares, and any combination of
two or more Holders, and the term "Holder" shall mean any such Person.
"Other Holders" shall mean Persons who subsequent to the date hereof
acquire more than 5% of the outstanding shares of Common Stock pursuant to
a transaction with the Company and to whom the Company grants registration
rights pursuant to a written agreement in connection with such transaction.
"Person" shall mean any individual, corporation, association,
partnership, group (as defined in Section 13(d)(3) of the Exchange Act),
joint venture, business trust or unincorporated organization, or a
governmental agency or authority or political subdivision thereof.
"Registrable Shares" shall mean (i) the 5,483,600 shares of Common
Stock owned by the Shareholder on the date of this Agreement, and (ii) any
securities of the Company issued or distributed after the date of this
Agreement to a Holder in respect of Registrable Shares by way of stock
dividend or stock split or other distribution, recapitalization or
reclassification and any securities of the Company acquired by a Holder
upon exercise or conversion of any such securities. As to any particular
Registrable Share, such Registrable Share shall cease to be a Registrable
Share when (w) it shall have been sold, transferred or otherwise disposed
of or exchanged pursuant to a registration statement under the Securities
Act, (x) it shall have been distributed to the public pursuant to Rule 144
(or any successor provision) under the Securities Act, (y) it shall have
been sold or transferred to a Person other than a Designated Transferee in
a private transaction effected other than pursuant to a registration
statement, or (z) it shall have been sold, transferred or otherwise
disposed of in violation of this Agreement.
"Registration Expenses" shall have the meaning set forth in Section
7(b) hereof.
"SEC" shall have the meaning set forth in Section 4(c) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. Incidental Registrations. (a) Right to Include Registrable Shares. Each
time the Company shall determine to file a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of shares
of Common Stock either by it or by any holders of shares of Common Stock, the
Company will give prompt written notice of its determination to each Holder and
of such Holder's rights under this Section 2 at least 21 days prior to the
anticipated filing date of such registration statement; provided, however, that
no such notice shall be required if the form of registration statement and the
rules of the SEC would not permit sales of Registrable Shares by the Holders
pursuant to the registration statement. Upon the
<PAGE> 2
written request of each Holder made at any time not later than 48 hours prior to
the effective date and time of such registration statement (which request shall
specify the number of Registrable Shares intended to be disposed of by such
Holder), the Company will use its reasonable best efforts, as provided in
Section 5 hereof, to effect the registration under the Securities Act of all
Registrable Shares which the Company has been so requested to register by the
Holders thereof; provided, however, that (i) if, at any time after giving
written notice of its intention to register the sale of shares of Common Stock
and prior to the effective date of the registration statement filed in
connection with such registration and relating to a proposed offer and sale of
its Common Stock by the Company, the Company shall determine for any reason not
to proceed with the proposed registration of the Common Stock to be sold by it,
the Company may, at its election, give written notice of such determination to
each Holder of Registrable Shares and thereupon shall be relieved of its
obligation hereunder to register any Registrable Shares in connection with such
registration, and (ii) if such registration involves an underwritten offering
for the registration of the issuance and sale of shares of Common Stock by the
Company, all Holders of Registrable Shares requesting to be included in the
Company's registration must sell their Registrable Shares to the underwriters on
the same terms and conditions as apply to the Company, with such differences,
including any with respect to indemnification and liability insurance, as may be
customary or appropriate in combined primary and secondary offerings. No
registration effected under this Section 2 shall relieve the Company of its
obligations to effect registrations upon request under Section 4 hereof. There
shall be no limit on the number of times that any Holder may participate in
registrations pursuant to this Section 2(a).
(b) Priority in Incidental Registrations. If a registration pursuant to
this Section 2 involves an underwritten offering and the managing underwriter or
underwriters in good faith advises the Company in writing that, in its opinion,
the number of shares of Common Stock which the Company, the Holders and any
other Persons intend to include in such registration exceeds the largest number
of such shares of Common Stock which can be sold in such offering without having
an adverse effect on such offering (including the price at which such shares of
Common Stock can be sold), then the Company will include in such registration
(i) first, if the registration pursuant to this Section 2 was initiated by any
Person holding shares of Common Stock exercising demand registration rights,
100% of the shares of Common Stock such other Person proposes to sell (except to
the extent the terms of such other Person's registration rights provide
otherwise); (ii) second, 100% of the shares of Common Stock the Company proposes
to sell for its own account; and (iii) third, to the extent that the number of
shares of Common Stock which such other Person exercising demand registration
rights and the Company propose to sell is less than the number of shares of
Common Stock which the Company has been advised can be sold in such offering
without having the adverse effect referred to above, such number of Registrable
Shares which the Holders have requested to be included in such registration and
such number of shares of Common Stock which other Persons have requested to be
included in such registration, in each case pursuant to Section 2(a) hereof or
other piggyback or incidental registration rights and which, in the opinion of
such managing underwriter or underwriters, can be sold without having the
adverse effect referred to above, such number of Registrable Shares and shares
of Common Stock to be included on a pro rata basis among all requesting Holders
and other Persons on the basis of the relative number of shares of Common Stock
beneficially owned (as such term is used in Rule 13d-3 of the Exchange Act) by
such Holders and other Persons.
3. Holdback Agreements. If the Company shall effect a registration of the
sale of shares of Common Stock by the Company pursuant to an underwritten public
offering, the Holders agree not to effect any sale, transfer or other
disposition (except in connection with such public offering) of shares of Common
Stock, or of any security convertible into or exchangeable or exercisable for
shares of Common Stock (in each case, other than as part of such underwritten
public offering), during the 90-day period (or such lesser period as the
managing underwriter or underwriters may permit) beginning on the effective date
of such registration, if, and to the extent, the managing underwriter or
underwriters of any such offering determines such action is necessary or
desirable to effect such offering and the managing underwriter or underwriters
or the Company gives notice of such determination to the Holders.
4. Registration on Request. (a) Request by Holders. Upon the written
request of any one or more Holders that the Company effect the registration
under the Securities Act of all or part of such Holders'
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Registrable Shares, and specifying the amount (which shall not be less than
1,000,000 Registrable Shares) and the intended method of disposition thereof,
the Company will promptly give notice of such requested registration to all
other Holders of Registrable Shares and, as expeditiously as possible, use its
reasonable best efforts, as provided in Section 5 hereof, to effect the
registration under the Securities Act of the Registrable Shares which the
Company has been so requested to register; provided, however, that the Company
shall not be required to effect more than three registrations pursuant to this
Section 4; provided, further, that the Company shall not be obligated to file a
registration statement relating to a registration request under this Section 4
(i) if the registration request is delivered after delivery of a notice by the
Company of an intended registration of the sale of shares of Common Stock by the
Company and prior to the earlier of 90 days from such notice or the effective
date of the registration statement referred to in such notice, or (ii) within a
period of 180 days after the effective date of any other registration statement
of the Company requested by a Holder pursuant to this Section 4 or pursuant to
which the Holders included Registrable Shares. The Holders initially requesting
a registration pursuant to this Section 4 may, at any time prior to the
effective date of the registration statement relating to such registration,
revoke such request by providing a written notice to the Company revoking such
request; provided, however, that, in the event the Holders shall have made a
written request for a demand registration (i) which is subsequently withdrawn by
the Holders after the Company has filed a registration statement with the SEC in
connection therewith but prior to such demand registration being declared
effective by the SEC or (ii) which is not declared effective solely as a result
of the failure of the Holders to take all actions reasonably required in order
to have the registration and the related registration statement declared
effective by the SEC, then, in any such event, such demand registration shall be
deemed to have been effected for purposes of this Section 4(a).
(b) Registration Statement Form. If any registration requested pursuant to
this Section 4 which is proposed by the Company to be effected by the filing of
a registration statement Form S-3 (or any successor or similar short-form
registration statement) shall be in connection with an underwritten public
offering, and if the managing underwriter or underwriters shall advise the
Company in writing that, in its opinion, the use of another form of registration
statement or the inclusion in such form of public information concerning the
Company not required by such form is of material importance to the success of
such proposed offering, then such registration shall be effected on such other
form and such other information shall be used or included.
(c) Registration Statement Deemed Effected. A registration requested
pursuant to this Section 4 will not be deemed to have been effected unless it
has become effective under the Securities Act and has remained effective for 180
days or such shorter period as all the Registrable Shares included in such
registration have actually been sold thereunder. In addition, if within 180 days
after a registration has become effective, the intended method of distribution
of Registrable Shares pursuant to such registration is materially interfered
with by any stop order, injunction or other order or requirement of the
Securities and Exchange Commission (the "SEC") or other governmental agency or
court, or any threat thereof, or by any notice given by the Company pursuant to
Section 5(a)(vi) hereof, such registration will be deemed not to have been
effected for purposes of Section 4(a).
(d) Priority in Requested Registrations. If a requested registration
pursuant to this Section 4 involves an underwritten offering and the managing
underwriter or underwriters in good faith advises the Holders requesting such
registration and the Company in writing that, in its opinion, the number of
shares of Common Stock requested to be included in such registration (including
shares of Common Stock which are not Registrable Shares) exceeds the largest
number of shares of Common Stock which can be sold in such offering without
having an adverse effect on such offering (including the price at which such
shares of Common Stock can be sold), then the Company will include in such
registration (i) first, 100% of the Registrable Shares requested to be
registered pursuant to Section 4(a) hereof (provided that if the number of
Registrable Shares requested to be registered pursuant to Section 4(a) hereof
exceeds the number which the Holders and the Company have been advised can be
sold in such offering without having the adverse effect referred to above, the
number of such Registrable Shares to be included in such registration by the
Holders shall be allocated pro rata among such Holders on the basis of the
relative number of Registrable Shares each such Holder has requested to be
included in such registration); (ii) second, to the extent that the number of
Registrable Shares requested to be registered pursuant to Section 4(a) hereof is
less than the number of
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<PAGE> 4
shares of Common Stock which such Holders and the Company have been advised can
be sold in such offering without having the adverse effect referred to above,
such number of shares of Common Stock the Company requests to be included in
such registration; and (iii) third, to the extent that the number of Registrable
Shares requested to be included in such registration pursuant to Section 4(a)
hereof and the shares of Common Stock which the Company proposes to sell for its
own account are, in the aggregate, less than the number of shares of Common
Stock which such Holders and the Company have been advised can be sold in such
offering without having the adverse effect referred to above, such number of
other shares of Common Stock proposed to be sold by any other Person which, in
the opinion of such managing underwriter or underwriters, can be sold without
having the adverse effect referred to above (provided that if the number of such
shares of Common Stock of such other Persons requested to be registered exceeds
the number which such Holders and the Company have been advised can be sold in
such offering without having the adverse effect referred to above, the number of
such shares of Common Stock to be included in such registration pursuant to this
Section 4(d) shall be allocated pro rata among all such other Persons on the
basis of the relative number of shares of Common Stock each such Person has
requested to be included in such registration).
5. Registration Procedures. (a) If and whenever the Company is required by
the provisions of Sections 2 or 4 hereof to use its reasonable best efforts to
effect or cause the registration of Registrable Shares, the Company shall as
expeditiously as possible:
(i) prepare and (in the event of a registration requested pursuant to
Section 4 hereof, as soon as reasonably possible and in any event within 60
days after the request for registration is given to the Company) file with
the SEC a registration statement with respect to such Registrable Shares
and use its reasonable best efforts to cause such registration statement to
become effective;
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period not in excess of 180 days and to comply with the provisions of the
Exchange Act, and the rules and regulations promulgated thereunder, with
respect to the disposition of all the shares of Common Stock covered by
such registration statement during such period in accordance with the
intended methods of disposition by the Holders thereof set forth in such
registration statement; provided, that (A) before filing a registration
statement (including an initial filing) or prospectus, or any amendments or
supplements thereto, the Company will furnish to one counsel selected by
the Holders of a majority of the Registrable Shares covered by such
registration statement copies of all documents proposed to be filed, which
documents will be subject to the review and comment of such counsel, and
(B) the Company will notify each Holder of Registrable Shares covered by
such registration statement of any stop order issued or threatened by the
SEC, any other order suspending the use of any preliminary prospectus or of
the suspension of the qualification of the registration statement for
offering or sale in any jurisdiction, and take all reasonable actions
required to prevent the entry of such stop order, other order or suspension
or to remove it if entered;
(iii) furnish to each Holder and each underwriter, if applicable, of
Registrable Shares covered by such registration statement such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as each Holder
of Registrable Shares covered by such registration statement may reasonably
request in order to facilitate the disposition of the Registrable Shares
owned by such Holder;
(iv) use its reasonable best efforts to register or qualify such
Registrable Shares covered by such registration statement under the state
securities or blue sky laws of such jurisdictions as each Holder of
Registrable Shares covered by such registration statement and, if
applicable, each underwriter, may reasonably request, and do any and all
other acts and things which may be reasonably necessary to consummate the
disposition in such jurisdictions of the Registrable Shares owned by such
Holder, except that the Company shall not for any purpose be required to
qualify generally to do business as a foreign
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<PAGE> 5
corporation in any jurisdiction where, but for the requirements of this
clause (iv), it would not be obligated to be so qualified;
(v) use its reasonable best efforts to cause such Registrable Shares
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the Holders thereof to consummate the disposition of such
Registrable Shares;
(vi) if at any time when a prospectus relating to the Registrable
Shares is required to be delivered under the Securities Act any event shall
have occurred as the result of which any such prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, immediately give written notice thereof
to each Holder and the managing underwriter or underwriters, if any, of
such Registrable Shares and prepare and furnish to each such Holder a
reasonable number of copies of an amended or supplemental prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement
of material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(vii) use its reasonable best efforts to list such Registrable Shares
on any securities exchange on which similar securities of the Company are
then listed, and enter into customary agreements including a listing
application and indemnification agreement in customary form, provided that
the applicable listing requirements are satisfied, and provide a transfer
agent and registrar for such Registrable Shares covered by such
registration statement not later than the effective date of such
registration statement;
(viii) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions as each Holder of
Registrable Shares being sold or the underwriter or underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of
such Registrable Shares, including customary indemnification and opinions;
(ix) use its reasonable best efforts to obtain all "comfort" letters
and consents from the Company's independent public accountants and all
legal opinions and consents from the Company's legal counsel and the
cooperation of other experts, all in customary form and covering matters of
the type customarily covered by such letters, opinions and experts as such
Holders or the underwriters retained by such Holders shall reasonably
request;
(x) make available for inspection by representatives of any Holder of
Registrable Shares covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by such Holders or any such underwriter, all financial and other
records, pertinent corporate documents and properties of the Company and
its subsidiaries, and cause all of the Company's and its subsidiaries'
officers, directors and employees to supply all information and respond to
all inquiries reasonably requested by such Holders or any such
representative, underwriter, attorney, accountant or agent in connection
with such registration statement and to participate in any reasonable
marketing "road show" presentations which such Holders or the underwriters
retained by such Holders may request;
(xi) notify counsel for the Holders of Registrable Shares included in
such registration statement and the managing underwriter or underwriters,
if any, immediately, and confirm the notice in writing, (A) when the
registration statement, or any post-effective amendment to the registration
statement, shall have become effective, or any supplement to the prospectus
or any amendment prospectus shall have been filed, (B) of the receipt of
any comments from the SEC and (C) of any request of the SEC to amend the
registration statement or amend or supplement the prospectus or for
additional information; and
(xii) in the case of any underwritten public offering pursuant to a
registration effected pursuant to Section 4 hereof, agree not to effect any
sale, transfer or other disposition (except in connection with such public
offering or an offering on Form S-8) of shares of Common Stock or any
security convertible into or exchangeable or exercisable for shares of
Common Stock for a 90-day period (or such lesser period as the managing
underwriter or underwriters may permit) beginning on the effective date of
such registration, if,
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<PAGE> 6
and to the extent, the managing underwriter or underwriters of any such
offering determines such action is necessary or desirable to effect such
offering and the managing underwriter or underwriters or the Holders give
notice of such determination to the Company.
(b) Each Holder of Registrable Shares hereby agrees that, upon receipt of
any notice from the Company of the happening of any event of the type described
in Section 5(a)(vi) hereof, such Holder shall forthwith discontinue disposition
of such Registrable Shares covered by such registration statement or related
prospectus until such Holder's receipt of the copies of the supplemental or
amended prospectus contemplated by Section 5(a)(vi) hereof, and, if so directed
by the Company, such Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Shares at the time of
receipt of such notice. In the event the Company shall give any such notice, the
period mentioned in Section 5(a)(ii) hereof shall be extended by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 5(a)(vi) hereof and including the date when such Holder
shall have received the copies of the supplemental or amended prospectus
contemplated by Section 5(a)(vi) hereof. If for any other reason the
effectiveness of any registration statement filed pursuant to Section 4 hereof
is suspended or interrupted prior to the expiration of the time period regarding
the maintenance of the effectiveness of such registration statement required by
Section 5(a)(ii) hereof so that Registrable Shares may not be sold pursuant
thereto, the applicable time period shall be extended by the number of days
equal to the number of days during the period beginning with the date of such
suspension or interruption to and ending with the date when the sale of
Registrable Shares pursuant to such registration statement may be recommenced.
(c) Each Holder hereby agrees to provide the Company, upon receipt of its
request, with such information about such Holder to enable the Company to comply
with the requirements of Securities Act and to execute such certificates as the
Company may reasonably request in connection with such information and otherwise
to satisfy any requirements of law.
(d) Notwithstanding anything to the contrary contained in this Agreement,
the Company may delay filing a registration statement, and may withhold efforts
to cause the registration statement to become effective, if the Company
determines in good faith that such registration might (i) materially interfere
with or adversely affect the negotiation or completion of any transaction that
is being contemplated by the Company (whether or not a final decision has been
made to undertake such transaction) or any underwritten public offering of
Common Stock which is the subject of a registration that the Company intends to
effect within 30 days after the right to delay is exercised, or (ii) involve
initial or continuing disclosure obligations that might not be in the best
interest of the Company's stockholders.
6. Underwritten Registrations. Subject to the provisions of Sections 2, 3
and 4 hereof, any of the Registrable Shares covered by a registration statement
may be sold in an underwritten offering at the discretion of the Holder thereof.
In the case of an underwritten offering pursuant to Section 2 hereof, the
managing underwriter or underwriters that will administer the offering shall be
the managing underwriter or underwriters selected by the Company, if such
managing underwriter or underwriters is reasonably satisfactory to the Holders
of a majority of the Registrable Shares to be registered. In the case of any
underwritten offering pursuant to Section 4 hereof, the managing underwriter or
underwriters that will administer the offering shall be the managing underwriter
or underwriters selected by the Holders of a majority of the Registrable Shares
to be registered, if such managing underwriter or underwriters are reasonably
satisfactory to the Company.
7. Expenses. (a) The Registration Expenses of all registrations effected
pursuant to Section 2 and Section 4 hereof shall be borne by (i) the Holders,
collectively, and (ii) by the Company (if the Company sells any shares of Common
Stock in connection with such registration) and by any other Person selling
shares of Common Stock in such registration, collectively, in proportion to the
number of shares of Common Stock (or if equity securities other than Common
Stock are included in such registration, based upon the relative aggregate
offering price of all securities included in such registration) included in such
registration.
(b) The Registration Expenses shall include, without limitation, all
out-of-pocket expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all SEC and stock exchange
registration and filing fees and expenses, reasonable fees and expenses of any
"qualified
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independent underwriter" and its counsel as may be required by the rules of the
National Association of Securities Dealers, Inc., fees and expenses of
compliance with securities or blue sky laws (including without limitation
reasonable fees and disbursements of counsel for the underwriters, if any, in
connection with blue sky qualifications of the Registrable Shares), rating
agency fees, printing expenses, the fees and expenses incurred in connection
with the listing of the shares of Common Stock to be registered on each
securities exchange or national market system on which shares of Common Stock
issued by the Company are then listed, fees and disbursements of counsel for the
Company and all independent certified public accountants (including the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance and compliance), securities laws liability insurance (if the Company
decides to obtain such insurance and the Holders are named insureds of such
insurance), the fees and disbursements of the underwriters (including, without
limitation, expenses relating to "road shows" and other marketing activities),
and the reasonable fees and expenses of any special experts and other Persons
retained by the Company in connection with such registration; provided, however,
that Registration Expenses shall not include (i) any allocation of the overhead
of the Company, including any allocation of the compensation or benefits of
employees of the Company that assist in a registration, or (ii) any other
expense to the extent it would have been incurred by the Company in the absence
of any sale of shares of Common Stock in connection with such registration
(including the cost of the Company's annual audit and its preparation of
quarterly financial statements), or (iii) if the Company is selling any shares
of Common Stock in connection with such registration, the fees and disbursements
of counsel for the Company and any fees and expenses incurred in connection with
the listing of such shares sold by the Company on any securities exchange or
national market system .
(c) The Holders shall bear the following expenses of all registrations
effected pursuant to Section 2 and Section 4 hereof: (i) any underwriting
discounts or commissions or transfer taxes, if any, attributable to the sale of
Registrable Shares by the Holders, and (ii) the fees of counsel retained in
connection with each such registration by the Holders.
8. Indemnification. (a) Indemnification by the Company. In the event of
any registration of any shares of Common Stock of the Company under the
Securities Act pursuant to Sections 2 or 4 hereof, the Company will, and it
hereby does, indemnify and hold harmless, to the extent permitted by law, each
of the Holders of any Registrable Shares covered by such registration statement,
each affiliate of such Holder and their respective directors and officers or
general and limited partners (and the directors, officers, general and limited
partners, affiliates and controlling Persons thereof), each other Person who
participates as an underwriter in the offering or sale of such shares of Common
Stock and each other Person, if any, who controls such Holder or any such
underwriter within the meaning of the Securities Act (collectively, the
"Indemnified Parties"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses (including any amounts paid in any
settlement effected with the Company's consent, which consent shall not be
unreasonably withheld) to which any Indemnified Party may become subject under
the Securities Act, state securities or blue sky laws, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof, whether or not such Indemnified Party is a party
thereto) or expenses arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such shares of Common Stock were registered under the
Securities Act, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement thereto, (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or (iii) any violation by the Company of
any federal, state or common law rule or regulation applicable to the Company
and relating to action required of or inaction by the Company in connection with
any such registration, and the Company will reimburse such Indemnified Party for
any reasonable legal or any other expenses incurred by it in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable to any Indemnified
Party in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or amendment or supplement
thereto or in any such preliminary, final or summary prospectus in reliance upon
and in conformity with written information with respect to such Holder furnished
to the Company by such Holder specifically for use in the preparation thereof.
Such indemnity shall remain in full force and effect
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regardless of any investigation made by or on behalf of such Holder or any
Indemnified Party and shall survive the transfer of such securities by such
Holder.
(b) Indemnification by the Holders and Underwriters. The Company may
require, as a condition to including any Registrable Shares in any registration
statement filed in accordance with Sections 2 or 4 hereof, that the Company
shall have received an undertaking reasonably satisfactory to it from the
Holders of such Registrable Shares or any underwriter to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section 8(a)
hereof) the Company with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information with respect to the
Holders of the Registrable Shares being registered or such underwriter furnished
to the Company by such Holders or such underwriter specifically for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any of
the Holders, or any of their respective affiliates, directors, officers or
controlling Persons, and shall survive the transfer of such securities by such
Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding with
respect to which a claim for indemnification may be made pursuant to this
Section 8, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of the indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 8(a) or (b), except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, with counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided, that the indemnified party shall have the right to
employ counsel to represent the indemnified party and its respective controlling
persons, directors, officers, general or limited partners, employees or agents
who may be subject to liability arising out of any claim in respect of which
indemnity may be sought by the indemnified party against such indemnifying party
under this Section 8 if (i) the employment of such counsel shall have been
authorized in writing by such indemnifying party in connection with the defense
of such action, (ii) the indemnifying party shall not have promptly employed
counsel reasonably satisfactory to the indemnified party to assume the defense
of such action or counsel, or (iii) any indemnified party shall have been
advised in writing by outside counsel reasonably satisfactory to the
indemnifying party that there may be defenses available to such indemnified
party or its respective controlling persons, directors, officers, employees or
agents which are in conflict with those available to the indemnifying party, and
in that event the reasonable fees and expenses of one firm of separate counsel
for the indemnified party (in addition to the reasonable fees and expenses of
one party serving as local counsel) shall be paid by the indemnifying party. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this Section 8
shall for any reason be unavailable to any indemnified party under Section 8(a)
or 8(b) hereof or is insufficient to hold it harmless in respect of any loss,
claim, damage or liability, or any action in respect thereof referred to
therein, then each indemnifying party shall contribute to the amount paid
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the indemnified party
and indemnifying party, and (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) but also the
relative fault of the indemnified party and indemnifying party with respect to
the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. Notwithstanding
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any other provision of this Section 8(d), no Holder of Registrable Shares shall
be required to contribute an amount greater than the dollar amount of the
proceeds received by such Holder with respect to the sale of any such
Registrable Shares. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Other Indemnification. Indemnification similar to that specified in
the preceding subdivisions of this Section 8 (with appropriate modifications)
shall be given by the Company and each Holder of Registrable Shares with respect
to any required registration or other qualification of securities under any
federal or state law or regulation or governmental authority other than the
Securities Act.
(f) Non-Exclusivity. The obligations of the parties under this Section 8
shall be in addition to any liability which any party may otherwise have to any
other party.
9. Rule 144. The Company will file in a timely manner the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any Holder of Registrable
Shares, make publicly available such information), and it will take such further
action as any Holder of Registrable Shares may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Shares without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any Holder of Registrable
Shares, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
10. Certain Restrictions on Sales. Notwithstanding anything contained in
this Agreement to the contrary, neither the Shareholder nor any Designated
Transferee shall sell, transfer or otherwise dispose of any Common Stock
(including the Registrable Shares) after the date hereof and on or prior to July
26, 1997 without the prior written consent of the Company, which consent will
not be withheld if the Company determines, in its reasonable discretion, that
the proposed sale, transfer or other disposition of Registrable Shares would not
be inconsistent with the Company's proposed utilization of its net operating
losses for federal income tax purposes.
11. Assignability. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and permitted
assigns as provided in this Section 11. The Holders may assign their rights
under this Agreement, in whole or in part, only to a Person (a "Designated
Transferee") (a) who (i) is an affiliate of the Shareholder or (ii) is not an
affiliate of the Shareholder but the transfer to whom is consented to in writing
by the Company, (b) who is a transferee of Registrable Shares, and (c) who
agrees to be bound by the terms of this Agreement. Any purported assignment in
violation of the Section shall be void.
12. Notices. Any and all notices or any other communications shall be
given in writing by either (a) personal delivery to and receipted for by the
addressee or by (b) telecopy or registered certified mail which shall be
addressed, in the case of the Company, to: Timothy G. Rupert, Senior Vice
President and Chief Financial Officer, RMI Titanium Company, 1000 Warren Avenue,
Niles, Ohio 44446; and, in the case of the Holders, to: Dan D. Sandman, General
Counsel and Secretary, USX Corporation, 600 Grant Street, Pittsburgh,
Pennsylvania 15219. All such notices and communications shall be deemed to have
been duly given and effective (i) when delivered by hand, if personally
delivered; (ii) two business days after being deposited in the mail, postage
prepaid, if mailed; and (iii) when receipt is acknowledged, if telecopied.
13. No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its Common Stock which is inconsistent with the
rights granted to the Holders in this Agreement.
14. Specific Performance. The Company acknowledges that the rights granted
to the Holders in this Agreement are of a special, unique and extraordinary
character, and that any breach of this Agreement by the Company could not be
compensated for by damages. Accordingly, if the Company breaches its obligations
under this Agreement, the Holders shall be entitled, in addition to any other
remedies that they may have, to
9
<PAGE> 10
enforcement of this Agreement by a decree of specific performance requiring the
Company to fulfill its obligations under this Agreement.
15. Severability. If any provision of this Agreement or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed to be severed from this Agreement. Every other
provision, and any portion of such an invalidated provision that is not
invalidated by such a determination, shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in or more counterparts,
each of which shall be deemed an original and all of which, together, shall
constitute one and the same instrument.
17. Defaults. A default by any Holder in such Holder's compliance with any
of the conditions or covenants hereof or performance of any of the obligations
of such Holder hereunder shall not constitute a default by any other Holder.
18. Amendments, Waivers. (a) Generally. This Agreement may not be amended,
modified or supplemented and no waivers of or consents to departures from the
provisions hereof may be given unless consented to in writing by the Company and
the holders of a majority of the Registrable Shares.
(b) Upon Issuance or Distribution of Other Equity Securities. If, after
the date of this Agreement, the Company issues or distributes any equity
security other than Common Stock by way of stock dividend or stock split or
other distribution, recapitalization or reclassification, the Company and the
Shareholder shall agree upon appropriate additions to and modifications of this
Agreement to (i) preserve to the Shareholder all of the benefits of this
Agreement and (ii) extend to the Shareholder similar rights with respect to such
other securities as are provided in this Agreement to the Shareholder with
respect to the Common Stock if the Company registers shares of such other
security.
19. Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
20. Entire Agreement. This Agreement contains the entire agreement among
the parties hereto with respect to the transactions contemplated herein and the
understandings among the parties relating to the subject matter hereof. Any and
all previous agreements and understandings between or among the parties hereto
regarding the subject matter hereof are, whether written or oral, superseded by
this Agreement.
21. Governing Law. This Agreement is made pursuant to and shall be
construed in accordance with the laws of the State of Ohio. The parties hereto
submit to the jurisdiction of the courts of the State of Ohio in any action or
proceeding arising out of or relating to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
RMI TITANIUM COMPANY
By: /s/ T. G. RUPERT
---------------------------
Name: T. G. Rupert
Title: Executive Vice President
and Chief Financial Officer
USX CORPORATION
By: /s/ G. R. HAGGERTY
---------------------------
Name: G. R. Haggerty
Title: Vice President and
Treasurer
10
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<CIK> 0000854663
<NAME> RMI TITANIUM
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
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0
0
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