<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1996
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WCI STEEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
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<CAPTION>
OHIO 3312 34-1585405
<S> <C> <C>
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
1040 PINE AVENUE, S.E.
WARREN, OHIO 44483-6528
(330) 841-8314
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
BRET W. WISE
VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
1040 PINE AVENUE, S.E.
WARREN, OHIO 44483-6528
(330) 841-8314
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL C. RYAN, ESQ.
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 504-6177
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED NOTE PRICE+ REGISTRATION FEE
<S> <C> <C> <C> <C>
10% Senior Secured Notes due 2004,
Series B............................ $300,000,000 100% $300,000,000 $90,910
</TABLE>
+ Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(f).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 17, 1996
PROSPECTUS
, 1997
[LOGO]
OFFER TO EXCHANGE ITS 10% SENIOR SECURED NOTES DUE 2004, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING
10% SENIOR SECURED NOTES DUE 2004, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 4:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
WCI Steel, Inc., an Ohio corporation ("WCI" or the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and together with this Prospectus, the "Exchange Offer'), to
exchange its 10% Senior Secured Notes due 2004, Series B (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined) of which
this Prospectus is a part, for an equal principal amount of its outstanding 10%
Senior Secured Notes due 2004, Series A (the "Old Notes"), of which $300 million
principal amount is outstanding. The Exchange Notes and the Old Notes are
collectively referred to herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 4:00 p.m., New York City time, on
, 1997, unless the Exchange Offer is extended (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 4:00 p.m., New York
City time, on the Expiration Date. The Exchange Notes will be issued and
delivered promptly after the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer." Old Notes may be tendered only in integral
multiples of $1,000. The Company has agreed to pay the expenses of the Exchange
Offer.
The Exchange Notes will be obligations of the Company evidencing the same
debt and secured ratably by the same collateral as the Old Notes, and will be
entitled to the benefits of the same indenture, dated as of November 27, 1996
(the "Indenture"), between the Company and Fleet National Bank, as trustee (the
"Trustee"). The form and terms of the Exchange Notes are substantially the same
as the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act. See "The Exchange Offer."
The Exchange Notes will bear interest from November 27, 1996. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
up until the date of the issuance of the Exchange Notes. Such waiver will not
result in the loss of interest income to such holders, since the Exchange Notes
will bear interest from the issue date of the Old Notes.
Interest on the Exchange Notes is payable semi-annually on June 1 and
December 1 of each year, commencing June 1, 1997, accruing from November 27,
1996 at the rate of 10% per annum. Except as set forth below, the Exchange Notes
will not be redeemable prior to December 1, 2001. Thereafter, the Exchange Notes
will be redeemable at the option of the Company, in whole or in part, at the
redemption prices set forth herein, together with accrued and unpaid interest,
if any, to the date of redemption. In addition, at any time on or prior to
December 1, 1999, the Company may, subject to certain requirements, redeem up to
33 1/3% of the original aggregate principal amount of the Exchange Notes with
the net cash proceeds of one or more Equity Offerings (as defined), at 109% of
the principal amount thereof, together with accrued and unpaid interest, if any,
to the date of redemption; PROVIDED that at least $200 million of Exchange Notes
remain outstanding immediately after any such redemption. Upon the occurrence of
a Change of Control (as defined), each holder of Notes may require the Company
to repurchase such holder's Notes at 101% of the principal amount thereof plus
accrued interest to the date of repurchase. The Company is obligated in certain
instances to make offers to repurchase Exchange Notes at a purchase price equal
to 100% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase, with the net cash proceeds of
certain sales and other dispositions of assets. See "Description of the Notes."
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a Prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that, by so acknowledging and by
delivering a Prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making or other trading activities. The Company has agreed that
for a period of 180 days after consummation of the Exchange Offer, it will make
this Prospectus, as it may be amended or supplemented from time to time,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
There has been no public market for the Old Notes. If a market for the
Exchange Notes should develop, the Exchange Notes could trade at a discount from
their principal amount. The Company does not intend to list the Exchange Notes
on a national securities exchange or to apply for quotation of the Exchange
Notes through the National Association of Securities Dealers Automated Quotation
System. There can be no assurance that an active public market for the Exchange
Notes will develop.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE EXCHANGE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Exchange Notes offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information with respect to the Company, and the
Exchange Notes offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of certain documents
filed as exhibits to the Registration Statement are not necessarily complete
and, in each case, are qualified by reference to the copy of the document so
filed. The Registration Statement can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material also
can be reviewed through the Commission's Electronic Data Gathering, Analysis,
and Retrieval System, which is publicly available through the Commission's Web
site (http://www.sec.gov).
The Company intends to furnish to each holder of the Exchange Notes annual
reports containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. The Company also will furnish to each holder of the Exchange Notes such
other reports as may be required by applicable law.
The principal executive offices of the Company are located at 1040 Pine
Avenue, S.E., Warren, Ohio 44483-6528, telephone number: (330) 841-8211.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus under the captions "Prospectus
Summary," "Risk Factors," "The Transactions," "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and "Business" and
elsewhere constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of the
Company, or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties and other important factors include, among
others: general economic and business conditions; industry capacity; industry
trends; competition; raw material costs and availability; currency fluctuations;
the loss of any significant customers; changes in business strategy or
development plans; availability, terms and deployment of capital; availability
of qualified personnel; changes in, or the failure or inability to comply with,
government regulation, including, without limitation, environmental regulations;
and other factors referenced in this Prospectus. See "Risk Factors." These
forward-looking statements speak only as of the date of this Prospectus. The
Company expressly disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. HOLDERS OF OLD NOTES ARE URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY BEFORE EXCHANGING THEIR OLD NOTES FOR EXCHANGE NOTES.
WCI'S FISCAL YEAR ENDS OCTOBER 31, AND THUS, FOR EXAMPLE, "FISCAL 1995" REFERS
TO THE FISCAL YEAR ENDED OCTOBER 31, 1995.
THE COMPANY
GENERAL
WCI is a niche oriented integrated producer of value-added, custom steel
products. The Company produces a wide range of custom flat rolled products,
including high carbon, alloy and high strength, silicon electrical, terne coated
and galvanized steel. Since fiscal 1991, custom products have increased from
47.2% of total shipments to 57.9% in fiscal 1996. The Company shipped
approximately 1.4 million tons of steel products in fiscal 1996.
WCI produces approximately 135 grades of custom and commodity steel products
that are used in the manufacture of a wide variety of value-added products such
as saw blades, golf club shafts, lawn mower blades, drive chain links, razor
blades, hand and garden tools, electric motors, gasoline tanks, automotive
bumpers and culvert products. These custom grades typically sell at higher
prices than commodity products, resulting in higher operating margins. Since
fiscal 1991, the price of the Company's custom products has averaged $542 per
ton, while commodity products have averaged $382 per ton. WCI's commodity steel
products consist principally of low carbon flat rolled steel.
WCI's primary customers are steel converters, steel service centers,
construction product companies, electrical equipment manufacturers and, to a
lesser extent, automobile and automotive parts manufacturers. The Company
believes that the small order quantities, narrow widths, specialized chemistries
and other metallurgical properties required to serve these customers make these
markets less attractive to larger integrated steel producers and minimills.
Moreover, most minimill competitors have not offered product in these markets
due to the complex metallurgical requirements of the custom steel grades and the
adverse effect on the productivity of their facilities when producing these
custom products.
WCI believes that it operates at a distinct competitive advantage to other
integrated steel manufacturers due to its low cost structure, its niche oriented
custom product mix and its experienced management team. While categorized as an
integrated mill, management operates WCI with the high efficiency and low
overhead cost structure of a minimill. WCI is among the lowest cost integrated
steel producers in the United States, with one of the lowest labor and overhead
costs per ton in the integrated steel industry given its wide product range. In
addition to low production costs, WCI believes that it has one of the lowest
selling, general and administrative expense structures in the industry at 3.1%
of net sales in fiscal 1995. WCI believes that the combination of these factors
has permitted WCI to generate one of the highest operating margins per net ton
in the domestic steel industry.
WCI's business strategy consists of three principal elements: (a) continue
to increase sales of custom products, thereby further improving operating
margins; (b) continue to build and maintain strong relationships with strategic
customers, targeting customers for which it can supply at least 25% of such
customers' custom steel needs; and (c) continue to improve operating efficiency
and product quality through strategic cost reduction initiatives, as well as a
significant capital investment program.
Since its inception in 1988, WCI has completed over $260 million of capital
investments designed, in part, to increase productivity, decrease production
costs, expand product range and improve product quality. In particular, the
Company currently is in the process of completing the initial phase of a three
to five year upgrade of its hot strip mill, the scope of which includes
enhancing essentially every element of the mill operation, including the
heating, roughing, finishing, cooling and coiling processes. When
3
<PAGE>
completed in mid-1997, the first phase of the hot strip mill upgrade will
significantly improve product quality and expand WCI's product range, in
addition to improving the mill's productivity and reducing operating costs. WCI
is also currently installing a high-temperature hydrogen anneal facility to
upgrade its product mix and to meet the rising demand in the custom product
market for silicon electrical steels.
In April 1995, the Company completed a major reline of its blast furnace, a
procedure which is performed on a routine basis every eight to ten years. In
December 1991, WCI completed the installation of a twin-strand continuous slab
caster (the "Continuous Caster") and a ladle metallurgy facility (the "LMF") at
a combined cost of approximately $135 million, and all of the Company's products
have been continuously cast since May 1992. The Continuous Caster substantially
reduced the Company's operating costs, dramatically improved the metallurgical
and surface qualities of its products and enabled WCI to participate in markets
where the superiority of continuously cast steel is a competitive strength. See
"Business--Capital Investments." WCI believes that as a result of the capital
investments completed to date, as well as those ongoing presently, the Company
operates and will continue to maintain a modern and efficient integrated steel
mill offering a diverse product mix.
RECENT DEVELOPMENTS
Results for fiscal 1995 and the first two quarters of fiscal 1996 were
adversely impacted by a 54 day labor contract dispute and resulting work
stoppage beginning September 1, 1995 upon the expiration of the Company's
previous collective bargaining agreement with the United Steelworkers of America
(the "USWA"). In particular, WCI's order rate, shipping volume, order backlog
and net sales were significantly reduced during the work stoppage. On October
24, 1995, the Company successfully reached a new four year agreement with the
USWA. Subsequent to entering into such agreement, the Company undertook to
reestablish its order rate and backlog over the first two quarters of fiscal
1996. Since the Company's custom product mix was below levels realized in fiscal
1995, WCI's net sales and operating income were reduced during such periods.
Results for fiscal 1995 were also negatively affected by the planned reline of
the Company's blast furnace discussed above.
Despite the labor contract dispute, the Company has reported strong
operating results during fiscal 1996. For the year ended October 31, 1996, the
Company generated net sales of $660.8 million, Adjusted EBITDA (as defined) of
$94.0 million and net income of $28.0 million. Moreover, for the fourth quarter
of fiscal 1996, custom steel products represented approximately 65.9% of net
tons shipped versus 44.4% during the first quarter of fiscal 1996, immediately
following the settlement of the labor contract dispute. The Company believes
that this rapid return to its custom product mix reflects the Company's strong
relationships with its customers and the benefits derived from offering niche
oriented custom steel products.
CONTROL OF THE COMPANY
All of the Company's issued and outstanding Common Stock is owned by The
Renco Group, Inc. ("Renco"), which is 95.9% owned by Mr. Ira Leon Rennert, the
Chairman of the Company and Chairman and Chief Executive Officer of Renco, and
by trusts established by him for members of his family (but of which he is not a
trustee). As a result of such ownership, Mr. Rennert controls the Company and
its subsidiaries. Mr. Rennert is the sole Director of the Company.
4
<PAGE>
THE EXCHANGE OFFER
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THE EXCHANGE OFFER.................. $1,000 principal amount of Exchange Notes will be
issued in exchange for each $1,000 principal amount
of Old Notes validly tendered pursuant to the
Exchange Offer. As of the date hereof, $300 million
in aggregate principal amount of Old Notes are
outstanding. The Company will issue the Exchange
Notes to tendering holders of Old Notes promptly
after the Expiration Date.
RESALES............................. Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any person
receiving such Exchange Notes, whether or not such
person is the holder (other than any such holder or
other person which is (i) a broker-dealer that
receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-
making or other trading activities, or (ii) an
"affiliate" of the Company within the meaning of Rule
405 under the Securities Act (collectively,
"Restricted Holders")) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that (a) such Exchange
Notes are acquired in the ordinary course of business
of such holder or other person (b) neither such
holder nor such other person is engaged in or intends
to engage in a distribution of such Exchange Notes
and (c) neither such holder nor other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. See Morgan Stanley & Co. Incorporated, SEC
No-Action Letter (available June 5, 1991) and Exxon
Capital Holdings Corporation, SEC No-Action Letter
(available May 13, 1988). Each broker or dealer that
receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were
acquired by such broker or dealer as a result of
market-making or other activities, must acknowledge
that it will deliver a Prospectus in connection with
any sale of such Exchange Notes. See "Plan of
Distribution."
EXPIRATION DATE..................... 4:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended, in which case
the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
ACCRUED INTEREST ON THE EXCHANGE
NOTES AND OLD NOTES............... The Exchange Notes will bear interest from November
27, 1996. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived
the right to receive any payment in respect of
interest on such Old Notes accrued to the date of
issuance of the Exchange Notes.
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5
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CONDITIONS TO THE EXCHANGE OFFER.... The Exchange Offer is subject to certain customary
conditions. The conditions are limited and relate in
general to proceedings which have been instituted or
laws which have been adopted that might impair the
ability of the Company to proceed with the Exchange
Offer. As of the date of this Prospectus, none of
these events had occurred, and the Company believes
their occurrence to be unlikely. If any such
conditions exist prior to the Expiration Date, the
Company may (a) refuse to accept any Old Notes and
return all previously tendered Old Notes, (b) extend
the Exchange Offer or (c) waive such conditions. See
"The Exchange Offer--Conditions."
PROCEDURES FOR TENDERING OLD
NOTES............................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the Old
Notes to be exchanged and any other required
documentation to the Exchange Agent (as defined) at
the address set forth herein and therein. Tendered
Old Notes, the Letter of Transmittal and accompanying
documents must be received by the Exchange Agent by
4:00 p.m. New York City time, on the Expiration Date.
See "The Exchange Offer-- Procedures for Tendering."
By executing the Letter of Transmittal, each holder
will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such
Exchange Notes, whether or not such person is the
holder, that neither the holder nor any such other
person is engaged in or intends to engage in a
distribution of the Exchange Notes or has an
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes, and that neither the holder nor any such other
person is an "affiliate," as defined under Rule 405
of the Securities Act, of the Company.
SPECIAL PROCEDURES FOR BENEFICIAL
HOLDERS........................... Any beneficial holder whose Old Notes are registered
in the name of his broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on his behalf. If such
beneficial holder wishes to tender on his own behalf,
such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering
his Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond
power from the registered holder. The transfer of
record ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES...... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who
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6
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cannot deliver their Old Notes and a properly
completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date may
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS................... Tenders may be withdrawn at any time prior to 4:00
p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF OLD NOTES AND DELIVERY
OF EXCHANGE NOTES................. Subject to certain conditions, the Company will
accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 4:00
p.m., New York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange Offer
will be delivered promptly after the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS.................... The exchange of Old Notes for Exchange Notes pursuant
to the Exchange Offer will not be a taxable event for
federal income tax purposes. A holder's holding
period for Exchange Notes will include the holding
period for Old Notes. See "Certain Federal Income Tax
Considerations."
EXCHANGE AGENT...................... Fleet National Bank is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer. The mailing address of the Exchange Agent is
Fleet National Bank, Corporate Trust Administration,
777 Main Street - CTMO0238, Hartford, Connecticut
06115, Attention: Robert Reynolds. Deliveries by hand
or overnight courier should be addressed to Fleet
National Bank, c/o First Chicago Trust Company of New
York, 14 Wall Street, 8th Floor - Window No. 2, New
York, New York 10005. For information with respect to
the Exchange Offer, call the Exchange Agent at (860)
986-1271 or fax at (860) 986-7908.
USE OF PROCEEDS..................... The Company will not receive any proceeds from the
Exchange Offer. See "Use of Proceeds." The Company
has agreed to bear the expenses of the Exchange Offer
pursuant to the Registration Rights Agreement (as
defined). No underwriter is being used in connection
with the Exchange Offer.
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SUMMARY OF TERMS OF EXCHANGE NOTES
The Exchange Offer constitutes an offer to exchange up to $300 million
aggregate principal amount of the Exchange Notes for up to an equal aggregate
principal amount of Old Notes. The Exchange Notes will be obligations of the
Company evidencing the same indebtedness as the Old Notes, and will be entitled
to the benefit of the same Indenture. The form and terms of the Exchange Notes
are substantially the same as the form and terms of the Old Notes except that
the Exchange Notes have been registered under the Securities Act. See
"Description of the Notes."
COMPARISON WITH OLD NOTES
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FREELY TRANSFERABLE................. The Exchange Notes will be freely transferable under
the Securities Act by holders who are not Restricted
Holders. Restricted Holders are restricted from
transferring the Exchange Notes without compliance
with the registration and prospectus delivery
requirements of the Securities Act. The Exchange
Notes will be identical in all material respects
(including interest rate, maturity and restrictive
covenants) to the Old Notes, with the exception that
the Exchange Notes will be registered under the
Securities Act. See "The Exchange Offer--Terms of the
Exchange Offer."
REGISTRATION RIGHTS................. The holders of Old Notes currently are entitled to
certain registration rights pursuant to the
Registration Rights Agreement, dated November 27,
1996 (the "Registration Rights Agreement"), by and
between the Company and Donaldson, Lufkin and
Jenrette Securities Corporation, the initial
purchaser of the Old Notes ("DLJ"), including the
right to cause the Company to register the Old Notes
under the Securities Act if the Exchange Offer is not
consummated prior to the Exchange Offer Termination
Date (as defined). See "The Exchange
Offer--Conditions." However, pursuant to the
Registration Rights Agreement, such registration
rights will expire upon consummation of the Exchange
Offer. Accordingly, holders of Old Notes who do not
exchange their Old Notes for Exchange Notes in the
Exchange Offer will not be able to reoffer, resell or
otherwise dispose of their Old Notes unless such Old
Notes are subsequently registered under the
Securities Act or unless an exemption from the
registration requirements of the Securities Act is
available.
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TERMS OF THE EXCHANGE NOTES
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<S> <C>
MATURITY DATE....................... December 1, 2004.
INTEREST PAYMENT DATES.............. June 1 and December 1, commencing June 1, 1997.
OPTIONAL REDEMPTION................. The Exchange Notes will be redeemable at the
Company's option, in whole or in part, at any time on
or after December 1, 2001, at the redemption prices
set forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. In
addition, on or prior to December 1, 1999, in the
event of one or more Equity Offerings (as defined),
the Company may, at its option, redeem up to 33 1/3%
of the principal amount of Exchange Notes originally
issued from the net proceeds thereof at a redemption
price equal to 109% of the principal amount thereof,
together with accrued and
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
unpaid interest, if any, to the date of redemption;
provided that at least $200 million of Notes remain
outstanding immediately after such redemption and any
such redemption occurs not more than 120 days after
the consummation of any such Equity Offering.
CHANGE OF CONTROL................... Upon a Change of Control, each holder of Exchange
Notes will have the right to require the Company to
repurchase all or a portion of such holder's Exchange
Notes at a price of 101% of the principal amount
thereof plus accrued interest to the repurchase date.
See "Description of the Notes--Certain
Covenants--Change of Control."
ASSET SALE PROCEEDS................. The Company is obligated in certain instances to make
offers to purchase the Exchange Notes at a redemption
price of 100% of the principal amount thereof plus
accrued interest to the repurchase date with the net
cash proceeds of certain sales or other dispositions
of assets. See "Description of the Notes--Certain
Covenants--Limitation on Sale of Assets."
SECURITY............................ The Company's obligations will be secured by a second
priority lien on substantially all of the existing
property, plant and equipment of the Company (other
than inventory, accounts receivable and other current
assets, intangibles and the capital stock or assets
of the Company's subsidiaries), which will become a
first priority lien if all of the Company's 10 1/2%
Senior Notes Due 2002 (the "Existing Notes") cease to
be outstanding ($280,000 in aggregate principal
amount of the Existing Notes are currently
outstanding). A Voluntary Employee Beneficiaries
Association trust fund (the "VEBA Trust"),
established to hold Company contributions to fund
postretirement health care and life insurance
obligations for the benefit of hourly employees, will
also hold a second priority lien on the security for
the Exchange Notes, which lien will remain a second
priority lien even if the lien in favor of the
Exchange Notes becomes a first priority lien. See
"Risk Factors--Relating to WCI--Substantial Employee
Postretirement Obligations." Nevertheless, pursuant
to an agreement between the Company and the USWA, the
lien held by the VEBA Trust may not be exercised so
long as any senior indebtedness, including the Notes
and the Existing Notes, is outstanding.
RANKING............................. The Exchange Notes will be senior secured obligations
of the Company and will rank senior in right of
payment to all future senior subordinated and
subordinated indebtedness of the Company and PARI
PASSU with all other existing and future senior
indebtedness of the Company.
CERTAIN COVENANTS................... The Indenture contains certain covenants, including,
without limitation, covenants with respect to the
following matters: (a) limitation on indebtedness;
(b) limitation on liens; (c) limitation on restricted
payments; (d) limitation on payment restrictions
affecting subsidiaries; (e) limitation on transac-
tions with affiliates; (f) limitation on
sale/leaseback transactions; (g) impairment of
security interest; (h) consolidations, mergers and
transfers of all or substantially all of the assets
of the Company; and (i) limitation on preferred stock
of subsidiaries. See "Description of the
Notes--Certain Covenants."
</TABLE>
9
<PAGE>
THE TRANSACTIONS
On October 23, 1996, WCI commenced a tender offer (the "Tender Offer") to
purchase for cash up to all (but not less than a majority in principal amount
outstanding) of the Existing Notes and a related solicitation (the "Consent
Solicitation") of consents to delete or modify certain terms of the indenture
related to the Existing Notes (the "Existing Notes Indenture"). The aggregate
purchase price paid in respect of validly tendered and not withdrawn Existing
Notes and the related consents was 112.5% of their principal amount plus accrued
interest up to, but not including, the date of purchase. The Company received
tenders and consents representing approximately $206.1 million in aggregate
principal amount of the Existing Notes outstanding and consummated the Tender
Offer and the Consent Solicitation on November 27, 1996. The Old Notes Offering
(as defined), the Tender Offer and the Consent Solicitation are referred to
collectively as the "Debt Transactions."
On October 28, 1996, WCI Steel Holdings, Inc. ("Holdings"), a wholly-owned
subsidiary of Renco, commenced a tender offer (the "Equity Tender Offer") to
purchase for cash all of the outstanding shares of common stock, no par value,
$.01 stated value (the "Common Stock"), of the Company. The purchase price paid
in respect of validly tendered shares of Common Stock was $10 per share, net to
the seller in cash. Holdings received tenders of 5,397,623 shares of Common
Stock and consummated the Equity Tender Offer on November 27, 1996. Renco owned
approximately 84% of the outstanding Common Stock prior to the Equity Tender
Offer and contributed its shares of Common Stock to Holdings, which together
with the shares of Common Stock purchased by Holdings in the Equity Tender
Offer, resulted in Holdings owning approximately 99.3% of the outstanding Common
Stock. Immediately after completion of the Equity Tender Offer, Holdings
effected a "short form" merger of Holdings, at the same price per share as in
the Equity Tender Offer, with and into WCI (the "Merger"), with WCI surviving as
a wholly-owned subsidiary of Renco. The Equity Tender Offer and the Merger are
collectively referred to as the "Equity Transactions."
On November 27, 1996, the Company issued and sold the Old Notes (the "Old
Notes Offering"). Also on November 27, 1996, the Company used a portion of the
net proceeds from the Old Notes Offering and its available cash to purchase the
Existing Notes tendered pursuant to the Tender Offer, to purchase the Common
Stock tendered pursuant to the Equity Tender Offer and to fund in escrow the
consideration to be paid to non-tendering shareholders of the Company pursuant
to the Merger. In addition, immediately after the Merger, the Company used a
portion of the net proceeds from the Old Notes Offering and its available cash
to pay a dividend to Renco. The Debt Transactions, the Equity Transactions and
the dividend to Renco are referred to collectively as the "Transactions."
RISK FACTORS
Prospective holders of the Exchange Notes should carefully consider all of
the information set forth in this Prospectus and, in particular, should evaluate
the specific factors set forth under "Risk Factors" for risks involved with an
investment in the Exchange Notes.
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data for each of the years in the
five fiscal year periods ended October 31, 1995 and the balance sheet data as of
October 31, 1995 have been derived from the consolidated financial statements of
WCI, which financial statements have been audited by KPMG Peat Marwick LLP. The
consolidated statement of operations data for the nine months ended July 31,
1995 and 1996 and the balance sheet data as of July 31, 1996 have been derived
from WCI's unaudited consolidated financial statements. The financial data set
forth below should be read in conjunction with WCI's audited consolidated
financial statements and the related notes thereto for the fiscal years ended
October 31, 1993, 1994 and 1995 and the unaudited results and the related notes
thereto for the nine months ended July 31, 1995 and 1996 appearing elsewhere
herein and with "Management's Discussion and Analysis of Results of Operations
and Financial Condition."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED OCTOBER 31, JULY 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994(1) 1995(2) 1995(3) 1996(4)
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS AND TONS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $ 507,118 $ 515,708 $ 578,639 $ 709,363 $ 630,990 $ 523,611 $ 490,147
Gross margin...................................... 45,608 51,770 86,639 134,753 86,201 99,777 78,680
Operating income.................................. 13,350 13,877 46,517 79,996 45,348 67,446 45,781
Interest expense.................................. 9,983 13,715 23,182 28,709 25,787 19,530 18,742
Interest income................................... -- -- -- 1,377 5,441 3,833 4,469
Income before income taxes, extraordinary losses
on early retirement of debt and cumulative
effect of change in accounting principle........ 3,617 424 23,636 52,792 25,773 52,426 31,852
Income before extraordinary losses on early
retirement of debt and cumulative effect of
change in accounting principle.................. 963 36 14,151 30,853 15,460 31,419 19,112
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(5)......................................... $ 32,194 $ 36,265 $ 67,796 $ 99,992 $ 67,297 $ 83,627 $ 63,085
Adjusted EBITDA(6)................................ 38,146 42,411 77,065 109,599 77,363 91,132 67,176
Pro forma cash interest expense(7)................ 31,964 24,162 23,373
Capital expenditures.............................. 55,497 25,477 14,639 14,371 26,173 23,943 20,406
Depreciation and amortization..................... 18,594 22,126 20,978 19,868 21,178 15,504 16,960
Ratio of adjusted EBITDA to pro forma cash
interest expense................................ 2.4x 3.8x 2.9x
OTHER OPERATING DATA:
Net tons shipped.................................. 1,135 1,209 1,302 1,468 1,222 1,013 1,055
Percent custom products........................... 47.2% 44.9% 53.9% 56.9% 59.4% 58.6% 55.4%
Average selling price per net ton shipped......... $ 447 $ 427 $ 445 $ 483 $ 516 $ 517 $ 465
Average cost per net ton shipped.................. 407 384 378 391 446 418 390
Average gross margin per net ton shipped.......... 40 43 67 92 71 98 75
Average operating income per net ton shipped...... 12 11 36 54 37 67 43
Order backlog at end of period (tons)............. 230 212 301 294 220 241 299
Average number of active employees................ 2,704 2,636 2,471 2,323 2,217 2,223 2,174
Man-hours per net ton shipped(8).................. 3.1 2.9 2.5 2.3 2.4 2.4 2.1
</TABLE>
<TABLE>
<CAPTION>
AS OF
JULY 31, 1996
------------------------
<S> <C> <C>
ACTUAL ADJUSTED(9)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (excluding cash, cash equivalents and short-term investments)........... $ 31,128 10) $ 56,946
Property, plant and equipment, net...................................................... 195,033 195,033
Total assets............................................................................ 571,947 462,152
Total debt (including current portion).................................................. 211,801 305,681
Shareholders' equity (deficit).......................................................... 73,464 (116,658)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
11
<PAGE>
(1) Fiscal 1994 Statement of Operations reflects $11.1 million of nonrecurring
expenses related to the Company's initial public offering and the offering
of the Existing Notes.
(2) Fiscal 1995 results were adversely impacted by a 54 day labor contract
dispute and resulting work stoppage commencing September 1, 1995 and a 36
day blast furnace reline commencing on April 1, 1995. See "Prospectus
Summary--The Company--Recent Developments."
(3) Results for the nine months ended July 31, 1995 were adversely impacted by
a 36 day blast furnace reline commencing on April 1, 1995. See "Offering
Memorandum Summary--The Company--Recent Developments."
(4) The Company's custom product mix and the results for the nine months ended
July 31, 1996 were adversely impacted by a 54 day labor contract dispute
and resulting work stoppage which was concluded on October 24, 1995. See
"Offering Memorandum Summary--The Company--Recent Developments."
(5) EBITDA represents earnings before interest expense (net of interest
income), income taxes and depreciation and amortization. Information
regarding EBITDA is presented because of its use by certain investors as
one measure of an issuer's historical ability to service its debt. EBITDA
should not be considered an alternative to, or more meaningful than,
operating income or cash flow as an indicator of an issuer's operating
performance.
(6) Adjusted EBITDA represents EBITDA plus non-cash charges associated with
postretirement health care and life insurance benefits.
(7) Pro forma cash interest expense is computed by removing from cash interest
expense the cash interest expense associated with the tendered Existing
Notes ($21.6 million for fiscal 1995 and $16.2 million for each of the
nine month periods ended July 31, 1995 and 1996) and adding cash interest
expense on the Notes of $30.0 million for fiscal 1995 and $22.5 million
for each of the nine month periods ended July 31, 1995 and 1996.
(8) Reflects hours associated with hourly steel production and maintenance
employees.
(9) The Balance Sheet Data as adjusted reflects adjustments to give effect to
the Transactions, as if each had occurred on July 31, 1996.
(10) Working capital excludes cash, cash equivalents and short-term investments
of approximately $156.7 million.
12
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET FORTH
BELOW AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS.
RELATING TO WCI
SUBSTANTIAL INDEBTEDNESS
WCI has substantial indebtedness and debt service requirements. At July 31,
1996, after giving effect to the Transactions, WCI would have had outstanding
consolidated long-term debt of approximately $305.7 million and a shareholder's
deficit of approximately $116.7 million.
WCI's level of indebtedness will have several important effects on its
future operations, including the following: (a) a significant portion of WCI's
cash flow from operations will be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes; (b) the financial
covenants and other restrictions contained in WCI's $100.0 million revolving
credit agreement (the "WCI Revolving Credit Facility") require WCI to meet
certain financial tests and limit its ability to borrow additional funds or to
dispose of assets; and (c) WCI's ability to obtain additional financing in the
future for working capital, postretirement health care and pension funding,
capital expenditures, acquisitions, general corporate purposes or other purposes
may be impaired. Additionally, WCI's ability to meet its debt service
obligations and to reduce its total debt will be dependent upon WCI's future
performance, which will be subject to general economic conditions and to
financial, business and other factors affecting the operations of WCI, many of
which are beyond its control.
In addition, the consummation of the Transactions has reduced WCI's
liquidity. If the Company is unable to draw amounts available under the WCI
Revolving Credit Facility, such inability could have a material adverse effect
on the financial condition and results of operations of the Company. Moreover,
an inability of WCI to meet the financial covenants contained in the WCI
Revolving Credit Facility or other indebtedness could result in an acceleration
of amounts due thereunder.
RESTRICTIONS IMPOSED BY TERMS OF WCI'S INDEBTEDNESS
The terms and conditions of the WCI Revolving Credit Facility and the
Indenture impose restrictions that will affect, among other things, the ability
of WCI to incur debt, pay dividends, make acquisitions, create liens, make
capital expenditures and make certain investments.
The ability of WCI to comply with the foregoing provisions can be affected
by events beyond WCI's control. The breach of any of these covenants could
result in a default under WCI's indebtedness, including the WCI Revolving Credit
Facility and the Indenture. In the event of any such default, depending on the
actions taken by the lenders under the WCI Revolving Credit Facility, WCI may be
unable to make any payments of principal or interest on the Exchange Notes for a
period of time. In addition, the lenders under the WCI Revolving Credit Facility
could elect to declare all amounts borrowed, together with accrued and unpaid
interest, to be due and payable. If WCI were unable to repay such amounts, the
lenders under the WCI Revolving Credit Facility could proceed against certain
collateral securing indebtedness under the WCI Revolving Credit Facility. If
such indebtedness under the WCI Revolving Credit Facility were to be
accelerated, there can be no assurance that the assets of WCI would be
sufficient to repay in full such indebtedness and the other indebtedness of WCI,
including the Exchange Notes. See "Description of WCI Revolving Credit Facility"
and "Description of the Notes."
CERTAIN CREDITORS' RIGHTS
The Old Notes Offering and the application of the net proceeds therefrom may
be subject to review under relevant federal and state fraudulent conveyance laws
if a bankruptcy, reorganization or rehabilitation case or a lawsuit (including
in circumstances where bankruptcy is not involved) were commenced by or
13
<PAGE>
on behalf of unpaid creditors of WCI at some future date. These laws vary among
the various jurisdictions. In general, under these laws, if a court were to find
that, at the time an obligation (such as the Old Notes) was incurred, either (a)
such obligation was incurred with the intent of hindering, delaying or
defrauding creditors or (b) the entity incurring the obligation received less
than reasonably equivalent or fair value consideration in exchange for the
incurrence of such obligation and (i) was insolvent or was rendered insolvent by
reason thereof, (ii) was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, (iii) intended to
incur, or believed, or reasonably should have believed, that it would incur,
debts beyond its ability to pay such debts as they matured (as all of the
foregoing terms are defined in or interpreted under the fraudulent conveyance
statutes) or (iv) such entity was a defendant in an action for money damages, or
had a judgment for money damages docketed against it (if, in either case, after
final judgment, the judgment is unsatisfied) (each of clauses (i)-(iv) above, a
"Fraudulent Conveyance"), such court could impose legal and equitable remedies,
including (x) subordination of the obligation to presently existing and future
indebtedness of the entity, (y) avoidance of the issuance of the obligation and
the liens, and direction of the repayment of any amounts paid from the proceeds
thereof to a fund for the benefit of the entity's creditors or (z) taking of
other action detrimental to the holders of the Notes.
The measures of insolvency for purposes of determining whether a Fraudulent
Conveyance occurred would vary depending upon the laws of the relevant
jurisdiction and upon the valuation assumptions and methodology applied by the
court. Generally, however, a company would be considered insolvent for purposes
of the foregoing if the sum of the company's debts, including contingent
unliquidated and unmatured liabilities, is greater than all of such company's
property at a fair valuation, or if the present fair saleable value of the
company's assets is less than the amount that will be required to pay the
probable liability on its existing debts as they become absolute and matured.
WCI believes that at the time of, or as a result of, the issuance of the Old
Notes and the use of proceeds therefrom, WCI (a) was not insolvent or rendered
insolvent under the foregoing standards, (b) was not engaged in a business or
transactions for which its remaining assets constitute unreasonably small
capital, (c) did not intend to incur, and does not believe that it did incur,
debts beyond its ability to pay such debts as they mature and (d) had sufficient
assets to satisfy any probable money judgment against it in any pending actions.
Consequently, WCI believes that even if one or more elements of the Old Notes
Offering were deemed to involve the incurrence of an obligation for less than
reasonably equivalent or fair value, a Fraudulent Conveyance would not occur.
The beliefs with regard to the solvency of WCI are based in part on WCI's
operating history and management's analysis of internal cash flow projections
and estimated values of assets and liabilities of WCI at the time of the Old
Notes Offering. There can no be assurance, however, that a court passing on
these issues would adopt the same methodology or assumptions, or arrive at the
same conclusions.
SECURITY
The Old Notes are, and the Exchange Notes will be, secured by a second
priority lien on, and security interest in, substantially all of WCI's existing
property, plant and equipment, which will become a first priority lien if all of
the Existing Notes cease to be outstanding, as described under "Description of
the Notes--Security." Such security will not extend to WCI's inventory, accounts
receivable and other current assets, intangibles and the capital stock or assets
of WCI's subsidiaries. The VEBA Trust also holds a second priority lien on the
security for the Old Notes and will hold a second priority lien on the security
for the Exchange Notes; however, such lien will remain a second priority lien
even if the lien in favor of the Notes becomes a first priority lien.
The net book value of the Collateral (as defined) on July 31, 1996 was
approximately $188 million and no appraisals of any of the Collateral were
prepared in connection with the Old Notes Offering or have been prepared in
connection with the Exchange Offer. There can be no assurance that the proceeds
of the sale of any Collateral pursuant to the Indenture and the related Security
Documents (as defined) following
14
<PAGE>
a declaration of acceleration of the Notes will be sufficient to satisfy payment
of the then outstanding Notes. While any Existing Notes are outstanding
($280,000 in aggregate principal amount of the Existing Notes are currently
outstanding), such proceeds would be shared on a PRO RATA basis by the holders
of the outstanding Notes and the VEBA Trust, established to hold Company
contributions to fund postretirement health care and life insurance obligations
for the benefit of hourly employees. See "--Substantial Employee Postretirement
Obligations." Any deficiency claim would rank PARI PASSU in right of payment
with all other unsecured senior indebtedness of WCI. Through August 31, 1999,
the Company has the right to terminate the liens granted in favor of the VEBA
Trust by making a cash and/or stock contribution to the VEBA Trust sufficient to
cause the assets of the VEBA Trust to be $32 million. In addition, the ability
of the holders of the Exchange Notes to realize upon the Collateral may be
subject to certain bankruptcy law limitations in the event of a bankruptcy of
WCI. See "Description of the Notes--Certain Bankruptcy Limitations."
The Indenture permits the release of Collateral without substitution of
collateral of equal value under certain circumstances. See "Description of the
Notes--Possession, Use and Release of Collateral."
CONTROL BY RENCO
WCI is a wholly-owned subsidiary of Renco, of which Mr. Ira Leon Rennert is
the controlling stockholder. As a result of his indirect ownership of all the
capital stock of WCI, Mr. Rennert is, and will continue to be, able to direct
and control the policies of WCI, including mergers, sales of assets and similar
transactions and the election of directors. Mr. Rennert is the sole Director of
the Company.
LABOR RELATIONS
The USWA represents approximately 75% of the Company's employees. In October
1995, the Company negotiated a new collective bargaining agreement with the
USWA, which expires on August 31, 1999. There can be no assurance as to the
results of negotiations of future collective bargaining agreements, whether
future collective bargaining agreements will be negotiated without production
interruptions or the possible impact of future collective bargaining agreements,
or the negotiation thereof, on the Company's financial condition and results of
operations. The Company experienced a 54 day labor contract dispute and
resulting work stoppage in connection with the negotiation of the current
collective bargaining agreement. There can be no assurance that work stoppages
will not occur in the future in connection with labor negotiations or otherwise.
SUBSTANTIAL EMPLOYEE POSTRETIREMENT OBLIGATIONS
The Company has substantial financial obligations related to its employee
postretirement plans for medical and life insurance and pensions. Statement of
Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106") requires accrual of retiree medical and life
insurance benefits rather than recognition of costs as claims are paid. In
accordance with SFAS 106, a liability has been established for the present value
of the estimated future unfunded medical and life insurance benefit obligations.
In addition, in accordance with the Statement of Financial Accounting Standards
No. 87, "Pensions," the Company has recognized a minimum liability equal to its
unfunded accumulated pension benefit obligations. As of October 31, 1995, the
Company had an accumulated postretirement health care and life insurance benefit
obligation of approximately $94.2 million (of which approximately $81.5 million
relates to hourly employees who are beneficiaries of the VEBA Trust and the
second priority lien in favor of the VEBA Trust will secure the obligations of
the Company for postretirement health care and life insurance benefits, see
"--Security"), and the Company had a projected pension benefit obligation in
excess of plan assets of approximately $44.5 million. The cash payments for
actual postretirement health care and life insurance claims were approximately
$1.1 million during the first nine months of fiscal 1996. The Company also has a
contractual agreement to contribute $.50 per hour worked by certain hourly
employees to the VEBA Trust, or a minimum of approximately $1.5 million per
year, and
15
<PAGE>
has certain minimum pension funding requirements under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). See "Business--Benefit Plans"
and Notes 7 and 8 to the Company's audited consolidated financial statements.
ENVIRONMENTAL MATTERS
In common with much of the steel industry, WCI's facilities are located on
sites that have been used for heavy industrial purposes for decades.
Accordingly, WCI is and will continue to be subject to numerous federal, state
and local environmental laws and regulations governing, among other things, air
emissions, waste water discharge and solid and hazardous waste disposal. WCI has
made and intends to continue to make the necessary expenditures for
environmental remediation and compliance with environmental laws and
regulations. Environmental laws and regulations have changed rapidly in recent
years, and WCI may be subject to more stringent environmental laws and
regulations in the future. Compliance with more stringent environmental laws and
regulations could have a material adverse effect on WCI's financial condition
and results of operations.
On June 29, 1995, the Department of Justice, on behalf of the Environmental
Protection Agency (the "EPA"), instituted a civil action against WCI under the
Clean Water Act in the United States District Court for the Northern District of
Ohio (the "CWA Litigation"). The action alleges numerous violations of the
Company's National Pollution Discharge Elimination System permit alleged to have
occurred during the years 1989 through 1996, inclusive. On March 29, 1996, the
Department of Justice on behalf of the EPA, instituted another civil action
against the Company in the same court under the Clean Air Act alleging
violations by the Company of the work practice, inspection and notice
requirements for demolition and renovation of the National Emission Standard for
Hazardous Air Pollutants for Asbestos and also violations of the particulate
standard and the opacity limits applicable to the Company's facilities in
Warren, Ohio. Each action seeks a civil penalty not to exceed the statutory
maximum of $25,000 per day per violation and also seeks an injunction against
continuing violations. The Company believes that imposition of the statutory
maximum penalty for the alleged violations is unlikely based upon past judicial
penalties imposed under the Clean Water Act and the Clean Air Act, and that it
has defenses to liability. However, no assurance can be given that the Company
will not be found to have liability and, if it has liability, that the statutory
maximum penalty will not be imposed. By letter dated November 1, 1996, EPA's
Region V Water Division Director requested information pursuant to the Clean
Water Act from the Company relating to the Warren facility. The request seeks
information as to the effect of a prohibition against federal procurement of the
Company's products on the Company's business. The Company has not been notified
that the EPA will seek a federal procurement prohibition based on alleged permit
violations. However, there can be no assurance that a federal procurement
prohibition will not be imposed. If the statutory maximum penalty or federal
procurement prohibition or a similarly substantial penalty were imposed, it
could have a material adverse effect on the Company. The Company is negotiating
with the EPA toward a settlement of these matters.
WCI has obtained a storage permit under the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), for waste pickle liquor at its Warren
facility acid regeneration plant. As a provision of the permit, the Company will
be required to undertake a corrective action program with respect to historical
material handling practices at the Warren facility. WCI has developed and
submitted a workplan for the first investigation step of the corrective action
program, the RCRA Facility Investigation ("RFI"), to the EPA and is presently
negotiating the scope of the RFI with the EPA. The final scope of the corrective
action required to remediate or reclaim any contamination that may be present at
or emanating from the Warren facility is dependent upon the findings of the RFI
and the development and approval of the corrective action program. Accordingly,
the Company is unable at this time to estimate the final cost of the corrective
action program or the period over which such costs may be incurred, and there
can be no assurance that it would not have a material adverse effect on the
financial condition of the Company.
16
<PAGE>
The costs for environmental compliance may place domestic steel producers,
including WCI, at a competitive disadvantage with respect to certain foreign
steel producers and manufacturers of steel substitutes that are subject to less
stringent environmental requirements. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition--Liquidity and Capital
Resources-- Environmental Matters" and "Business--Environmental Matters."
ABSENCE OF A PUBLIC MARKET
The Exchange Notes will be new securities for which there is currently no
public market. The Company does not intend to list the Exchange Notes on any
national securities exchange or to seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"). DLJ has advised the Company that it currently intends to make a
market in the Exchange Notes, but it is not obligated to do so and, if
commenced, may discontinue such market making at any time. Accordingly, there
can be no assurance as to the development of any market or liquidity of any
market that may develop for the Exchange Notes.
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, the aggregate principal amount of Old Notes outstanding will decrease,
with a resulting decrease in the liquidity of the market therefor.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of the Old Notes set forth in the legend thereon as a consequence of
the issuance of the Old Notes pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act. In general,
Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company currently
does not anticipate that it will register the Old Notes under the Securities
Act.
RELATING TO THE INDUSTRY
CYCLICALITY
The steel industry is highly cyclical in nature and is affected
significantly by economic conditions generally. The economic recession of the
early 1990s had an adverse impact on the industry. Most domestic integrated
steel producers suffered substantial losses as a result of that economic
recession and other factors such as high levels of steel imports, worldwide
production overcapacity, a strong U.S. dollar and increased domestic and
international competition. During that time, WCI experienced a decline in net
tons shipped and in average selling price per net ton shipped. While the outlook
for steel companies has improved as a result of the recent increase in steel
demand and higher steel prices, there can be no assurance that these trends will
continue. Additionally, no assurance can be given that other events having an
adverse effect on the steel industry or WCI may not occur, such as an economic
downturn or a further increase in steel imports, production, the strength of the
U.S. dollar, or domestic or international competition. See "--Competition."
COMPETITION
The domestic steel industry is highly competitive. Despite significant
reductions in raw steel production capacity by major domestic producers in the
1980s, the domestic industry continues to be adversely affected by excess world
capacity.
In the United States, WCI competes with many other domestic steel companies.
The highly competitive nature of the domestic steel industry has been aggravated
further by the restructuring of certain
17
<PAGE>
domestic integrated producers. These restructurings may result in reduced
operating costs and permit such producers to price their products more
competitively. Such restructurings may also promote the continued operation and
modernization of marginal facilities, which could increase existing overcapacity
and lead to further price pressure.
WCI also faces increasing competitive pressures from minimills. Minimills
are generally smaller volume steel producers that use ferrous scrap metals as
their basic raw material. Compared to integrated producers, minimills, which
rely on less capital intensive hot metal sources, have certain advantages. Since
minimills typically are not unionized, they have more flexible work rules that
have resulted in lower employment costs per net ton shipped. Since 1989,
significant flat rolled minimill capacity has been constructed and these
minimills now compete with integrated producers in product areas that
traditionally have not faced significant competition from minimills. In
addition, there is significant additional flat rolled minimill capacity under
construction or announced with various planned commissioning dates in 1996
through 1999. These minimills are expected to compete with the Company primarily
in the commodity flat rolled steel market. In addition, the increased
competition in commodity product markets may result in certain integrated
producers increasing product offerings to compete with the Company's custom
products.
During the early 1990s, the domestic steel market experienced significant
increases in imports of foreign produced flat rolled products. The level of
imports, however, declined somewhat in late 1995 and early 1996. During the same
period, exports of domestically produced flat rolled steel increased
significantly. In recent months, there has been an increase in imports of flat
rolled products, due in part to increases of semi-finished steel purchased by
domestic steel producers and a decrease in exports of flat rolled steel
products. The strength of the U.S. dollar and economy, as well as the strength
of foreign economies, Europe in particular, can significantly affect the
import/export trade balance for flat rolled steel products. The status of the
trade balance may significantly affect the ability of the new minimill capacity
to come on-line without disrupting the domestic flat rolled steel market.
Materials such as aluminum, cement, composites, glass and plastics compete
as substitutes for steel in many markets.
AVAILABILITY OF AND FLUCTUATION IN RAW MATERIAL AND ENERGY COSTS
WCI's operations are heavily dependent on the supply of various raw
materials including iron ore pellets, coke and energy. WCI purchases all of its
iron ore pellets and coke requirements through long-term contracts based in part
on market pricing. Supply interruptions or cost increases, to the extent that
WCI could not pass on these costs to its customers, could adversely affect WCI's
future results of operations. The domestic supply of coke has decreased
significantly over the last decade and is expected to decrease further in the
future due to the requirements of the Clean Air Act. As the Company does not own
a coke battery, it is dependent upon commercially available domestic or imported
coke to sustain its operations. The Company has contracts for the purchase of
its estimated coke requirements through 1999 and believes that there will be
adequate supplies of coke available domestically or from foreign sources
thereafter for its purposes. However, there can be no assurance that adequate
supplies of coke will be available to the Company in the future. See
"Business--Raw Materials."
18
<PAGE>
THE TRANSACTIONS
On October 23, 1996, WCI commenced the Tender Offer to purchase for cash up
to all (but not less than a majority in principal amount outstanding) of the
Existing Notes and a related Consent Solicitation to delete or modify certain
terms of the Existing Notes Indenture. The aggregate purchase price paid in
respect of validly tendered and not withdrawn Existing Notes and the related
consents was 112.5% of their principal amount plus accrued interest up to, but
not including, the date of purchase. The Company received tenders and consents
representing approximately $206.1 million in aggregate principal amount of the
Existing Notes outstanding and consummated the Tender Offer and the Consent
Solicitation on November 27, 1996.
On October 28, 1996, Holdings, a wholly-owned subsidiary of Renco, commenced
the Equity Tender Offer to purchase for cash all of the outstanding shares of
Common Stock of the Company. The purchase price paid in respect of validly
tendered shares of Common Stock was $10 per share, net to the seller in cash.
Holdings received tenders of 5,397,623 shares of Common Stock and consummated
the Equity Tender Offer on November 27, 1996. Renco owned approximately 84% of
the outstanding Common Stock prior to the Equity Tender Offer and contributed
its shares of Common Stock to Holdings, which together with the shares of Common
Stock purchased by Holdings in the Equity Tender Offer, resulted in Holdings
owning approximately 99.3% of the outstanding Common Stock. Immediately after
completion of the Equity Tender Offer, Holdings effected a "short form" Merger
of Holdings, at the same price per share as in the Equity Tender Offer, with and
into WCI, with WCI surviving as a wholly-owned subsidiary of Renco. Shareholders
of WCI who properly exercise their appraisal rights in connection with the
Merger may receive more than $10 per share. In addition, although Renco has
advised WCI that it has no present intention to sell WCI, Renco has agreed that
if within one year of the consummation of the Equity Transactions Renco were to
agree to sell WCI in a transaction in which it would realize value after
expenses in excess of the value represented by the $10 per share offer price,
Renco would at that time pay the allocable difference to the public shareholders
whose shares were acquired in the Equity Transactions.
On November 27, 1996, the Company completed the Old Notes Offering. Also on
November 27, 1996, the Company used a portion of the net proceeds from the Old
Notes Offering and its available cash to purchase the Existing Notes tendered
pursuant to the Tender Offer, to purchase the Common Stock tendered pursuant to
the Equity Tender Offer and to fund in escrow the consideration to be paid to
non-tendering shareholders of the Company pursuant to the Merger. In addition,
immediately after the Merger, the Company used a portion of the net proceeds
from the Old Notes Offering and its available cash to pay a dividend to Renco.
USE OF PROCEEDS
The Company will not receive, any proceeds from the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive in exchange Old Notes of like principal amount, the
terms of which are indentical in all material respects to the Exchange Notes.
The Old Notes surrendered in exchange for Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any increase in the indebtedness of the Company. The Company
has agreed to bear the expenses of the Exchange Offer pursuant to the
Registration Rights Agreement. No underwriter is being used in connection with
the Exchange Offer.
19
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
WCI as of July 31, 1996 and as adjusted to give effect to the Transactions,
including the application of the net proceeds from the Old Notes Offering. The
table below should be read in conjunction with "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and WCI's
consolidated financial statements and the related notes thereto appearing
elsewhere herein.
<TABLE>
<CAPTION>
AS OF JULY 31, 1996
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion:
WCI Revolving Credit Facility(1).................................................... $ -- $ --
Existing Notes...................................................................... 206,400 280
Old Notes........................................................................... -- 300,000
Other............................................................................... 5,401 5,401
---------- -----------
Total long-term debt, including current portion................................. 211,801 305,681
---------- -----------
Shareholders' equity (deficit):
Preferred stock, par value $1,000 per share, 5,000 shares authorized, none issued
and outstanding................................................................... -- --
Common stock, no par value, $.01 stated value, 40,000,000 shares authorized,
36,623,700 shares issued and 36,401,400 shares outstanding, and 100 shares issued
and outstanding as adjusted....................................................... 366 0
Treasury stock at cost, 222,300 shares, and 0 shares as adjusted.................... (1,200) --
Additional paid-in capital.......................................................... 534 --
Retained earnings (deficit)......................................................... 73,764 (116,658)
---------- -----------
Total shareholders' equity (deficit)............................................ 73,464 (116,658)
---------- -----------
Total capitalization.................................................................. $ 285,265 $ 189,023
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Represents the Company's $100.0 million revolving credit facility, which is
undrawn, exclusive of $5.5 million in outstanding letters of credit, and
expires on December 29, 1999. See "Description of WCI Revolving Credit
Facility."
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data for, and the balance sheet
data as of, each of the years in the five fiscal year period ended October 31,
1995 have been derived from the consolidated financial statements of WCI, which
financial statements have been audited by KPMG Peat Marwick LLP. The
consolidated statement of operations data for the nine months ended, and the
balance sheet data as of, July 31, 1995 and 1996 have been derived from WCI's
unaudited consolidated financial statements. The financial data set forth below
should be read in conjunction with WCI's audited consolidated financial
statements and the related notes thereto for the fiscal years ended October 31,
1993, 1994 and 1995 and the unaudited results and the related notes thereto for
the nine months ended July 31, 1995 and 1996 appearing elsewhere herein and with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED OCTOBER 31, JULY 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994(1) 1995(2) 1995(3) 1996(4)
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS AND TONS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $ 507,118 $ 515,708 $ 578,639 $ 709,363 $ 630,990 $ 523,611 $ 490,147
Cost of products sold.............................. 461,510 463,938 492,000 574,610 544,789 423,834 411,467
--------- --------- --------- --------- --------- --------- ---------
Gross margin....................................... 45,608 51,770 86,639 134,753 86,201 99,777 78,680
Depreciation and amortization...................... 18,594 22,126 20,978 19,868 21,178 15,504 16,960
Selling, general and administrative expenses....... 13,664 15,767 19,144 34,889 19,675 16,827 15,939
--------- --------- --------- --------- --------- --------- ---------
Operating income................................... 13,350 13,877 46,517 79,996 45,348 67,446 45,781
Interest expense................................... 9,983 13,715 23,182 28,709 25,787 19,530 18,742
Interest income.................................... -- -- -- 1,377 5,441 3,833 4,469
Other income....................................... 250 262 301 128 771 677 344
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes, extraordinary losses on
early retirement of debt and cumulative effect of
change in accounting principle................... 3,617 424 23,636 52,792 25,773 52,426 31,852
Income taxes....................................... 2,654 388 9,485 21,939 10,313 21,007 12,740
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary losses on early
retirement of debt and cumulative effect of
change in accounting principle................... $ 963 $ 36 $ 14,151 $ 30,853 $ 15,460 $ 31,419 $ 19,112
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(5).......................................... $ 32,194 $ 36,265 $ 67,796 $ 99,992 $ 67,297 $ 83,627 $ 63,085
Adjusted EBITDA(6)................................. 38,146 42,411 77,065 109,599 77,363 91,132 67,176
Pro forma cash interest expense(7)................. 31,964 24,162 23,373
Capital expenditures............................... 55,497 25,477 14,639 14,371 26,173 23,943 20,406
Depreciation and amortization...................... 18,594 22,126 20,978 19,868 21,178 15,504 16,960
Ratio of adjusted EBITDA to pro forma cash interest
expense.......................................... 2.4x 3.8x 2.9x
Ratio of earnings to fixed charges(8).............. (9) (9) 2.0x 2.8x 2.0x 3.7x 2.7x
OTHER OPERATING DATA:
Net tons shipped................................... 1,135 1,209 1,302 1,468 1,222 1,013 1,055
Percent custom products............................ 47.2% 44.9% 53.9% 56.9% 59.4% 58.6% 55.4%
Average selling price per net ton shipped.......... $ 447 $ 427 $ 445 $ 483 $ 516 $ 517 $ 465
Average cost per net ton shipped................... 407 384 378 391 446 418 390
Average gross margin per net ton shipped........... 40 43 67 92 71 98 75
Average operating income per net ton shipped....... 12 11 36 54 37 67 43
Order backlog at end of period (tons).............. 230 212 301 294 220 241 299
Average number of active employees................. 2,704 2,636 2,471 2,323 2,217 2,223 2,174
Man-hours per net ton shipped(10).................. 3.1 2.9 2.5 2.3 2.4 2.4 2.1
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
AS OF
AS OF OCTOBER 31, JULY 31, 1996
----------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 ACTUAL ADJUSTED(11)
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments................................... $ 1,418 $ 719 $ 9,366 $ 71,426 $ 106,548 $ 156,685 $ 26,396
Working capital (excluding cash, cash
equivalents and short-term investments)....... 41,399 53,725 49,510 69,193 61,881 31,128 56,946
Property, plant and equipment, net.............. 210,407 212,907 206,951 196,212 189,733 195,033 195,033
Total assets.................................... 373,850 381,192 396,342 481,596 519,159 571,947 462,152
Total debt (including current portion).......... 166,054 164,478 136,858 216,108 213,854 211,801 305,681
Shareholders' equity (deficit).................. 51,938 51,974 69,168 43,877 59,495 73,464 (116,658)
</TABLE>
- ------------------------
(1) Fiscal 1994 Statement of Operations reflects $11.1 million of nonrecurring
expenses related to the Company's initial public offering and the offering
of the Existing Notes.
(2) Fiscal 1995 results were adversely impacted by a 54 day labor contract
dispute and resulting work stoppage commencing September 1, 1995 and a 36
day blast furnace reline commencing on April 1, 1995. See "Prospectus
Summary--The Company--Recent Developments."
(3) Results for the nine months ended July 31, 1995 were adversely impacted by
a 36 day blast furnace reline commencing on April 1, 1995. See "Offering
Memorandum Summary--The Company--Recent Developments."
(4) The Company's custom product mix and the results for the nine months ended
July 31, 1996 were adversely impacted by a 54 day labor contract dispute
and resulting work stoppage which was concluded on October 24, 1995. See
"Offering Memorandum Summary--The Company--Recent Developments."
(5) EBITDA represents earnings before interest expense (net of interest
income), income taxes and depreciation and amortization. Information
regarding EBITDA is presented because of its use by certain investors as
one measure of an issuer's historical ability to service its debt. EBITDA
should not be considered an alternative to, or more meaningful than,
operating income or cash flow as an indicator of an issuer's operating
performance.
(6) Adjusted EBITDA represents EBITDA plus non-cash charges associated with
postretirement health care and life insurance benefits.
(7) Pro forma cash interest expense is computed by removing from cash interest
expense the cash interest expense associated with the tendered Existing
Notes ($21.6 million for fiscal 1995 and $16.2 million for each of the
nine month periods ended July 31, 1995 and 1996) and adding cash interest
expense on the Notes of $30.0 million for fiscal 1995 and $22.5 million
for each of the nine month periods ended July 31, 1995 and 1996.
(8) Fixed charges consist of interest expense, capitalized interest,
amortization of deferred financing costs and the portion of rental expense
that is representative of interest expense. Earnings consist of income
before taxes plus fixed charges less capitalized interest.
(9) Earnings were insufficient to cover fixed charges for the fiscal years
ended October 31, 1991 and 1992 by $6.0 million and $4.0 million,
respectively.
(10) Reflects hours associated with hourly steel production and maintenance
employees.
(11) The Balance Sheet Data as adjusted reflects adjustments to give effect to
the Transactions, as if each had occurred on July 31, 1996.
22
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
GENERAL
In connection with the sale of Old Notes to the initial purchaser pursuant
to the Purchase Agreement, dated November 27, 1996 (the "Purchase Agreement"),
between the Company and DLJ, the holders of the Old Notes became entitled to the
benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, the Company became obligated to (a)
file a registration statement in connection with a registered exchange offer
within 45 days after November 27, 1996, the date the Old Notes were issued (the
"Issue Date"), and (b) cause the registration statement relating to such
registered exchange offer to become effective within 120 days after the Issue
Date. The Exchange Offer being made hereby, if consummated within the required
time periods, will satisfy the Company's obligations under the Registration
Rights Agreement. The Company understands that there are approximately
beneficial owners of such Old Notes. This Prospectus, together with the
Letter of Transmittal, is being sent to all such beneficial holders known to the
Company.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered and not withdrawn prior to 4:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer.
Based on an interpretation by the staff of the Commission set forth in no-
action letters to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any person received such Exchange
Notes, whether or not such person is the holder (other than Restricted Holders)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's or other person's business, neither such holder
nor such other person is engaged in or intends to engage in any distribution of
the Exchange Notes and such holders or other persons have no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. See Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(available June 5, 1991) and Exxon Capital Holdings Corporation, SEC No-Action
Letter (available May 13, 1988).
If any person were to be participating in the Exchange Offer for the
purposes of participating in a distribution of the Exchange Notes in a manner
not permitted by the Commission's interpretation, such person (a) could not rely
on such interpretation of the staff of the Commission and (b) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after consummation of the Exchange Offer, it will
make this Prospectus, as it may be amended or supplemented from time to time,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
23
<PAGE>
The Company will not receive any proceeds from the Exchange Offer. See "Use
of Proceeds." The Company has agreed to bear the expenses of the Exchange Offer
pursuant to the Registration Rights Agreement. No underwriter is being used in
connection with the Exchange Offer.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes for the purposes of receiving the Exchange Notes from the Company
and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes,
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes in connection with the Exchange Offer. See
"--Fees and Expenses."
In the event the Exchange Offer is consummated, the Company will not be
required to register the Old Notes. In such event, holders of Old Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act. See "Risk
Factors--Relating to WCI--Consequences of Failure to Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The term "Expiration Date" shall mean the expiration date set forth on the
cover page of this Prospectus, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Such announcement may state that the Company is extending the Exchange
Offer for a specified period of time.
The Company reserves the right (a) to delay accepting any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept Old
Notes not previously accepted if any of the conditions set forth herein under
"--Conditions" shall have occurred and shall not have been waived by the Company
(if permitted to be waived by the Company), by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (b) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
holders of the Old Notes. Any such delay in acceptance, extension, termination
or amendment will be followed as promptly as practicable by oral or written
notice thereof. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment and the Company may extend the Exchange Offer for a
period of up to ten business days, depending upon the significance of the
amendment and the manner of disclosure to holders of the Old Notes, if the
Exchange Offer would otherwise expire during such extension period.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
24
<PAGE>
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from November 27, 1996, payable
semiannually on June 1 and December 1 of each year, commencing June 1, 1997, at
the rate of 10% per annum. Holders of Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued up until the date of the issuance
of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by instruction 3 of the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes and any other required documents. To be validly tendered, such
documents must reach the Exchange Agent on or before 4:00 p.m., New York City
time, on the Expiration Date.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect such tender for such
holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery to the Exchange Agent on or before 4:00 p.m.
New York City time, on the Expiration Date. No Letter of Transmittal or Old
Notes should be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such registered holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (an "Eligible Institution") unless the Old Notes tendered pursuant
thereto are tendered (a) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (b) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers and a proxy
25
<PAGE>
which authorizes such person to tender the Old Notes on behalf of the registered
holder, in each case signed as the name of the registered holder or holders
appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or other acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority so to act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any irregularities or conditions of tender as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Old Notes, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth under "--Conditions," to terminate the
Exchange Offer in accordance with the terms of the Registration Rights Agreement
and (b) to the extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers will differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (a) the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of such holder or other person, (b)
neither such holder nor such other person is engaged in or intends to engage in
a distribution of the Exchange Notes (c) neither such holder or other person has
any arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and (d) such holder or other person is not
an "affiliate," as defined under Rule 405 of the Securities Act, of the Company
or, if such holder or other person is such an affiliate, will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus, as it may be amended or supplemented from time to time, available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
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<PAGE>
The Company will not receive any proceeds from the Exchange Offer. See "Use
of Proceeds." The Company has agreed to bear the expenses of the Exchange Offer
pursuant to the Registration Rights Agreement. No underwriter is being used in
connection with the Exchange Offer.
The Old Notes were issued on November 27, 1996 and there is no public market
for them at present. To the extent Old Notes are tendered and accepted in the
Exchange Offer, the principal amount of outstanding Old Notes will decrease with
a resulting decrease in the liquidity in the market therefor. Following the
consummation of the Exchange Offer, holders of Old Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for the Old Notes could be adversely affected.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available or (b) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(i) the tender is make through an Eligible Institution;
(ii) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within three business days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer and any other documents required by the Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Old Notes in proper form for transfer and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within three business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 4:00 p.m., New York City time, on the Expiration Date,
unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 4:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (a) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"), (b)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (c) be signed by the Depositor
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the Depositor withdrawing the tender and (d) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the
27
<PAGE>
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes not theretofore accepted for exchange, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Old Notes, if
the Company or the holders of at least a majority in principal amount of Old
Notes reasonably determine in good faith that any of the following conditions
exist: (a) the Exchange Notes to be received by such holders of Old Notes in the
Exchange Offer, upon receipt, will not be tradable by each such holder (other
than a holder which is an affiliate of the Company at any time on or prior to
the consummation of the Exchange Offer) without restriction under the Securities
Act and the Exchange Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States, (b) the
interests of the holders of the Old Notes, taken as a whole, would be materially
adversely affected by the consummation of the Exchange Offer or (c) after
conferring with counsel, the Commission is unlikely to permit the making of the
Exchange Offer prior to March 27, 1997.
Pursuant to the Registration Rights Agreement, if an Exchange Offer shall
not be consummated prior to the Exchange Offer Termination Date, the Company
will be obligated to cause to be filed with the Commission a shelf registration
statement with respect to the Old Notes (the "Shelf Registration Statement") on
or prior to 30 days after the Exchange Offer Termination Date and use its
reasonable efforts to have the Shelf Registration Statement declared effective
on or prior to 90 days after the Exchange Offer Termination Date.
"Exchange Offer Termination Date" means the date on which the earliest of
any of the following events occurs: (a) the Exchange Offer is not permitted by
applicable law or (b) any holder of Notes notifies the Company within 20
business days following consummation of the Exchange Offer that (i) such holder
was prohibited by law or Commission policy from participating in the Exchange
Offer, (ii) such holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and this Prospectus
is not appropriate or available for such resales by such holder or (iii) such
holder is a broker-dealer and holds Old Notes acquired directly from the Company
or its affiliate.
If any of the conditions described above exist, the Company will refuse to
accept any Old Notes and will return all tendered Old Notes to exchanging
holders of the Old Notes.
EXCHANGE AGENT
Fleet National Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance and requests for additional copies
of this Prospectus or of the Letter of Transmittal and deliveries of completed
Letters of Transmittal with tendered Old Notes should be directed to the
Exchange Agent addressed as follows:
<TABLE>
<S> <C>
BY MAIL BY HAND/OVERNIGHT DELIVERY
Fleet National Bank Fleet National Bank
Corporate Trust Administration c/o First Chicago Trust Company of New York
777 Main Street - CTMO0238 14 Wall Street
Hartford, Connecticut 06115 8th Floor - Window No. 2
Attention: Robert Reynolds New York, New York 10005
</TABLE>
28
<PAGE>
The Company will indemnify the Exchange Agent and its agents for any loss,
liability or expense incurred by them, including reasonable costs and expenses
of their defense, except for any such loss, liability or expense caused by
negligence or bad faith.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telephone or facsimile.
The Company will not make any payments to brokers, dealers, or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes, and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees and expenses, will be paid by the Company, and are estimated in the
aggregate to be approximately $300,000.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes (or Old Notes for principal amounts not tendered or
accepted for exchange) are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Company will not recognize any gain or loss for accounting purposes upon
the consummation of the Exchange Offer. The expense of the Exchange Offer will
be amortized by the Company over the term of the Exchange Notes under generally
accepted accounting principles.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
WCI was incorporated on April 13, 1988 to acquire certain steel production
facilities in Warren, Ohio and other assets from LTV Inc. ("LTV") and assume
certain liabilities. Prior to the acquisition, the Warren facility was operated
as a division of LTV, with its primary business objective being to supply other
mills of LTV with commodity hot rolled steel for further processing. Upon WCI's
acquisition of the Warren facility in 1988, the marketing focus shifted from
being a commodity product supplier for other LTV facilities to the development
and sale of higher margin custom products. These custom products, which normally
cost more to produce, sell at higher prices and generally result in higher
operating margins.
Since its inception, WCI has recognized the importance of investing in its
production facilities in order to satisfy customer specifications and to reduce
operating costs. Since 1988, the Company has completed over $260 million of
capital investments including the construction and installation of the
Continuous Caster in December 1991 to decrease production costs, increase its
product range, improve product quality and increase productivity. Presently, the
Company is undertaking a capital program focused on the finishing facilities of
its operations, including a significant upgrade to its hot strip mill expected
to be completed over the next three to five years. In addition to the ongoing
capital investment program, WCI expended on average approximately $68 per net
ton shipped on maintenance expenditures during the period fiscal 1992 through
fiscal 1995 or an average of approximately $88 million annually.
INDUSTRY DEVELOPMENTS
The United States economy has been in an extended period of moderate growth
since 1992. This, in addition to other factors, has resulted in increasing
consumption of steel in the United States from approximately 95 million tons in
1992 to approximately 115 million tons in 1995. This moderate growth trend has
continued in 1996. During this period, the Company furthered its business
strategy by increasing its custom product mix from 44.9% of shipments in fiscal
1992 to 59.4% in fiscal 1995.
In addition to the growth of steel consumption, the stronger market allowed
for increases in selling prices through mid-1995, at which time selling prices
began to weaken through the last calendar quarter of 1995. Since that time,
however, the pricing environment has improved somewhat during 1996, with the
implementation of several price increases throughout the year. Moreover, certain
domestic steel producers have announced further price increases effective in
January 1997. There can be no assurance that these price increases will be
sustained.
Results for fiscal 1995 and the first two quarters of fiscal 1996 were
adversely affected by a 54 day labor contract dispute and resulting work
stoppage beginning September 1, 1995 upon the expiration of the Company's
previous collective bargaining agreement with the USWA. In particular, WCI's
order rate, shipping volume, order backlog and net sales were significantly
reduced during the work stoppage. On October 24, 1995, the Company and the USWA
reached agreement on a new four year agreement. Subsequent to entering into such
agreement with the USWA, the Company undertook to reestablish its order rate and
backlog over the first and second quarters of fiscal 1996. Since the Company's
custom product mix was below levels realized in fiscal 1995, WCI's net sales and
operating income were reduced during such periods. Results for fiscal 1995 were
also negatively impacted by a scheduled blast furnace reline that resulted in
the idling of all of the Company's steel making equipment for 36 days during
April and May of 1995.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1996 COMPARED TO NINE MONTHS ENDED JULY 31, 1995
Net sales for the nine months ended July 31, 1996 were $490.1 million on
1,054,585 tons shipped, representing a 6.4% decline in net sales and a 4.1%
increase in tons shipped compared to the nine months
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ended July 31, 1995. Net sales per ton shipped declined 10.1% to $465 compared
to $517 for the nine months ended July 31, 1995 due to lower prices realized in
the spot market as well as a change in product mix. The 1996 period included the
sales of approximately 46,000 tons of lower value added semi-finished steel and
a lower mix of custom carbon, alloy and electrical steel products which
accounted for 55.4% of total shipments in the first nine months of 1996 compared
with 58.6% in the first nine months of 1995. The sales mix and volume were
adversely affected during the first two quarters of fiscal 1996 by the labor
contract dispute and resulting work stoppage which was concluded October 24,
1995. During the third quarter of fiscal 1996, the Company's product mix
returned to a more traditional mix, with sales of custom products accounting for
63.8% of shipments compared to 61.8% in fiscal 1995. Shipments for the three
months ended July 31, 1996 increased 12.3% to 363,765 tons compared to the same
period in fiscal 1995. As of July 31, 1996 the Company had a backlog of
approximately 299,000 tons compared to approximately 241,000 tons at July 31,
1995.
Gross margin was $78.7 million for the nine months ended July 31, 1996
compared to $99.8 million for the nine months ended July 31, 1995. The decline
in gross margin reflects the lower sales prices in fiscal 1996 and the change in
product mix mentioned above, offset somewhat by higher volume and improved per
ton operating costs in the 1996 period. The 1995 period included cost penalties
related to the blast furnace reline completed in May 1995 and the restart of the
furnace.
Operating income was $45.8 million, $43 per ton shipped, for the nine months
ended July 31, 1996 compared to $67.4 million, $67 per ton shipped, for the nine
months ended July 31, 1995. The results for the nine months ended July 31, 1996
reflect the lower gross margin described above and higher depreciation and
amortization expense associated with the completion of the blast furnace reline
in May of 1995.
As a result of the items discussed above, net income was $19.1 million ($.52
per common share) for the nine months ended July 31, 1996 compared to net income
of $31.4 million ($.86 per common share) for the nine months ended July 31,
1995.
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales in fiscal 1995 were $631.0 million on 1,221,940 tons shipped,
representing an 11.0% decrease in net sales and a 16.8% decrease in shipping
volume compared to fiscal 1994. The decrease in sales and shipments in fiscal
1995 is attributable primarily to the labor contract dispute and resulting work
stoppage in the Company's fourth quarter, as previously discussed. The work
stoppage contributed significantly to the decline in shipments as evidenced by
fourth quarter shipments of 208,522 tons compared to 389,636 tons in the fourth
quarter of fiscal 1994. During fiscal 1995, the Company realized $516 per net
ton shipped, a 6.8% increase from the $483 realized in fiscal 1994, reflecting a
strong domestic steel market early in the year which moderated as the year
progressed. Custom carbon, alloy and electrical steel products represented
approximately 59.4% of tons shipped in fiscal 1995 compared to approximately
56.9% in fiscal 1994. As of October 31, 1995, the Company had a sales backlog of
approximately 220,000 tons, compared to approximately 294,000 tons as of October
31, 1994.
Gross margin fell to $86.2 million in fiscal 1995 from $134.8 million in
fiscal 1994. This decrease is primarily the result of excess production costs
and expenses related to idling the facilities during the labor contract dispute
and resulting work stoppage, including salary and benefit costs, bonuses paid in
early November 1995 to hourly and salaried employees following the ratification
of the new collective bargaining agreement and lower shipping volume during the
fourth quarter discussed above. Gross margins prior to the labor contract
dispute were relatively flat compared to fiscal 1994, reflecting higher sales
prices in fiscal 1995 offset by higher costs associated primarily with the blast
furnace reline completed in May 1995.
Operating income was $45.3 million in fiscal 1995, a $34.7 million decrease
from $80.0 million in fiscal 1994. These operating results reflect the decrease
in gross margin discussed above, offset somewhat by lower selling, general and
administrative expenses in fiscal 1995. Selling, general and administrative
expenses decreased $15.2 million in fiscal 1995 primarily as a result of $11.1
million of nonrecurring
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expenses in fiscal 1994 related to the Company's initial public stock offering
and the offering of the Existing Notes and a $3.9 million reduction in fiscal
1995 related to variable compensation programs and other expenses tied to the
earnings of the Company.
Interest expense decreased $2.9 million to $25.8 million in fiscal 1995,
reflecting the repurchase of $43.6 million aggregate principal amount of
Existing Notes in July 1994 in connection with the Company's initial public
stock offering. Interest and other income increased $4.7 million in fiscal 1995
compared to fiscal 1994 primarily as a result of higher cash and cash
equivalents and short-term investments in fiscal 1995.
Net income decreased to $15.5 million ($.42 per common share) in fiscal 1995
compared to income before extraordinary losses and an accounting change of $30.9
million ($.94 per common share) in fiscal 1994, primarily as a result of the
lower shipping volume and costs incurred related to the labor contract dispute
and resulting work stoppage as well as the blast furnace reline, all of which
were previously discussed.
FISCAL 1994 COMPARED TO FISCAL 1993
Net sales in fiscal 1994 were $709.4 million on 1,468,095 tons shipped,
representing a 22.6% increase in net sales for the year and a 12.8% increase in
shipping volume. During fiscal 1994, the Company realized $483 per net ton
shipped, a $38 and 8.5% increase from net sales per ton shipped of $445 in
fiscal 1993. The increase in sales and tons shipped reflected a strong domestic
steel market in fiscal 1994, several announced price increases during the year,
and continuance of the Company's strategy to emphasize custom steels in its
product mix. Custom carbon, alloy and electrical steel products represented
approximately 56.9% of tons shipped in fiscal 1994 compared to approximately
53.9% in fiscal 1993. As of October 31, 1994, the Company had a sales backlog of
approximately 294,000 tons, compared to approximately 301,000 tons at October
31, 1993.
Gross margin was $134.8 million in fiscal 1994 compared to $86.6 million in
fiscal 1993. The $48.2 million increase in gross margin reflects the increased
shipping volume and an improvement in gross margin as a percent of net sales
from 15% in fiscal 1993 to 19% in fiscal 1994. The increased percentage margins
reflect the shift toward custom products described previously, two base price
increases and related contract price increases implemented in fiscal 1994.
Operating income was approximately $80.0 million in fiscal 1994, a $33.5
million or 72% increase from $46.5 million in fiscal 1993. The improved
operating results reflect the increase in gross margin described above, offset
somewhat by higher selling, general and administrative expenses in fiscal 1994.
Selling, general and administrative expenses were $34.9 million in fiscal 1994
compared to $19.1 million in fiscal 1993. The increase was principally the
result of $11.1 million of nonrecurring expenses in fiscal 1994 related to the
Company's initial public stock offering and the offering of the Existing Notes,
and $3.6 million related to variable compensation programs tied to the earnings
of the Company.
Interest expense rose to $28.7 million in fiscal 1994 compared to $23.2
million in fiscal 1993. The increase in interest expense reflects higher
borrowings and lower weighted average interest rates in fiscal 1994 resulting
from the sale of the Existing Notes.
Income before extraordinary losses and the cumulative effect of an
accounting change rose to $30.9 million ($.94 per common share) in fiscal 1994
compared to net income of $14.2 million ($.44 per common share) in fiscal 1993,
a $16.7 million increase. This increase reflects the higher shipping volume and
operating margins discussed above. Net income fell to $11.5 million ($.34 per
common share) in fiscal 1994, reflecting extraordinary losses, net of income
taxes, of $20.2 million ($.62 per common share) on the early retirement of debt,
and a $.8 million ($.02 per common share) benefit relating to a change in
accounting for income taxes.
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LIQUIDITY AND CAPITAL RESOURCES
WCI's liquidity requirements result from capital investments, working
capital requirements, postretirement health care and pension funding, interest
expense and, to a lesser extent, principal payments on its indebtedness. WCI has
met these requirements in each fiscal year since fiscal 1992 from cash provided
by operating activities. The Company's primary sources of liquidity as of July
31, 1996 consist of cash and cash equivalents and short-term investments of
$156.7 million and available borrowing under the WCI Revolving Credit Facility.
The WCI Revolving Credit Facility has a maximum borrowing limit of $100
million, is secured by eligible inventories and receivables, as defined therein,
and expires on December 29, 1999. As of July 31, 1996, WCI had no borrowings
outstanding under the WCI Revolving Credit Facility, exclusive of $5.2 million
in outstanding letters of credit.
Cash provided by operating activities was $77.3 million for the nine months
ended July 31, 1996 compared to $84.8 million for the nine months ended July 31,
1995 and $60.7 million, $76.9 million and $60.6 million, in fiscal 1995, 1994
and 1993, respectively. The decrease in operating cash flow in fiscal 1995
compared to fiscal 1994 resulted from the lower operating income discussed
previously, partially offset by cash provided by a reduction in inventory during
the blast furnace reline and a temporary reduction in working capital as a
result of ceasing operations during the labor contract dispute.
As of July 31, 1996, at pricing then in effect, WCI had commitments under
raw material supply contracts for coke, iron ore pellets and oxygen of
approximately $62.4 million for the remainder of fiscal 1996, and $211.1 million
thereafter through fiscal 1999.
Capital expenditures were $20.4 million in the first nine months of fiscal
1996, are expected to be approximately $30 million in fiscal 1996 and are
estimated to be $40 million to $45 million in fiscal 1997, including planned
expenditures for the upgrade of the hot strip mill and installation of a
hydrogen anneal facility. Management has funded the Company's capital
expenditures in fiscal 1996 through cash balances and cash provided by operating
activities. At July 31, 1996, the Company had commitments for capital
expenditures of approximately $17.7 million related primarily to the hot strip
mill upgrade.
As a result of the Debt Transactions and the Equity Transactions, the
Company will record certain non-recurring charges in the first quarter of fiscal
1997, including (a) extraordinary charges of $19.7 million related to the
premium paid to retire the Existing Notes, accelerated amortization of deferred
financing costs and related expenses, net of income taxes, and (b) compensation
charges of $8.7 million related to contractual payments made to certain
executives. As a result of the Transactions (which includes the related dividend
paid to Renco of $108 million), WCI's liquidity, including its cash and cash
equivalents and short-term investments, was reduced significantly and its debt
service requirements increased significantly. See "Risk Factors--Relating to
WCI--Substantial Indebtedness." Management anticipates that cash flow from
operations and availability under the WCI Revolving Credit Facility will be
sufficient to finance the Company's liquidity needs for the foreseeable future.
The WCI Revolving Credit Facility contains numerous covenants and
prohibitions that will impose limitations on the liquidity of the Company,
including requirements that the Company satisfy certain financial ratios and
limitations on the incurrence of additional indebtedness. See "Description of
WCI Revolving Credit Facility." The Indenture governing the Notes imposes
limitations on the incurrence of additional indebtedness. See "Description of
the Notes--Certain Covenants." The ability of the Company to meet its debt
service requirements and to comply with such covenants will be dependent upon
future operating performance and financial results of the Company, which will be
subject to financial, economic, political, competitive and other factors
affecting the Company, many of which are beyond its control.
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ENVIRONMENTAL MATTERS
WCI has incurred and, in the future, will continue to incur capital and
operating expenditures for matters relating to environmental control and
monitoring. Capital expenditures for environmental control and monitoring were
$.2 million, $2.3 million, $.5 million and $2.1 million for the first nine
months of fiscal 1996 and the fiscal years 1995, 1994 and 1993, respectively.
These expenditures related primarily to a rebuild of a basic oxygen furnace
("BOF") precipitator. The Company expects that future environmental capital
expenditures will be dependent in part upon the outcome of certain pending
environmental matters. See "Business--Environmental Matters." Operating costs
for control and monitoring equipment, excluding depreciation and amortization
expense were $6.5 million, $8.9 million, $10.3 million and $8.9 million for the
first nine months of fiscal 1996 and the fiscal years 1995, 1994 and 1993,
respectively. Operating costs for fiscal 1996 and 1997 for control and
monitoring equipment are not expected to increase significantly from the prior
periods.
WCI has made and will continue to make the necessary capital expenditures
for environmental remediation and compliance with environmental laws and
regulations. The Company believes that compliance with environmental
requirements as presently interpreted and enforced, including remediation of
existing conditions, could have a material adverse effect on the future
operating results of the Company in a particular quarterly or annual period, but
the effect of such matters should not have a material adverse impact on its
consolidated financial position.
Environmental laws and regulations have changed rapidly in recent years, and
WCI may become subject to more stringent environmental laws and regulations in
the future. Compliance with more stringent environmental laws and regulations
could have a material adverse effect on WCI's consolidated financial position
and future results of operations. The EPA has asserted certain alleged
environmental violations against the Company which are described in
"Business--Environmental Matters."
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BUSINESS
GENERAL
WCI, a niche oriented integrated producer of value-added, custom steel
products, was incorporated in Ohio in 1988 and commenced operations on September
1, 1988. WCI's primary facility covers approximately 1,100 acres in Warren,
Ohio, with additional facilities located in Niles and Youngstown, Ohio, all of
which are situated between Cleveland and Pittsburgh. WCI currently produces
approximately 135 grades of flat rolled custom and commodity steel products.
Custom flat rolled products, which include high carbon, alloy and high strength,
silicon electrical, terne coated and galvanized steel, constituted approximately
59.4% of net tons shipped during fiscal 1995. Major users of WCI products are
steel converters, steel service centers, construction product companies,
electrical equipment manufacturers and, to a lesser extent, automobile and
automotive parts manufacturers.
BUSINESS STRATEGY
WCI's business strategy consists of three principal elements: (a) continue
to increase sales of custom products, thereby further improving operating
margins; (b) continue to build and maintain strong relationships with strategic
customers, targeting customers for which it can supply at least 25% of such
customers' custom steel needs; and (c) continue to improve operating efficiency
and product quality through strategic cost reduction initiatives, as well as a
significant capital investment program.
INCREASE SALES OF CUSTOM PRODUCTS
In response to intense competition in commodity steels from other integrated
mills (both domestic and international) and domestic minimills, WCI's strategy
is to increase sales of custom products. Custom products comprised 59.4% of net
tons shipped in fiscal 1995 and 55.4% for the nine months ended July 31, 1996.
The Company's sales mix, and specifically custom product sales, were adversely
impacted during the first and second quarters of fiscal 1996 due to the labor
contract dispute and resulting work stoppage that was settled on October 24,
1995. By the third quarter of fiscal 1996, the Company's percentage of custom
steel products reached 63.8% of net tons shipped versus 44.4% during the first
quarter of fiscal 1996, immediately following the settlement of the labor
contract dispute. With less competition in custom products, WCI believes it can
sustain higher prices and operating margins in these products compared to
commodity steel products. There can be no assurance, however, that WCI will be
able to sustain such prices or margins.
The Continuous Caster installed during 1992 enabled WCI to improve the
quality and mix of its products and to enter new markets. WCI offers
approximately 135 grades of custom and commodity steel with cast quality. With
the Continuous Caster, WCI has achieved substantial cost savings, as well as
gained the ability to offer products with higher quality standards to a broader
group of customers. In addition, the Company is currently completing the first
phase of a three to five year upgrade to its hot strip mill. The first phase of
the upgrade, expected to be completed in mid-1997, will improve the Company's
product quality and expand WCI's product range.
BUILD AND MAINTAIN STRONG RELATIONSHIPS WITH STRATEGIC CUSTOMERS
The second component of WCI's strategy is to become a major supplier to its
strategic customer base. WCI targets accounts where it can supply 25% or more of
the customer's steel requirements. Specifically, WCI looks for custom steel
customers with needs that currently are incompatible with the market direction
or production capabilities of major integrated producers and minimills. Examples
of such needs are as follows: small order quantities; narrow widths; and
specialized chemistries and/or metallurgical properties. WCI invests significant
resources in these customers, building processing and product knowledge over
35
<PAGE>
time. WCI believes that as a significant supplier, it will have a certain degree
of protection against competition due to WCI's investment in processing
knowledge, its high level of service to these customers and the difficulty
competitors have with the smaller order quantities, typical of WCI's custom
steel products.
IMPROVE OPERATING EFFICIENCIES AND PRODUCT QUALITY
WCI is committed to improving its operating efficiencies through focused
capital investment and the implementation of non-capital cost reduction programs
throughout its operations. Since its inception in 1988, WCI has completed over
$260 million of capital investments designed, in part, to decrease production
costs, increase product range and improve product quality, as well as increase
productivity. The cornerstone of this program was the installation of the
Continuous Caster and the LMF in December 1991 at a combined cost of $135
million. Since May 1992, the Continuous Caster has enabled the Company to offer
a 100% continuously cast product line which has substantially reduced the
Company's operating costs, dramatically improved the quality of its products,
and enabled WCI to participate in new markets where the superiority of
continuously cast steel is a competitive strength. Other capital investments
were the reactivation of the Youngstown sinter plant, which reduced the
Company's dependence on iron ore pellets, as well as reduced manufacturing costs
by recycling waste streams from the steel making process. In May 1995, the
Company completed the reline of its blast furnace, a procedure which is
performed on a routine basis every eight to ten years, thereby essentially
completing the upgrade of WCI's primary steelmaking capabilities.
Presently, WCI's capital investment program is focused on its finishing
facilities or the customer end of the mill, the most important of which is the
ongoing phased upgrade to its hot strip mill. Specifically, the Company is
currently in the process of completing the initial phase of a three to five year
program to upgrade its hot strip mill, the scope of which includes enhancing
virtually every element of the mill operation including the heating, roughing,
finishing, cooling and coiling processes. When completed in mid-1997, this
initial phase will significantly improve product quality and expand WCI's
product range, in addition to reducing operating costs. WCI is also installing a
high-temperature hydrogen anneal facility to meet the rising demand for silicon
electrical steels, an important custom product for WCI.
In addition to the ongoing capital improvement program, WCI expended on
average approximately $68 per net ton shipped on maintenance expenditures during
the period fiscal 1992 through fiscal 1995 or an average of approximately $88
million annually. As a result of these expenditures, in addition to the ongoing
capital improvement program, the Company believes that it operates and will
continue to maintain a modern and efficient integrated steel mill offering a
diverse product mix.
Consistent with WCI's commitment to improve product quality and operating
efficiencies, the Company obtained in 1995 ISO 9002 certification, an
internationally recognized quality systems standard.
PRODUCTS
OVERVIEW
WCI produces a wide range of custom flat rolled steel products, including
high carbon, alloy and high strength, silicon electrical, terne coated and
galvanized steel. WCI's custom steels are used in the manufacture of a variety
of high value-added applications such as saw blades, golf club shafts, lawn
mower blades, drive chain links, razor blades, hand and garden tools, electric
motors, fuel tanks, automotive bumpers and culvert products. In these markets,
WCI competes principally on the basis of (a) customer and product requirements,
including small order quantities, specialized chemistries, narrow widths and
delivery performance, (b) quality and (c) to a lesser extent, price. WCI's
commodity steel product sales consist principally of hot and cold rolled low
carbon sheet steel. Many of these products are sold to
36
<PAGE>
customers that manufacture a variety of steel products, including tubular
products, containers and metal stamped parts. In these markets, WCI competes
principally on the basis of price and delivery performance. Export sales ranged
from 0.9% to 1.8% of net sales during the last three fiscal years.
Estimates about the size of the segments of the domestic steel market
contained in this Prospectus have been developed by the Company from internal
sources and reflect the Company's current estimates; however, no assurance can
be given regarding the accuracy of such estimates.
<TABLE>
<CAPTION>
NET TONS SHIPPED PERCENT OF TOTAL
----------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NINE
NINE MONTHS MONTHS
FISCAL YEAR ENDED ENDED FISCAL YEAR ENDED ENDED
OCTOBER 31, JULY 31, OCTOBER 31, JULY 31,
------------------------------- -------------------- ------------------------------- ---------
1993 1994 1995 1995 1996 1993 1994 1995 1995
Custom Products:
Hot and Cold Rolled:
High Carbon.......... 190,593 268,837 208,583 168,815 177,620 14.6% 18.3% 17.1% 16.7%
Alloy................ 72,651 62,955 67,159 51,933 58,879 5.6 4.3 5.5 5.1
High Strength........ 79,336 91,024 82,814 67,337 69,324 6.1 6.2 6.7 6.6
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Hot and Cold
Rolled............... 342,580 422,816 358,556 288,085 305,823 26.3 28.8 29.3 28.4
Coated:
Silicon.............. 96,730 100,948 86,788 73,138 68,861 7.4 6.9 7.1 7.2
Galvanized (Non-
Culvert)........... 120,983 148,157 134,090 114,063 92,738 9.3 10.1 11.0 11.3
Galvanized (Culvert
Coil).............. 117,787 139,628 128,505 104,557 107,752 9.0 9.5 10.5 10.3
Terne................ 24,064 23,319 18,061 14,076 8,789 1.9 1.6 1.5 1.4
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Coated........... 359,564 412,052 367,444 305,834 278,140 27.6 28.1 30.1 30.2
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Custom Products.... 702,144 834,868 726,000 593,919 583,963 53.9 56.9 59.4 58.6
Total Commodity.......... 599,615 633,227 495,940 419,499 470,622 46.1 43.1 40.6 41.4
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Steel Products..... 1,301,759 1,468,095 1,221,940 1,013,418 1,054,585 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
<S> <C>
1996
Custom Products:
Hot and Cold Rolled:
High Carbon.......... 16.8%
Alloy................ 5.6
High Strength........ 6.6
-----
Total Hot and Cold
Rolled............... 29.0
Coated:
Silicon.............. 6.5
Galvanized (Non-
Culvert)........... 8.8
Galvanized (Culvert
Coil).............. 10.2
Terne................ 0.9
-----
Total Coated........... 26.4
-----
Total Custom Products.... 55.4
Total Commodity.......... 44.6
-----
Total Steel Products..... 100.0%
-----
-----
</TABLE>
CUSTOM PRODUCTS
HIGH CARBON, ALLOY, HIGH STRENGTH. WCI has developed specialty niche
markets for high carbon, alloy and high strength steel products that are sold to
strip converters, steel service centers, and automobile and automotive parts
manufacturers. Products required by the strip converter customers are
characterized by low order quantities, relatively narrow width and specific
metallurgical properties. Certain specific physical properties are met by
introducing particular alloys such as chrome, molybdenum, manganese and vanadium
in the LMF or BOF during the steelmaking process or additionally through other
finishing processes such as annealing. WCI presently produces over 100
specialized chemistries for these niche markets.
WCI's customers in this sector, in turn, supply end-users which have highly
specific and defined product needs requiring the strip converter to order steel
in narrow widths, close gauge tolerances, minimal crown profiles and critical
surface qualities. Due to the nature of these customer requirements, high carbon
and alloy custom steels are not manufactured readily by the larger integrated
mills or minimills. The larger integrated producers prefer to produce large
quantities of a particular size and grade, rather than small quantities of
special grades needed by customers in this market. In addition, since the hot
strip mills of large integrated producers and minimills typically are configured
to handle wide sheet steel (60 or more inches wide), it is not cost effective
for them to produce and roll narrow width (less than 36 inches wide) coils to
meet the requirements of these customers.
From 1989 to 1995, WCI has grown its annual custom high carbon, alloy and
high strength hot rolled business by 132.8%. WCI attributes this increase to the
installation of the Continuous Caster, the
37
<PAGE>
implementation of its marketing strategy and a major competitor ceasing
operations. Management believes that demand from these custom niche markets is
relatively stable.
In the high carbon and alloy market, WCI competes primarily with Acme Steel
and Bethlehem Steel (Sparrows Point facility in Maryland) in the United States,
as well as various steel producers in Canada, Europe and Japan. In the high
strength market, WCI competes with various major integrated mills.
Management believes that the domestic market for high carbon steel in fiscal
1995 was approximately 835,000 tons, of which WCI supplied 208,583 tons or
approximately 25.0% of this market. In addition, the estimated market for alloy
steel in fiscal 1995 was approximately 200,000 tons, of which WCI supplied
67,159 tons or approximately 33.6% of this market. WCI supplied 82,814 tons of
high strength steel in fiscal 1995, which represents a small percentage of this
market.
SILICON. Silicon electrical steel is sheet steel that exhibits certain
electrical or magnetic properties as a result of the introduction of silicon at
the BOF during the steelmaking process. Silicon steel is used in the manufacture
of transformers, power generators, lighting ballasts and electric motors. The
magnetic properties of this product permit electric motors to run at high speeds
for extended periods of time with greater efficiency while minimizing heat loss.
The market for electrical sheet steel can be divided into two main segments:
grain oriented silicon sheet and non-grain oriented silicon sheet. The
distinction between grain and non-grain oriented silicon sheet pertains to the
electrical properties of the steel. WCI's silicon annealing line is designed for
production of non-grain oriented silicon sheet and all of WCI's silicon
shipments are in this segment.
In response to the rising demand for non-grain oriented silicon electrical
steels, WCI is in the process of installing a high temperature hydrogen anneal
facility. The expectations for higher demand are based upon a new U.S.
government standard to take effect in 1997, which requires higher energy
efficiency in electric motors. The new facility will enable WCI to produce
improved magnetic and metallurgical properties and to supply more sophisticated
grades of fully processed, non-grain oriented silicon electrical steels.
Management believes that the market for non-grain oriented silicon steel in
fiscal 1995 was approximately 210,000 tons, of which WCI supplied 86,788 tons or
approximately 41.3% of this market. Presently, WCI's principal competitor in
this category is Armco Inc., which essentially supplies the balance of this
market.
GALVANIZED (NON-CULVERT). Galvanized steel is zinc coated sheet steel
produced on WCI's hot dipped galvanizing line. The market for galvanized sheet
steel is divided into two broad categories: heavy and light gauge steel. Heavy
gauge galvanized steel is used in the manufacture of electrical boxes,
automotive bumpers and grain bins, as well as many other end uses. Light gauge
galvanized steel is used in numerous applications such as automotive
applications, metal building panels and framing, roofing and siding, roof and
floor deck material, heating ducts, as well as metal building studs.
WCI's galvanized finishing line is suited to produce heavy gauge steel, and
as a result, a majority of WCI's galvanized shipments are in this sector. WCI
believes that its galvanized finishing line provides WCI with a distinct
competitive advantage on heavy gauge applications because it permits the use of
hot rolled sheet directly, as compared to WCI's competitors for which cold
rolled sheet most often is required. By eliminating the cold rolling process,
WCI enjoys a substantial cost advantage, thereby permitting WCI to be more cost
competitive.
In non-culvert galvanized steel, WCI supplied 134,090 tons for fiscal 1995,
which represents a small percentage of the total market. WCI competes with other
integrated producers including Wheeling-Pittsburgh Corporation
("Wheeling-Pittsburgh"), Weirton Steel Corporation and National Steel
Corporation, as well as independent producers such as Metaltech.
38
<PAGE>
The light gauge galvanized steel sector is among the most rapidly growing in
the steel industry, due to the increased demand for this product from the
automobile and metal building industries. In response to this increased demand,
there has been significant finishing capacity recently added or announced by
other integrated producers and minimills. Since the larger integrated producers
and minimills are concentrating on the fast growing light gauge market and
currently are not equipped to produce steel for heavy gauge applications, WCI
views the heavy gauge segment in which it operates as an attractive niche
market.
GALVANIZED (CULVERT COIL). A significant niche market for heavy gauge
galvanized sheet is culvert coil to manufacture culvert pipe. Culvert pipe is
used in drainage systems and is tied principally to road construction. WCI
inventories culvert coil in four facilities nationally for quick distribution to
its customer base. WCI estimates that the market for galvanized culvert steel in
fiscal 1995 was approximately 325,000 tons, of which WCI supplied 128,505 tons
or approximately 39.5% of this market. Other significant producers of galvanized
culvert coil are Wheeling-Pittsburgh and Gulf States Steel.
TERNE. Terne steel is sheet steel coated with a mixture of lead and tin and
is principally used in the manufacture of gasoline tanks. As a result, the
demand for terne steel closely tracks trends in the automotive sector. Terne
steel also is being used in areas where the ability to weld, solder, paint and
resist corrosion is required to promote longer life and attractiveness of the
end product.
WCI believes that the market for terne steel in fiscal 1995 was
approximately 150,000 tons, of which WCI supplied 18,061 tons or approximately
12.0% of this market. Given the current regulatory concerns involving products
containing lead, demand for terne steel is expected to decrease. Terne accounted
for approximately 1% of the Company's net sales for the first nine months of
fiscal 1996. Presently WCI's principal competitors in this market are USX--U.S.
Steel Group and AK Steel.
COMMODITY PRODUCTS
In fiscal 1995, WCI shipped 495,940 tons in the aggregate of hot and cold
rolled low carbon sheet and strip, which represented approximately 40.6% of the
Company's net tons shipped. Hot rolled low carbon sheet is more price sensitive
than custom hot rolled steels and is sold to steel service centers or
manufacturers producing a broad array of products, including tubing, stampings
and roll formed parts. Cold rolled sheet and strip is purchased by service
centers, container manufacturers, and the automotive and appliance industries.
In these commodity steel markets, WCI competes with all major integrated
producers and several minimills.
As part of the Company's plan to restart its facility following settlement
of the labor contract dispute, the Company shipped 45,822 tons of semi-finished
steel in the first half of fiscal 1996. The Company did not make any further
shipments of semi-finished product during the balance of fiscal 1996.
MARKETING
WCI's marketing and sales strategy is to focus on increasing sales of custom
products and on becoming a major supplier to its strategic customer base. Over
50% of WCI's shipments are to customers within 200 miles of the Warren facility.
WCI believes that, due to the large number of active and potential customers in
this geographic area, it has a competitive advantage over competitors located
farther away.
On July 31, 1996, WCI employed a direct sales force of ten field
representatives covering potential steel accounts within WCI's geographic
market. WCI has approximately 300 active accounts. The sales force is assisted
in the field by a staff of eight technical service representatives with strong
metallurgical and technical backgrounds. Collectively, the sales force and
technical staff comprise a knowledgeable team qualified to identify and meet
customers' needs.
39
<PAGE>
Sales outside WCI's geographic market are made through four independent
sales representatives on a commission basis. Although transportation costs can
be prohibitive at extreme distances from the Warren facility, select niche
custom products are competitively priced outside WCI's normal target markets.
WCI believes that independent sales representatives provide the most cost
effective method to access these customers. Approximately 4.1% of WCI's volume
in fiscal 1995 was sold through the independent sales representatives.
Marketing and pricing are centralized at the Warren facility, where the
marketing strategy and the pricing levels are established for all WCI products.
WCI's four person marketing staff works closely with the sales and technical
service representatives to coordinate its sales and marketing strategies.
On July 31, 1996, WCI employed seventeen persons at the Warren facility who
provide customer service and order entry. WCI has a fully automated computerized
sales network that provides the salesforce with up-to-date cost information for
any set of product specifications, as well as timely order status information.
CUSTOMERS
WCI's customer strategy is to market to prospective accounts that have
special needs such as small order quantities, narrow widths, specialized
chemistries and other metallurgical properties not readily met by WCI's
competitors. WCI targets customers for which it can supply at least 25% of such
customer's steel requirements. Nevertheless, WCI attempts to minimize its
customer concentration by not having sales to a single customer greater than 5%
of net sales. Consistent with this strategy, WCI's customer base is dominated by
steel converters and steel service centers, which in fiscal 1995 represented 62%
of shipments. The remaining shipments were direct to end users.
The following table sets forth the percentage of WCI's net tons shipped to
various markets for the past three fiscal years and the nine months ended July
31, 1995 and 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
OCTOBER 31, JULY 31,
------------------------------- --------------------
CUSTOMER CATEGORY 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Conversion/further processing............................... 41.6% 42.8% 39.3% 39.1% 45.7%
Steel service centers....................................... 28.9 25.4 23.0 23.8 23.9
Construction................................................ 9.4 11.5 13.1 13.1 11.3
Electrical equipment........................................ 7.3 7.3 8.4 8.2 6.7
Direct automotive........................................... 6.7 8.9 11.1 10.7 7.6
Other....................................................... 6.1 4.1 5.1 5.1 4.8
--------- --------- --------- --------- ---------
Total................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
In fiscal years 1995, 1994, and 1993, WCI's twenty largest customers
represented approximately 56%, 57%, and 54%, respectively, of net sales with its
largest customer representing approximately 10.0%, 9.9% and 8.1% of net sales.
For the nine months ended July 31, 1996, two customers exceeded 5% of net sales,
one of which accounted for approximately 9.3%.
BACKLOG
On October 31, 1996, WCI's order backlog was approximately 255,000 net tons
with an approximate value of $128 million compared to approximately 220,000 net
tons with an approximate value of $115 million at October 31, 1995, based in
each case on the then current prices. Under the applicable orders, WCI is
scheduled to ship substantially all of the orders in the October 31, 1996
backlog by April 1997.
40
<PAGE>
MANUFACTURING PROCESS
In WCI's primary steelmaking process, iron ore pellets, coke, limestone,
sinter and other raw materials are consumed in the blast furnace to produce "hot
metal." Hot metal is further converted into liquid steel through its BOF process
where impurities are removed, recycled scrap is added and metallurgical
properties for end use are determined on a batch-by-batch basis. WCI's BOF has
two vessels, each with a steelmaking capacity of 175 tons per heat. From the
BOF, the heats of steel are sent to the LMF, where the temperature and chemistry
of the steel are adjusted to precise tolerances. In addition, the steel may be
vacuum degassed to further improve its cleanliness. Liquid steel from the LMF
then is formed into slabs through the process of continuous casting. The
Continuous Caster allows WCI to cast all of its steel products. After continuous
casting, slabs then are reheated, reduced and finished by extensive rolling,
shaping, tempering and, in certain cases, by the application of coatings at
WCI's downstream operations. Finished products are normally shipped to customers
in the form of coils. WCI has linked its steelmaking and rolling equipment with
a computer based integrated manufacturing control system to coordinate
production and sales activities.
RAW MATERIALS
WCI's steelmaking operations are dependent on reliable supplies of various
raw materials, principally iron ore pellets, coke and energy. WCI believes that
it has adequate sources of its principal raw materials to meet its present
needs. As of July 31, 1996, at pricing then in effect, WCI had commitments under
its raw material contracts for coke, iron ore pellets and oxygen of
approximately $62 million for the remainder of fiscal 1996 and $211 million in
the aggregate thereafter through fiscal 1999.
IRON ORE PELLETS
WCI has a long-term contract with a major supplier of iron ore pellets for
all of its requirements through fiscal 1998 and no less than half of its
requirements in fiscal 1999. Iron ore pellets satisfied approximately 71% of
WCI's iron ore requirements in fiscal 1995, while WCI's sinter plant provided
the balance. The iron ore pellet contract requires WCI to purchase all of its
iron ore pellet requirements from the contracting vendor. WCI carries an
increased level of iron ore pellet inventory immediately preceding the winter
months, due to the curtailment of vendor shipments during the winter as a result
of the freezing of the Great Lakes.
COKE
Coke is the principal fuel used to produce liquid iron and is an essential
ingredient in steelmaking. WCI has contracts to purchase from three integrated
steel producers its coke requirements for fiscal 1996 and long-term contracts
with two integrated steel producers for its estimated coke requirements through
fiscal 1999. WCI's coke requirements are approximately 600,000 tons per year.
The domestic supply of coke has decreased significantly over the last decade and
is expected to decrease further in the future due to the requirements of the
Clean Air Act. As the Company does not own a coke battery, it is dependent upon
commercially available domestic or imported coke to sustain its operations. The
Company believes that there will be adequate supplies of domestic or imported
coke available for its purposes after the expiration of its contracts in 1999.
However, there can be no assurance that adequate supplies of coke will be
available to the Company in the future. See "Risk Factors--Relating to the
Industry--Availability of and Fluctuation in Raw Material and Energy Costs."
ENERGY AND GASES
WCI's steel operation consumes large amounts of electricity, natural gas,
oxygen and other industrial gases. WCI purchases its electrical power
requirements under a contract that extends to 2001 from a local utility. WCI can
generate approximately 20% of its own electrical needs. Natural gas is also
purchased
41
<PAGE>
pursuant to a supply contract that extends to 1997. Oxygen is delivered from
supplier-owned plants located at the Warren facility. Pursuant to a contract
entered into in 1988, WCI is required to purchase all coke oven gas produced at
an adjoining coke plant, which is usable by WCI, at a price based upon, but at a
discount to, natural gas prices.
CAPITAL INVESTMENTS
WCI believes that it must continuously strive to improve product quality and
control manufacturing costs in order to remain competitive. Accordingly, WCI is
committed to continuing to make extensive capital investments with the objective
of reducing manufacturing costs per ton, improving the quality of steel produced
and broadening the array of products offered to WCI's served markets. The
following table summarizes the primary areas of WCI's capital investments:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
CAPITAL IMPROVEMENTS:
Continuous Caster and LMF................... $ 4,659 $ 69,084 $ 42,489 $ 18,060 $ 1,157 $ 22 $ --
Youngstown Sinter Plant..................... -- 895 7,783 758 30 -- --
Hot Strip Mill Upgrade...................... -- -- -- -- -- -- 432
Hydrogen Anneal Facility.................... -- -- -- -- -- -- 790
Other....................................... 2,809 1,808 -- 45 179 1,077 612
--------- --------- --------- --------- --------- --------- ---------
Total Capital Improvements.............. 7,468 71,787 50,272 18,863 1,366 1,099 1,834
--------- --------- --------- --------- --------- --------- ---------
MAINTENANCE CAPITAL:
Blast Furnace Reline........................ -- -- -- -- -- 5,984 14,847
Mill Rolls.................................. 5,030 5,078 4,689 5,264 4,644 5,172 4,548
Other....................................... 2,086 1,164 536 1,350 8,629 2,116 4,944
--------- --------- --------- --------- --------- --------- ---------
Total Maintenance Capital(1)............ 7,116 6,242 5,225 6,614 13,273 13,272 24,399
--------- --------- --------- --------- --------- --------- ---------
Total Capital Investments....................... $ 14,584 $ 78,029 $ 55,497 $ 25,477 $ 14,639 $ 14,371 $ 26,173
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
NINE
JULY 31,
1996 TOTAL
<S> <C> <C>
CAPITAL IMPROVEMENTS:
Continuous Caster and LMF................... $ -- $ 135,471
Youngstown Sinter Plant..................... -- 9,466
Hot Strip Mill Upgrade...................... 12,048 12,480
Hydrogen Anneal Facility.................... 1,290 2,080
Other....................................... 1,538 8,068
----------- ---------
Total Capital Improvements.............. 14,876 167,565
----------- ---------
MAINTENANCE CAPITAL:
Blast Furnace Reline........................ -- 20,831
Mill Rolls.................................. 3,769 38,194
Other....................................... 1,761 22,586
----------- ---------
Total Maintenance Capital(1)............ 5,530 81,611
----------- ---------
Total Capital Investments....................... $ 20,406 $ 249,176(2)
----------- ---------
----------- ---------
</TABLE>
- ------------------------------
(1) Since the installation of the Continuous Caster in fiscal 1992, WCI has
expensed an average of approximately $68 per net ton shipped on maintenance
expenditures averaging approximately $88 million annually.
(2) In September and October 1988, the Company completed a blast furnace reline
and purchased mill rolls, for an aggregate cost of approximately $10.0
million.
FACILITIES
WCI's Warren, Ohio facility, situated on approximately 1,100 acres, includes
a blast furnace, a two vessel BOF shop, an LMF and a vacuum degasser, a
twin-strand Continuous Caster, a 56-inch hot strip mill, 54-inch tandem and
temper mills, annealing facilities, a silicon continuous anneal line, hot-dip
galvanizing and terne coating lines and other finishing facilities.
The blast furnace was relined in April and May 1995 as part of its planned
maintenance, a procedure which is performed on a routine basis every eight to
ten years, which required the Company to shut down the blast furnace for 36
days. In connection with the reline, the Company purchased and/or produced in
advance sufficient cast slabs such that there were no material interruptions in
shipments to its customers during the blast furnace reline.
The Company also owns and operates a sinter plant located in Youngstown,
Ohio on 51 acres. The sinter plant converts plant waste dusts and iron ore into
resources usable in the blast furnace, reducing iron ore pellet feed
requirements by approximately 29% in fiscal 1995.
42
<PAGE>
WCI's Niles Industrial Park is located approximately five miles from the
Warren facility, and has a total of approximately 600,000 square feet of usable
building space. Presently, four steel users are tenants at the Niles facility,
using 52% of the space. WCI is continuing to seek other appropriate tenants.
WCI believes that its facilities are well maintained and they are considered
satisfactory for their purposes.
ENVIRONMENTAL MATTERS
It is WCI's policy to endeavor to comply with all applicable environmental
laws and regulations. In common with much of the steel industry, WCI's
facilities are located on sites that have been used for heavy industrial
purposes for decades. Accordingly, WCI is subject to numerous federal, state and
local environmental laws and regulations governing, among other things, air
emissions, waste water discharge and solid and hazardous waste disposal. WCI has
made and intends to continue to make the necessary expenditures for
environmental remediation and compliance with environmental laws and
regulations. Environmental laws and regulations have changed rapidly in recent
years, and WCI may be subject to more stringent environmental laws and
regulations in the future. Compliance with more stringent environmental laws and
regulations could have a material adverse effect on the Company's financial
condition and results of operations.
On June 29, 1995, the Department of Justice, on behalf of the EPA,
instituted the CWA Litigation. The action alleges numerous violations of the
Company's National Pollution Discharge Elimination System permit alleged to have
occurred during the years 1989 through 1996, inclusive. On March 29, 1996, the
Department of Justice on behalf of the EPA, instituted another civil action
against the Company in the same court under the Clean Air Act alleging
violations by the Company of the work practice, inspection and notice
requirements for demolition and renovation of the National Emission Standard for
Hazardous Air Pollutants for Asbestos and also violations of the particulate
standard and the opacity limits applicable to the Company's facilities in
Warren, Ohio. By letter dated November 13, 1996, the EPA's Region V Air and
Radiation Division issued a notice of violation alleging violations on nine days
in 1992, 1993 and 1994 of the particulate standards applicable to the Warren
facility. Each action seeks a civil penalty not to exceed the statutory maximum
of $25,000 per day per violation and also seeks an injunction against continuing
violations. The Company believes that imposition of the statutory maximum
penalty for the alleged violations is unlikely based upon past judicial
penalties imposed under the Clean Water Act and the Clean Air Act, and that it
has defenses to liability. However, no assurance can be given that the Company
will not be found to have liability and, if it has liability, that the statutory
maximum penalty will not be imposed. By letter dated November 1, 1996, EPA's
Region V Water Division Director requested information pursuant to the Clean
Water Act from the Company relating to the Warren facility. The request seeks
information as to the effect of a prohibition against federal procurement of the
Company's products on the Company's business. The Company has not been notified
that the EPA will seek a federal procurement prohibition based on alleged permit
violations. However, there can be no assurance that a federal procurement
prohibition will not be imposed. If the statutory maximum penalty or federal
procurement prohibition or a similarly substantial penalty were imposed, it
could have a material adverse effect on the Company. The Company is negotiating
with the EPA toward a settlement of these matters.
WCI has obtained a storage permit under the RCRA, for waste pickle liquor at
its Warren facility acid regeneration plant. As a provision of the permit, the
Company will be required to undertake a corrective action program with respect
to historical material handling practices at the Warren facility. WCI has
developed and submitted a workplan for the first investigation step of the
corrective action program, the RFI, to the EPA and is presently negotiating the
scope of the RFI with the EPA. The final scope of the corrective action required
to remediate or reclaim any contamination that may be present at or emanating
from the Warren facility is dependent upon the findings of the RFI and the
development and approval of the corrective action program. Accordingly, the
Company is unable at this time to estimate the final cost of
43
<PAGE>
the corrective action program or the period over which such costs may be
incurred, and there can be no assurance that it would not have a material
adverse effect on the financial condition of the Company.
WCI has received from the EPA a formal request dated April 1, 1994 for
information pursuant to Section 3007 of the RCRA and Section 104(e) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"). The request requires WCI to submit information relating to
the generation, storage, treatment and disposal of solid or hazardous wastes or
hazardous substances at the Warren facility. The request also requires WCI to
submit certain financial information and other information needed to evaluate
the facility's compliance with the RCRA and CERCLA requirements. The request
does not identify violations, seek to impose penalties or monetary sanctions or
require the performance of remedial activities or other capital expenditures.
The request seeks information about a specific area at which waste management
occurred at the Warren facility under the prior owner. This area was remediated
by the prior owner before the facility was sold to WCI, and the area is also
scheduled to be investigated under the corrective action RFI. Under EPA
guidance, the area will not be addressed under CERCLA when it is included in the
corrective action process. Because of the past remediation of the area by the
prior owner and the inclusion of the area in the corrective action process, WCI
believes that the area would not be regarded as a priority risk under CERCLA.
The Company's hydrochloric acid recycling unit is subject to the Maximum
Achievable Control Technology Standards which will be promulgated by the EPA
under the Clean Air Act commencing in 1997. The Company expects to have up to
two years to achieve compliance once the standards are finalized. The Company is
presently evaluating alternatives to achieve compliance with likely standards,
including outsourcing the hydrochloric acid recycling. The Company does not
believe that the cost of compliance with the standards will have a material
adverse effect on the financial condition of the Company.
The Company operates a landfill at its Warren facility which receives waste
materials from the iron and steel-making operations. The Company has submitted a
plan to state environmental authorities to replace this landfill with a new
lined landfill. The plan involves closure by removal of the present landfill by
selling approximately one-third of its contents to established markets for
construction materials and recycling most of the remaining contents over an
extended period at the sinter plant in Youngstown, Ohio operated by the
Company's subsidiary, Youngstown Sinter Company, and disposing of any
non-salable or non-recyclable material in the new lined landfill. Youngstown
Sinter Company is presently exploring modifications to sulfur dioxide emission
regulations applicable to the Youngstown sinter plant to enable it to comply
with applicable sulfur dioxide emission levels, as well as allow faster
recycling of the present landfill contents. The Company does not believe that
the sinter plant's noncompliance will result in any material expenditures. The
new lined landfill construction and existing landfill closure is presently
planned for seven consecutive phases. The estimated cost through Phase I is
approximately $2.7 million to $3.7 million expended over three years. The
estimated cost for Phase II is approximately $1.5 million expended over six
years, and the estimated cost for Phase III is approximately $1.6 million
expended over ten years.
EMPLOYEES
As of July 31, 1996, WCI had 538 active salaried employees and 1,585 active
hourly employees. Most of the hourly employees are located at the Warren
facility and are represented by the USWA with which WCI reached a four year
collective bargaining agreement during 1995 which expires August 31, 1999. The
Company's prior labor agreement with the USWA expired on August 31, 1995. At
that time, the Company and the USWA were unable to reach an agreement resulting
in a 54 day labor contract dispute and work stoppage.
44
<PAGE>
BENEFIT PLANS
HOURLY PROFIT SHARING PLAN
Certain hourly employees represented by the USWA participate in a profit
sharing plan under which the Company pays 12% of pretax income as defined in the
profit sharing agreement. The Company advances one-half of the amounts due under
this plan on a quarterly basis, within 45 days following the end of each fiscal
quarter, and pays the remaining amounts by February 15 of the subsequent year.
SALARIED VARIABLE COMPENSATION PLAN
WCI has a variable compensation plan for salaried employees known as the
Company Performance Compensation Program ("CPC"). Under the CPC, salaried
employees receive variable compensation based on WCI's pretax income as defined
in the plan. CPC payments are measured as a percentage of the employees base
salary and paid quarterly.
PENSION
WCI has defined contribution retirement plans that cover substantially all
employees. WCI follows the policy of funding contributions as earned on a
monthly basis. Company contributions to the plans are based on employee age,
length of service and compensation.
During 1995, the Company adopted a defined benefit floor offset pension plan
which covers substantially all hourly employees at the Warren facility. The
plan, when combined with benefits from the Company's defined contribution plan
and benefits from an LTV Steel Company, Inc. ("LTV Steel") defined benefit
pension plan, will provide a minimum level of pension benefits for eligible
employees. Benefits are based on age and years of service, but not compensation.
Under this plan, employees will receive upon retirement a monthly benefit equal
to $35 times the number of years of service with WCI, LTV Steel or its
predecessors. If the employee has at least 30 years of service at retirement,
the monthly benefit is subject to certain minimums based on age at retirement.
Monthly benefits under the plan are reduced by any benefit from the Company's
defined contribution plan (as an annuity equivalent) and the LTV Steel defined
benefit pension plan. No named executive officer is eligible to participate in
this plan.
POSTRETIREMENT HEALTH CARE
WCI provides postretirement health care benefits to employees who retire
while meeting certain age and service eligibility requirements. As part of the
1995 labor agreement with the USWA, the Company agreed to establish the VEBA
Trust to hold Company contributions to fund future postretirement health care
and life insurance obligations. The Company contributions are $.50 per hour or a
minimum of approximately $1.5 million per year. See "Risk Factors--Relating to
WCI--Substantial Employee Postretirement Obligations."
PENDING LITIGATION
On January 23, 1996, two retired employees instituted an action against the
Company in the United States District Court for the Northern District of Ohio
alleging in substance that certain distributions made by the Company to
employees and benefit plans violated certain agreements, the Employee Retirement
Income Security Act, the National Labor Relations Act and common law. The
plaintiffs seek declaratory and injunctive relief and damages. Plaintiffs have
brought this action as a class action; however, the court has not ruled as to
whether this action is properly maintainable as a class action. The Company
denies the plaintiffs' allegations of liability and has filed for dismissal of
the action. The court has not yet ruled on the Company's motion.
On April 5, 1996, an employee instituted an action for damages against the
Company in the Court of Common Pleas, Trumbull County, Ohio alleging that, under
Ohio common law, her privacy rights were violated and that she has been
subjected to sexual harassment. In July 1996, the plaintiff moved for an order
permitting her to amend her complaint to add new party plaintiffs alleging a
claim under only the
45
<PAGE>
privacy rights cause of action. The Company denies plaintiff's allegations of
liability and has opposed the motion to amend the complaint. The court has not
yet ruled on the plaintiff's motion. Discovery is underway, and no substantive
motions have been made.
For a description of pending litigation related to environmental matters,
see "--Environmental Matters."
In addition, the Company is involved in various claims and lawsuits
incidental to the ordinary course of its business. Although the outcome of the
above described matters, to the extent they exceed applicable resources, could
have a material adverse effect on the future operating results of the Company,
the Company believes that the effect of such matters will not have a material
adverse effect on the Company's consolidated financial condition.
46
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Ira Leon Rennert..................................... 62 Chairman of the Board and Director
Edward R. Caine...................................... 58 President and Chief Executive Officer
Patrick T. Kenney.................................... 56 Vice President, Operations
Patrick G. Tatom..................................... 46 Vice President, Commercial
Bret W. Wise......................................... 36 Vice President, Finance and Chief Financial Officer
</TABLE>
IRA LEON RENNERT has been Chairman, Chief Executive Officer and principal
shareholder of WCI's parent company, Renco (including predecessors), since
Renco's first acquisition in 1975, and Chairman of WCI since its formation in
1988. Renco holds controlling interests in a number of manufacturing and
distribution concerns operating in businesses not competing with WCI, including
Renco Metals, Inc. and AM General Corporation, for both of which he serves as a
Director. Mr. Rennert was Chairman of the Board, and Renco was majority
shareholder, of Covert Marine, Inc., a wholesale distributor of recreational
boating equipment in Kansas City, Missouri. An order for relief for Covert
Marine, Inc. was entered on October 23, 1992 under Chapter 11 of the Bankruptcy
Code by the United States Bankruptcy Court for the Western District of Missouri.
WCI has never had any business relationship with Covert Marine, Inc.
EDWARD R. CAINE has been President and Chief Executive Officer since April
1, 1996. Mr. Caine was a Director of the Company from April 1, 1996 through
December 16, 1996. Prior to joining WCI, Mr. Caine had 37 years of experience in
the steel industry with U.S. Steel, most recently as General Manager of U.S.
Steel's Fairfield, Alabama integrated steel operations from April 1991 to March
1996.
PATRICK T. KENNEY has served as Vice President, Operations since June 1994
and, prior to that, as General Superintendent of Finishing Operations of WCI
since its inception.
PATRICK G. TATOM has served as Vice President, Commercial since November 1,
1995 and served as Vice President, Sales from February 1994 through October 31,
1995 and as General Manager of Sales from September 1988 to February 1994.
BRET W. WISE joined WCI as Vice President, Finance and Chief Financial
Officer effective September 1, 1994. Prior to joining WCI, Mr. Wise was a
partner with the accounting and consulting firm of KPMG Peat Marwick LLP and had
been with that firm in various capacities from June 1982 through August 31,
1994.
Since December 16, 1996, Mr. Rennert has been the sole Director of the
Company.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met five times (four regularly scheduled meetings and
one special meeting) during fiscal 1996. During fiscal 1996, all directors
attended more than 75% of all meetings of the Board of Directors and committees
thereof on which they served.
During fiscal 1996, the standing committees of the Board of Directors
included the Audit Committee and the Compensation Committee. The Audit Committee
and the Compensation Committee have been disolved, and the Board of Directors
has not had a Nominating Committee, and the usual functions of such committees
are performed by the entire Board of Directors. The Audit Committee met twice
during fiscal 1996. The Compensation Committee met once during fiscal 1996.
47
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, the Compensation Committee was composed of Arthur W.
Fried, Mr. Rennert and William Schwartz (Messrs. Fried and Schwartz are no
longer Directors). Except as provided below, no member of the Compensation
Committee was, during fiscal 1996, an officer or employee of the Company or any
of its subsidiaries, was formerly an officer of the Company or any of its
subsidiaries or had any relationship requiring disclosure by the Company. Mr.
Rennert is an executive officer of the Company, and Renco has relationships with
the Company as described in "Stock Ownership and Certain Relationships and
Transactions."
During fiscal 1996, no executive officer of the Company served (a) as a
member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served on the
Compensation Committee, (b) as a director of another entity, one of whose
executive officers served on the Compensation Committee or (c) as a member of
the compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of
directors) of another entity, one of whose executive officers served as a
Director of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the named executive officers by the Company for services rendered to it in
all capacities during fiscal 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) ----------------------------
FISCAL ---------------------- RESTRICTED LTIP ALL OTHER
NAME AND POSITION YEAR SALARY BONUS STOCK AWARDS(2) PAYOUTS(3) COMPENSATION(4)
<S> <C> <C> <C> <C> <C> <C>
Ira Leon Rennert(5)............. 1996 -- -- -- -- $ 1,200,000
Chairman of the Board 1995 -- -- -- -- 1,200,000
1994 -- -- -- -- 1,200,000
James V. Stack(6)............... 1996 -- -- -- $ 748,164 172,918
President and Chief Executive 1995 -- -- -- 748,164 419,659
Officer (September 20, 1995 to 1994 $ 265,633 $ 200,000 $ 250,000 97,500 31,251
March 31, 1996)
Edward R. Caine(7).............. 1996 159,616 360,394 115,625 386,945 18,977
President and Chief Executive 1995 -- -- -- -- --
Officer (since April 1, 1996) 1994 -- -- -- -- --
Patrick T. Kenney(8)............ 1996 132,494 50,000 32,375 543,533 14,563
Vice President, Operations 1995 132,129 75,000 -- -- 10,938
1994 115,474 17,500 30,000 39,000 9,559
Patrick G. Tatom(9)............. 1996 130,983 50,000 32,375 404,248 10,782
Vice President, Commercial 1995 130,566 75,000 -- -- 7,813
1994 126,384 40,000 30,000 39,000 7,562
Bret W. Wise(10)................ 1996 142,848 50,000 46,250 310,748 8,275
Vice President, Finance and 1995 132,401 75,000 -- -- 4,875
Chief Financial Officer 1994 22,067 40,000 -- -- 812
</TABLE>
- ------------------------
(1) Value of perquisites and other personal benefits did not exceed the lesser
of $50,000 or 10% of total salary and bonus per named executive officer.
(2) The amounts shown as "Restricted Stock Awards" in the table for each named
executive officer for fiscal 1994 represent the value of the restricted
stock grant award made in July 1994 upon completion
48
<PAGE>
of the Company's initial public stock offering computed as the number of
restricted shares granted multiplied by $10 per common share (the initial
public offering price) and the amounts shown for fiscal 1996 represent the
value of restricted stock grant awards made in June 1996 computed as the
number of restricted shares granted multiplied by the closing market price
for the Common Stock on the last full trading day before the restricted
stock grant award. The number of restricted shares granted to each of the
named executive officers in June 1996 was 25,000 shares to Mr. Caine, 7,000
shares to each of Messrs. Kenney and Tatom and 10,000 shares to Mr. Wise. As
of October 31, 1996, 80,000 restricted common shares were held by the named
executive officers with an aggregate market value of $790,000. The
restriction on 25% of the shares originally granted to the named executive
officers will expire on July 1 of each of 1997, 1999, 2002 and 2004. The
Board of Directors, by resolution, waived the continued employment
requirement with respect to the restricted shares of Mr. Stack upon his
retirement on November 1, 1994, although the restriction on transfers remain
in effect as per the schedule outlined above. The Company has waived the
transfer restrictions applicable to the restricted shares to permit the
holders of such shares to tender their shares in the Equity Tender Offer.
(3) The amounts shown as "LTIP Payouts" in the table for each named executive
officer represent contractual payments under such officer's Net Worth
Appreciation Agreement. See "--Net Worth Appreciation Agreements."
(4) The other compensation shown, except for Mr. Rennert for all periods and Mr.
Stack in fiscal 1996 and fiscal 1995, consists of WCI contributions to a
defined contribution pension plan and, in fiscal 1996, matching
contributions under the Company's 401(k) savings plan.
(5) Mr. Rennert receives no compensation directly from WCI. He is Chairman of
the Board and the principal stockholder of Renco which receives a management
fee from WCI pursuant to a Management Consultant Agreement. The amounts
shown as all other compensation to Mr. Rennert are the management fees paid
by WCI to Renco for each fiscal year. See "Stock Ownership and Certain
Relationships and Transactions."
(6) Compensation shown in fiscal 1994 was earned in the capacity of President
and Chief Executive Officer. Mr. Stack retired effective November 1, 1994
and thereafter served as Vice Chairman of the Board and as a consultant to
the Company. Compensation shown for Mr. Stack in fiscal 1996 and fiscal 1995
represents amounts earned under a consulting agreement in the capacity as
President and Chief Executive Officer (from September 20, 1995 through March
31, 1996) and as a consultant to the Company. See "Stock Ownership and
Certain Relationships and Transactions." For a description of payments to
Mr. Stack under his Net Worth Appreciation Agreement, see "--Net Worth
Appreciation Agreements."
(7) Mr. Caine was named President and Chief Executive Officer effective April 1,
1996.
(8) Mr. Kenney was named Vice President, Operations effective June 1, 1994 and,
prior to that date, was General Superintendent, Finishing Operations since
September 1, 1988.
(9) Mr. Tatom was named Vice President, Commercial effective November 1, 1995
and, prior to that date, was Vice President, Sales from May 1, 1994 to
October 31, 1995 and General Manager of Sales from September 1, 1988 through
April 30, 1994.
(10) Mr. Wise was named Vice President, Finance and Chief Financial Officer
effective September 1, 1994. Mr. Wise has a severance pay agreement that
provides for severance pay based on his base salary if his employment is
terminated other than for "cause" prior to August 31, 1997.
NET WORTH APPRECIATION AGREEMENTS
The named executive officers (with the exception of Mr. Rennert) and one
other employee of the Company are each parties to Net Worth Appreciation
Agreements with the Company, pursuant to which each earns as deferred
compensation a fixed percentage of the increase in the net worth of the Company,
as defined, during the term of their employment. The following table summarizes
the Net Worth
49
<PAGE>
Appreciation Agreements now held by the named executive officers, and the
amounts earned thereunder during each of fiscal 1996, 1995 and 1994.
<TABLE>
<CAPTION>
CREDIT AS OF
NET WORTH FISCAL AMOUNT OCTOBER 31,
PERCENTAGE BASE DATE YEAR EARNED 1996(1)
<S> <C> <C> <C> <C> <C>
James V. Stack............................... 5%(2) 08/31/88 1996 -- $ 5,985,322
1995 --
1994 $ 4,572,107
Edward R. Caine.............................. 5%(3)(4) 04/01/96 1996 1,038,711 651,766
1995 --
1994 --
Patrick T. Kenney............................%(121/4) 08/31/88 1996 602,250 2,806,665
%(3)(5) 3/4 06/01/94 1995 363,550
1994 1,656,345
Patrick G. Tatom............................. 2%(3)(6) 05/01/94 1996 602,250 2,017,385
1995 363,550
1994 1,455,168
Bret W. Wise................................. 2%(3)(7) 08/01/94 1996 602,250 879,645
1995 363,550
1994 223,927
</TABLE>
- ------------------------
(1) Represents gross aggregate amount earned under the applicable agreement less
any amounts paid under the agreements through October 31, 1996.
(2) Fully vested. Accruals for Mr. Stack ceased upon his retirement on November
1, 1994.
(3) Subject to earlier partial vesting in certain cases (E.G. death or
discontinuance of employment due to disability).
(4) Vests as to 3% on April 1, 1999, and as to an additional 1% on each of April
1, 2000 and 2001, provided that in each case Mr. Caine remains in the employ
of the Company until the applicable vesting date.
(5) Vests as to 0.45% on October 31, 1997 and as to an additional 0.15% on each
of October 31, 1998 and October 31, 1999, provided that in each case Mr.
Kenney remains in the employ of the Company until the applicable vesting
date.
(6) Vests as to 1.2% on May 1, 1997 and as to an additional 0.4% on each of May
1, 1998 and May 1, 1999, provided that in each case Mr. Tatom remains in the
employ of the Company until the applicable vesting date.
(7) Vests as to 1.2% on September 1, 1997 and as to an additional 0.4% on each
of September 1, 1998 and September 1, 1999, provided that in each case Mr.
Wise remains in the employ of the Company until the applicable vesting date.
The Net Worth Appreciation Agreements also provide that active participants
receive an annual payment of 5% of the balance of their accumulated deferred
compensation amount as of the end of the previous fiscal year, subject to
certain annual minimum and maximum amounts and subject to reductions based upon
amounts received under the Net Worth Appreciation Agreements as a result of
dividends paid by the Company in such fiscal year. In the event of payment of a
dividend or a sale of WCI, the active participants are entitled to receive a
percentage of the dividend or a percentage of the net proceeds received from the
sale (less an amount derived from the net worth of the Company at the effective
date of their respective agreement) equal to their full net worth percentage
under their agreement. As a result of
50
<PAGE>
the Transactions, approximately $13.2 million in the aggregate was paid to
Messrs. Caine, Kenney, Tatom and Wise and one other employee of the Company
pursuant to the Net Worth Appreciation Agreements. Such payments reduced the
amounts owed to such persons under their Net Worth Appreciation Agreements.
Active participants are also entitled to receive the balance of the vested
amount earned under their Net Worth Appreciation Agreement in 40 equal quarterly
payments commencing upon the earliest of age 62, ten years after the termination
of their employment, or twenty years after the date the participant was first
employed by the Company. Receipt by each employee of his payment is conditioned
on his observance of his confidentiality and non-compete agreement with the
Company.
51
<PAGE>
STOCK OWNERSHIP AND CERTAIN RELATIONSHIPS AND TRANSACTIONS
The following table sets forth certain information as of November 30, 1996
regarding the beneficial ownership of Common Stock by each beneficial owner of
5% or more of the Common Stock, each director and each named executive officer
of the Company during the last fiscal year, and by all directors and executive
officers of the Company as a group. Except as otherwise noted, the persons named
in the table below have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AS OF NOVEMBER 30, 1996
------------------------------
<S> <C> <C>
SHARES OF
NAME OF BENEFICIAL OWNERS AND ADDRESS OF 5% BENEFICIAL OWNERS COMMON STOCK PERCENT
The Renco Group, Inc..................................................................... 100 100.0%
30 Rockefeller Plaza, 42nd Floor
New York, NY 10112
Ira Leon Rennert(1)...................................................................... 100 100.0%
c/o The Renco Group, Inc.
30 Rockefeller Plaza, 42nd Floor
New York, NY 10112
All directors and executive officers as a group (5 persons).............................. 100 100.0%
</TABLE>
- ------------------------
(1) Mr. Rennert is deemed to beneficially own the Common Stock of the Company
owned by Renco due to the ownership by himself and six trusts established by
him (but of which he is not a trustee) for himself and members of his family
of a total of 95.9% of the outstanding Common Stock of Renco.
By virtue of Renco's ownership of all the outstanding share of Common Stock,
and Mr. Rennert's ownership of a majority of the stock of Renco, Mr. Rennert is
in position to control actions that require the consent of a majority of the
holders of the Company's outstanding shares of Common Stock, including the
election of the Board of Directors.
Under a Management Consultant Agreement, effective October 1, 1992, as
amended, between Renco and WCI, WCI pays a monthly fee of $100,000 to Renco. The
Management Consultant Agreement provides that WCI shall not make any payment
thereunder which would violate any of its agreements with respect to any of its
outstanding indebtedness. The Management Consultant Agreement extends to October
31, 1998 and thereafter shall continue for additional terms of three years each
unless sooner terminated by either party by giving six months prior written
notice. In the year ended October 31, 1995, WCI paid management fees to Renco in
the amount of $1,200,000. The Company believes that the cost of obtaining the
type and quality of services rendered by Renco under the Management Consultant
Agreement was, and continues to be, no less favorable than that at which the
Company could obtain such services from unaffiliated entities.
WCI is included in the consolidated federal income tax return of Renco.
Under the terms of the tax sharing agreement with Renco, income taxes are
allocated to WCI on a separate return basis except that transactions between WCI
and Renco and its other subsidiaries are accounted for on a cash basis and not
on an accrual basis. WCI is not entitled to the benefit of net tax loss
carryforwards, unless such tax losses were a result of timing differences
between WCI's accounting for tax and financial reporting purposes. As of October
31, 1995, WCI had no net operating tax loss carryforwards. Renco has agreed to
indemnify WCI for any tax imposed on or paid by WCI in excess of the amount
payable by WCI and its subsidiaries under the tax sharing agreement. As of
October 31, 1995, WCI had recoverable income taxes of $6.0 million under this
agreement, representing estimated tax payments made by the Company to Renco in
excess of the Company's actual tax liability due to the unexpected losses
incurred by the Company in the last quarter of fiscal 1995. The above amount was
fully recovered by July 31, 1996.
52
<PAGE>
To obtain the advantages of volume, Renco purchases certain insurance
coverages for its subsidiaries, including the Company, and the actual cost of
such insurance, without markup, is reimbursed by the covered subsidiaries. The
major areas of the Company's insurance coverage obtained under the Renco
programs are property, business interruption, general, product and auto
liability and workers' compensation (other than Ohio for which the Company is
self insured). The premiums for director and officer, fidelity, fiduciary,
property, business interruption, auto liability and casualty umbrella are
allocated by Renco substantially as indicated in the underlying policies.
General and product liability and workers' compensation coverages (excluding the
Ohio self insured program) are loss sensitive programs with both fixed and
variable premium components. The fixed premium component for this coverage is
allocated to each insured Renco subsidiary based on factors that include
historical guaranteed cost premium, the overall growth of each subsidiary and an
assessment of risk based on loss experience. The fixed component is subject to
revision resulting from the insurance carrier's audit of actual premium factors.
As claims (the variable component) are paid, each insured within the loss
sensitive program is charged for its claims up to a maximum amount and subject
to an overall maximum for all insured subsidiaries. Each insured Renco
subsidiary has been assigned an individual maximum cost based on historical
guaranteed cost premiums. The overall and individual subsidiary maximums are
subject to revision based on audit of actual premium factors. If an insured
Renco subsidiary reaches its individual maximum cost, the other insured
subsidiaries are required to share proportionately in the excess cost of the
subsidiary which has reached its individual maximum. In fiscal 1995, the Company
incurred costs of approximately $1.9 million under the Renco insurance program.
The Company believes that its insurance costs under this program were less than
it would have incurred if it had obtained its insurance directly.
Effective November 1, 1994, Mr. Stack and the Company entered into a
Consulting Agreement under which Mr. Stack was to receive an annual retainer fee
of $150,000 in fiscal 1995 and $100,000 annually thereafter in return for
consultation and advice relating to: the Company's blast furnace reline
completed in 1995; general conditions in the steel industry; WCI's operations,
business plans, and capital expenditure plans; special projects; and other
matters as agreed to between the Chairman of the Board or President of WCI and
Mr. Stack. On September 20, 1995, Mr. Stack, at the request of the Board of
Directors, resumed the duties of President and Chief Executive Officer upon the
resignation of the then President. In recognition of the increased
responsibilities assumed by Mr. Stack effective September 20, 1995, and
continuing until the election of Edward R. Caine as President and Chief
Executive Officer by the Board of Directors effective as of April 1, 1996, Mr.
Stack's remuneration under the Consulting Agreement was adjusted to provide for
a one-time fee of $250,000 and the annual retainer fee was adjusted to $275,000
during such period. The agreement extends from year-to-year unless terminated as
of any year end by notice by either party. In addition, Renco has agreed to
indemnify Mr. Stack against, and reimburse him for, any incremental cost or
expense he may incur or be required to pay because of his resumption of and
continuation in office as President of the Company.
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DESCRIPTION OF THE NOTES
The Old Notes were and the Exchange Notes will be issued under the
Indenture. The following summary of the material provisions of the Indenture
does not purport to be complete and is subject to, and qualified in its entirety
by, reference to the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"), as in
effect on the date of the Indenture. The definitions of certain capitalized
terms used in the following summary are set forth below under "--Certain
Definitions."
GENERAL
The Notes will mature on December 1, 2004. Each Note will bear interest at
the rate set forth on the cover page hereof from the date of issuance or from
the most recent interest payment date to which interest has been paid, payable
semiannually in arrears on June 1 and December 1 each year, commencing June 1,
1997, to the person in whose name the Note (or any predecessor Note) is
registered at the close of business on the May 15 or November 15 next preceding
such interest payment date.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
WCI in The City of New York maintained for such purposes (which initially will
be the Trustee or its agent); provided that payment of interest may be made at
the option of WCI by check mailed to the registered holders of the Notes
("Holders") at their registered addresses. The Notes will be issued only in
fully registered form without coupons, in denominations of $1,000 and any
integral multiple thereof. No service charge will be made for any registration
of transfer, exchange or redemption of Notes, except in certain circumstances
for any tax or other governmental charge that may be imposed in connection
therewith. Interest will be computed on the basis of a 360 day year comprised of
twelve 30 day months.
OPTIONAL REDEMPTION
The Notes will be subject to redemption, in whole or in part, at the option
of WCI, at any time on or after December 1, 2001, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued
interest to the redemption date, if redeemed during the twelve month period
beginning on December 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2001.............................................................................. 105.000%
2002.............................................................................. 103.333%
2003.............................................................................. 101.000%
</TABLE>
OPTIONAL REDEMPTION UPON EQUITY OFFERINGS
In addition, at any time prior to December 1, 1999, WCI may redeem up to
33 1/3% of the aggregate principal amount of the Notes originally issued with
the proceeds of one or more Equity Offerings at a redemption price (expressed as
a percentage of principal amount) of 109% plus accrued interest to the
redemption date; provided that at least $200 million aggregate principal amount
of Notes remains outstanding immediately after any such redemption. In order to
effect the foregoing redemption with the proceeds of any Equity Offering, WCI
shall make such redemption not more than 120 days after the consummation of any
such Equity Offering. "Equity Offering" means an offering of Qualified Capital
Stock of WCI (other than to any Subsidiary of WCI).
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
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SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which such Notes are listed or, if such Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED, HOWEVER, that (i) no Notes of
a principal amount of $1,000 or less shall be redeemed in part and (ii) a
redemption with the net cash proceeds of an Equity Offering shall be made on a
pro rata basis unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption.
RANKING
The indebtedness of WCI evidenced by the Notes ranks senior in right of
payment to all senior subordinated and subordinated indebtedness of WCI, and
PARI PASSU with all other existing and future senior indebtedness of WCI.
SECURITY
Pursuant to the Security Documents, WCI has assigned and pledged as
collateral to the Trustee for the benefit of the Trustee and the Holders of the
Notes a security interest in certain of its existing real and personal property
summarized below, whether now owned or, in the case of certain personal property
located on real property constituting Collateral, hereafter acquired, together
with the proceeds therefrom. The Collateral for the Notes initially represents
substantially all of the property, plant and equipment of WCI (other than
inventory, accounts receivable, or other current assets, intangibles and the
capital stock or assets of WCI's subsidiaries). In addition, certain
improvements and equipment constructed or acquired, as applicable, after the
Issue Date which are not an integral part of (or the replacement of an integral
part of) WCI's operations at the Warren, Ohio facility as in existence on the
Issue Date will not constitute Collateral. The foregoing exclusion from the
Collateral may in the future necessitate the release of a portion of the real
property constituting a portion of the Collateral on which such improvements or
equipment may be located. The security interest in the Collateral is a second
priority lien (such lien ranking junior only to the existing lien on such
Collateral for the benefit of the holders of the Existing Notes to the extent
any Existing Notes remain outstanding). In addition, such second priority lien
will be PARI PASSU with the lien granted to the VEBA Trust; PROVIDED that at
such time as no Existing Notes remain outstanding, the security interest in the
Collateral for the benefit of the Holders of the Notes shall become a first
priority lien and the lien of the VEBA Trust shall remain a second priority lien
junior to the lien for the benefit of the Holders of the Notes. See "Risk
Factors--Relating to WCI--Substantial Employee Postretirement Obligations."
Nevertheless, pursuant to an agreement between WCI and the USWA, the lien held
by the VEBA Trust may not be exercised so long as any senior indebtedness,
including the Notes and the Existing Notes, is outstanding.
No appraisals of any of the Collateral were prepared in connection with the
Old Notes Offering or have been prepared in connection with the Exchange Offer.
The net book value of the Collateral as of July 31, 1996 was approximately $188
million. There can be no assurance that the proceeds of any sale of the
Collateral in whole or in part pursuant to the Indenture and the related
Security Documents following an Event of Default would be sufficient to satisfy
payments due on the Notes. See "Risk Factors--Relating to WCI--Security." In
addition, the ability of the Holders of Notes to realize upon the Collateral may
be
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subject to certain bankruptcy law limitations in the event of a bankruptcy. See
"--Certain Bankruptcy Limitations" below.
WCI is permitted to transfer all or a portion of the Collateral to one or
more of its Wholly-Owned Subsidiaries; PROVIDED that any such Wholly-Owned
Subsidiary executes a senior guarantee (secured by the Collateral transferred)
of WCI's obligations under the Notes and the Indenture. See "--Certain
Covenants--Future Guarantees."
The collateral release provisions of the Indenture permit the release of
Collateral without substitution of collateral of equal value under certain
circumstances. See "--Release of Collateral." As described under "--Certain
Covenants--Limitation on Sale of Assets," the Net Cash Proceeds of such Asset
Sales may be required to be utilized to make an offer to purchase Notes. To the
extent an offer to purchase Notes is not subscribed to by Holders thereof on the
basis described under "--Certain Covenants--Limitation on Sale of Assets," the
unutilized Net Cash Proceeds may be retained by WCI, free of the lien of the
Indenture and the Security Documents.
Pursuant to the Security Documents, WCI has assigned and pledged to the
Trustee, for its benefit and the benefit of the Holders of the Notes, each of
the following assets: (a) all machinery and equipment owned by WCI on the Issue
Date and located at the facility in Warren, Ohio (together with all improvements
and additions thereto and replacements thereof); (b) the instruments deposited
or required to be deposited in the Collateral Account upon the sale or other
disposition of Collateral; (c) WCI's interest in the real property consisting of
the owned facility located in Warren, Ohio and described under
"Business--Facilities" above (together with all additions, improvements and
accessions thereto) (the "Real Property Collateral"); and (d) all proceeds and
products of any and all of the foregoing.
The personal property Collateral is pledged pursuant to a security agreement
between WCI and the Trustee (the "Security Agreement") and the Real Property
Collateral is pledged pursuant to mortgages (the "Mortgages").
If an Event of Default occurs under the Indenture and a declaration of
acceleration of the Notes occurs as a result thereof, the Trustee, on behalf of
the Holders of the Notes, in addition to any rights or remedies available to it
under the Indenture, may take such action as it deems advisable to protect and
enforce its rights in the Collateral, including the institution of foreclosure
proceedings. The proceeds received by the Trustee from any foreclosure will be
applied by the Trustee first to pay the expenses of such foreclosure and fees
and other amounts then payable to the Trustee under the Indenture, and
thereafter to pay the principal, premium, if any, and interest on the Notes. If,
at the time of such foreclosure proceeding, the VEBA Trust has a mortgage lien
which is PARI PASSU with the mortgage lien in favor of the Trustee, such
proceeds would be shared on a PRO RATA basis by the Holders of the outstanding
Notes and the VEBA Trust.
Dispositions of Real Property Collateral may be subject to delay pursuant to
an intercreditor agreement entered into with the lenders under the WCI Revolving
Credit Facility. Such intercreditor agreement provides that the Trustee will
provide access to and use of the real property and, under certain circumstances,
may delay liquidation of the real property for a period of time to permit the
agent for the lenders under the WCI Revolving Credit Facility to conduct an
orderly liquidation of inventory located on the real property (including,
without limitation, the processing of work in process).
Real property pledged as security to a lender may be subject to known and
unforeseen environmental risks. Under CERCLA, a secured lender may be held
liable, in certain limited circumstances, for the costs of remediating or
preventing releases or threatened releases of hazardous substances at or from a
mortgaged property. There may be similar risks under various state laws and
common law theories. Lender liability may be imposed where the lender actually
participates in the management or operational affairs of the mortgaged property
with certain exceptions.
Under the Indenture, the Trustee may, prior to taking certain actions,
request that Holders of Notes provide an indemnification against its costs,
expenses and liabilities. It is possible that CERCLA (or
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analogous) cleanup costs could become a liability of the Trustee and cause a
loss to any Holders of Notes that provided an indemnification. In addition, such
Holders may act directly rather than through the Trustee, in specified
circumstances, in order to pursue a remedy under the Indenture. If Holders of
Notes exercise that right, they could, under certain circumstances, be subject
to the risks of environmental liability discussed above.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Trustee to repossess and dispose of the Collateral upon the
occurrence of an Event of Default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or
against WCI prior to the Trustee having repossessed and disposed of the
Collateral. Under the Bankruptcy Code, a secured creditor such as the Trustee is
prohibited from repossessing its security from a debtor in a bankruptcy case, or
from disposing of security repossessed from such debtor, without bankruptcy
court approval. Moreover, the Bankruptcy Code permits the debtor to continue to
retain and to use collateral even though the debtor is in default under the
applicable debt instruments, provided that the secured creditor is given
"adequate protection." The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the secured creditor's interest in the collateral and may include cash
payments or the granting of additional security, if and at such times as the
court in its discretion determines, for any diminution in the value of the
collateral as a result of the stay of repossession or disposition or any use of
the collateral by the debtor during the pendency of the bankruptcy case. In view
of the lack of a precise definition of the term "adequate protection" and the
broad discretionary powers of a bankruptcy court, it is impossible to predict
how long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Trustee could repossess or dispose of the
Collateral or whether or to what extent Holders of the Notes would be
compensated for any delay in payment or loss of value of the Collateral through
the requirement of "adequate protection."
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS
(a) WCI will not, and will not cause or permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
the payment of (collectively "incur") any Indebtedness (including Acquired
Indebtedness) other than Permitted Indebtedness; PROVIDED that WCI may incur
Indebtedness (including Acquired Indebtedness) if: (A) no Default or Event of
Default shall have occurred and be continuing at the time of the proposed
incurrence thereof or shall occur as a result of such proposed incurrence, and
(B) after giving effect to such proposed incurrence, the Consolidated Fixed
Charge Coverage Ratio of WCI is at least equal to 2.5 to 1.0. Notwithstanding
the foregoing, a Subsidiary of WCI may incur Acquired Indebtedness to the extent
such Indebtedness could have been incurred by the Company pursuant to the
PROVISO in the immediately preceding sentence.
(b) WCI shall not, directly or indirectly, in any event incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is subordinated to any other Indebtedness of WCI unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinated to the Notes to the same extent
and in the same manner as such Indebtedness is subordinated to such other
Indebtedness of WCI.
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LIMITATION ON RESTRICTED PAYMENTS
WCI will not, and will not permit any of its Subsidiaries to, directly or
indirectly, after the Issue Date (a) declare or pay any dividend or make any
distribution on WCI's Capital Stock or make any payment to holders of such
Capital Stock (other than dividends or distributions payable in Qualified
Capital Stock of WCI), (b) purchase, redeem or otherwise acquire or retire for
value any Qualified Capital Stock of WCI or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock, other than the
exchange of such Capital Stock for Qualified Capital Stock, (c) purchase,
redeem, prepay, defease or otherwise acquire or retire for value, prior to any
scheduled maturity, scheduled repayment or scheduled sinking fund payment,
Disqualified Capital Stock of WCI or Indebtedness of WCI that is expressly
subordinate in right of payment to the Notes or (d) make any Investment
(excluding any Permitted Investment) (each of the foregoing actions set forth in
clauses (a), (b), (c) and (d) being referred to as a "Restricted Payment"), if
at the time of such Restricted Payment or immediately after giving effect
thereto, (i) a Default or an Event of Default shall have occurred and be
continuing or (ii) Restricted Payments made subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, shall be the Fair
Market Value of such property proposed to be transferred by WCI or such
Subsidiary, as the case may be, pursuant to such Restricted Payment) shall
exceed the sum of:
(x) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of WCI
earned subsequent to October 31, 1996 and prior to the date the Restricted
Payment occurs (treating such period as a single accounting period);
(y) 100% of the aggregate net proceeds, including the Fair Market Value
of property other than cash, received by WCI from any person (other than a
Subsidiary of WCI) from the issuance and sale subsequent to the Issue Date
of Qualified Capital Stock of WCI (excluding (A) Qualified Capital Stock
paid as a dividend on any Capital Stock or as interest on any Indebtedness,
(B) any net proceeds from issuances and sales financed directly or
indirectly using funds borrowed from WCI or any Subsidiary of WCI, until and
to the extent such borrowing is repaid and (C) any net proceeds from any
Equity Offering which are used to redeem Notes pursuant to, and in
accordance with, the provisions described under the caption "--Optional
Redemption--Optional Redemption Upon Equity Offerings" above); and
(z) 100% of the aggregate net proceeds, including the Fair Market Value
of property other than cash, received by WCI from any person (other than a
Subsidiary of WCI) from the issuance and sale of Disqualified Capital Stock
and/or Indebtedness, in each case that has been converted into or exchanged
for Qualified Capital Stock of WCI after the Issue Date.
The foregoing provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of its
declaration if the dividend would have been permitted on the date of
declaration;
(2) the acquisition of Capital Stock of WCI or Indebtedness of WCI
either (i) solely in exchange for shares of Qualified Capital Stock or (ii)
through the application of net proceeds of a substantially concurrent sale
for cash (other than to a Subsidiary of WCI) of shares of Qualified Capital
Stock;
(3) the acquisition of Indebtedness of WCI that is expressly subordinate
in right of payment to the Notes either (i) solely in exchange for
Indebtedness of WCI which is expressly subordinate in right of payment to
the Notes at least to the extent that the Indebtedness being acquired is
subordinated to the Notes and has no scheduled principal prepayment dates
prior to the scheduled final maturity date of the Indebtedness being
exchanged or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of WCI) of Indebtedness
of WCI which is expressly subordinate in right of payment to the Notes at
least to the extent that the Indebtedness being acquired is subordinated to
the Notes and has no scheduled principal prepayment dates prior the
scheduled final maturity date of the Indebtedness being refinanced;
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(4) the making of payments by WCI to Renco (A) no earlier than ten days
prior to the date on which Renco is required to make its payments to the
Internal Revenue Service or the applicable state taxing authority, as the
case may be, pursuant to a tax sharing agreement between WCI and Renco
(which tax sharing agreement provides that the payments thereunder shall not
exceed the amount WCI would have been required to pay for taxes on a
stand-alone basis, except that WCI will not have the benefit of any of its
tax loss carryforwards unless such tax losses were a result of timing
differences between WCI's accounting for tax and financial reporting
purposes, and which tax sharing agreement also provides that transactions
between WCI and Renco and its other subsidiaries are accounted for on a cash
basis and not on an accrual basis) and (B) to reimburse Renco for out of
pocket insurance payments made by Renco on behalf of WCI and its
Subsidiaries;
(5) the payment by WCI or any of its Subsidiaries of a management fee to
Renco in an amount not to exceed $100,000 in any month;
(6) the payment by WCI of a dividend to Renco on the Issue Date not to
exceed an amount currently estimated to be approximately $108 million; and
(7) the making of a loan to Holdings on the Issue Date not to exceed $60
million which loan will be extinguished immediately after the merger of
Holdings with and into WCI, which will occur on, or as soon as reasonably
practicable after, the Issue Date;
PROVIDED that in the case of clauses (2), (3) and (5), no Default or Event of
Default shall have occurred and be continuing at the time of such payment or as
a result thereof.
In determining the aggregate amount of Restricted Payments permissible under
clause (ii) of the first paragraph of this section, amounts expended, incurred
or outstanding pursuant to clauses (1) and (2) (but not pursuant to clauses (3),
(4), (5), (6) or (7)) of the second paragraph of this section shall be included
as Restricted Payments; PROVIDED that any proceeds received from the issuance of
Qualified Capital Stock pursuant to clause (2) of the second paragraph of this
section shall be included in calculating the amount referred to in clause (y) or
clause (z), as the case may be, of the first paragraph of this section.
LIMITATION ON SALE OF ASSETS
WCI will not, and will not permit any of its Subsidiaries to, consummate any
Asset Sale unless (i) such Asset Sale is for at least Fair Market Value, (ii) at
least 80% of the consideration therefrom received by WCI or such Subsidiary is
in the form of cash or Cash Equivalents, (iii) if such Asset Sale involves
Collateral it shall be in compliance with the provisions described under
"--Release of Collateral," and (iv) WCI or such Subsidiary shall apply the Net
Cash Proceeds of such Asset Sale within 180 days of receipt thereof, as follows:
(a) first, to the extent such Net Cash Proceeds are received from an
Asset Sale not involving the sale, transfer or disposition of Collateral
("Non-Collateral Proceeds"), to repay (and, in the case of a revolving
credit facility, effect a permanent reduction in the commitment thereunder)
any Indebtedness secured by the assets involved in such Asset Sale or
otherwise required to be repaid with the proceeds thereof (including
repurchasing any Existing Notes required to be repurchased pursuant to the
indenture governing the Existing Notes), and
(b) second, with respect to any Non-Collateral Proceeds remaining after
application pursuant to the preceding paragraph (a) and any Net Cash
Proceeds received from an Asset Sale involving Collateral (after
repurchasing any Existing Notes required to be repurchased pursuant to the
indenture governing the Existing Notes) ("Collateral Proceeds" and, together
with such remaining Non-Collateral Proceeds, the "Available Amount"), WCI
shall make an offer to purchase (the "Asset Sale Offer") from all Holders of
Notes, up to a maximum principal amount (expressed as a multiple of $1,000)
of Notes equal to the Available Amount at a purchase price equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon, if
any, to the date of purchase; PROVIDED,
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however, that WCI will not be required to apply pursuant to this paragraph
(b) Net Cash Proceeds received from any Asset Sale if, and only to the
extent that, such Net Cash Proceeds are applied to a Related Business
Investment within 180 days of such Asset Sale and, if the Net Cash Proceeds
so invested were Collateral Proceeds, the property and assets constituting
such Related Business Investment and any other non-cash consideration
received as a result of such Asset Sale are made subject to the Lien of the
Indenture and the applicable Security Documents; PROVIDED, FURTHER, that to
the extent any such assets subject to an Asset Sale constituted Collateral,
any property and assets constituting a Related Business Investment and any
other non-cash consideration received as a result of such Asset Sale shall
not consist of inventory or receivables and shall constitute Collateral
under the terms of the Indenture and under the terms of the Security
Documents; PROVIDED, FURTHER, that if at any time any non-cash consideration
received by WCI or any Subsidiary of WCI, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for
cash, then such conversion or disposition shall be deemed to constitute an
Asset Sale under the Indenture and the Net Cash Proceeds thereof shall be
applied in accordance with this "Limitation on Sale of Assets" covenant; and
PROVIDED, FURTHER, that WCI may defer the Asset Sale Offer until there is an
aggregate unutilized Available Amount equal to or in excess of $5 million
resulting from one or more Asset Sales (at which time, the entire unutilized
Available Amount, and not just the amount in excess of $5 million, shall be
applied as required pursuant to this paragraph). To the extent the Asset
Sale Offer is not fully subscribed to by Holders of the Notes, WCI may
obtain a release of the unutilized portion of the Available Amount from the
Lien of the Security Documents.
All Collateral Proceeds shall constitute Trust Moneys and shall be delivered
by WCI (or the applicable Subsidiary) to the Trustee and shall be deposited in
the Collateral Account in accordance with the Indenture. Collateral Proceeds so
deposited may be withdrawn from the Collateral Account pursuant to the
Indenture.
In the event of the transfer of substantially all (but not all) of the
property and assets of WCI and its Subsidiaries as an entirety to a person in a
transaction permitted under "--Merger, Consolidation, Etc." below, the successor
corporation shall be deemed to have sold the properties and assets of WCI and
its Subsidiaries not so transferred for purposes of this covenant, and shall
comply with the provisions of this covenant with respect to such deemed sale as
if it were an Asset Sale. In addition, the Fair Market Value of such properties
and assets of WCI or its Subsidiaries deemed to be sold shall be deemed to be
Net Cash Proceeds for purposes of this covenant.
Notice of an Asset Sale Offer will be mailed to the record Holders as shown
on the register of Holders not less than 30 days nor more than 60 days before
the payment date for the Asset Sale Offer, with a copy to the Trustee, and shall
comply with the procedures set forth in the Indenture. Upon receiving notice of
the Asset Sale Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 principal amount at maturity in exchange
for cash. To the extent Holders properly tender Notes in an amount exceeding the
Available Amount, Notes of tendering Holders will be repurchased on a PRO RATA
basis (based on amounts tendered). An Asset Sale Offer shall remain open for a
period of 20 business days or such longer period as may be required by law.
If an offer is made to repurchase the Notes pursuant to an Asset Sale Offer,
WCI will and will cause its Subsidiaries to comply with all tender offer rules
under state and Federal securities laws, including, but not limited to, Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent applicable
to such offer.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, WCI shall be obligated to make
an offer to purchase (a "Change of Control Offer"), and shall, subject to the
provisions described below, purchase, on a business day (the "Change of Control
Purchase Date") not more than 60 nor less than 45 days following the
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occurrence of the Change of Control, all of the then outstanding Notes at a
purchase price (the "Change of Control Purchase Price") equal to 101% of the
principal amount of the Notes plus accrued and unpaid interest thereon to the
date of purchase. WCI shall, subject to the provisions described below, be
required to purchase all Notes validly tendered into the Change of Control Offer
and not withdrawn. The Change of Control Offer is required to remain open for at
least 20 business days and until the close of business on the Change of Control
Purchase Date.
In order to effect such Change of Control Offer, WCI shall, not later than
the 30th day after the Change of Control, mail to each Holder of Notes notice of
the Change of Control Offer, which notice shall govern the terms of the Change
of Control Offer and shall state, among other things, the procedures that
Holders of Notes must follow to accept the Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that WCI
will have available funds sufficient to pay the Change of Control Purchase Price
for all of the Notes that might be delivered by Holders of Notes seeking to
accept the Change of Control Offer. WCI shall not be required to make a Change
of Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by WCI and purchases
all Notes validly tendered and not withdrawn under such Change of Control Offer.
WCI will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and WCI
is required to purchase Notes as described above.
LIMITATION ON LIENS
WCI will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Liens (i) upon any item
of Collateral other than the Liens created by the Notes, the Indenture and the
Security Documents and the Liens expressly permitted by the applicable Security
Document, including the Liens, if any, on the Issue Date in favor of the holders
of the Existing Notes and the Liens in favor of the VEBA Trust and (ii) upon any
other properties or assets of WCI (including, without limitation, any Capital
Stock of a Subsidiary) or any of their Subsidiaries whether owned on the Issue
Date or acquired after the Issue Date, or on any income or profits therefrom, or
assign or otherwise convey any right to receive income or profits thereon other
than (a) Liens existing on the Issue Date to the extent and in the manner such
Liens are in effect on the Issue Date, including, without limitation, Liens
securing Indebtedness under the WCI Revolving Credit Facility as of the Issue
Date and (b) Permitted Liens.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
WCI will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Subsidiary of WCI to: (a) pay
dividends or make any other distributions on its Capital Stock, or any other
interest or participation in, or measured by, its profits, owned by WCI or by
any Subsidiary of WCI, or pay any Indebtedness owed to WCI or a Subsidiary of
WCI; (b) make loans or advances to WCI or a Subsidiary of WCI; or (c) transfer
any of its properties or assets to WCI or to any Subsidiary of WCI, except for
such encumbrances or restrictions existing under or by reason of: (i) applicable
law; (ii) the Indenture and the indenture governing the Existing Notes; (iii)
customary nonassignment provisions of any lease governing a leasehold interest
of WCI or any Subsidiary of WCI; (iv) any instrument governing Indebtedness of a
person acquired by WCI or any Subsidiary of WCI at the time of such acquisition,
which encumbrance or restriction is not applicable to any person, or the
properties or assets of any person, other than the person or its Subsidiaries so
acquired; (v) any written agreement existing on the Issue Date; PROVIDED that
the term of any such agreement shall not be extended beyond the term as in
effect on the Issue Date and no such
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agreement shall be modified or amended in such a manner as to make the
encumbrance or restriction more restrictive than as in effect on the Issue Date;
(vi) Indebtedness existing and as in effect on the Issue Date, including,
without limitation, the WCI Revolving Credit Facility or any refinancing,
refunding, replacement or extensions thereof; PROVIDED that any such encumbrance
or restriction contained in any refinancing, refunding, replacement or extension
of the WCI Revolving Credit Facility shall be no more restrictive than such
encumbrance or restriction contained in the WCI Revolving Credit Facility as in
effect on the Issue Date; and (vii) Indebtedness incurred in accordance with the
Indenture; provided that such encumbrance or restriction shall be no more
restrictive than any encumbrance or restriction contained in the WCI Revolving
Credit Facility as in effect on the Issue Date.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS
WCI shall not, and shall not permit any of its Subsidiaries to, enter into
any Sale/leaseback. Notwithstanding the foregoing, WCI and its Subsidiaries may
enter into a Sale/leaseback involving only the sale or transfer of assets
acquired after the Issue Date and not constituting Collateral if (i) after
giving pro forma effect to any such Sale/leaseback, WCI shall be in compliance
with the "Limitation on Indebtedness" covenant described above, (ii) the sale
price in such Sale/leaseback is at least equal to the Fair Market Value of such
property and (iii) WCI or such Subsidiary shall apply the Net Cash Proceeds of
the sale as provided under "Limitation on Sale of Assets" above, to the extent
required by such provision.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
(a) WCI will not, and will not permit any of its Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with or for the benefit of, an Affiliate of WCI or any
Subsidiary of WCI (other than transactions between WCI and a Wholly-Owned
Subsidiary of WCI or between Wholly-Owned Subsidiaries of WCI) (an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under (b) below
and (y) Affiliate Transactions (including lease transactions) on terms that are
no less favorable to WCI or the relevant Subsidiary in the aggregate than those
that might reasonably have been obtained in a comparable transaction by WCI or
such Subsidiary on an arm's-length basis (as determined in good faith by the
Board of Directors of WCI, as evidenced by a Board Resolution) from a person
that is not an Affiliate; PROVIDED that except as otherwise provided by (b)
below, neither WCI nor any of its Subsidiaries shall enter into an Affiliate
Transaction or series of related Affiliate Transactions involving or having a
value of more than $5.0 million unless WCI or such Subsidiary, as the case may
be, has received an opinion from an Independent Financial Advisor, with a copy
thereof to the Trustee, to the effect that the financial terms of such Affiliate
Transaction are fair and reasonable to WCI or such Subsidiary, as the case may
be, and such terms are no less favorable to WCI or such Subsidiary, as the case
may be, than those that could be obtained in a comparable transaction on an
arm's-length basis with a person that is not an Affiliate.
(b) The foregoing provisions shall not apply to (i) any Restricted Payment
that is made in compliance with the provisions under "--Limitation on Restricted
Payments," (ii) the payment by WCI or any of its Subsidiaries of a management
fee to Renco in an amount not to exceed $100,000 in any month and any other
amounts payable under the Management Consultant Agreement as in effect on the
Issue Date and (iii) reasonable and customary regular fees to directors of WCI
who are not employees of WCI.
IMPAIRMENT OF SECURITY INTEREST
WCI shall not, and shall not permit any of its Subsidiaries to, take or omit
to take any action which action or omission might or would have the result of
affecting or impairing the security interest in favor of the Trustee, on behalf
of itself and the Holders of the Notes, with respect to the Collateral, and WCI
shall not grant to any Person (other than the Trustee on behalf of itself and
the Holders of the Notes) any interest whatsoever in the Collateral other than
Liens permitted by the Indenture and the Security Documents.
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LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES
WCI will not permit any Subsidiary of WCI to issue any Preferred Stock
(except to WCI or a Wholly-Owned Subsidiary of WCI), nor will WCI permit any
person (other than WCI or a Wholly-Owned Subsidiary of WCI) to hold any
Preferred Stock of a Subsidiary of WCI.
FUTURE GUARANTEES
WCI or any of its Wholly-Owned Subsidiaries may transfer, in one transaction
or a series of related transactions, any Collateral to any Wholly-Owned
Subsidiary of WCI, if such transferee Wholly-Owned Subsidiary shall (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Wholly-Owned Subsidiary shall
unconditionally guarantee on a senior secured basis (secured by the Collateral
so transferred) all of WCI's obligations under the Notes and the Indenture, (ii)
take all necessary action to cause the Lien on such Collateral in favor of the
Trustee to remain in full force and effect at all times, (iii) deliver to the
Trustee an opinion of counsel that such supplemental indenture and any other
documents required to comply with clause (ii) above have been duly authorized,
executed and delivered by such Wholly-Owned Subsidiary and the supplemental
indenture and each such other document constitutes a legal, valid, binding and
enforceable obligation of such Wholly-Owned Subsidiary and (iv) take such
further action and execute and deliver such other documents specified in the
Indenture or otherwise reasonably requested by the Trustee to effectuate the
foregoing.
REPORTS
So long as any Note is outstanding, WCI will file with the Commission and,
within fifteen days after it files them with the Commission, file with the
Trustee and mail or cause the Trustee to mail to the Holders at their addresses
as set forth in the register of the Notes copies of the annual reports on Form
10-K and of the information, documents and other reports which WCI is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
or which WCI would be required to file with the Commission if WCI then had a
class of securities registered under the Exchange Act. Such financial
information shall include annual reports containing consolidated financial
statements and notes thereto, together with an opinion thereon expressed by an
independent public accounting firm, management's discussion and analysis of
financial condition and results of operations as well as quarterly reports
containing unaudited condensed consolidated financial statements for the first
three quarters of every fiscal year.
MERGER, CONSOLIDATION, ETC.
Other than the merger of WCI Holdings, Inc. with and into WCI on, or as soon
as reasonably practicable after, the Issue Date (provided that WCI Holdings,
Inc. has no Indebtedness outstanding other than Indebtedness owing to WCI not to
exceed $60 million), WCI will not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
any person or adopt a Plan of Liquidation unless: (i) either (1) WCI shall be
the surviving or continuing corporation or (2) the person (if other than WCI),
formed by such consolidation or into which WCI is merged or the person which
acquires by conveyance, transfer or lease the properties and assets of WCI
substantially as an entirety or in the case of a Plan of Liquidation, or the
person to which assets of WCI have been transferred (x) shall be a corporation
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (y) shall expressly assume, by
supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes and the Indenture on the part of WCI
to be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), WCI (in the case of clause (1) of the foregoing clause (i)) or
such
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person (in the case of clause (2) thereof) (a) shall have a Consolidated Net
Worth (immediately after the transaction but prior to any purchase accounting
adjustments relating to such transaction) equal to or greater than the
Consolidated Net Worth of WCI immediately prior to such transaction and (b)
shall be able to incur (assuming a market rate of interest with respect thereto)
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) as
if it were WCI under paragraph (a) of "--Certain Covenants--Limitation on
Indebtedness" above; (iii) immediately before and after giving effect to such
transaction and the assumption contemplated by clause (y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of the transaction)
no Default and no Event of Default shall have occurred or be continuing; (iv)
WCI or such person shall have delivered to the Trustee (A) an Officers'
Certificate and an Opinion of Counsel (which counsel shall not be in-house
counsel of WCI) each stating that such consolidation, merger, conveyance,
transfer or lease or Plan of Liquidation and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this provision of the Indenture and that all conditions precedent in
the Indenture relating to such transaction have been satisfied and (B) a
certificate from WCI's independent certified public accountants stating that WCI
has made the calculations required by clause (ii) above in accordance with the
terms of the Indenture; and (v) neither WCI nor any Subsidiary of WCI nor such
person, as the case may be, would thereupon become obligated with respect to any
Indebtedness (including Acquired Indebtedness), nor any of its property or
assets subject to any Lien, unless WCI or such Subsidiary or such person, as the
case may be, could incur such Indebtedness (including Acquired Indebtedness) or
create such Lien under the Indenture (giving effect to such person being bound
by all the terms of the Indenture).
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of WCI
the Capital Stock of which constitutes all or substantially all of the
properties and assets of WCI shall be deemed to be the transfer of all or
substantially all of the properties and assets of WCI.
Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor person formed by such consolidation
or into which WCI is merged or to which such conveyance, lease or transfer is
made will succeed to, and be substituted for, and may exercise every right and
power of, WCI under the Indenture with the same effect as if such successor had
been named as WCI therein, and thereafter (except in the case of a sale,
assignment, transfer, lease, conveyance or other disposition) the predecessor
corporation will be relieved of all further obligations and covenants under the
Indenture and the Notes.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(a) WCI defaults in the payment of interest on the Notes when the same
becomes due and payable and the Default continues for a period of 30 days;
(b) WCI defaults in the payment of the stated principal amount of the
Notes when the same becomes due and payable at maturity, upon acceleration
or redemption pursuant to an offer to purchase required under the Indenture
or otherwise;
(c) WCI fails to comply in all material respects with any of its other
agreements contained in the Notes or the Indenture (including, without
limitation, under the provisions of "--Certain Covenants--Change of
Control," "--Certain Covenants--Limitation on Sale of Assets" and "--Merger,
Consolidation, Etc."), and the Default continues for the period and after
the notice specified below;
(d) there shall be any default or defaults in the payment of principal
or interest under one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of Indebtedness
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under which WCI or any Subsidiary of WCI then has outstanding Indebtedness
in excess of $7,500,000, individually or in the aggregate;
(e) there shall be any default or defaults under one or more agreements,
instruments, mortgages, bonds, debentures or other evidences of Indebtedness
under which WCI or any Subsidiary of WCI then has outstanding Indebtedness
in excess of $7,500,000, individually or in the aggregate, and such default
or defaults have resulted in the acceleration of the maturity of such
Indebtedness;
(f) WCI or any of its Subsidiaries fails to perform any term, covenant,
condition or provision of one or more agreements, instruments, mortgages,
bonds, debentures or other evidences of Indebtedness under which WCI or any
of its Subsidiaries then has outstanding Indebtedness in excess of
$7,500,000, individually or in the aggregate, and such failure to perform
results in the commencement of judicial proceedings to foreclose upon any
assets of WCI or any of its Subsidiaries securing such Indebtedness or the
holders of such Indebtedness shall have exercised any right under applicable
law or applicable security documents to take ownership of any such assets in
lieu of foreclosure;
(g) one or more judgments, orders or decrees for the payment of money
which either individually or in the aggregate at any one time exceeds
$7,500,000 shall be rendered against WCI or any of its Subsidiaries by a
court of competent jurisdiction and shall remain undischarged and unbonded
for a period (during which execution shall not be effectively stayed) of 60
consecutive days after such judgment becomes final and nonappealable;
(h) WCI or any Significant Subsidiary of WCI (1) admits in writing its
inability to pay its debts generally as they become due, (2) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (3) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy Law,
(4) consents to the appointment of a Custodian of it or for substantially
all of its property, (5) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (6) makes a general
assignment for the benefit of its creditors, or (7) takes any corporate
action to authorize or effect any of the foregoing;
(i) a court of competent jurisdiction enters a judgment, decree or order
for relief in respect of WCI or any Significant Subsidiary of WCI in an
involuntary case or proceeding under any Bankruptcy Law, which shall (1)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of WCI or any Significant Subsidiary of
WCI, (2) appoint a Custodian of WCI, or any Significant Subsidiary of WCI or
for substantially all of its property or (3) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; and
(j) any of the Security Documents ceases to be in full force and effect
or any of the Security Documents ceases to give the Trustee the Liens,
rights, powers and privileges purported to be created thereby in any
material respect.
A Default under clause (c) above (other than in the case of any Default
under the provisions of "--Certain Covenants--Limitation on Sale of Assets,"
"--Certain Covenants--Change of Control," "--Certain Covenants--Limitation on
Preferred Stock of Subsidiaries," or "--Merger, Consolidation, Etc.," which
Defaults shall be Events of Default without the notice and without the passage
of time specified in this paragraph) is not an Event of Default until the
Trustee notifies WCI, or the Holders of at least 25% in principal amount of the
outstanding Notes notify WCI and the Trustee, of the Default and WCI does not
cure the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is a
"Notice of Default." Such notice shall be given by the Trustee if so requested
by the Holders of at least 25% in principal amount of the Notes then
outstanding.
If an Event of Default (other than an Event of Default specified in clause
(h) or (i) above) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in aggregate
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principal amount of the then outstanding Notes may declare the unpaid principal
of, premium, if any, and accrued and unpaid interest on, all the Notes then
outstanding to be due and payable, by a notice in writing to WCI (and to the
Trustee, if given by Holders) and upon such declaration such principal amount,
premium, if any, and accrued and unpaid interest will become immediately due and
payable, notwithstanding anything contained in the Indenture or the Notes to the
contrary. If an Event of Default specified in clause (h) or (i) above occurs,
all unpaid principal of, and premium, if any, and accrued and unpaid interest
on, the Notes then outstanding will IPSO FACTO become due and payable without
any declaration or other act on the part of the Trustee or any Holder.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to the provisions of the Indenture relating
to the duties of the Trustee, the Trustee is under no obligation to exercise any
of its rights or powers under the Indenture at the request, order or direction
of any of the Holders, unless such Holders have offered to the Trustee
reasonable indemnity. Subject to all provisions of the Indenture and applicable
law, the Holders of a majority in aggregate principal amount of the then
outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee may withhold from
Holders notice of any continuing Default or Event of Default (except a Default
or Event of Default in the payment of principal of or premium, if any, or
interest on the Notes or that resulted from the failure to comply with the
provisions of "Certain Covenants--Change of Control" or "--Merger,
Consolidation, Etc.") if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and premium, if any, and interest on the Notes which has become due
solely by virtue of such acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding may, on behalf of the Holders of all the Notes, waive any past
Default or Event of Default under the Indenture and its consequences, except
Default in the payment of principal of or premium, if any, or interest on the
Notes or in respect of a covenant or provision of the Indenture which cannot be
modified or amended without the consent of all Holders.
Under the Indenture, WCI is required to provide an Officers' Certificate to
the Trustee promptly upon any such officer obtaining knowledge of any Default or
Event of Default (provided that such officers shall provide such certification
at least annually whether or not they know of any Default or Event of Default)
that has occurred and, if applicable, describe such Default or Event of Default
and the status thereof. In addition, for each fiscal year, WCI's independent
certified public accountants are required to certify to the Trustee that they
have reviewed the terms of the Indenture and the Notes as they relate to
accounting matters and whether, during the course of their audit examination,
any Default or Event of Default has come to their attention, and specifying the
nature and period of existence of any such Default or Event of Default.
AMENDMENT, SUPPLEMENT AND WAIVER
The Indenture contains provisions permitting WCI and the Trustee, with the
consent of the Holders of not less than a majority in aggregate principal amount
of the then outstanding Notes, to enter into any supplemental indenture for the
purpose of adding, changing or eliminating any of the provisions of the
Indenture or the Security Documents or of modifying in any manner the rights of
the Holders under the Indenture or the Security Documents; provided that no such
supplemental indenture may without the consent of the Holder of each outstanding
Note affected thereby: (i) reduce the amount of Notes whose holders must consent
to an amendment or waiver; (ii) reduce the rate of, or extend the time for
payment of, interest, including defaulted interest, on any Note; (iii) reduce
the principal of or premium on or
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change the fixed maturity of any Note or alter the redemption provisions with
respect thereto; (iv) make the principal of, or interest on, any Note payable in
money other than as provided for in the Indenture and the Notes; (v) make any
change in provisions relating to waivers of defaults, the ability of Holders to
enforce their right under the Indenture or the Security Documents or in the
matters discussed in these clauses (i) through (ix); (vi) waive a default in the
payment of principal of or interest on, or redemption or repurchase payment with
respect to, any Notes, including, without limitation, a failure to make payment
when required upon a Change of Control or after an Asset Sale Offer; (vii)
adversely affect the ranking of the Notes; (viii) change the Maturity Date or
alter the redemption provisions in a manner adverse to Holders; or (ix) after
WCI's obligation to purchase the Notes arises thereunder, amend, modify or
change the obligation of WCI to make and consummate a Change of Control Offer in
the event of a Change of Control or an Asset Sale Offer in the event of an Asset
Sale or waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any such offers.
In addition to the foregoing, no portion of the Collateral may be released
without the consent of the Holders of at least 75% in aggregate principal amount
of the then outstanding Notes.
DEFEASANCE
The Indenture provides that WCI may terminate its obligations under the
Notes, and the Indenture if: (i) all Notes previously authenticated and
delivered have been delivered to the Trustee for cancellation or WCI has paid
all sums payable by it thereunder, or (ii) WCI has irrevocably deposited or
caused to be deposited with the Trustee or the Paying Agent and conveyed all
right, title and interest for the benefit of the Holders of such Notes, under
the terms of an irrevocable trust agreement in form and substance satisfactory
to the Trustee, as trust funds in trust solely for the benefit of the Holders
for that purpose, money or United States government obligations maturing as to
principal and interest in such amounts and at such times as are sufficient
without consideration of any reinvestment of such interest to pay principal of,
premium, if any, and interest on such outstanding Notes to maturity; PROVIDED
that, among other things, WCI shall have delivered to the Trustee (i) either (a)
a ruling directed to the Trustee received from the Internal Revenue Service to
the effect that the Holders of such Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of WCI's exercise of its option
under the defeasance provision of the Indenture and will be subject to Federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised or (b) an Opinion
of Counsel to the same effect as the ruling described in clause (a) above
accompanied by a ruling to that effect published by the Internal Revenue
Service, unless there has been a change in the applicable Federal income tax law
since the date of the Indenture such that a ruling from the Internal Revenue
Service is no longer required, and (ii) an Opinion of Counsel to the effect
that, after the passage of 90 days following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally. Certain
obligations of WCI under the Indenture or the Notes, including the payment of
interest and principal, shall remain in full force and effect until such Notes
have been paid in full.
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, WCI has
the right to remain in possession and retain exclusive control of the Collateral
securing the Notes (other than any cash, securities, obligations or Cash
Equivalents constituting a part of the Collateral and deposited with the Trustee
in the Collateral Account and other than as set forth in the Security
Documents), or freely operate the Collateral and to collect, invest and dispose
of any income therefrom.
RELEASE OF COLLATERAL
Upon compliance by WCI with the conditions set forth below in respect of any
Asset Sale Release, and upon delivery by WCI to the Trustee of an Opinion of
Counsel to the effect that such conditions have
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been met, the Trustee will release the Released Interests (as hereinafter
defined) from the Lien of the Security Documents and reconvey the Released
Interests to WCI.
ASSET SALE RELEASE
WCI has the right to obtain a release of items of Collateral (the "Released
Interests") subject to an Asset Sale upon compliance with the condition that WCI
deliver to the Trustee the following:
(a) A notice from WCI requesting the release of Released Interests, (i)
describing the proposed Released Interests, (ii) specifying the value of such
Released Interests on a date within 60 days of such notice (the "Valuation
Date"), (iii) stating that the purchase price received is at least equal to the
Fair Market Value of the Released Interests, (iv) stating that the release of
such Released Interests will not interfere with the Trustee's ability to realize
the value of the remaining Collateral and will not impair the maintenance and
operation of the remaining Collateral and (v) certifying that such Asset Sale
complies with the terms and conditions of the Indenture with respect thereto;
(b) An Officers' Certificate of WCI stating that (i) such Asset Sale covers
only the Released Interests and complies with the terms and conditions of the
Indenture with respect to Asset Sales, (ii) all Net Cash Proceeds from the sale
of any of the Released Interests will be applied pursuant to the provisions of
the Indenture in respect of Asset Sales, (iii) there is no Default or Event of
Default in effect or continuing on the date thereof, the Valuation Date or the
date of such Asset Sale, (iv) the release of the Collateral will not result in a
Default or Event of Default under the Indenture, and (v) all conditions
precedent in the Indenture relating to the release in question have been
complied with;
(c) The Net Cash Proceeds and other non-cash consideration from the Asset
Sale required to be delivered to the Trustee pursuant to the Indenture; and
(d) All documentation required by the TIA prior to the release of Collateral
by the Trustee.
DISPOSITION OF COLLATERAL WITHOUT RELEASE
So long as no Event of Default shall have occurred and be continuing, WCI
may, without any release or consent by the Trustee, sell or otherwise dispose of
any machinery, equipment, furniture, apparatus, tools or implements or other
similar property subject to the Lien of the Security Documents, which may have
become worn out or obsolete, not exceeding individually, in Fair Market Value,
$250,000.
USE OF TRUST MONEYS
All Trust Moneys (including, without limitation, all Collateral Proceeds)
shall be held by the Trustee as a part of the Collateral securing the Notes and,
so long as no Event of Default shall have occurred and be continuing, may either
(i) be released in accordance with "Possession, Use and Release of Collateral"
above if such Trust Moneys represent Collateral Proceeds in respect of any Asset
Sale or (ii) at the direction of the Company be applied by the Trustee from time
to time to the payment of the principal of, premium, if any, and interest on any
Notes at maturity or upon redemption or to the purchase of Notes upon tender or
in the open market or at private sale or upon any exchange or in any one or more
of such ways, in each case in compliance with the Indenture. The Company may
also withdraw Trust Moneys constituting the proceeds of insurance upon any part
of the Collateral or an award for any Collateral taken by eminent domain to
reimburse the Company for repair or replacement of such Collateral, subject to
certain conditions.
The Trustee shall be entitled to apply any Trust Moneys to the cure of any
Default or Event of Default under the Indenture. Trust Moneys deposited with the
Trustee shall be invested in Cash Equivalents pursuant to the direction of the
Company and, so long as no Event of Default shall have occurred and be
continuing, the Company shall be entitled to any interest or dividends accrued,
earned or paid on such Cash Equivalents.
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GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
Fleet National Bank is serving as Trustee under the Indenture and is acting
as collateral agent or the mortgagee, as applicable, under the Security
Documents.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of WCI, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; PROVIDED that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person or any of its
Subsidiaries existing at the time such person becomes a Subsidiary of WCI or
assumed in connection with the acquisition of assets from such person,
including, without limitation, Indebtedness incurred by such person in
connection with, or in anticipation or contemplation of, such person becoming a
Subsidiary of WCI or such acquisition.
"Affiliate" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative of the
foregoing. For purposes of "Certain Covenants--Limitation on Transactions with
Affiliates," the term "Affiliate" shall include any person who, as a result of
any transaction described therein, would become an Affiliate.
"Asset Acquisition" means (i) an Investment by WCI or any Subsidiary of WCI
in any other person pursuant to which such person shall become a Subsidiary of
WCI or any Subsidiary of WCI or shall be merged with WCI or any Subsidiary of
WCI or (ii) the acquisition by WCI or any Subsidiary of WCI of the assets of any
person which constitute all or substantially all of the assets of such person or
any division or line of business of such person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by WCI or any of its
Subsidiaries (including, without limitation, any Sale/leaseback (other than a
Sale/leaseback of an asset constituting Collateral)) to any person, in one
transaction or a series of related transactions, of (i) any Capital Stock of any
Subsidiary of WCI; (ii) all or substantially all of the properties and assets of
any division or line of business of WCI or any Subsidiary of WCI; or (iii) any
other properties or assets of WCI or any Subsidiary of WCI other than in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any sale, issuance, conveyance, transfer, lease
or other disposition of properties or assets that is consummated in accordance
with the provisions of "--Merger, Consolidation, Etc." above.
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"Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Capital Expenditures" shall mean payments for any assets, or improvements,
replacements, substitutions or additions thereto, that have a useful life of
more than one year and which, in accordance with GAAP consistently applied, are
required to be capitalized (as opposed to expensed in the period in which the
payment occurred).
"Capital Lease," as applied to any person, means any lease of (or any
agreement conveying the right to use) any property (whether real, personal or
mixed) by such person as lessee which, in conformity with GAAP, is required to
be accounted for as a capital lease on the balance sheet of such person.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participation or other equivalents (however designated) of such
person's capital stock, whether outstanding at the Issue Date or issued after
the Issue Date, and any and all rights, warrants or options exchangeable for or
convertible into such capital stock (but excluding any debt security that is
exchangeable for or convertible into such capital stock).
"Capitalized Lease Obligation" means, as to any person, the obligations of
such person under a Capital Lease and, for purposes of this Indenture, the
amount of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within two years from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within two years from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than two years from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
maturing within two years from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $500,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above. Notwithstanding the foregoing, for purposes of clause (i) of the
definition of "Permitted Investment", 20% of the Cash Equivalents may include
securities having a rating of at least BBB by Standard & Poor's Corporation and
Baa by Moody's Investors Service, Inc.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of WCI
or Renco to any person or group of related persons for purposes of Section 13(d)
of the Exchange Act (a "Group") (other than a Permitted Holder or a Group
controlled by a Permitted Holder), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) the
approval by the holders of Capital Stock of WCI or Renco, as the case may be, of
any plan or proposal for the liquidation or dissolution of WCI or Renco, as the
case may be (whether or not otherwise in compliance with the provisions of the
Indenture); (iii) the acquisition in one or more transactions of "beneficial
ownership" (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) by any person, entity
or Group (other than a Permitted Holder or a Group controlled by any Permitted
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Holder) of any Capital Stock of WCI or Renco such that, as a result of such
acquisition, such person, entity or Group either (A) beneficially owns (within
the meaning of Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, more than 50% of WCI's or Renco's then outstanding voting securities
entitled to vote on a regular basis in an election for a majority of the Board
of Directors of WCI or Renco or (B) otherwise has the ability to elect, directly
or indirectly, a majority of the members of WCI's or Renco's Board of Directors;
or (iv) the shareholders of Renco as of the Issue Date and the Permitted Holders
shall cease to own at least 50% of the equity of Renco owned by such
shareholders on the Issue Date.
"Collateral" means, collectively, all of the property and assets (including,
without limitation, Trust Moneys) that are from time to time subject to the
Security Documents.
"Collateral Account" means the collateral account to be established pursuant
to the Indenture.
"Commission" means the Securities and Exchange Commission.
"Consolidated EBITDA" means, with respect to any person, for any period, the
sum (without duplication) of (i) Consolidated Net Income, (ii) to the extent
Consolidated Net Income has been reduced thereby, all income taxes of such
person and its Subsidiaries paid or accrued in accordance with GAAP for such
period (other than income taxes attributable to extraordinary, unusual or
non-recurring gains or losses), Consolidated Interest Expense (net of any
interest income), amortization expense (including amortization of deferred
financing costs) and depreciation expense and (iii) other non-cash items other
than non-cash interest reducing Consolidated Net Income (including, without
limitation, any non-cash charges in respect of post-employment benefits for
health care, life insurance and long-term disability benefits required in
accordance with GAAP) less other non-cash items increasing Consolidated Net
Income, all as determined on a consolidated basis for such person and its
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of Consolidated EBITDA of such person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such person for the Four Quarter Period. For purposes of this definition, if the
Transaction Date occurs prior to the date on which four full fiscal quarters
have elapsed subsequent to the Issue Date and financial statements with respect
thereto are available, "Consolidated EBITDA" and "Consolidated Fixed Charges"
shall be calculated, in the case of WCI, after giving effect on a PRO FORMA
basis to the issuance of the Notes and the application of the net proceeds
therefrom as if the Notes were issued on the first day of the Four Quarter
Period. In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a PRO FORMA basis for the period of such
calculation to (i) the incurrence of any Indebtedness of such person or any of
its Subsidiaries giving rise to the need to make such calculation and any
incurrence of other Indebtedness at any time on or after the first day of the
Four Quarter Period and on or prior to the Transaction Date (the "Reference
Period"), as if such incurrence occurred on the first day of the Reference
Period and (ii) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such person or one of its Subsidiaries (including any
person who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness) occurring during
the Reference Period, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Reference Period. If such person
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such person or any Subsidiary of such person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on Indebtedness determined on a fluctuating
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basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date; (2)
if interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Reference Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Rate Protection
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements. In calculating the
Consolidated Fixed Charge Coverage Ratio, and giving pro forma effect to any
incurrence of Indebtedness during the Reference Period, pro forma effect shall
be given to the use of the proceeds thereof to permanently repay or retire
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (i) Consolidated Interest Expense (net of any
interest income) less non-cash amortization of deferred financing costs and (ii)
the product of (x) the amount of all dividends declared, paid or accrued on
Preferred Stock of such person during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated Federal, state, local and foreign tax rate
(expressed as a decimal number between 1 and 0) of such person during such
period (as reflected in the audited consolidated financial statements of such
person for the most recently completed fiscal year). "Consolidated Interest
Expense" means, with respect to any person for any period, without duplication,
the sum of (i) the interest expense of such person and its Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP
consistently applied, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation and (d) all accrued interest, and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Subsidiaries, on a consolidated
basis for such period determined in accordance with GAAP; PROVIDED that (i) the
net income of any person in which such person or any Subsidiary of such person
has an ownership interest with a third party shall be included only to the
extent of the amount that has actually been received by such person or its
Wholly-Owned Subsidiaries in the form of dividends or other distributions during
such period (subject to, in the case of any dividend or distribution received by
a Wholly-Owned Subsidiary of such Person, the restrictions set forth in clause
(ii) below) and (ii) the net income of any Subsidiary of such person that is
subject to any restriction or limitation on the payment of dividends or the
making of other distributions shall be excluded to the extent of such
restriction or limitation; PROVIDED, FURTHER, that there shall be excluded (a)
the net income (or loss) of any person (acquired in a pooling of interests
transaction) accrued prior to the date it becomes a Subsidiary of such person or
is merged into or consolidated with such person or any Subsidiary of such
person, (b) any net gain (or loss) resulting from an Asset Sale by such person
or any of its Subsidiaries, (c) any extraordinary, unusual or nonrecurring gains
or losses (and related tax effects) in accordance with GAAP and (d) any
compensation-related expenses arising as a result of the Transactions.
"Consolidated Net Worth" means, with respect to any person at any date, the
sum of (i) the consolidated stockholders' equity of such person less the amount
of such stockholders' equity attributable to Disqualified Capital Stock of such
person and its Subsidiaries, as determined on a consolidated basis in accordance
with GAAP consistently applied and (ii) the amount of any Preferred Stock of
such person not included in the stockholders' equity of such person in
accordance with GAAP, which Preferred Stock does not constitute Disqualified
Capital Stock.
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"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default (as defined in the Indenture).
"Disqualified Capital Stock" means any class of Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date.
"Event of Default" has the meaning set forth under "--Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value of any asset of WCI
and its Subsidiaries shall be determined by the Board of Directors of WCI acting
in good faith and shall be evidenced by a Board Resolution thereof delivered to
the Trustee; PROVIDED that with respect to any Asset Sale which involves in
excess of $5,000,000, the Fair Market Value of any such asset or assets shall be
determined by an Independent Financial Advisor.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Indebtedness" means with respect to any person, without duplication, (i)
all obligations of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such person, (iv) all obligations of such
person issued or assumed as the deferred purchase price of property or services,
all conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable, accrued expenses and deferred
taxes arising in the ordinary course of business), (v) all obligations of such
person for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction entered into in the ordinary course of
business, (vi) all obligations of any other person of the type referred to in
clauses (i) through (v) which are secured by any Lien on any property or asset
of such first person and the amount of such obligation shall be the lesser of
the value of such property or asset or the amount of the obligation so secured,
(vii) all guarantees of Indebtedness by such person, (viii) Disqualified Capital
Stock valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends, (ix) all obligations under
Interest Rate Protection Obligations of such person and (x) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (i) through (ix) above. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value to be determined in good faith by the
Board of Directors of the person issuing such Disqualified Capital Stock.
"Independent Financial Advisor" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is, in the reasonable and
good faith judgment of the Board of Directors of WCI, qualified to perform the
task for which such firm has been engaged and disinterested and independent with
respect to WCI and its Affiliates.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any arrangement with any other person, whereby, directly or
indirectly, such person is entitled to receive from time to
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time periodic payments calculated by applying either a floating or a fixed rate
of interest on a stated notional amount in exchange for periodic payments made
by such other person calculated by applying a fixed or a floating rate of
interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
"Investment" means, with respect to any person, any direct or indirect
advance, loan, guarantee or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others or otherwise), or any
purchase or acquisition by such person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any other
person. Investments shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices. For the purposes of
the "Limitation on Restricted Payments" covenant, the amount of any Investment
shall be the original cost of such Investment plus the cost of all additional
Investments by the Company or any of its Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment.
"Issue Date" means the date on which the Notes offered hereby are originally
issued under the Indenture.
"Lien" means (x) any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute and (y) any agreement to enter into any of the foregoing.
"Management Consultant Agreement" means the management agreement effective
October 1, 1992 between Renco and WCI.
"Maturity Date" means December 1, 2004.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to WCI or any Subsidiary of WCI) net of (i) brokerage commissions
and other fees and expenses (including fees and expenses of legal counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a direct result of such Asset Sale and (iii) appropriate amounts to
be PROVIDED by WCI or any Subsidiary of WCI, as the case may be, as a reserve
required in accordance with GAAP consistently applied against any liabilities
associated with such Asset Sale and retained by WCI or any Subsidiary of WCI, as
the case may be, after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate
delivered to the Trustee.
"Operating Lease" means, as applied to any person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that person is the lessor.
"Permitted Holders" means Ira Leon Rennert and his Affiliates, estate, heirs
and legatees, and the legal representatives of any of the foregoing, including,
without limitation, the trustee of any trust of which one or more of the
foregoing are the sole beneficiaries.
"Permitted Indebtedness" means (i) any Indebtedness of WCI and its
Subsidiaries under the WCI Revolving Credit Facility in an aggregate amount not
to exceed $100 million in aggregate principal amount at any time outstanding
plus any interest, fees and expenses from time to time owed thereunder less the
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amount of any Indebtedness under the WCI Revolving Credit Facility required to
be repaid and repaid with the net cash proceeds of an asset sale pursuant to the
terms of the WCI Revolving Credit Facility and such repayment effects a
permanent reduction in the commitment thereunder, PROVIDED that at no time shall
the sum of the aggregate principal amount outstanding under the WCI Revolving
Credit Facility pursuant to this clause (i) and the amount outstanding under
clause (iii) below exceed $100 million in the aggregate, (ii) the Notes and any
Existing Notes outstanding on the Issue Date, (iii) all obligations of WCI and
its Subsidiaries for the reimbursement of any obligor on any letter of credit
not to exceed $20 million at any time outstanding; PROVIDED that at no time
shall the sum of the amount outstanding under this clause (iii) and the
aggregate principal amount outstanding under the WCI Revolving Credit Facility
pursuant to clause (i) above exceed $100 million in the aggregate, (iv) the
subordinated note of WCI payable to LTV Steel Company, Inc. in the principal
amount of approximately $1.9 million less any principal payments thereof, (v)
Indebtedness of the Youngstown Sinter Company represented by the State Economic
Development Revenue Bonds (Ohio Enterprise Bond Fund), Series 1990-2 (Youngstown
Sinter Company Project) as in effect on the Issue Date in the principal amount
of approximately $1.9 million less any principal payments thereof, (vi)
Indebtedness of the Youngstown Sinter Company represented by the Urban
Development Action Grant as in effect on the Issue Date in the principal amount
of approximately $1.6 million less any principal payments thereof, (vii)
purchase money Indebtedness and any Indebtedness incurred for Capitalized Lease
Obligations not to exceed $10 million in the aggregate at any time outstanding,
(viii) Interest Rate Protection Obligations to the extent the notional principal
amount of such Interest Rate Protection Obligations does not exceed the
principal amount of the Indebtedness to which such Interest Rate Protection
Obligations relate, (ix) additional Indebtedness not to exceed $20 million in
the aggregate at any time outstanding, (x) Indebtedness owed by WCI or any of
its Wholly-Owned Subsidiaries to any Wholly-Owned Subsidiary of WCI or any
Indebtedness owed to WCI by a Wholly-Owned Subsidiary of WCI; PROVIDED that in
the case of Indebtedness owed by WCI to any Wholly-Owned Subsidiary of WCI, such
Indebtedness is subordinated to the Notes, (xi) any renewals, extensions,
substitutions, refundings, refinancings or replacements of any Indebtedness
described in the preceding clauses (i) and (ii) above and this clause (xi), so
long as such renewal, extension, substitution, refunding, refinancing or
replacement does not result in an increase in the aggregate principal amount of
the outstanding Indebtedness represented thereby (except if such Indebtedness
refinances Indebtedness under the WCI Revolving Credit Facility or any other
agreement providing for subsequent borrowings, does not result in an increase in
the commitment available under the WCI Revolving Credit Facility or such other
agreement), (xii) any guarantees of the foregoing and (xiii) trade accounts
payable to the extent they constitute Indebtedness.
"Permitted Investment" means (i) cash and Cash Equivalents, (ii) any
Investment by WCI or any of its Subsidiaries in WCI or any Wholly-Owned
Subsidiary of WCI, (iii) any Related Business Investment in assets other than
the type described in clause (iv) below, (iv) Related Business Investments by
WCI or any of its Subsidiaries in joint ventures, partnerships or persons that
are not Wholly-Owned Subsidiaries in an amount not to exceed $25 million in the
aggregate; provided that in no event shall such Related Business Investments
pursuant to this clause (iv) exceed $5 million in any one fiscal year, (v)
Investments by WCI or any Subsidiary of WCI in another person, if as a result of
such Investment (a) such other person becomes a Wholly-Owned Subsidiary of WCI
or (b) such other person is merged or consolidated with or into, or transfers or
conveys all or substantially all of its assets to, WCI or a Wholly-Owned
Subsidiary of WCI, (vi) Investments received in connection with the bankruptcy
or reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers, in each case
arising in the ordinary course of business, (vii) the non-cash proceeds of any
Asset Sale and (viii) loans and advances to employees of WCI and its
Subsidiaries made in the ordinary course of business.
"Permitted Liens" means (i) pledges or deposits by such person under
worker's compensation laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such person is a party, or
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deposits to secure public statutory obligations of such person or deposits to
secure surety or appeal bonds to which such person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, (ii)
Liens imposed by law, such as landlords', carriers', warehousemen's and
mechanics' Liens or bankers' Liens incurred in the ordinary course of business
for sums which are not yet due or are being contested in good faith and for
which adequate provision has been made, (iii) Liens for taxes not yet subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings, if adequate reserve, as may be required by GAAP, shall
have been made therefor, (iv) Liens in favor of issuers of surety bonds or
appeal bonds issued pursuant to the request of and for the account of such
person in the ordinary course of its business, (v) Liens to support trade
letters of credit issued in the ordinary course of business, (vi) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions on the use of real property,
(vii) Liens securing Indebtedness permitted under clause (vii) of the definition
of Permitted Indebtedness; provided that the Fair Market Value of the asset at
the time of the incurrence of the Indebtedness subject to the Lien shall not
exceed the principal amount of the Indebtedness secured, (viii) Liens with
respect to Acquired Indebtedness permitted to be incurred in accordance with the
"--Limitation on Indebtedness" covenant above; provided that such Liens secured
such Acquired Indebtedness at the time of the incurrence of such Acquired
Indebtedness by WCI and were not incurred in connection with, or in anticipation
of, the incurrence of such Acquired Indebtedness by WCI; PROVIDED, FURTHER, that
such Liens do not extend to or cover any property or assets of WCI other than
the property or assets that secured the Acquired Indebtedness prior to the time
such Indebtedness became Acquired Indebtedness of WCI and are no more favorable
to the lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by WCI, (ix) Liens arising from
judgments, decrees or attachments in circumstances not constituting an Event of
Default, (x) Liens in favor of the trustee of the VEBA Trust existing on the
Issue Date or thereafter arising pursuant to agreements in effect on the Issue
Date, (xi) Liens on assets or property (including any real property upon which
such assets or property are or will be located) securing Indebtedness incurred
to purchase or construct such assets or property, which Indebtedness is
permitted to be incurred under the Indenture and (xii) Liens permitted by the
Security Documents.
"person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such person to holders of
Capital Stock of such person.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participation or other equivalents (however designated) of such
person's preferred or preference stock, whether outstanding on the date hereof
or issued after the date of the Indenture, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act.
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock or convertible into
or exchangeable or exercisable for Disqualified Capital Stock.
76
<PAGE>
"Related Business Investment" means any Investment, Capital Expenditure or
other expenditure by WCI or any Subsidiary of WCI which is related to the
business of WCI and its Subsidiaries as it is conducted on the Issue Date.
"Renco" means The Renco Group, Inc., a New York corporation, which is the
ultimate parent of WCI, or any successor thereto.
"Sale/leaseback" means any lease, whether an Operating Lease or a Capital
Lease, whereby WCI or any of its Subsidiaries, directly or indirectly, becomes
or remains liable as lessee or as guarantor or other surety, of any property
(whether real or personal or mixed) whether now owned or hereafter acquired, (i)
that WCI or its Subsidiaries, as the case may be, has sold or transferred or is
to sell or transfer to any other person (other than WCI), or (ii) that WCI or
any of its Subsidiaries, as the case may be, intends to use for substantially
the same purpose as any other property that has been or is to be sold or
transferred by WCI or any such Subsidiary to any person (other than WCI) in
connection with such lease.
"Security Documents" means the Security Agreement and the Mortgages referred
to under "Security" above and the documentation relating to the Collateral
Account.
"Significant Subsidiary" means any Subsidiary of WCI that satisfies the
criteria for a "significant subsidiary" set forth in Rule 1.02(v) of Regulation
S-X under the Securities Act.
"Subsidiary" of any person means (i) any corporation of which the
outstanding capital stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such person or (ii) any other person of
which at least a majority of the voting interest under ordinary circumstances is
at the time owned, directly or indirectly, by such person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"WCI Revolving Credit Facility" means the Amended and Restated Loan and
Security Agreement dated as of December 29, 1992, as amended, among WCI, the
lending institutions named therein and Congress Financial Corporation, as agent,
as the same may be amended, restated, supplemented or otherwise modified from
time to time, and includes any agreement renewing, refinancing or replacing all
or any portion of the Indebtedness under such agreement.
"Wholly-Owned Subsidiary" means, with respect to any person, any Subsidiary
of such person all the outstanding shares of Capital Stock (other than
directors' qualifying shares, if applicable) of which are owned directly by such
person or another Wholly-Owned Subsidiary of such person.
77
<PAGE>
DESCRIPTION OF WCI REVOLVING CREDIT FACILITY
The following description of the WCI Revolving Credit Facility does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions thereof.
GENERAL
As of November 30, 1996, no amounts were outstanding under the WCI Revolving
Credit Facility with the revolving credit lenders (the "Revolving Credit
Lenders"), exclusive of $5.5 million in outstanding letters of credit. Under the
WCI Revolving Credit Facility, the Revolving Credit Lenders will, in their
discretion, lend and relend to WCI up to not more than the sum of (a) 85% of the
Net Amount of Eligible Accounts (as defined in the WCI Revolving Credit
Facility) plus (b) 60% of the Value of Eligible Inventory (as defined in the WCI
Revolving Credit Facility) (but not more than a loan value of $60 million) up to
the limit of $100 million. WCI's collections from accounts are applied to reduce
the loan balance, which may be reborrowed up to the aforesaid limits. The
Revolving Credit Lenders may extend up to $20 million of letter of credit
accommodations within the limits set forth above.
INTEREST
Interest on WCI's loan balance is payable monthly at the prime rate plus
1/2% changing monthly with each change in such prime rate, or at the Company's
option, the Eurodollar Rate plus 2 1/2%, up to $20 million in Eurodollar Rate
loans and the Eurodollar Rate plus 3% on Eurodollar Rate loans exceeding $20
million, provided the Eurodollar Rate portion does not exceed 75% of the total
loan outstanding. The interest rate on November 30, 1996 was 8 3/4% using the
the prime rate plus 1/2%. In the event of a default by WCI under the WCI
Revolving Credit Facility, the interest rate would be 2 1/2% per annum in excess
of such prime rate and 5% per annum in excess of the Eurodollar Rate for all
Eurodollar Rate loans.
SECURITY
As security for the indebtedness of WCI to the Revolving Credit Lenders, WCI
has granted to them a first priority security interest in all of its inventory
(including raw material, work in process, semi-finished and finished goods and
supplies) and accounts, contract rights, documents and instruments arising from
the sale or other disposition of inventory or rendition of services and related
rights and general intangibles (other than trademarks and patents).
TERM
The WCI Revolving Credit Facility continues until December 29, 1999 and from
year to year thereafter, provided that either WCI or the Revolving Credit
Lenders may terminate the agreement at December 29, 1999 or any subsequent
anniversary date on 60 days' advance written notice. WCI is paying the Revolving
Credit Lenders a customary fee in consideration of their consent to the
Transactions.
CERTAIN COVENANTS
In addition to customary covenants, the WCI Revolving Credit Facility
requires that WCI: (a) maintain Consolidated Adjusted Working Capital (as
defined in the WCI Revolving Credit Facility) and Consolidated Adjusted Net
Worth (as defined in the WCI Revolving Credit Facility), (b) limit Capital
Expenditures (as defined in the WCI Revolving Credit Facility), (c) not incur
any indebtedness other than the Notes, indebtedness under the WCI Revolving
Credit Agreement and certain other indebtedness and (d) not permit any liens to
exist on any of its property, except the liens in favor of the Revolving Credit
Lenders and the holders of the Notes and certain other liens.
78
<PAGE>
EVENTS OF DEFAULT
The WCI Revolving Credit Agreement contains certain events of default,
including, without limitation, the following: (a) the failure of WCI or its
subsidiaries to pay any of its obligations to the lenders when due; (b) any
failure by WCI or its subsidiaries to pay principal or interest on any
indebtedness or contingent obligation in an individual or aggregate principal
amount in excess of $500,000 or more, after any applicable grace period, or any
breach or default by WCI or its subsidiaries of any term of any indebtedness or
contingent obligation in an individual or aggregate principal amount of $500,000
or more; (c) any default by WCI or its subsidiaries in the performance or
observance of the conditions and covenants of the WCI Revolving Credit Agreement
or related agreements, beyond any applicable cure period; (d) any representation
or warranty made by WCI to the Revolving Credit Lenders proving to be false in
any material respect; (e) the rendering of a judgment which remains unvacated,
unbonded or unstayed for a period of 30 days against WCI or any of its
subsidiaries which exceeds, in any individual amount or in the aggregate,
$500,000; (f) certain events of bankruptcy or insolvency of WCI; and (g) the
occurrence of certain change of control events.
79
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary is based on the tax laws of the United States in
effect on the date of this Prospectus, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on or before such
date. The foregoing laws and interpretations thereof are subject to change,
which could apply retroactively.
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not be a taxable event for federal income tax purposes. A holder's holding
period for Exchange Notes will include the holding period for Old Notes. HOLDERS
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR EXCHANGE NOTES.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Old Notes that were acquired for the
account of such broker-dealer as a result of market-making or other trading
activities (other than Old Notes acquired directly from the Company or any
affiliate of the Company) may exchange such Old Notes for Exchange Notes
pursuant to the Exchange Offer; PROVIDED, that each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that for a period of 180 days
after the Expiration Date, it will make this Prospectus, as it may be amended or
supplemented from time to time, available to any broker-dealer for use in
connection with any such resale. In addition, until , 1997, all dealers
affecting transactions in the Exchange Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other holder of Exchange Notes. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker- dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after consummation of the Exchange Offer, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer and to the Company's performance of, or
compliance with, the Registration Rights Agreement (other than commissions or
concessions of any brokers or dealers) and will indemnify the holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
80
<PAGE>
LEGAL MATTERS
Certain legal matters related to the Exchange Notes being offered hereby are
being passed upon for WCI by Cadwalader, Wickersham & Taft, New York, New York.
EXPERTS
The audited consolidated financial statements and schedule of WCI Steel,
Inc. and subsidiaries as of October 31, 1994 and 1995, and for each of the years
in the three year period ended October 31, 1995 have been included in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the October 31, 1994 consolidated financial
statements refer to a change in the method of accounting for income taxes.
81
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
Independent Auditors' Report....................................................................... F-2
Consolidated Balance Sheets as of October 31, 1994 and 1995 and unaudited as of
July 31, 1996.................................................................................... F-3
Consolidated Statements of Income for the years ended October 31, 1993, 1994 and 1995 and unaudited
for the nine months ended July 31, 1995 and 1996................................................. F-4
Consolidated Statements of Shareholders' Equity for the years ended October 31, 1993, 1994 and 1995
and unaudited for the nine months ended July 31, 1996............................................ F-5
Consolidated Statements of Cash Flows for the years ended October 31, 1993, 1994 and 1995 and
unaudited for the nine months ended July 31, 1995 and 1996....................................... F-6
Notes to Consolidated Financial Statements......................................................... F-7 to F-19
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
WCI Steel, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of WCI Steel,
Inc. and subsidiaries (a majority-owned subsidiary of The Renco Group, Inc.) as
of October 31, 1995 and 1994, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the years in the three-year
period ended October 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of WCI Steel,
Inc. and subsidiaries as of October 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended October 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 9 to the consolidated financial statements,
effective November 1, 1993, the Company changed its method of accounting for
income taxes to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Stardards No. 109, ACCOUNTING FOR
INCOME TAXES.
KPMG PEAT MARWICK LLP
Cleveland, Ohio
December 1, 1995
F-2
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------- JULY 31,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents................................................. $ 71,426 $ 94,266 $ 138,633
Short-term investments.................................................... -- 12,282 18,052
Accounts receivable, less allowances for doubtful accounts of $2,400,
$2,258 and $1,700, respectively......................................... 73,429 33,616 65,652
Inventories............................................................... 108,423 101,089 81,044
Recoverable income taxes.................................................. -- 5,960 --
Deferred income taxes..................................................... 13,523 11,102 10,499
Prepaid expenses.......................................................... 353 1,372 361
--------- --------- -----------
Total current assets.................................................. 267,154 259,687 314,241
Property, plant and equipment, net.......................................... 196,212 189,733 195,033
Intangible pension asset.................................................... -- 44,028 41,157
Other assets, net........................................................... 18,230 25,711 21,516
--------- --------- -----------
Total assets.......................................................... $ 481,596 $ 519,159 $ 571,947
--------- --------- -----------
--------- --------- -----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities
Current portion of long-term debt......................................... $ 2,253 $ 2,323 $ 2,447
Accounts payable.......................................................... 72,949 47,740 72,640
Accrued liabilities....................................................... 44,407 39,584 48,596
Income taxes.............................................................. 6,926 1,611 2,745
--------- --------- -----------
Total current liabilities............................................. 126,535 91,258 126,428
Long-term debt, excluding current portion................................... 213,855 211,531 209,354
Deferred income taxes....................................................... 9,670 10,367 9,351
Postretirement health benefits.............................................. 66,221 76,287 80,378
Pension benefits............................................................ -- 44,027 46,231
Other liabilities........................................................... 21,438 26,194 26,741
--------- --------- -----------
Total liabilities..................................................... 437,719 459,664 498,483
--------- --------- -----------
Shareholders' equity
Common stock, stated value $.01, 40,000,000 shares authorized, 36,575,500,
36,563,300 and 36,623,700 shares issued at October 31, 1994 and 1995 and
July 31, 1996, respectively............................................. 366 366 366
Treasury stock at cost, 222,300 shares.................................... -- -- (1,200)
Additional paid-in capital................................................ 300 458 534
Retained earnings......................................................... 43,211 58,671 73,764
--------- --------- -----------
Total shareholders' equity............................................ 43,877 59,495 73,464
--------- --------- -----------
Commitments and contingencies............................................... -- -- --
Total liabilities and shareholders' equity............................ $ 481,596 $ 519,159 $ 571,947
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED OCTOBER 31, JULY 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales.............................................. $ 578,639 $ 709,363 $ 630,990 $ 523,611 $ 490,147
Operating costs and expenses
Cost of products sold................................ 492,000 574,610 544,789 423,834 411,467
Depreciation and amortization........................ 20,978 19,868 21,178 15,504 16,960
Selling, general, and administrative expenses........ 19,144 34,889 19,675 16,827 15,939
---------- ---------- ---------- ---------- ----------
532,122 629,367 585,642 456,165 444,366
---------- ---------- ---------- ---------- ----------
Operating income................................... 46,517 79,996 45,348 67,446 45,781
---------- ---------- ---------- ---------- ----------
Other income (expense)
Interest expense..................................... (23,182) (28,709) (25,787) (19,530) (18,742)
Interest and other income, net....................... 301 1,505 6,212 4,510 4,813
---------- ---------- ---------- ---------- ----------
(22,881) (27,204) (19,575) (15,020) (13,929)
---------- ---------- ---------- ---------- ----------
Income before income taxes, extraordinary losses
and cumulative effect of change in accounting
principle........................................ 23,636 52,792 25,773 52,426 31,852
Income tax expense..................................... 9,485 21,939 10,313 21,007 12,740
---------- ---------- ---------- ---------- ----------
Income before extraordinary losses and cumulative
effect of change in accounting principle......... 14,151 30,853 15,460 31,419 19,112
Extraordinary losses on early retirement of debt, net
of income taxes...................................... -- (20,214) -- -- --
Cumulative effect of change in accounting for income
taxes................................................ -- 834 -- -- --
---------- ---------- ---------- ---------- ----------
Net income......................................... $ 14,151 $ 11,473 $ 15,460 $ 31,419 $ 19,112
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income per common share
Income before extraordinary losses and cumulative
effect of change in accounting principle........... $ .44 $ .94 $ .42 $ .86 $ .52
Extraordinary losses on early retirement of debt, net
of income taxes.................................... -- (.62) -- -- --
Cumulative effect of change in accounting for income
taxes................................................ -- .02 -- -- --
---------- ---------- ---------- ---------- ----------
Net income per common share............................ $ .44 $ .34 $ .42 $ .86 $ .52
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Dividends paid per common share........................ -- -- -- -- $ .11
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1993, 1994, AND 1995 AND
THE NINE MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PREFERRED COMMON TREASURY PAID-IN RETAINED SHAREHOLDERS'
STOCK STOCK STOCK CAPITAL EARNINGS EQUITY
----------- ---------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
Balance at October 31, 1992.............. $ 5,000 $ 10,000 $ -- $ -- $ 36,974 $ 51,974
Net income............................... -- -- -- -- 14,151 14,151
Cancellation and elimination of
previously declared and unpaid
dividends on common stock.............. -- -- -- -- 3,043 3,043
----------- ---------- --------- ----------- ---------- -------------
Balance at October 31, 1993.............. 5,000 10,000 -- -- 54,168 69,168
Net income............................... -- -- -- -- 11,473 11,473
Capital contribution..................... -- -- -- 4,001 -- 4,001
Common stock split and change to stated
value of $.01 per share................ -- (9,693) -- 9,693 -- --
Issuance of common stock................. -- 58 -- 51,826 -- 51,884
Predecessor basis adjustment............. -- -- -- (65,520) (20,480) (86,000)
Redemption of preferred stock, including
dividends of $1,950.................... (5,000) -- -- -- (1,950) (6,950)
Other.................................... -- 1 -- 300 -- 301
----------- ---------- --------- ----------- ---------- -------------
Balance at October 31, 1994.............. -- 366 -- 300 43,211 43,877
Net income............................... -- -- -- -- 15,460 15,460
Other.................................... -- -- -- 158 -- 158
----------- ---------- --------- ----------- ---------- -------------
Balance at October 31, 1995.............. -- 366 -- 458 58,671 59,495
Net income............................... -- -- -- -- 19,112 19,112
Dividends paid on common stock........... -- -- -- -- (4,019) (4,019)
Purchase of treasury stock............... -- -- (1,200) -- -- (1,200)
Other.................................... -- -- -- 76 -- 76
----------- ---------- --------- ----------- ---------- -------------
Balance at July 31, 1996................. $ -- $ 366 $ (1,200) $ 534 $ 73,764 $ 73,464
----------- ---------- --------- ----------- ---------- -------------
----------- ---------- --------- ----------- ---------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED OCTOBER 31, ENDED JULY 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................. $ 14,151 $ 11,473 $ 15,460 $ 31,419 $ 19,112
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization............................ 20,978 19,868 19,713 14,869 14,763
Amortization of deferred blast furnace maintenance
costs.................................................. -- -- 1,465 635 2,197
Amortization of financing costs.......................... 1,827 2,272 2,180 1,636 1,637
Postretirement health benefits........................... 9,269 9,607 10,066 7,505 4,091
Pension benefits......................................... -- -- -- -- 5,075
Provision for losses on accounts receivable.............. 1,200 812 117 117 (558)
Deferred income taxes.................................... (1,084) (3,738) 3,118 2,826 (413)
Extraordinary losses..................................... -- 33,803 -- -- --
Cumulative effect of change in accounting principle...... -- (834) -- -- --
Expenses paid by Parent net of related tax benefit....... -- 4,000 -- -- --
Other.................................................... 4,027 720 (836) (1,020) (78)
Cash provided (used) by changes in certain assets and
liabilities
Accounts receivable.................................. (9,023) (5,524) 39,696 8,767 (31,478)
Inventories.......................................... (1,452) (13,670) 7,334 13,145 20,045
Prepaid expenses and other assets.................... 232 1,012 (1,031) 344 1,372
Accounts payable..................................... 636 (7,960) (25,209) (2,221) 24,900
Accrued liabilities.................................. 11,782 12,134 (4,823) 3,970 9,012
Income taxes payable and recoverable, net............ 6,255 2,572 (11,275) (168) 7,094
Other liabilities.................................... 1,769 10,375 4,756 2,951 547
--------- --------- --------- --------- ---------
Net cash provided by operating activities.......... 60,567 76,922 60,731 84,775 77,318
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment............... (14,639) (8,387) (14,575) (12,552) (20,406)
Deferred blast furnace maintenance costs................. -- (5,984) (11,598) (11,391) --
Gross proceeds from the sale of assets................... -- -- 2,818 2,818 497
Purchase of short-term investments, net.................. -- -- (12,282) -- (5,770)
--------- --------- --------- --------- ---------
Net cash used by investing activities................ (14,639) (14,371) (35,637) (21,125) (25,679)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt..................... (44,764) (170,750) (2,254) (1,960) (2,053)
Dividends paid on common shares.......................... -- -- -- -- (4,019)
Purchases of treasury stock.............................. -- -- -- -- (1,200)
Repayments under revolving credit facility............... (107,856) -- -- -- --
Proceeds from issuance of long-term debt................. 125,000 250,000 -- -- --
Net proceeds from issuance of common stock............... -- 51,884 -- -- --
Redemption of preferred stock, including cumulative
dividends.............................................. -- (6,950) -- -- --
Predecessor basis adjustment............................. -- (86,000) -- -- --
Premiums paid on early retirement of debt................ (500) (26,656) -- -- --
Financing costs paid..................................... (9,161) (12,019) -- -- --
--------- --------- --------- --------- ---------
Net cash used by financing activities................ (37,281) (491) (2,254) (1,960) (7,272)
--------- --------- --------- --------- ---------
Net increase in cash and cash equivalents.................. 8,647 62,060 22,840 61,690 44,367
Cash and cash equivalents at beginning of year............. 719 9,366 71,426 71,426 94,266
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year................... $ 9,366 $ 71,426 $ 94,266 $ 133,116 $ 138,633
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosure of cash flow information...........
Cash paid for interest................................... $ 15,797 $ 25,383 $ 23,718 $ 12,644 $ 11,811
Cash paid for income taxes............................... 4,315 11,561 18,471 18,348 6,071
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
WCI Steel, Inc. (Company) is a majority-owned subsidiary of The Renco Group,
Inc. (Renco or Parent).
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany profits,
transactions, and balances have been eliminated in consolidation.
(b) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and short-term investments
with maturities of three months or less from the date of acquisition.
(c) SHORT-TERM INVESTMENTS
Short-term investments consist of United States government or agency issues
which have maturities of less than one year but greater than three months when
purchased. These investments are stated at cost plus accrued interest which
approximates market value.
(d) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method.
(e) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives of the
assets. Expenditures for normal repairs and maintenance are charged to expense
as incurred.
(f) OTHER ASSETS
Other assets include deferred financing costs which are amortized using the
effective yield method over the term of the related financing and deferred blast
furnace maintenance costs which are amortized using the straight-line method
over a six-year period.
(g) INCOME TAXES
The Company is included in the consolidated income tax return of Renco.
Under the terms of the present tax sharing agreement with Renco, income taxes
are allocated to the Company on a separate return basis, except that
transactions between the Company, its subsidiaries, Renco and Renco's other
subsidiaries are accounted for on a cash basis and the Company does not receive
the benefit of net operating tax loss carryforwards, unless such tax losses were
a result of timing differences between the Company's accounting for tax and
financial reporting purposes.
F-7
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES (Statement 109), which
supersedes Statement No. 96, ACCOUNTING FOR INCOME TAXES. The Company previously
accounted for income taxes under APB No. 11, having elected not to adopt
Statement No. 96 prior to its required effective date. Statement 109 changed the
Company's method of accounting for income taxes from the deferred method
required under APB No. 11 to the asset and liability method. Under the deferred
method, annual income tax expense was matched with pretax accounting income by
providing deferred taxes at current tax rates for timing differences between the
determination of net income for financial reporting and tax purposes. The
objective of the asset and liability method is to establish deferred tax assets
and liabilities for the temporary differences between the financial reporting
basis and the tax basis of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized or settled.
(h) ENVIRONMENTAL COMPLIANCE COSTS
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial expenditures are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals coincides with the
earlier of completion of a feasibility study or the Company's development of, or
commitment to, a plan of action based on the then known facts.
(i) NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income, less
cumulative preferred stock dividends prior to redemption in July 1994, by the
weighted average common shares outstanding during the period. Preferred
dividends amounted to $400,000 in 1994 and $600, 000 in 1993. The weighted
average common shares outstanding were 30,750,000 in 1993, 32,491,103 in 1994,
36,575,227 in 1995, 36,576,444 for the nine months ended July 31, 1995 and
36,552,069 for the nine months ended July 31, 1996.
(j) SIGNIFICANT CUSTOMER
Sales to the Company's largest customer were 8.1%, 9.9%, 10.0% and 9.3% of
net sales during 1993, 1994, 1995 and the nine months ended July 31, 1996
respectively.
(k) USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) RECLASSIFICATIONS
Certain items in the consolidated financial statements for 1993 and 1994
have been reclassified to conform to the 1995 presentation.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31
---------------------- JULY 31,
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Raw materials........................................... $ 22,711 $ 41,471 $ 30,785
Finished and semi-finished product...................... 90,339 65,979 57,807
Supplies................................................ 613 571 380
---------- ---------- -----------
113,663 108,021 88,972
Less LIFO reserve....................................... 5,240 6,932 7,928
---------- ---------- -----------
$ 108,423 $ 101,089 $ 81,044
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
OCTOBER 31
---------------------- JULY 31,
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land and improvements................................... $ 623 $ 585 $ 493
Buildings............................................... 25,315 24,965 25,641
Machinery and equipment................................. 257,524 252,988 253,580
Construction in progress................................ 6,328 4,043 19,222
---------- ---------- -----------
289,790 282,581 298,936
Less accumulated depreciation........................... 93,578 92,848 103,903
---------- ---------- -----------
$ 196,212 $ 189,733 $ 195,033
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
F-9
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31
-------------------- JULY 31,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Senior Notes with interest at 10.5% payable
semiannually, due 2002................... $ 206,400 $ 206,400 $ 206,400
Revolving Credit Facility (Revolver) with
interest at prime plus 1.75% (10.5% at
October 31, 1995) payable monthly........ -- -- --
Other...................................... 9,708 7,454 5,401
--------- --------- -----------
216,108 213,854 211,801
Less current portion of long-term debt..... 2,253 2,323 2,447
--------- --------- -----------
$ 213,855 $ 211,531 $ 209,354
--------- --------- -----------
--------- --------- -----------
</TABLE>
On December 29, 1992, the Company issued $125,000,000, 12.625% senior
secured notes (Notes) due in the year 2002. The proceeds from this offering were
used to repay certain outstanding long-term debt, cover transaction costs, and
decrease the balance of the Company's revolving credit facility. On December 14,
1993, Renco Steel, Inc. (RSI), a wholly owned subsidiary of Renco, completed the
sale of $250,000,000, 10.5% senior notes (Senior Notes) due 2002, which were
guaranteed on a senior basis by the Company. The Senior Notes are secured by a
first priority lien on substantially all of the Company's property, plant and
equipment, excluding the assets of its subsidiaries. The proceeds from the
Senior Notes were used to enable RSI to acquire all of the outstanding capital
stock of the Company for $86,000,000 from Renco (Acquisition), and to retire the
Company's then outstanding 12.625% Notes at a rate of $1,200 per $1,000
principal amount outstanding plus accrued interest, and to cover transaction
costs.
Immediately upon completion of the sale of the Senior Notes and the
Acquisition, RSI was merged with and into the Company (Merger) and, accordingly,
the Senior Notes became a direct obligation of the Company. RSI was incorporated
on September 10, 1993 and was subsequently capitalized with $1,000. RSI had no
operations from its inception through the date of the Merger. The Acquisition
and the Merger have been accounted for as a combination of entities under common
control and, accordingly, the amount paid by RSI to acquire the Company has been
reflected as a reduction of the Company's shareholders' equity. Upon completion
of the above transactions, Renco paid $6,000,000 of bonuses to certain
executives of the Company. The bonuses are reflected as compensation in the
Company's statement of operations in fiscal 1994 and as a capital contribution,
net of income taxes.
The Company recognized extraordinary losses totalling $20,214,000 net of
income tax benefits of $13,589,000 on the early retirement of the Notes and the
repurchase of a portion of the Senior Notes in connection with the Company's
initial public stock offering discussed in Note 13. The extraordinary losses
consist primarily of premiums paid on the early retirement of debt and
accelerated amortization of deferred financing costs.
F-10
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(4) LONG-TERM DEBT (CONTINUED)
The Company has a $100,000,000 Revolver secured by and subject to eligible
inventories and receivables as defined, reduced by any outstanding letters of
credit. The Revolver is subject to an annual commitment fee of .5 of 1% of the
unused balance payable monthly. There were no borrowings outstanding under the
Revolver as of or during the year or nine months ended October 31, 1995 and July
31, 1996, respectively. The Revolver, which expires December 29, 1996, also
provides for up to an aggregate amount of $10,000,000 in letters of credit. The
Company had $88,086,000 available under the Revolver at October 31, 1995 based
on the then existing level of eligible accounts receivable and inventory with
approximately $9,630,000 in letters of credit outstanding. The Revolver is
subject to a penalty of $1,000,000 if terminated, without being refinanced with
the same lender, prior to December 29, 1996 (see Note 15).
The Company's debt agreements contain certain financial and other covenants,
including maintenance of specified levels of net worth as defined, working
capital, and debt service and limitations on capital expenditures. Additional
covenants limit payments affecting subsidiaries, purchases of the Company's
common stock, transactions with affiliates, sale/leaseback transactions,
impairment of security interest, consolidations, mergers and transfer of the
Company's assets. As of December 14, 1995, the Company is permitted to declare
and pay dividends, purchase its common stock, and to make other transactions
with affiliates provided no condition of default exists or will exist, the
Company meets a specified fixed charge coverage ratio, and the accumulated
amount of such transactions is no greater than fifty percent (50%) of the
consolidated net income (less 100% of any consolidated net loss) earned for
periods subsequent to October 31, 1995 when taken as a single accounting period
less management fees paid to Renco for the same period.
Aggregate principal payments on long-term debt for the five years subsequent
to October 31, 1995 are as follows: $2,348,000 in 1996, $2,448,000 in 1997,
$1,320,000 in 1998, $116,000 in 1999 and $122,000 in 2000. The fair value of the
Senior Notes was $199,950,000 at October 31, 1995 based on quoted market prices.
(5) ACCRUED LIABILITIES
Accrued liabilities included employment related costs of $26,830,000 and
$25,140,000 at October 31, 1994 and 1995, respectively and $27,846,000 at July
31, 1996.
(6) EMPLOYEE COMPENSATION PLANS
The Company has a profit sharing plan for the benefit of all bargained for
employees and a variable compensation plan for the benefit of substantially all
salaried employees. The amount of compensation due under these plans is based on
the Company's pretax income as defined under the agreements in effect. Total
expense under the plans was $6,488,000, $15,297,000 and $8,455,000 for the years
ended October 31, 1993, 1994, and 1995, respectively and $12,010,000 and
$7,520,000 for the nine months ended July 31, 1995 and 1996, respectively.
In addition, the Company has deferred compensation agreements with certain
management employees, which are based on changes in the net worth of the
Company, as defined. For the years ended
F-11
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(6) EMPLOYEE COMPENSATION PLANS (CONTINUED)
October 31, 1993, 1994, and 1995, the Company expensed approximately $1,737,000,
$9,902,000, and $2,638,000, respectively, under these plans and $3,615,000 and
$2,226,000 for the nine months ended July 31, 1995 and 1996, respectively.
(7) PENSION PLANS
The Company has defined contribution retirement plans that cover
substantially all employees. Contributions under the plans are based on employee
age and compensation and aggregated approximately $5,002,000, $4,953,000 and
$4,988,000 for the years ended October 31, 1993, 1994, and 1995, respectively
and $3,747,000 and $3,943,000 for the nine months ended July 31, 1995 and 1996,
respectively.
During 1995, the Company adopted a defined benefit pension plan in
connection with a new four-year collective bargaining agreement with the United
Steelworkers of America. The plan, which covers substantially all bargained for
employees, provides minimum pension benefits based on age, years of service and
benefits provided under the Company's defined contribution plan and a
predecessor company's defined benefit plan. The Company intends to make future
contributions to the plan in amounts that at least meet the minimum funding
requirements of ERISA and the Internal Revenue Code.
The following table sets forth the funded status of the plan at October 31,
1995:
<TABLE>
<CAPTION>
Actuarial present value of benefit obligations (dollars in
thousands):
<S> <C>
Accumulated benefit obligation, including vested benefits of $ 58,028
$49,531.....................................................
---------
---------
Projected benefit obligation.................................. $ 58,528
Plan assets at fair value..................................... 14,001
---------
Projected benefit obligation in excess of plan assets......... (44,527)
Unrecognized prior service cost............................... 44,528
Additional minimum liability.................................. (44,028)
---------
Accrued pension cost.......................................... $ (44,027)
---------
---------
</TABLE>
Statement of Financial Accounting Standards No. 87, EMPLOYERS' ACCOUNTING
FOR PENSIONS, requires the Company to recognize a minimum pension liability
equal to the amount by which the actuarial present value of the accumulated
benefit obligation exceeds the fair value of the plan assets. Accordingly, the
Company has recognized a liability in the amount of $44,027,000 at October 31,
1995. A corresponding amount is recognized as an intangible asset to the extent
of the unrecognized prior service cost. An intangible asset of $44,028,000 was
recognized at October 31, 1995 representing unrecognized prior service cost.
An assumed discount rate of 6.5% and an expected return on plan assets of
7.5% were used for purposes of valuing the benefits under the defined benefit
pension plan.
F-12
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(8) POSTRETIREMENT HEALTH BENEFITS
The Company provides postretirement health care and life insurance benefits
to employees who retire from the Company upon meeting certain age and length of
service eligibility requirements.
The following table sets forth the plan's accumulated postretirement benefit
obligation:
<TABLE>
<CAPTION>
OCTOBER 31
----------------------
1994 1995
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Accumulated postretirement benefit obligation
Retirees........................................................ $ 15,126 $ 16,663
Fully eligible active plan participants......................... 39,997 34,492
Other active participants....................................... 37,540 43,087
---------- ----------
92,663 94,242
Unrecognized prior service cost resulting from plan
amendments.................................................... (13,449) (11,867)
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions....................... (12,993) (6,088)
---------- ----------
Accrued postretirement benefit cost............................. $ 66,221 $ 76,287
---------- ----------
---------- ----------
</TABLE>
The accumulated postretirement benefit obligation was determined using a
discount rate of 7.0% in 1995 (8.0% in 1994) and an assumed health care cost
trend rate of 8% in 1996, gradually declining to 5% after 2003. Assuming a 1%
increase in the health care cost trend rate, the accumulated postretirement
benefit obligation at October 31, 1995 would increase by $17,607,000 along with
an increase in the 1995 service and interest cost components of $1,457,000.
Net periodic postretirement benefit costs included the following components:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost................................................ $ 2,209 $ 2,419 $ 2,562
Interest cost............................................... 6,052 6,035 7,007
Net amortization and deferral............................... 1,637 1,866 1,025
--------- --------- ---------
Net periodic postretirement benefit cost.................... $ 9,898 $ 10,320 $ 10,594
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company's policy had been to fund claims as incurred. Total claims paid
during the years ended October 31, 1993, 1994 and 1995 were $629,000, $713,000,
and $528,000, respectively. In connection with the new four-year collective
bargaining agreement with the United Steelworkers of America, the Company has
agreed to establish a trust to begin funding postretirement health care and life
insurance benefits for substantially all hourly employees. The Company has
agreed to make an initial contribution of $2,000,000 to the trust and to
contribute a minimum of $1,525,000 per year beginning in 1996. The Company will
continue to pay current claims as incurred until the trust assets exceed 50% of
the accumulated postretirement benefit obligation for the hourly employees
included in the plan.
F-13
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(9) INCOME TAXES
The provision for income tax expense (benefit) is comprised of the
following:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31
--------------------------------
1993 1994 1995
--------- ---------- ---------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Federal income taxes
Current.................................................. $ 7,071 $ 19,419 $ 5,770
Deferred................................................. 523 (2,105) 2,662
State income taxes
Current.................................................. 1,068 5,573 1,427
Deferred................................................. 823 (948) 454
--------- ---------- ---------
Provision for income taxes................................. $ 9,485 $ 21,939 $ 10,313
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
In addition to the above income taxes, the Company recognized $13,589,000 of
current income tax benefits in 1994 related to extraordinary losses on the early
retirement of debt (see Note 4).
A reconciliation between income tax expense reported and income tax expense
computed by applying the federal statutory rate to income before income taxes,
extraordinary losses and cumulative effect of change in accounting principle,
follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Income taxes at federal statuary rate........................ $ 8,232 $ 18,477 $ 9,020
State income taxes, net of federal income tax benefit........ 1,232 3,006 1,223
Other........................................................ 21 456 70
--------- --------- ---------
$ 9,485 $ 21,939 $ 10,313
--------- --------- ---------
--------- --------- ---------
</TABLE>
Under Statement 109, deferred tax assets are recognized in the period in
which they arise and a valuation allowance is established to reduce those
deferred tax assets if it is "more likely than not" that the related tax
benefits will not be realized in the future. Total deferred tax assets amounted
to approximately $46,222,000 and $47,727,000 as of October 31, 1994 and 1995;
the most significant items comprising the deferred tax assets were
postretirement health benefits of $16,678,000 and $20,936,000, compensation
accruals of $11,334,000 and $10,102,000, and alternative minimum tax credit
carryforwards of $4,510,000 and $4,028,000. Total deferred tax liabilities
amounted to approximately $42,369,000 and $46,992,000 as of October 31, 1994 and
1995, consisting primarily of deferred taxes on inventory of $3,507,000 and
$3,065,000 and fixed assets of $38,796,000 and $43,861,000. The Company had no
valuation allowance for realization of deferred tax assets as of October 31,
1994 or 1995.
Tax effects of the principal timing differences between income for financial
reporting and tax reporting for 1993 were as follows: Excess tax over book
depreciation of $11,025,000, accruals (primarily
F-14
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(9) INCOME TAXES (CONTINUED)
for employee benefits) not currently deductible for tax purposes of
($6,325,000), accounts receivable allowances not currently deductible for tax
purposes ($323,000), book over tax inventory of $864,000, and alternative
minimum tax of ($3,061,000).
As a result of the tax sharing agreement discussed in Note 1(g), the
Company's recoverable income taxes of $5,960,000 at October 31, 1995 is due from
Renco.
As discussed in Note 1(g), the Company adopted Statement 109 effective
November 1, 1993, and recognized a cumulative benefit of $834,000 as a change in
accounting principle. Prior years' financial statements have not been restated
to apply the provisions of Statement 109.
(10) LEASES
The Company leases a portion of its operating and data processing equipment.
Minimum future lease payments under noncancelable operating leases are
$1,157,000, $961,000, $835,000, $699,000, and $590,000 for the years ending
October 31, 1996, 1997, 1998, 1999 and 2000, respectively and $182,000
thereafter. Rent expense for noncancelable operating leases amounted to
approximately $482,000, $805,000, and $1,033,000 for the years ended October 31,
1993, 1994, and 1995, respectively and $738,000 and $911,000 for the nine months
ended July 31, 1995 and 1996, respectively.
(11) AGREEMENT WITH THE RENCO GROUP, INC.
The Company has a management services agreement with Renco under which Renco
provides certain management services to the Company. Under terms of this
agreement, the Company is charged a monthly fee of $100,000. The term of this
agreement extends to October 31, 1998. Total expense for management services
fees amounted to $1,200,000 for each of the years ended October 31, 1993, 1994,
and 1995 and $900,000 for the nine months ended July 31, 1995 and 1996. At
October 31, 1994 and 1995, and July 31, 1996, $480,000, $480,000 and $180,000,
respectively was owed to Renco for management services fees.
In connection with the issuance of certain indebtedness and renegotiation of
the Revolver during 1993, the Company paid Renco $4,500,000 related to
transaction costs.
(12) COMMITMENTS AND CONTINGENCIES
At October 31, 1995, the Company was committed to spend approximately
$41,712,000 for data processing services over the remaining 6.5 years of its
management information systems facilities management agreement and approximately
$101,200,000 in 1996 and $4,108,000 thereafter on raw material purchase
commitments.
The Company and other industrial companies have, in recent years, become
subject to increasingly demanding environmental standards imposed by federal,
state and local environmental laws and regulations. It is the policy of the
Company to endeavor to comply with applicable environmental laws and
regulations. A liability has been established for an amount, which the Company
believes is adequate, based on information currently available, to cover the
costs of remedial actions it will likely be required to take to comply with
existing environmental laws and regulations.
F-15
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(12) COMMITMENTS AND CONTINGENCIES (CONTINUED)
On June 29, 1995, the Department of Justice, on behalf of the Environmental
Protection Agency (EPA), filed an action against WCI under the Clean Water Act
in the United States District Court for the Northern District of Ohio. The
action alleges numerous violations of the Company's National Pollution Discharge
Elimination System permit alleged to have occurred during the years 1989 through
1995, inclusive, and seeks civil penalties not to exceed the statutory maximum
of $25,000 per day per violation. On August 25, 1995, the Company filed for
dismissal of certain of the alleged violations. The court has not taken action
on the Company's submittal. The Company believes that imposition of the
statutory maximum penalty for the alleged violations is unlikely based upon past
judicial penalties imposed under the Clean Water Act, and that it has defenses
to liability. However, no assurance can be given that the Company will not be
found to have liability and, if it has liability, that the statutory maximum
penalty will not be imposed. If the statutory maximum penalty or a similarly
substantial penalty were imposed, it could have a material adverse effect on the
Company. The Company is continuing to negotiate with the EPA toward a settlement
of this matter.
The Company has obtained a Resource Conservation and Recovery Act (RCRA)
storage permit for waste pickle liquor at its Warren facility acid regeneration
plant. As a provision of the permit, the Company will be required to undertake a
corrective action program with respect to historical material handling practices
at the Warren facility. The Company has developed and submitted a workplan for
the first investigation step of the corrective action program, the RCRA Facility
Investigation (RFI), to the EPA and is presently negotiating the scope of the
RFI with the EPA. The final scope of the corrective action required to remediate
or reclaim any contamination that may be present at the Warren facility is
dependent upon the findings of the RFI and the development and approval of a
corrective action program. Accordingly, the Company is unable at this time to
estimate the final cost of the corrective action program or the period over
which such costs may be incurred.
In addition to the above matters, the Company is contingently liable with
respect to lawsuits and other claims incidental to the ordinary course of its
operations. Although the outcome of the above described matters, to the extent
they exceed applicable reserves, could have a material adverse effect on the
future operating results of the Company in a particular quarterly or annual
period, the Company believes that the effect of such matters will not have a
material adverse effect on the Company's consolidated financial position.
(13) INITIAL PUBLIC STOCK OFFERING
In July 1994, the Company completed an initial public offering (IPO) of
5,750,000 common shares (including overallotment shares) at $10.00 per share.
The net proceeds of the IPO (after deducting offering transaction expenses and
underwriting discounts of $5,616,000 in the aggregate) were $51,884,000, of
which $6,950,000 was used to repurchase all of the outstanding preferred stock
of the Company including cumulative dividends, and the remainder was used to
repurchase $43,600,000 aggregate principal amount Senior Notes (see note 4).
In connection with the IPO, the Company's board of directors and sole
shareholder approved an amendment to the Company's charter increasing the number
of authorized common shares to 40,000,000, without par value, at a stated value
of $.0l per common share, and declared a 41,000 to 1 common stock
F-16
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(13) INITIAL PUBLIC STOCK OFFERING (CONTINUED)
split, which resulted in 30,750,000 shares outstanding immediately before the
IPO. All share and per share amounts stated herein have been adjusted to reflect
the common stock split. In addition, in connection with the IPO, 74,000
restricted shares were issued to certain management employees.
(14) SELECTED QUARTERLY DATA (UNAUDITED)
The following is a summary of unaudited quarterly results for the years
ended October 31, 1994 and 1995:
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1994 JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
- ------------------------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales.................................................... $ 158,546 $ 174,548 $ 183,223 $ 193,046
Gross margin................................................. 29,624 32,943 36,134 36,052
Income before extraordinary losses and cumulative effect of
change in accounting principle............................. 3,745 8,879 7,166 11,063
Net income (loss)............................................ $ (13,606) $ 8,879 $ 5,137 $ 11,063
Income (loss) per common share...............................
Income before extraordinary losses and cumulative effect of
change in accounting principle............................. $ .12 $ .28 $ .22 $ .30
Net income (loss) per common share........................... $ (.45) $ .28 $ .16 $ .30
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1995 JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
- ------------------------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales.................................................... $ 175,099 $ 177,770 $ 170,742 $ 107,379
Gross margin (loss).......................................... 33,850 34,229 31,698 (13,576)
Net income (loss)............................................ 10,909 11,139 9,371 (15,959)
Net income (loss) per common share........................... $ .30 $ .30 $ .26 $ (.44)
</TABLE>
During the three months ended October 31, 1995, the Company experienced a 54
day labor contract dispute and resulting work stoppage. The negative gross
margin and the net loss for the quarter resulted principally from excess
production costs and expenses related to idling equipment during the work
stoppage, including salary and benefit costs, bonuses paid to hourly and
salaried employees upon conclusion of the work stoppage, and lower shipping
volume.
Income per common share calculations for each of the quarters are based on
the weighted average number of common shares outstanding for each period, and
the sum of the quarters may not necessarily be equal to the full year income per
share amount.
(15) SUBSEQUENT EVENTS (UNAUDITED)
During August 1996, the Company amended its $100 million Revolver. This
amendment extended the expiration date to December 29, 1999, reduced the
interest rate to prime plus 0.5% or, at the Company's option, a Eurodollar based
rate, increased to $20,000,000 the aggregate amount of letters of credit
available and modified certain financial covenants. The Revolver, as amended, is
subject to a penalty of
F-17
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(15) SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
$500,000 if terminated, without being refinanced with the same lender, prior to
December 29, 1998 and $250,000 if terminated prior to December 29, 1999.
On March 29, 1996, the Department of Justice on behalf of the EPA,
instituted a civil action against the Company under the Clean Air Act in the
United States District Court for the Northern District of Ohio. The action
alleges violations by the Company of the work practice, inspection and notice
requirements for the demolition and renovation of the National Emission Standard
for Hazardous Air Pollutants for Asbestos and also violations of the particulate
standard and the opacity limits applicable to the Company's facilities in
Warren, Ohio. The action seeks a civil penalty not to exceed the statutory
maximum of $25,000 per day per violation and also seeks an injunction against
continuing violations. The Company believes that imposition of the statutory
maximum penalty for the alleged violations is unlikely based upon past judicial
penalties imposed under the Clean Air Act and that it has defenses to liability.
However, no assurance can be given that the Company will not be found to have
liability and, if it has liability, that the statutory maximum penalty will not
be imposed. By letter dated November 1, 1996, EPA's Region V Water Division
Director requested information pursuant to the Clean Water Act from the Company
relating to the Warren facility. The request seeks information as to the effect
of a prohibition against federal procurement of the Company's products on the
Company's business. The Company has not been notified that the EPA will seek a
federal procurement prohibition based on alleged permit violations. However,
there can be no assurance that a federal procurement prohibition will not be
imposed. If the statutory maximum penalty or federal procurement prohibition or
a similarly substantial penalty were imposed, it could have a material adverse
effect on the Company. The Company is negotiating with the EPA toward a
settlement of these matters.
On January 23, 1996, two retired employees instituted an action against the
Company in the United States District Court for the Northern District of Ohio
alleging in substance that certain distributions made by the Company to
employees and benefit plans violated certain agreements, the Employee Retirement
Income Security Act, the National Labor Relations Act and common law. The
plaintiffs seek declaratory and injunctive relief and damages. Plaintiffs have
brought this action as a class action; however, the court has not ruled as to
whether this action is properly maintainable as a class action. The Company
denies the plaintiffs' allegations of liability and has filed for dismissal of
the action. The court has not yet ruled on the Company's motion.
On April 5, 1996, an employee instituted an action for damages against the
Company in the Court of Common Pleas, Trumbull County, Ohio alleging that, under
Ohio common law, her privacy rights were violated and that she has been
subjected to sexual harassment. In July 1996, the plaintiff moved for an order
permitting her to amend her complaint to add new party plaintiffs alleging a
claim under only the privacy rights cause of action. The Company denies
plaintiff's allegations of liability and has opposed the motion to amend the
complaint. The court has not yet ruled on the plantiff's motion. Discovery is
underway, and no substantive motions have been made.
On November 27, 1996 WCI Steel Holdings, Inc., a wholly-owned subsidiary of
The Renco Group, Inc., completed a tender offer in which it purchased
substantially all the outstanding shares of common stock of the Company not held
by Renco. Following the completion of the tender offer, WCI Steel Holdings, Inc.
was merged with and into the Company with the Company surviving as a
wholly-owned
F-18
<PAGE>
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF JULY 31, 1996 AND FOR THE
NINE MONTHS ENDED JULY 31, 1995 AND 1996, IS UNAUDITED)
(15) SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
subsidiary of Renco. The total consideration paid for the common stock tendered
and the common stock reacquired as a result of the merger of WCI Steel Holdings,
Inc. with and into the Company was approximately $56,922,000, including related
expenses.
On the same date, the Company completed the sale of $300,000,000 10% Senior
Secured Notes due 2004 (Senior Secured Notes). The proceeds from the Senior
Secured Notes, with existing cash balances of the Company, were used to complete
a tender offer in which the Company acquired $206,120,000 of the $206,400,000
aggregate principal amount of the then outstanding Senior Notes at a rate of
$1,125.00 per $1,000 principal amount outstanding plus accrued interest, pay a
$108,000,000 dividend to Renco, make contractual compensation payments to
certain executives of the Company and pay related transaction costs. As a result
of these transactions, the Company expects to recognize an extraordinary loss of
approximately $19,670,000, net of taxes, and compensation expense of
approximately $9,026,000 in the first quarter of fiscal 1997.
The Senior Secured Notes are secured by a second priority lien on
substantially all of the existing property, plant and equipment of the Company
which will become a first priority lien if all of the Senior Notes are
extinguished.
F-19
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY WCI STEEL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Available Information.......................... 2
Forward-Looking Statements..................... 2
Prospectus Summary............................. 3
Risk Factors................................... 13
The Transactions............................... 19
Use of Proceeds................................ 19
Capitalization................................. 20
Selected Consolidated Financial Data........... 21
The Exchange Offer............................. 23
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 30
Business....................................... 35
Management..................................... 47
Stock Ownership and Certain Relationships and
Transactions................................. 52
Description of the Notes....................... 54
Description of WCI Revolving Credit Facility... 78
Certain Federal Income Tax Considerations...... 80
Plan of Distribution........................... 80
Legal Matters.................................. 81
Experts........................................ 81
Index to Consolidated Financial Statements..... F-1
</TABLE>
UNTIL , 1997 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
OFFER TO EXCHANGE ITS
10% SENIOR SECURED NOTES
DUE 2004, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
10% SENIOR SECURED NOTES
DUE 2004, SERIES A
--------------
PROSPECTUS
--------------
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1701.13(E)(1) of the Ohio General Corporation Law (the "OGCL")
provides that a corporation may indemnify a person made or threatened to be made
a party to any proceeding, other than a proceeding by or in the right of the
corporation, by reason of such person's official capacity as an officer,
director, employee or agent of the corporation, or if such person is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership, joint
venture, trust or other enterprise, against judgments, fines, expenses,
including attorney's fees, and disbursements paid in settlement incurred by such
person in connection with the proceeding, if such person (a) acted in good faith
and in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the corporation; and (b)in the case of a criminal proceeding,
had no reason to believe such person's conduct was unlawful.
Section 1701.13(E)(2) of the OGCL further provides that a corporation may
indemnify a person made or threatened to be made a party to any proceeding by or
in the right of the corporation to procure a judgment in its favor, by reason of
such person's official capacity as an officer, director, employee or agent of
the corporation or if such person is or was serving at the request of the
corporation as a director, trustee, officer, employee, member, manager or agent
of another corporation, domestic or foreign, nonprofit or for profit, a limited
liability company, or a partnership, joint venture, trust or other enterprise,
against expenses, including attorney's fees, and disbursements paid in
settlement incurred by such person in connection with the proceeding, if such
person acted in good faith and in a manner such person reasonably believed to be
in, or not opposed to, the best interests of the corporation, except that the
corporation may not indemnify such person for (a) any proceeding as to which
such person is adjudged to be liable for negligence or misconduct in the
performance of such person's duty to the corporation, unless the court in which
such proceeding is brought determines that, despite the adjudication of
liability, such person is entitled to indemnity for such expenses as the court
shall deem proper; and (b) any proceeding in which the only liability asserted
against a director is pursuant to Section 1701.95 of the Revised Code of Ohio.
Section 1701.13(E)(3) of the OGCL further provides that to the extent a
director, trustee, officer, employee, member, manager or agent is successful on
the merits or in defense of any proceeding brought under Sections 1701.13(E)(1)
and 1701.13(E)(2) of the OGCL, a corporation shall indemnify such person against
expenses, including attorney's fees, incurred by such person in connection with
the proceeding.
In addition, Section 1701.13(E)(a) of the OGCL provides that, unless
otherwise provided by a corporation's articles of incorporation or code of
regulations at the time of a director's act or omission, and unless the only
liability asserted against a director in a proceeding is pursuant to Section
1701.95 of the Revised Code of Ohio, if a director is made or threatened to be
made a party to a proceeding brought under Sections 1701.13(E)(1) and
1701.13(E)(2) of the OGCL, such person is entitled to payment or reimbursement
by a corporation of expenses, including attorney's fees, incurred by such person
in advance of the final disposition of the proceeding, upon receipt of an
undertaking by or on behalf of such person agreeing to (a) repay all amounts
paid or reimbursed by the corporation if it is ultimately determined that such
person's act or omission was undertaken with deliberate intent to cause injury
to the corporation or undertaken with reckless disregard for the best interests
of the corporation; and (b) cooperate with the corporation concerning the
proceeding. Expenses, including attorney's fees, incurred by a corporation's
director, trustee, officer, employee, or agent in a proceeding brought under
Sections 1701.13(E)(1) and 1701.13(E)(2) of the OGCL may be paid by the
corporation as they are incurred in advance of the final disposition of the
proceeding upon the receipt of an undertaking from such person to repay all
amounts
II-1
<PAGE>
paid or reimbursed by the corporation if it is ultimately determined that such
person is not entitled to be indemnified by the corporation.
Finally, Section 1701.13(E)(6) of the OGCL provides that a corporation's
articles of incorporation or code of regulations may extend further
indemnification rights in addition to those provided by Section 1701.13 of the
OGCL.
Registrant's Code of Regulations contains the indemnification provision set
forth below:
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened or pending action, suit, or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he, his testator, or intestate is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, or as a member of any
committee or similar body against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding or the defense or
settlement thereof or any claim, issue, or matter therein, to the fullest extent
permitted by the laws of Ohio as they may exist from time to time. To assure
indemnification under this provision of all such persons who are or were
"fiduciaries" of an employee benefit plan governed by the Act of Congress
entitled "Employee Retirement Income Security Act of 1974," as amended from time
to time, this paragraph shall, for the purposes hereof, be interpreted as
follows: an "other enterprise" shall be deemed to include an employee benefit
plan; the Company shall be deemed to have requested a person to serve an
employee benefit plan where the performance by such person of his duties to the
Company also imposes duties on, or otherwise involves services by, such person
to the plan or participants or beneficiaries of the plan; excise taxes assessed
on a person with respect to an employee benefit plan pursuant to said Act of
Congress shall be deemed "fines;" and action taken or omitted by a person with
respect to an employee benefit plan in the performance of such person's duties
for a purpose reasonably believed by such person to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Company. The foregoing
provisions of this paragraph shall be deemed to be a contract between the
Company and each director and officer who serves in such capacity at any time
while this paragraph is in effect, and any repeal or modification thereof shall
not affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.1 --Articles of Incorporation of the Registrant, filed April 13, 1998 and Articles of Amendment filed May
18, 1988, July 15, 1988, November 29, 1991, December 14, 1993 and July 13, 1994.(7)
3.2 --Code of Regulations of the Registrant, as amended December 16, 1996.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
4.1 --Indenture, dated as of December 14, 1993, among Renco Steel, Inc. (which subsequently was merged into
the Registrant), as issuer, the Registrant, as guarantor, and Shawmut Bank Connecticut, National
Association (now known as Fleet National Bank), as trustee, relating to the 10 1/2% Senior Notes Due
2002, Series A and the 10 1/2% Senior Notes Due 2002, Series B of the Registrant (containing, as
exhibits, specimens of the Series A Senior Notes and Series B Senior Notes).(3)
4.1.1 --First Supplemental Indenture to the indenture, dated as of December 14, 1993, among Renco Steel, Inc.
(which subsequently was merged into the Registrant), as issuer, the Registrant, as guarantor, and
Shawmut Bank Connecticut, National Association (now known as Fleet National Bank), as trustee,
relating to the 10 1/2% Senior Notes Due 2002, Series A and the 10 1/2% Senior Notes Due 2002, Series
B of the Registrant (containing, as exhibits, specimens of the Series A Senior Notes and Series B
Senior Notes).(3)
4.1.2 --Second Supplemental Indenture to the indenture, dated as of December 14, 1993, among Renco Steel,
Inc. (which subsequently was merged into the Registrant), as issuer, the Registrant, as guarantor,
and Shawmut Bank Connecticut, National Association (now known as Fleet National Bank), as trustee,
relating to the 10 1/2% Senior Notes Due 2002, Series A and the 10 1/2% Senior Notes Due 2002, Series
B of the Registrant (containing, as exhibits, specimens of the Series A Senior Notes and Series B
Senior Notes).
4.2 --Indenture, dated as of November 27, 1996, between the Registrant, as issuer, and Fleet National Bank,
as trustee, relating to the 10% Senior Secured Notes due 2004, Series A, and the 10% Senior Secured
Notes due 2004, Series B of the Registrant (containing, as exhibits, specimens of the Series A Senior
Secured Notes and Series B Senior Secured Notes).
4.3 --Purchase Agreement, dated November 22, 1996, between Donaldson, Lufkin and Jenrette Securities
Corporation and the Registrant, relating to the 10% Senior Secured Notes due 2004.
4.4 --Registration Rights Agreement, dated as of November 27, 1996, be and between Donaldson, Lufkin &
Jenrette Securities Corporation and the Registrant, relating to the 10% Senior Secured Notes due
2004.
4.5 --Form Letter of Transmittal.
5.1 --Opinion of Cadwalader, Wickersham & Taft (including opinion filed as Exhibit 8.1 and consent filed as
Exhibit 23.1).
8.1 --Opinion of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
10.1 --[Intentionally Omitted]
10.2 --Net Worth Appreciation Agreement, dated as of September 1, 1988, between the Registrant and James V.
Stack.(1)
10.2.1 --Amendment, dated November 15, 1993, to the Net Worth Appreciation Agreements between the Registrant
and James V. Stack.(3)
10.2.2 --Amended and Restated Net Worth Appreciation Agreement, effective November 1, 1995, between the
Registrant and Patrick T. Kenney.
10.2.3 --Amended and Restated Net Worth Appreciation Agreement, effective November 1, 1995, between the
Registrant and Patrick G. Tatom.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.2.4 --Amended and Restated Net Worth Appreciation Agreement, effective November 1, 1995, between the
Registrant and Bret W. Wise.
10.2.5 --Severance Pay Agreement, dated August 1, 1994, between the Registrant and Bret W. Wise.(6)
10.2.6 --Consulting Agreement, effective November 1, 1994, between the Registrant and James V. Stack.(7)
10.2.7 --Net Worth Appreciation Agreement, effective April 1, 1996, between the Registrant and Edward R.
Caine.
10.3 --Management Consultant Agreement, dated October 1, 1992, between Registrant and The Renco Group,
Inc.(1)
10.3.1 --Amendment No. 1, dated April 22, 1994, to Management Consultant Agreement.(4)
10.4 --Amended and Restated Loan and Security Agreement dated December 29, 1992 between the Registrant and
Congress Financial Corporation and Security Pacific Business Credit Inc. (the "Revolving Credit
Agreement").(1)
10.4.1 --Amendment No. 1 to the Revolving Credit Agreement, dated December 14, 1993.(3)
10.4.2 --[Intentionally Omitted]
10.4.3 --Indemnification Agreement, dated as of December 14, 1993, among the Registrant and the lenders under
the Revolving Credit Agreement.(3)
10.4.4 --Intercreditor Agreement, dated December 14, 1993, among the Shawmut Bank Connecticut, National
Association, Congress Financial Corporation and Security Pacific Business Credit Inc.(3)
10.4.5 --Amendment No. 2 to the Revolving Credit Agreement, dated July 13, 1994.(5)
10.4.6 --Amendment No. 3 to the Revolving Credit Agreement, dated March 28, 1995.(8)
10.4.7 --Amendment No. 4 to the Revolving Credit Agreement, dated February 23, 1996.(9)
10.4.8 --Amendment No. 5 to the Revolving Credit Agreement, dated March 8, 1996.(9)
10.4.9 --Amendment No. 6 to the Revolving Credit Agreement, dated June 17, 1996.(10)
10.4.10 --Amendment No. 7 to the Revolving Credit Agreement, dated November 27, 1996.
10.4.11 --Intercreditor Agreement, dated November 27, 1996, between Fleet National Bank and Congress Financial
Corporation.
10.5.1 --Intercreditor Agreement, dated November 27, 1996, among Fleet National Bank, Bank One Trust Company,
N.A. and the Registrant.
10.5.2 --Indemnification Agreement, dated as of November 27, 1996, between the Registrant and Bank One Trust
Company, N.A.
10.6 --Promissory Note, dated August 31, 1988, in the original principal amount of $5,552,000 made by the
Registrant to LTV Steel Company, Inc.(1)
10.7 --Loan Agreement, dated as of May 1, 1990, between the Director of Development of the State of Ohio and
Youngstown Sinter Company (Ohio Enterprise Bond Fund Program).(1)
10.8 --Agreement, dated June 11, 1990, between the City of Youngstown, Ohio and Youngstown Sinter Company
(with UDAG Grant Agreement).(1)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
12 --Statement regarding computation of ratio of earnings to fixed charges.
21 --List of Subsidiaries of Registrant.(2)
23.1 --Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
23.2 --Consent of KPMG Peat Marwick LLP.
25 --Statement of Eligibility and Qualification on Form T-1 of Fleet National Bank.
</TABLE>
- ------------------------
(1) Incorporated by reference to the same-numbered exhibit filed with the
Company's Registration Statement on Form S-4, as amended (File No.
33-58648), originally filed with the Commission on February 23, 1993.
(2) Incorporated by reference to Exhibit 22 filed with the Company's
Registration Statement on Form S-4, as amended (File No. 33-58648),
originally filed with the Commission on February 23, 1993.
(3) Incorporated by reference to the same-numbered exhibit filed with the
Company's Registration Statement on Form S-4 (File No. 33-74108), filed with
the Commission on January 14, 1994.
(4) Incorporated by reference to same-numbered exhibit filed with the Company's
Pre-Effective Amendment No. 2 to Registration Statement on Form S-1 (File
No. 33-75722), filed with the Commission on April 28, 1994.
(5) Incorporated by reference to exhibit 10.4.5 filed with the Company's Pre-
Effective Amendment No. 3 to Registration Statement on Form S-1 (File No.
33- 75722), filed with the Commission on May 4, 1994.
(6) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended July 31, 1994 (File No. 1-13028).
(7) Incorporated by reference to the Company's Form 10-K for the fiscal year
ended October 31, 1994 (File No. 1-13028).
(8) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended April 30, 1995 (File No. 1-13028).
(9) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended April 30, 1996 (File No. 1-13028).
(10) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended July 31, 1996 (File No. 1-13028).
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
Schedule II --Valuation and Qualifying Accounts
<S> <C> <C>
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
II-5
<PAGE>
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post- effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply be means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on December 17, 1996.
WCI STEEL, INC.
By: /s/ IRA LEON RENNERT
-----------------------------------------
IRA LEON RENNERT
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on December 17, 1996
SIGNATURE TITLE
- ------------------------------ ---------------------------
/s/ IRA LEON RENNERT Chairman of the Board and
- ------------------------------ Director
IRA LEON RENNERT
President and Chief
/s/ EDWARD R. CAINE Executive Officer
- ------------------------------ (Principal Executive
EDWARD R. CAINE Officer)
Vice President, Finance and
/s/ BRET W. WISE Chief Financial Officer
- ------------------------------ (Principal Financial and
BRET W. WISE Accounting Officer)
II-7
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors
WCI Steel, Inc. and Subsidiaries:
Under date of December 1, 1995, we reported on the consolidated balance
sheets of WCI Steel, Inc. and subsidiaries as of October 31, 1995 and 1994, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended October 31, 1995,
which are included in the Registration Statement. In connection with our audits
of the aforementioned consolidated financial statements, we also audited the
related financial statement schedule (Schedule II-- Valuation and Qualifying
Accounts) included in the Registration Statement. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement schedule based on our
audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
KPMG PEAT MARWICK LLP
Cleveland, Ohio
December 1, 1995
S-1
<PAGE>
WCI STEEL, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ------------------------ BALANCE AT
BEGINNING CHARGED TO CHARGES TO DEDUCTIONS END
CLASSIFICATION OF YEAR EXPENSE (B) OTHER (C) OF YEAR
- --------------------------------------------------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS (A):
Year ended October 31, 1995...................... $ 2,400 $ 117 -- $ 259 $ 2,258
Year ended October 31, 1994...................... 2,371 812 -- 783 2,400
Year ended October 31, 1993...................... 1,271 1,200 -- 100 2,371
</TABLE>
- ------------------------
(a) Allowance for doubtful accounts is shown as a reduction of accounts
receivable in the Company's Consolidated Financial Statements.
(b) Charges to expense for the provision for doubtful accounts.
(c) Trade receivables written-off.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.1 --Articles of Incorporation of the Registrant, filed April 13, 1998 and Articles of Amendment filed May
18, 1988, July 15, 1988, November 29, 1991, December 14, 1993 and July 13, 1994.(7)
3.2 --Code of Regulations of the Registrant, as amended December 16, 1996.
4.1 --Indenture, dated as of December 14, 1993, among Renco Steel, Inc. (which subsequently was merged into
the Registrant), as issuer, the Registrant, as guarantor, and Shawmut Bank Connecticut, National
Association (now known as Fleet National Bank), as trustee, relating to the 10 1/2% Senior Notes Due
2002, Series A and the 10 1/2% Senior Notes Due 2002, Series B of the Registrant (containing, as
exhibits, specimens of the Series A Senior Notes and Series B Senior Notes).(3)
4.1.1 --First Supplemental Indenture to the indenture, dated as of December 14, 1993, among Renco Steel, Inc.
(which subsequently was merged into the Registrant), as issuer, the Registrant, as guarantor, and
Shawmut Bank Connecticut, National Association (now known as Fleet National Bank), as trustee,
relating to the 10 1/2% Senior Notes Due 2002, Series A and the 10 1/2% Senior Notes Due 2002, Series
B of the Registrant (containing, as exhibits, specimens of the Series A Senior Notes and Series B
Senior Notes).(3)
4.1.2 --Second Supplemental Indenture to the indenture, dated as of December 14, 1993, among Renco Steel,
Inc. (which subsequently was merged into the Registrant), as issuer, the Registrant, as guarantor,
and Shawmut Bank Connecticut, National Association (now known as Fleet National Bank), as trustee,
relating to the 10 1/2% Senior Notes Due 2002, Series A and the 10 1/2% Senior Notes Due 2002, Series
B of the Registrant (containing, as exhibits, specimens of the Series A Senior Notes and Series B
Senior Notes).
4.2 --Indenture, dated as of November 27, 1996, between the Registrant, as issuer, and Fleet National Bank,
as trustee, relating to the 10% Senior Secured Notes due 2004, Series A, and the 10% Senior Secured
Notes due 2004, Series B of the Registrant (containing, as exhibits, specimens of the Series A Senior
Secured Notes and Series B Senior Secured Notes).
4.3 --Purchase Agreement, dated November 22, 1996, between Donaldson, Lufkin and Jenrette Securities
Corporation and the Registrant, relating to the 10% Senior Secured Notes due 2004.
4.4 --Registration Rights Agreement, dated as of November 27, 1996, be and between Donaldson, Lufkin &
Jenrette Securities Corporation and the Registrant, relating to the 10% Senior Secured Notes due
2004.
4.5 --Form Letter of Transmittal.
5.1 --Opinion of Cadwalader, Wickersham & Taft (including opinion filed as Exhibit 8.1 and consent filed as
Exhibit 23.1).
8.1 --Opinion of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
10.1 --[Intentionally Omitted]
10.2 --Net Worth Appreciation Agreement, dated as of September 1, 1988, between the Registrant and James V.
Stack.(1)
10.2.1 --Amendment, dated November 15, 1993, to the Net Worth Appreciation Agreements between the Registrant
and James V. Stack.(3)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.2.2 --Amended and Restated Net Worth Appreciation Agreement, effective November 1, 1995, between the
Registrant and Patrick T. Kenney.
10.2.3 --Amended and Restated Net Worth Appreciation Agreement, effective November 1, 1995, between the
Registrant and Patrick G. Tatom.
10.2.4 --Amended and Restated Net Worth Appreciation Agreement, effective November 1, 1995, between the
Registrant and Bret W. Wise.
10.2.5 --Severance Pay Agreement, dated August 1, 1994, between the Registrant and Bret W. Wise.(6)
10.2.6 --Consulting Agreement, effective November 1, 1994, between the Registrant and James V. Stack.(7)
10.2.7 --Net Worth Appreciation Agreement, effective April 1, 1996, between the Registrant and Edward R.
Caine.
10.3 --Management Consultant Agreement, dated October 1, 1992, between Registrant and The Renco Group,
Inc.(1)
10.3.1 --Amendment No. 1, dated April 22, 1994, to Management Consultant Agreement.(4)
10.4 --Amended and Restated Loan and Security Agreement dated December 29, 1992 between the Registrant and
Congress Financial Corporation and Security Pacific Business Credit Inc. (the "Revolving Credit
Agreement").(1)
10.4.1 --Amendment No. 1 to the Revolving Credit Agreement, dated December 14, 1993.(3)
10.4.2 --[Intentionally Omitted]
10.4.3 --Indemnification Agreement, dated as of December 14, 1993, among the Registrant and the lenders under
the Revolving Credit Agreement.(3)
10.4.4 --Intercreditor Agreement, dated December 14, 1993, among the Shawmut Bank Connecticut, National
Association, Congress Financial Corporation and Security Pacific Business Credit Inc.(3)
10.4.5 --Amendment No. 2 to the Revolving Credit Agreement, dated July 13, 1994.(5)
10.4.6 --Amendment No. 3 to the Revolving Credit Agreement, dated March 28, 1995.(8)
10.4.7 --Amendment No. 4 to the Revolving Credit Agreement, dated February 23, 1996.(9)
10.4.8 --Amendment No. 5 to the Revolving Credit Agreement, dated March 8, 1996.(9)
10.4.9 --Amendment No. 6 to the Revolving Credit Agreement, dated June 17, 1996.(10)
10.4.10 --Amendment No. 7 to the Revolving Credit Agreement, dated November 27, 1996.
10.4.11 --Intercreditor Agreement, dated November 27, 1996, between Fleet National Bank and Congress Financial
Corporation.
10.5.1 --Intercreditor Agreement, dated November 27, 1996, among Fleet National Bank, Bank One Trust Company,
N.A. and the Registrant.
10.5.2 --Indemnification Agreement, dated as of November 27, 1996, between the Registrant and Bank One Trust
Company, N.A.
10.6 --Promissory Note, dated August 31, 1988, in the original principal amount of $5,552,000 made by the
Registrant to LTV Steel Company, Inc.(1)
10.7 --Loan Agreement, dated as of May 1, 1990, between the Director of Development of the State of Ohio and
Youngstown Sinter Company (Ohio Enterprise Bond Fund Program).(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.8 --Agreement, dated June 11, 1990, between the City of Youngstown, Ohio and Youngstown Sinter Company
(with UDAG Grant Agreement).(1)
12 --Statement regarding computation of ratio of earnings to fixed charges.
21 --List of Subsidiaries of Registrant.(2)
23.1 --Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
23.2 --Consent of KPMG Peat Marwick LLP.
25 --Statement of Eligibility and Qualification on Form T-1 of Fleet National Bank.
</TABLE>
- ------------------------
(1) Incorporated by reference to the same-numbered exhibit filed with the
Company's Registration Statement on Form S-4, as amended (File No.
33-58648), originally filed with the Commission on February 23, 1993.
(2) Incorporated by reference to Exhibit 22 filed with the Company's
Registration Statement on Form S-4, as amended (File No. 33-58648),
originally filed with the Commission on February 23, 1993.
(3) Incorporated by reference to the same-numbered exhibit filed with the
Company's Registration Statement on Form S-4 (File No. 33-74108), filed with
the Commission on January 14, 1994.
(4) Incorporated by reference to same-numbered exhibit filed with the Company's
Pre-Effective Amendment No. 2 to Registration Statement on Form S-1 (File
No. 33-75722), filed with the Commission on April 28, 1994.
(5) Incorporated by reference to exhibit 10.4.5 filed with the Company's
Pre-Effective Amendment No. 3 to Registration Statement on Form S-1 (File
No. 33-75722), filed with the Commission on May 4, 1994.
(6) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended July 31, 1994 (File No. 1-13028).
(7) Incorporated by reference to the Company's Form 10-K for the fiscal year
ended October 31, 1994 (File No. 1-13028).
(8) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended April 30, 1995 (File No. 1-13028).
(9) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended April 30, 1996 (File No. 1-13028).
(10) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended July 31, 1996 (File No. 1-13028).
<PAGE>
EXHIBIT 3.2
CODE OF REGULATIONS
OF
WCI STEEL, INC.
(FORMERLY WARREN CONSOLIDATED INDUSTRIES, INC.)
AS AMENDED DECEMBER 16, 1996
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the
shareholders of this Company, for the purpose of fixing or changing the
number of directors of the Company, electing directors and transacting such
other business as may come before the meeting, shall be held on such date, at
such time and at such place as may be designated by the board of directors.
If the annual meeting is not held or if directors are not elected at the
meeting, the directors may be elected at any special meeting called and held
for that purpose.
Section 2. SPECIAL MEETINGS. Special meetings of the
shareholders may be called at any time by the president or a vice-president
or a majority of the board of directors acting with or without a meeting, or
the holder or holders of one-fourth of all the shares outstanding and
entitled to vote thereat.
Section 3. PLACE OF MEETINGS. Meetings of shareholders shall be
held at the office of the Company unless the board of directors decides that
a meeting shall be held at some other place within or without the State of
Ohio and causes the notice thereof to so state.
Section 4. NOTICES OF MEETINGS. Unless waived, a written,
printed, or typewritten notice of each annual or special meeting, stating the
day, hour and place and the purpose or purposes thereof shall be served upon
or mailed to each shareholder of record entitled to vote or entitled to
notice, not more than sixty (60) days nor less than seven (7) days before any
such meeting. If mailed, it shall be directed to a shareholder at his or her
address as the same appears on the records of the Company.
Section 5. ORGANIZATION. At each meeting of the shareholders, the
president or, in his absence, the vice-president, or, in the absence of the
president and the vice-president, a chairman chosen by a majority in interest of
the shareholders present in person or by proxy and entitled to vote, shall act
as chairman, and the secretary of the Company, or, if the secretary of the
Company not be present, the assistant secretary, or if the secretary and the
assistant secretary not be present, any person whom the chairman of the meeting
shall appoint, shall act as secretary of the meeting.
Section 6. ORDER OF BUSINESS AND PROCEDURE. The order of
business at all meetings of the shareholders and all matters relating to the
manner of conducting the meeting shall be determined by the chairman of the
meeting, whose decisions may be overruled only by
<PAGE>
majority vote of the shareholders present and entitled to vote at the meeting in
person or by proxy. Meetings shall be conducted in a manner designed to
accomplish the business of the meeting in a prompt and orderly fashion and to be
fair and equitable to all shareholders, but it shall not be necessary to follow
any manual of parliamentary procedure.
ARTICLE II
BOARD OF DIRECTORS
Section 1. GENERAL POWERS OF BOARD. The powers of the Company shall
be exercised, its business and affairs conducted, and its property controlled by
the board of directors, except as otherwise provided by the law of Ohio or in
the articles of incorporation.
Section 2. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors
shall consist of such number of directors, not less than one nor more than
three, as shall be fixed from time to time by the Board of Directors; PROVIDED,
HOWEVER, that the number of directors shall be equal to at least three or the
number of shareholders of record, whichever is less. At each meeting of the
shareholders for the election of directors at which a quorum is present, the
persons receiving the greatest number of votes cast by the holders of each class
of stock shall be the directors elected by such class of stock.
Section 3. TERM OF OFFICE. Unless he shall earlier resign, be
removed, die, or be adjudged mentally incompetent, each director shall hold
office until the SINE DIE adjournment of the annual meeting of shareholders for
the election of directors next succeeding his election, or the taking by the
shareholders of an action in writing in lieu of such meeting, or, if for any
reason the election of directors shall not be held at such annual meeting or any
adjournment thereof, until the SINE DIE adjournment of the special meeting of
the shareholders for the election of directors held thereafter as provided for
in Section 1 of Article I of this code, or the taking by the shareholders of an
action in writing in lieu of such meeting, and until his successor is elected
and qualified.
Section 4. RESIGNATIONS. Any director of the Company may resign at
any time by giving written notice to the president or the secretary of the
Company. Such resignation shall take effect at the time specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. VACANCIES. Vacancies in the Board of Directors shall be
filled by the affirmative vote of the holders of a majority of the shares which
elected the directors to be replaced, and each director elected shall serve
until the next annual election of directors and the election of his successor.
In addition, vacancies (including any vacancy resulting from an
increase in the number of directors) may be filled by the remaining directors
even though less than a majority of the whole authorized number of directors, to
serve for the unexpired term.
2
<PAGE>
Section 6. MEETINGS OF THE BOARD. A meeting of the board of
directors shall be held immediately following the adjournment of each
shareholders' meeting at which directors are elected, and notice of such meeting
need not be given.
Section 6.1 The board of directors may, by bylaws or
resolutions, provide for other meetings of the board.
Section 6.2 Special meetings of the board of directors may be
held at any time upon call of the president, a vice-president, the
secretary, or any two members of the board.
Section 6.3 Notice of any special meeting of the board of
directors shall be mailed to each director, addressed to him at his
residence or usual place of business, at least three days before the
day on which the meeting is to be held, or shall be sent to him at
such place by telegraph, cable, radio, or wireless, or be given
personally or by telephone not later than the day before the day on
which the meeting is to be held. Every such notice shall state the
time and place of the meeting but need not state the purposes thereof.
Notice of any meeting of the board need not be given to any director
if waived by him in writing or by telegraph, cable, radio or wireless,
whether before or after such meeting be held, or if he shall be
present at such meeting.
Section 6.4 All meetings of the board shall be held at the
principal office of the Company or at such other place, within or
without the State of Ohio, as the board may determine from time to
time and as may be specified in the notice thereof.
Section 7. ACTION BY BOARD.
Section 7.1 A majority of the number of directors in office
constitutes a quorum of the board for the transaction of business.
Section 7.2 The act of a majority of the directors present at
any meeting at which a quorum is present, shall be the act of the
board of directors.
Section 7.3 Any action which may be taken at a meeting of the
board of directors may be taken without a meeting if a consent in
writing or writings, setting forth the action so taken, shall be
signed by all of the directors, and filed with or entered upon the
records of the corporation.
ARTICLE III
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Company shall be
a president, such number of vice-presidents as the board may from time to time
determine, a secretary, a treasurer and such other officers as the directors may
elect. Any person may hold any two or more offices and perform the duties
thereof, except as otherwise provided by the
3
<PAGE>
law of Ohio. If one person is chosen to hold the offices of secretary and
treasurer, he shall be known as secretary-treasurer of the Company. All the
duties and obligations assigned to, and all the references made to, both the
secretary and the treasurer in these regulations shall apply to the
secretary-treasurer if one person be elected to both of these offices.
Section 2. ELECTION, TERMS OF OFFICE, AND QUALIFICATION. The
officers of the Company named in Section 1 of this Article III shall be elected
by and hold office during the pleasure of the board of directors. At any time
after one year following the reelection of a full slate of such officers, an
election of officers shall be held within thirty days after delivery to the
president, the vice-president, or the secretary of a written request for such
election by any director. The notice of the meeting held in response to such
request shall specify that an election of officers is one of the purposes
thereof. The qualifications of all officers shall be such as the board of
directors may see fit to impose.
Section 3. ADDITIONAL OFFICERS, AGENTS, ETC. In addition to the
officers mentioned in Section 1 of this Article III, the Company may have a
chairman of the board and such other officers, committees, agents, and factors
as the board of directors may deem necessary and may appoint, each of whom or
each member of which shall hold office for such period, have such authority, and
perform such duties as may be provided in this Code of Regulations, or as the
board of directors may from time to time determine. The board of directors may
delegate to any officer or committee the power to appoint any subordinate
officers, committees, agents or factors. In the absence of any officer of the
corporation, or for any other reason the board of directors may deem sufficient,
the board of directors may delegate, for the time being, the powers and duties,
or any of them, of such officer to any other officer, or to any director.
Section 4. REMOVAL. Any officer of the Company may be removed,
either with or without cause, at any time, by resolution adopted by the board of
directors at any meeting of the board, the notices (or waivers of notice) of
which shall have specified that such removal action was to be considered. Any
officer appointed not by the board of directors but by an officer or committee
to which the board shall have delegated the power of appointment may be removed,
whether with or without cause, by the committee or superior officer (including
successors) who made the appointment, or by any committee or officer upon whom
such power of removal may be conferred by the board of directors.
Section 5. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the board of directors, or to the president, or to the
secretary of the Company. Any such resignation shall take effect at the time
specified therein, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 6. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise, shall be filled in the
manner prescribed in this Code of Regulations for regular appointments or
elections to such office.
4
<PAGE>
ARTICLE IV
DUTIES OF THE OFFICERS
Section 1. THE PRESIDENT. The president shall have power and
authority to manage and have general supervision over the business of the
Company and over its several officers, subject, however, to the control of the
board of directors. The president, if present, shall preside at all meetings of
shareholders, shall see that all orders and resolutions of the board of
directors are carried into effect, and shall from time to time report to the
board of directors all matters within his knowledge which the interests of the
Company may require to be brought to the notice of the board. He may sign with
the secretary, the treasurer or any other proper officer of the Company
thereunto authorized by the board of directors, certificates for shares in the
Company. He may sign, execute and deliver in the name of the Company all deeds,
mortgages, bonds, contracts, or other instruments when specially authorized by
the board of directors; and he may cause the seal of the Company, if any, to be
affixed to any instrument requiring the same; and, in general, perform all
duties incident to his respective office and such other duties as from time to
time may be assigned to him by the board of directors.
Section 2. VICE-PRESIDENTS. The vice-presidents shall perform such
duties as are conferred upon them by this Code of Regulations or as may from
time to time be assigned to them by the board of directors or the president.
The authority of vice-presidents to sign in the name of the Company all
certificates for shares and authorized deeds, mortgages, bonds, contracts, notes
and other instruments, shall be coordinate with like authority of the president.
Section 3. THE TREASURER. If required by the board of directors,
the treasurer shall give bond for the faithful discharge of his duties in
such sum and with such sureties as the board of directors shall determine.
He shall:
Section 3.1 Have charge and custody of, and be responsible
for, all funds, securities, notes, contracts, deeds, documents, and
all other indicia of title in the Company and valuable effects of the
Company; receive and give receipts for monies due and payable to the
Company from any sources whatsoever; deposit all such monies in the
name of the Company in such banks, trust companies, or other
depositories as shall be selected by or pursuant to the directions of
the board of directors; cause such funds to be discharged by checks or
drafts on the authorized depositories of the Company, signed as the
board of directors may require; and monitor the accuracy of the
amounts of, and cause to be preserved proper vouchers for, all monies
to be disbursed;
Section 3.2 Have the right to require from time to time
reports or statements giving such information as he may desire with
respect to any and all financial transactions of the Company from the
officers or agents transacting the same;
Section 3.3 Keep or cause to be kept at the principal office
or such other office or offices of the Company as the board of
directors shall from time to time
5
<PAGE>
designate correct records of the business and transactions of the
Company and exhibit such records to any of the directors of the
Company upon application at such office;
Section 3.4 Have charge of the audit and statistical
departments of the Company;
Section 3.5 Render to the president or the board of directors
whenever they shall require him so to do an account of the financial
condition of the Company and of all his transactions as treasurer and
as soon as practicable after the close of each fiscal year, make and
submit to the board of directors a like report for such fiscal year;
and
Section 3.6 Exhibit at all reasonable times his cash, books
and other records to any of the directors of the Company upon
application.
Section 4. THE SECRETARY. The secretary shall:
Section 4.1 Keep the minutes of all meetings of the
shareholders and of the board of directors in one or more books
provided for that purpose;
Section 4.2 See that all notices are duly given in accordance
with the provisions of this Code of Regulations or as required by law;
Section 4.3 Be custodian of the corporate records and, if one
is provided, of the seal of the Company, and see that such seal is
affixed to all certificates for shares prior to the issue thereof and
to all other documents to which the seal is required to be affixed and
the execution of which on behalf of the Company under its seal is duly
authorized in accordance with the provisions of this code;
Section 4.4 Have charge, directly or through such transfer
agent or transfer agents and registrar or registrars as the board of
directors shall appoint, of the issue, transfer and registration of
certificates for shares in the Company and of the records thereof,
such records to be kept in such manner as to show at any time the
number of shares in the Company issued and outstanding, the manner in
which and time when such stock was paid for, the names and addresses
of the holders of record thereof, the number and classes of shares
held by each, and the time when each became such holder of record;
Section 4.5 Exhibit at all reasonable times to any directors,
upon application, the aforesaid records of the issue, transfer, and
registration of such certificates;
Section 4.6 Sign (or see that the treasurer or other proper
officer of the Company thereunto authorized by the board of directors
shall sign), with the president certificates for shares in the
Company;
6
<PAGE>
Section 4.7 See that the books, reports, statements,
certificates, and all other documents and records required by law are
properly kept and filed; and
Section 4.8 In general, perform all duties incident to the
office of secretary and such other duties as from time to time may be
assigned to him by the president or the board of directors.
In the event the board of directors shall elect an assistant
secretary, he shall perform such duties as are conferred upon him by the
officers of the Company, or the board of directors, and in the absence or the
inability of the secretary to act, shall perform all the duties of the secretary
and when so acting shall have all the powers of the secretary.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened or pending action, suit, or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he, his testator, or intestate is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, or as a member of any
committee or similar body against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding or the defense or
settlement thereof or any claim, issue, or matter therein, to the fullest extent
permitted by the laws of Ohio as they may exist from time to time. To assure
indemnification under this provision of all such persons who are or were
"fiduciaries" of an employee benefit plan governed by the Act of Congress
entitled "Employee Retirement Income Security Act of 1974," as amended from time
to time, this paragraph shall, for the purposes hereof, be interpreted as
follows: an "other enterprise" shall be deemed to include an employee benefit
plan; the Company shall be deemed to have requested a person to serve an
employee benefit plan where the performance by such person of his duties to the
Company also imposes duties on, or otherwise involves services by, such person
to the plan or participants or beneficiaries of the plan; excise taxes assessed
on a person with respect to an employee benefit plan pursuant to said Act of
Congress shall be deemed "fines;" and action taken or omitted by a person with
respect to an employee benefit plan in the performance of such person's duties
for a purpose reasonably believed by such person to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Company. The foregoing
provisions of this paragraph shall be deemed to be a contract between the
Company and each director and officer who serves in such capacity at any time
while this paragraph is in effect, and any repeal or modification thereof shall
not affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
7
<PAGE>
ARTICLE VI
SEAL
The board of directors may provide a corporate seal, which shall be in
the form of a circle and shall bear the full name of the Company, and the words
"Seal" and "Ohio."
ARTICLE VII
AMENDMENT OF REGULATIONS
This Code of Regulations may be amended or added to, or repealed and
superseded by a new Code of Regulations, at any annual or special meeting of
shareholders in the notice (or waivers of notice) of which the intention to
consider such amendment, addition, or repeal is stated, by the affirmative vote
of the holders of record of two-thirds of the shares entitled to vote thereon.
ARTICLE VIII
SHARES AND THEIR TRANSFER
Section 1. CERTIFICATE FOR SHARES. Every owner of one or more
shares in the Company shall be entitled to a certificate, which shall be in
such form as the board of directors shall prescribe, certifying the number
and class of paid-up shares in the Company owned by him. The certificates
for the respective classes of such shares shall be numbered in the order in
which they shall be issued and shall be signed in the name of the Company by
the president or any vice-president and by the secretary, or any other proper
officer of the Company thereunto authorized by the board of directors, or the
treasurer, and the seal of the Company, if any, may be affixed thereto. A
record shall be kept of the name of the person, firm, or corporation owning
the snares represented by each such certificate and the number of shares
represented thereby, the date thereof, and in case of cancellation, the date
of cancellation. Every certificate surrendered to the Company for exchange
or transfer shall be cancelled and no new certificate or certificates shall
be issued in exchange for any existing certificates until such existing
certificates shall have been so cancelled, except in cases provided for in
Section 2 of this Article.
Section 2. LOST, DESTROYED AND MUTILATED CERTIFICATES. If any
certificates for shares in this Company become worn, defaced, or mutilated but
are still substantially intact and recognizable, the directors, upon production
and surrender thereof, shall order the same cancelled and shall issue a new
certificate in lieu of same. The holder of any shares in the Company shall
immediately notify the Company if a certificate therefor shall be lost,
destroyed, or mutilated beyond recognition, and the board of directors may,
however, in its discretion, require the owner oz the certificate which has been
lost, destroyed, mutilated beyond recognition, or his legal representative, to
give the Company a bond in such sum and with such surety or sureties as it may
direct, not exceeding double the value of the stock, to indemnify the Company
against any claim that may be made against it on account of the alleged loss,
destruction, or mutilation of any such certificate. The board of directors may,
8
<PAGE>
however, in its discretion, refuse to issue any such new certificate except
pursuant to legal proceedings, under the laws of the State of Ohio in such case
made and provided.
Section 3. TRANSFERS OF SHARES. Transfers of shares in the Company
shall be made only on the books of the Company by the registered holder thereof,
his legal guardian, executor, or administrator, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the secretary of
the Company or with a transfer agent appointed by the board of directors, and on
surrender of the certificate or certificates for such shares. The person in
whose name shares stand on the books of the Company shall, to the full extent
permitted by law, be deemed the owner thereof for all purposes as regards the
Company.
Section 4. TIME. In counting days when computing time limits in
this Code of Regulations, each shareholder and the Company shall always start
the day immediately succeeding the day on which occurred the action from
which the time is to be computed. Any action otherwise meeting the
requirements of this Code of Regulations will be sufficient if completed
before midnight of the last day of the time period allowed.
Section 5. REGULATIONS. The board of directors may make such rules
and regulations as it may deem expedient, not inconsistent with this Code of
Regulations, concerning the issue, transfer, and registration of certificates
for shares in the Company. It may appoint one or more transfer agents or one or
more registrars or both, and may require all certificates for shares to bear the
signature of either or both.
ARTICLE IX
RESTRICTION OF DUTIES
Section 1. OPPORTUNITIES. No officer, director, or shareholder
shall, except as set forth in a contract in writing signed by him with the
Company, have any duty, either at law or in equity, to offer or communicate to
the Company any opportunity to engage in any business or other transaction,
venture, activity, association, or enterprise.
Section 2. COMPETITION. Except as set forth in a contract with the
Company, each officer, director, and shareholder shall have the right to compete
with the Company in any business activity, market, geographic area, or
otherwise.
ARTICLE X
MISCELLANEOUS
Section 1. SECTION AND OTHER HEADINGS. The section and other
headings contained in this Code of Regulations are for reference purposes only
and shall not be deemed to be a part of this Code of Regulations or to affect
the meaning or interpretation of this Code of Regulations.
Section 2. GENDER. When used in this Code of Regulations the gender
of each personal pronoun shall also be construed to mean and include each other
gender.
9
<PAGE>
WCI STEEL, INC.,
as Issuer,
and
FLEET NATIONAL BANK,
as Trustee
---------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of November 27, 1996
Supplementing Indenture Dated
as of December 14, 1993
---------------------
10-1/2% Senior Notes Due 2002
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of November 27, 1996 (the
"Supplemental Indenture"), by and between WCI STEEL, INC., an Ohio corporation,
as issuer (the "Company"), and FLEET NATIONAL BANK (formerly known as SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION), a national banking association, as
trustee (the "Trustee").
WHEREAS, the Company and Renco Steel, Inc. (which subsequently was
merged into the Company) have heretofore executed and delivered to the Trustee
an Indenture, dated as of December 14, 1993 (the "Indenture"), as amended,
providing for the creation and issuance by the Company of 10-1/2% Senior Notes
Due 2002 of the Company (as issued, authenticated and delivered under the
Indenture, and as amended or supplemented from time to time pursuant to the
terms of the Indenture, the "Notes");
WHEREAS, Section 9.02 of the Indenture provides that the Company and
the Trustee may amend or supplement the Indenture or the Notes with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, subject to certain exceptions specified in
Section 9.02 of the Indenture;
WHEREAS, the parties hereto are entering into this Supplemental
Indenture to, among other things, (i) eliminate and modify certain of the
definitions contained in and add a definition to Section 1.01 of the Indenture,
(ii) eliminate and modify certain restrictive covenants contained in Article
Four of the Indenture, (iii) eliminate certain of the requirements contained in
Sections 5.01 and 8.02 of the Indenture; and (iv) eliminate all references in
the Indenture to sections and definitions to be deleted in accordance with the
preceding clauses (i), (ii) and (iii) (collectively, the "Proposed Amendments");
WHEREAS, the Holders of at least a majority in aggregate principal
amount of the Notes have duly consented to the Proposed Amendments in the manner
provided in Section 9.02 of the Indenture; and
WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture a valid, binding and legal instrument enforceable in
accordance with its terms have been performed and fulfilled by the parties
hereto and the execution and delivery of this Supplemental Indenture have been
in all respects duly authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each party
hereto agrees, for the benefit of the other party and for the equal and ratable
benefit of the Holders of the Notes, as follows:
<PAGE>
-2-
SECTION 1. Definitions.
(a) For all purposes of this Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise requires, the terms
used herein shall have the respective meanings assigned to them in the
Indenture.
(b) The following definitions and any references thereto are hereby
deleted in their entireties from Section 1.01 of the Indenture and from the
other sections of the Indenture where such definitions are referenced:
(i) Acquired Indebtedness;
(ii) Affiliate Transaction;
(iii) Asset Acquisition;
(iv) Consolidated EBITDA;
(v) Consolidated Fixed Charge Coverage Ratio;
(vi) Consolidated Fixed Charges;
(vii) Consolidated Interest Expense;
(viii) Consolidated Net Income;
(ix) Consolidated Net Worth;
(x) Management Consultant Agreement;
(xi) Permitted Indebtedness;
(xii) Permitted Investment;
(xiii) Purchase Agreement; and
(xiv) Restricted Payment.
(c) The definition of "Affiliate" is hereby modified by deleting the
last sentence thereof.
(d) The definition of "Permitted Liens" is hereby replaced in its
entirety with the following:
"Permitted Liens" means (i) pledges or deposits by such person
under worker's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which
such person is a party, or deposits to secure public statutory obligations
of such person or deposits to secure surety or appeal bonds to which such
person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, (ii) Liens imposed by law, such as
landlords', carriers', warehousemen's and mechanics' Liens or bankers'
Liens incurred in the ordinary course of business for sums which are not
yet due or are being contested in good faith and for which adequate
provision has been made, (iii) Liens for taxes not yet subject to
penalties for non-payment or which are being
<PAGE>
-3-
contested in good faith and by appropriate proceedings, if adequate
reserve, as may be required by GAAP, shall have been made therefor, (iv)
Liens in favor of issuers of surety bonds or appeal bonds issued pursuant
to the request of and for the account of such person in the ordinary
course of its business, (v) Liens to support trade letters of credit
issued in the ordinary course of business, (vi) survey exceptions,
encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and
other similar purposes, or zoning or other restrictions on the use of real
property, (vii) Liens securing purchase money Indebtedness and any
Indebtedness incurred for Capitalized Lease Obligations and any pledge of
assets of a Subsidiary of the Company to any third party to secure
Indebtedness of the Company to such third party to the extent the proceeds
of such Indebtedness were used to finance an acquisition by such
Subsidiary; provided that the Fair Market Value of the asset at the time
of the incurrence of the Indebtedness subject to the Lien shall not exceed
the principal amount of the Indebtedness secured, (viii) Liens arising
from judgments, decrees or attachments in circumstances not constituting
an Event of Default, (ix) Liens on assets or property (including any real
property upon which such assets or property are or will be located)
securing Indebtedness incurred to purchase or construct such assets or
property and (x) Liens permitted by the Collateral Documents.
(e) Add, in proper alphabetical order, to Section 1.01 of the
Indenture, the following definition:
"VEBA Trust" means a Voluntary Employee Beneficiaries
Association trust fund established under that certain 501(c)(9) Trust
Agreement, dated October 1, 1988, between Warren Consolidated Industries,
Inc. and Bank One Trust Company, N.A. to hold WCI contributions to fund
postretirement health care and life insurance obligations for the benefit
of certain hourly employees of WCI.
SECTION 2. Elimination of Certain Provisions of Article IV of
the Indenture.
(a) Section 4.03 of the Indenture entitled "Limitation on Restricted
Payments" is hereby deleted in its entirety, together with any references
thereto in the Indenture.
<PAGE>
-4-
(b) Section 4.11 of the Indenture entitled "Limitation on
Transactions with Affiliates" is hereby deleted in its entirety, together with
any references thereto in the Indenture.
(c) Section 4.12 of the Indenture entitled "Limitation on Incurrence
of Additional Indebtedness" is hereby deleted in its entirety, together with any
references thereto in the Indenture.
(d) Section 4.13 of the Indenture entitled "Limitation on Dividends
and Other Payment Restrictions Affecting Subsidiaries" is hereby deleted in its
entirety, together with any references thereto in the Indenture.
(e) Section 4.17 of the Indenture entitled "Limitation on
Sale/leaseback Transactions" is hereby deleted in its entirety, together with
any references thereto in the Indenture.
(f) Section 4.18 of the Indenture entitled "Ownership of WCI Capital
Stock and Limitation on Preferred Stock of Subsidiaries" is hereby deleted in
its entirety, together with any references thereto in the Indenture.
SECTION 3. Modification of Certain Provisions of Article IV of
the Indenture.
(a) Section 4.14 of the Indenture entitled "Limitation on Liens" is
hereby replaced in its entirety with the following:
SECTION 4.14. Limitation on Liens.
WCI will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Liens
upon any item of Collateral other than the Liens created by the
Securities, this Indenture and the Collateral Documents and the Liens
expressly permitted by the applicable Collateral Document other than (i)
Liens existing on the Issue Date to the extent and in the manner such
Liens are in effect on the Issue Date, including, without limitation,
Liens securing Indebtedness under the WCI Revolving Credit Agreement as of
the Issue Date, (ii) Liens junior in priority to the Liens created in
favor of the Collateral Agent pursuant to the Collateral Documents,
including, without limitation, Liens securing the $300,000,000 aggregate
principal amount of Senior Secured Notes of WCI and Liens in favor of the
trustee of the VEBA Trust and (iii) Permitted Liens.
<PAGE>
-5-
(b) Section 4.19 of the Indenture entitled "Additional Guarantors"
is hereby replaced in its entirety with the following:
SECTION 4.19. Additional Guarantors.
WCI or any of its wholly-owned Subsidiaries may transfer, in one
transaction or a series of related transactions, any Collateral to any
wholly-owned Subsidiary of WCI, if such transferee wholly-owned Subsidiary
shall (i) execute and deliver to the Trustee a supplemental indenture in
form reasonably satisfactory to the Trustee pursuant to which such
wholly-owned Subsidiary shall unconditionally guarantee on a senior
secured basis (secured by the Collateral so transferred) all of WCI's
obligations under the Notes and the Indenture, (ii) take all necessary
action to cause the Lien on such Collateral in favor of the Trustee to
remain in full force and effect at all times, (iii) deliver to the Trustee
an opinion of counsel that such supplemental indenture and any other
documents required to comply with clause (ii) above have been duly
authorized, executed and delivered by such wholly-owned Subsidiary and the
supplemental indenture and each such other document constitutes a legal,
valid, binding and enforceable obligation of such wholly-owned Subsidiary
and (iv) take such further action and execute and deliver such other
documents specified in the Indenture or otherwise reasonably requested by
the Trustee to effectuate the foregoing.
SECTION 4. Amendment of Section 5.01 of the Indenture.
(a) Each of subsections (a)(2), a(3), a(4), a(6) and a(7) of Section
5.01 of the Indenture is hereby deleted in its entirety.
(b) Subsection (a)(5) of Section 5.01 of the Indenture shall hereby
be renumbered subsection (a)(2) of Section 5.01 of the Indenture.
SECTION 5. Amendment of Section 8.02 of the Indenture.
(a) Each of subsections (d)(iv), (d)(v) and (d)(vi) of Section 8.02
of the Indenture is hereby deleted in its entirety.
(b) Subsection (d)(vii) of Section 8.02 of the Indenture shall
hereby be renumbered subsection (d)(iv) of Section 8.02 of the Indenture.
<PAGE>
-6-
SECTION 6. Operation of Supplemental Indenture.
This Supplemental Indenture will become effective upon execution by
the parties hereto in accordance with the Statement (as defined) and the
Proposed Amendments will become operative upon the purchase by the Company, by
accepting for payment, all Notes that are validly tendered (and not validly
withdrawn) pursuant to and upon the terms and conditions set forth in the
Company's Offer to Purchase and Consent Solicitation Statement, dated October
23, 1996, as supplemented by the First Supplement to Offer to Purchase and
Consent Solicitation Statement, dated November 6, 1996, and by the Second
Supplement to Offer to Purchase and Consent Solicitation Statement, dated
November 8, 1996 (collectively, the "Statement"), and the related Consent and
Letter of Transmittal, dated October 23, 1996.
SECTION 7. Concerning the Trustee.
The Trustee accepts the trusts of the Indenture, as supplemented by
this Supplemental Indenture, and agrees to perform the same, but only upon the
terms and conditions set forth in the Indenture, as supplemented by this
Supplemental Indenture, to which the parties hereto and the Holders from time to
time of the Notes agree and, except as expressly set forth in the Indenture, as
supplemented by this Supplemental Indenture, shall incur no liability or
responsibility in respect thereof. Without limiting the generality of the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be taken as the statements of the
Company. The Trustee makes no representation and shall have no responsibility as
to the validity or sufficiency of this Supplemental Indenture.
SECTION 8. Miscellaneous.
(a) Except as hereby expressly amended, the Indenture is in all
respects ratified and confirmed and all the terms, provisions and conditions
thereof shall be and remain in full force and effect.
(b) All agreements of the Company in this Supplemental Indenture
shall bind the Company's successors. All agreements of the Trustee in this
Supplemental Indenture shall bind the Trustees' successors.
(c) THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND
<PAGE>
-7-
PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.
(d) If and to the extent that any provision of this Supplemental
Indenture limits, qualifies or conflicts with another provision that is required
to be included in this Supplemental Indenture or in the Indenture by the TIA,
the required provision shall control.
(e) The titles and headings of the sections of this Supplemental
Indenture have been inserted for convenience of reference only, and are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
(f) This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall represent one and the same agreement.
(g) In case any provision of this Supplemental Indenture shall be
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof or of the Indenture shall not
in any way be affected or impaired thereby.
<PAGE>
-8-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
WCI STEEL, INC.,
as Issuer
By: /s/ Bret W. Wise
----------------------------
Name: Bret W. Wise
Title: VP, Finance and Chief
Financial Officer
FLEET NATIONAL BANK,
as Trustee
By: /s/ Philip G. Kane, Jr.
----------------------------
Name: Philip G. Kane
Title: Vice President
<PAGE>
================================================================================
WCI STEEL, INC.,
as Issuer
and
FLEET NATIONAL BANK,
as Trustee
INDENTURE
Dated as of November 27, 1996
$300,000,000
10% Senior Secured Notes
due 2004, Series A
and
10% Senior Secured Notes
due 2004, Series B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1)............................................... 7.10
(a)(2).............................................. 7.10
(a)(3).............................................. N.A.
(a)(4).............................................. N.A.
(a)(5).............................................. 7.10
(b)................................................. 7.08; 7.10; 12.02
(c)................................................. N.A.
311(a).................................................. 7.11
(b)................................................. 7.11
(c)................................................. N.A.
312(a).................................................. 2.05
(b)................................................. 12.03
(c)................................................. 12.03
313(a).................................................. 7.06
(b)(1).............................................. N.A.
(b)(2).............................................. 7.06
(c)................................................. 7.06; 12.02
(d)................................................. 7.06
314(a).................................................. 4.07; 4.09; 12.02
(b)................................................. 10.02
(c)(1).............................................. 12.04
(c)(2).............................................. 12.04
(c)(3).............................................. N.A.
(d)................................................. 10.03
(e)................................................. 12.05
(f)................................................. N.A
315(a).................................................. 7.01(b)
(b)................................................. 7.05; 12.02
(c)................................................. 7.01(a)
(d)................................................. 7.01(c)
(e)................................................. 6.11
316(a)(last sentence)................................... 2.09
(a)(1)(A)........................................... 6.05
(a)(1)(B)........................................... 6.04
(a)(2).............................................. N.A.
(b)................................................. 6.07
317(a)(1)............................................... 6.08
(a)(2).............................................. 6.09
(b)................................................. 2.04
318(a).................................................. 12.01
(c)................................................. 12.01
- ----------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions........................................... 1
Section 1.02 Incorporation by Reference of TIA..................... 24
Section 1.03 Rules of Construction................................. 25
ARTICLE TWO
THE SECURITIES
Section 2.01 Form and Dating....................................... 26
Section 2.02 Execution and Authentication.......................... 29
Section 2.03 Registrar and Paying Agent............................ 30
Section 2.04 Paying Agent To Hold Assets in Trust.................. 31
Section 2.05 Securityholder Lists.................................. 31
Section 2.06 Transfer and Exchange................................. 31
Section 2.07 Replacement Securities................................ 39
Section 2.08 Outstanding Securities................................ 40
Section 2.09 Treasury Securities................................... 40
Section 2.10 Temporary Securities.................................. 40
Section 2.11 Cancellation.......................................... 41
Section 2.12 Defaulted Interest.................................... 41
Section 2.13 CUSIP Number.......................................... 41
Section 2.14 Designation........................................... 42
ARTICLE THREE
REDEMPTION
Section 3.01 Optional Redemption................................... 42
Section 3.02 Notices to Trustee.................................... 43
Section 3.03 Selection of Securities To Be Redeemed................ 43
Section 3.04 Notice of Redemption.................................. 43
Section 3.05 Effect of Notice of Redemption........................ 44
Section 3.06 Deposit of Redemption Price........................... 45
Section 3.07 Securities Redeemed in Part........................... 45
-ii-
<PAGE>
Page
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ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Securities................................. 45
Section 4.02 Maintenance of Office or Agency....................... 46
Section 4.03 Limitation on Restricted Payments..................... 46
Section 4.04 Corporate Existence................................... 49
Section 4.05 Payment of Taxes and Other Claims..................... 49
Section 4.06 Maintenance of Properties and Insurance............... 50
Section 4.07 Compliance Certificate; Notice of
Default............................................. 51
Section 4.08 Compliance with Laws.................................. 51
Section 4.09 SEC Reports and Other Information..................... 52
Section 4.10 Waiver of Stay, Extension or Usury
Laws................................................ 53
Section 4.11 Limitation on Transactions with
Affiliates.......................................... 53
Section 4.12 Limitation on Incurrence of Additional
Indebtedness........................................ 54
Section 4.13 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries................. 54
Section 4.14 Limitation on Liens................................... 55
Section 4.15 Change of Control..................................... 56
Section 4.16 Limitation on Asset Sales............................. 58
Section 4.17 Limitation on Sale/leaseback
Transactions........................................ 61
Section 4.18 Limitation on Preferred Stock of
Subsidiaries........................................ 62
Section 4.19 Future Guarantees..................................... 62
Section 4.20 Impairment of Security Interest....................... 62
Section 4.21 Amendment to Collateral Documents..................... 63
Section 4.22 Inspection and Confidentiality........................ 63
Section 4.23 Release of Released Real Property..................... 63
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 When Company May Merge, Etc........................... 64
Section 5.02 Successor Corporation Substituted..................... 66
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default..................................... 66
Section 6.02 Acceleration.......................................... 68
Section 6.03 Other Remedies........................................ 69
-iii-
<PAGE>
Page
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Section 6.04 Waiver of Past Defaults............................... 70
Section 6.05 Control by Majority................................... 70
Section 6.06 Limitation on Suits................................... 70
Section 6.07 Rights of Holders To Receive Payment.................. 71
Section 6.08 Collection Suit by Trustee............................ 71
Section 6.09 Trustee May File Proofs of Claim...................... 71
Section 6.10 Priorities............................................ 72
Section 6.11 Undertaking for Costs................................. 73
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee..................................... 73
Section 7.02 Rights of Trustee..................................... 74
Section 7.03 Individual Rights of Trustee.......................... 75
Section 7.04 Trustee's Disclaimer.................................. 76
Section 7.05 Notice of Default..................................... 76
Section 7.06 Reports by Trustee to Holders......................... 76
Section 7.07 Compensation and Indemnity............................ 77
Section 7.08 Replacement of Trustee................................ 78
Section 7.09 Successor Trustee by Merger, Etc...................... 79
Section 7.10 Eligibility; Disqualification......................... 79
Section 7.11 Preferential Collection of Claims
Against Company..................................... 79
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of Company's Obligations.................. 80
Section 8.02 Legal Defeasance and Covenant
Defeasance.......................................... 81
Section 8.03 Application of Trust Money............................ 85
Section 8.04 Repayment to Company.................................. 85
Section 8.05 Reinstatement......................................... 86
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders............................ 86
Section 9.02 With Consent of Holders............................... 87
Section 9.03 Compliance with TIA................................... 89
Section 9.04 Revocation and Effect of Consents..................... 89
Section 9.05 Notation on or Exchange of Securities................. 89
Section 9.06 Trustee To Sign Amendments, Etc....................... 90
-iv-
<PAGE>
Page
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ARTICLE TEN
COLLATERAL DOCUMENTS
Section 10.01 Collateral and Collateral Documents................... 90
Section 10.02 Recording; Priority; Opinions, Etc.................... 91
Section 10.03 Release of Collateral................................. 93
Section 10.04 Disposition of Collateral Without
Release............................................. 96
Section 10.05 Eminent Domain and Other Governmental
Takings............................................. 97
Section 10.06 Trust Indenture Act Requirements...................... 99
Section 10.07 Suits To Protect Collateral .......................... 99
Section 10.08 Purchaser Protected................................... 100
Section 10.09 Powers Exercisable by Receiver or
Trustee............................................. 100
Section 10.10 Determinations Relating to Collateral ................ 100
Section 10.11 Form and Sufficiency of Release....................... 101
Section 10.12 Possession and Use of Collateral...................... 101
Section 10.13 Disposition of Obligations Received................... 101
Section 10.14 Release upon Termination of the
Company's Obligations............................... 102
ARTICLE ELEVEN
APPLICATION OF TRUST MONEYS
Section 11.01 "Trust Moneys" Defined................................ 102
Section 11.02 Withdrawals of Insurance Proceeds
and Condemnation Awards............................. 103
Section 11.03 Withdrawal of Trust Moneys on Basis
of Retirement of Securities......................... 107
Section 11.04 Withdrawal of Trust Moneys for
Reinvestment........................................ 109
Section 11.05 Powers Exercisable Notwithstanding
Default or Event of Default......................... 111
Section 11.06 Powers Exercisable by Trustee
or Receiver......................................... 111
Section 11.07 Investment of Trust Moneys............................ 112
ARTICLE TWELVE
MISCELLANEOUS
Section 12.01 TIA Controls.......................................... 112
Section 12.02 Notices............................................... 112
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<PAGE>
Page
----
Section 12.03 Communications by Holders with
Other Holders....................................... 113
Section 12.04 Certificate and Opinion as to
Conditions Precedent................................ 113
Section 12.05 Statements Required in Certificate
or Opinion.......................................... 114
Section 12.06 Rules by Trustee, Paying Agent,
Registrar........................................... 114
Section 12.07 Legal Holidays........................................ 114
Section 12.08 Governing Law......................................... 114
Section 12.09 No Adverse Interpretation of Other
Agreements.......................................... 115
Section 12.10 No Recourse Against Others............................ 115
Section 12.11 Successors............................................ 115
Section 12.12 Duplicate Originals................................... 115
Section 12.13 Severability.......................................... 115
Signatures.............................................................. 117
Exhibit A - Form of Series A Note
Exhibit B - Form of Series B Note
Exhibit C - Form of Legend for Book-Entry Securities
Exhibit D - Form of Transferee Letter of Representation
Exhibit E - Form of certification to be given by the holders of
beneficial interest in a temporary Regulation S
global security to Euroclear or Cedel
Exhibit F - Form of certification to be given by Euroclear oper-
ator or Cedel Bank, Societe Anonyme
Exhibit G - Form of certification to be given by transferee of
beneficial interest in a temporary Regulation S
global security
Exhibit H - Form of certification for transfer or exchange of
restricted global security to temporary Regulation S global
security
Exhibit I - Form of certification for transfer or exchange of
restricted global security to permanent Regulation S global
security
Exhibit J - Form of certification for transfer or exchange of temporary
Regulation S global security or permanent Regulation S global
security to restricted global security
Exhibit K-1 - Form of certification for transfer or exchange of
non-global restricted security to restricted global security
Exhibit K-2 - Form of certification for transfer or exchange of
non-global restricted security to permanent Regulation S global
security or temporary Regulation S global security
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<PAGE>
Exhibit L-1 - Form of certification for transfer or exchange of
non-global permanent Regulation S security to restricted global
security
Exhibit L-2 - Form of certification for transfer or exchange of
non-global permanent Regulation S security to permanent
Regulation S global security
Note: This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
-vii-
<PAGE>
INDENTURE, dated as of November 27, 1996, by and between WCI STEEL,
INC., an Ohio corporation (the "Company"), as issuer, and FLEET NATIONAL BANK, a
national banking association, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's 10%
Senior Secured Notes due 2004, Series A, and 10% Senior Secured Notes due 2004,
Series B, without
distinction as to Series:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a person or any of its
Subsidiaries existing at the time such person becomes a Subsidiary of the
Company or assumed in connection with the acquisition of assets from such
person, including, without limitation, Indebtedness incurred by such person in
connection with, or in anticipation or contemplation of, such person becoming a
Subsidiary of the Company or such acquisition.
"Affiliate" of any specified person means any other person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative of the
foregoing. For purposes of Section 4.11, the term "Affiliate" shall include any
person who, as a result of any transaction described therein, would become an
Affiliate.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar or Paying Agent.
"Agent Member" means any member of, or participant in, the
Depository.
"Applicable Procedures" has the meaning provided in Section 2.06(g).
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"Appraiser" means a Person who in the course of its business
appraises property and who is a member in good standing of the American
Institute of Real Estate Appraisers, recognized and licensed to do business in
the jurisdiction where the applicable Real Property is located.
"Asset Acquisition" means (i) an Investment by the Company or any
Subsidiary of the Company in any other person pursuant to which such person
shall become a Subsidiary of the Company or any Subsidiary of the Company or
shall be merged with the Company or any Subsidiary of the Company or (ii) the
acquisition by the Company or any Subsidiary of the Company of the assets of any
person which constitute all or substantially all of the assets of such person or
any division or line of business of such person.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease, assignment or other transfer for value by the
Company or any of its Subsidiaries (including, without limitation, any
Sale/leaseback (other than a Sale/leaseback of an asset constituting
Collateral)) to any person, in one transaction or a series of related
transactions, of (i) any Capital Stock of any Subsidiary of the Company; (ii)
all or substantially all of the properties and assets of any division or line of
business of the Company or any Subsidiary of the Company; or (iii) any other
properties or assets of the Company or any Subsidiary of the Company other than
in the ordinary course of business. For the purposes of this definition, the
term "Asset Sale" shall not include any sale, issuance, conveyance, transfer,
lease or other disposition of properties or assets that is consummated in
accordance with the provisions of Article Five.
"Asset Sale Offer" has the meaning provided in Section 4.16.
"Asset Sale Offer Payment Date" means, with respect to any Available
Amount from an Asset Sale, the earlier of (x) the 180th day following receipt of
such Available Amount or (y) such earlier date on which an Asset Sale Offer
shall expire.
"Asset Sale Release Notice" has the meaning provided in Section
10.03.
"Available Amount" has the meaning provided in Section 4.16.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
<PAGE>
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"Board of Directors" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such person.
"Board Resolution" means with respect to any person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such person
to have been duly adopted by the Board of Directors of such person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Book-Entry Security" means a Security represented by a Global
Security and registered in the name of the nominee of the Depository.
"Business Day" means any day that is not a Legal Holiday.
"Capital Expenditures" shall mean payments for any assets, or
improvements, replacements, substitutions or additions thereto, that have a
useful life of more than one year and which, in accordance with GAAP
consistently applied, are required to be capitalized (as opposed to expensed in
the period in which the payment occurred).
"Capital Lease," as applied to any person, means any lease of (or
any agreement conveying the right to use) any property (whether real, personal
or mixed) by such person as lessee which, in conformity with GAAP, is required
to be accounted for as a capital lease on the balance sheet of such person.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated) of
such person's capital stock, whether outstanding at the Issue Date or issued
after the Issue Date, and any and all rights, warrants or options exchangeable
for or convertible into such capital stock (but excluding any debt security that
is exchangeable for or convertible into such capital stock).
"Capitalized Lease Obligation" means, as to any person, the
obligations of such person under a Capital Lease and, for purposes of this
Indenture, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United
<PAGE>
-4-
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within two years from the
date of acquisition thereof; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within two years from the
date of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
two years from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Corporation or at least
P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit or
bankers' acceptances maturing within two years from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $500,000,000; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above. Notwithstanding the foregoing,
for purposes of clause (i) of the definition of "Permitted Investment," 20% of
the Cash Equivalents may include securities having a rating of at least BBB by
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. and Baa by Moody's Investors Service, Inc.
"CEDEL" means Cedel Bank, Societe Anonyme (or any successor
securities clearing agency).
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company or Renco to any person or group of related persons for
purposes of Section 13(d) of the Exchange Act (a "Group") (other than a
Permitted Holder or a Group controlled by a Permitted Holder), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of this Indenture); (ii) the approval by the holders of Capital Stock of the
Company or Renco, as the case may be, of any plan or proposal for the
liquidation or dissolution of the Company or Renco, as the case may be (whether
or not otherwise in compliance with the provisions of this Indenture); (iii) the
acquisition in one or more transactions of "beneficial ownership"
<PAGE>
-5-
(within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) by any person, entity or Group
(other than a Permitted Holder or a Group controlled by any Permitted Holder) of
any Capital Stock of the Company or Renco such that, as a result of such
acquisition, such person, entity or Group either (A) beneficially owns (within
the meaning of Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, more than 50% of the Company's or Renco's then outstanding voting
securities entitled to vote on a regular basis in an election for a majority of
the Board of Directors of the Company or Renco or (B) otherwise has the ability
to elect, directly or indirectly, a majority of the members of the Company's or
Renco's Board of Directors; or (iv) the shareholders of Renco as of the Issue
Date and the Permitted Holders shall cease to own at least 50% of the equity of
Renco owned by such shareholders on the Issue Date.
"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Collateral" means, collectively, all of the property and assets
(including, without limitation, Trust Moneys) that are from time to time subject
to, or purported to be subject to, the Lien of this Indenture or the Collateral
Documents.
"Collateral Account" has the meaning provided in Section 11.01.
"Collateral Agent" shall mean Fleet National Bank, a national
banking association, in its capacity as collateral agent under the Collateral
Documents, and any successor thereto in such capacity.
"Collateral Documents" means, collectively, the Security Agreement,
the Mortgage, the Intercreditor Agreements and all other instruments or
documents entered into or delivered in connection with any of the foregoing, as
such agreements, instruments or documents may be amended, amended and restated,
supplemented or otherwise modified from time to time.
<PAGE>
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"Collateral Proceeds" has the meaning provided in Section 4.16.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Company Order" means a written order or request signed in the name
of the Company by its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Consolidated EBITDA" means, with respect to any person, for any
period, the sum (without duplication) of (i) Consolidated Net Income, (ii) to
the extent Consolidated Net Income has been reduced thereby, all income taxes of
such person and its Subsidiaries paid or accrued in accordance with GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
non-recurring gains or losses), Consolidated Interest Expense (net of any
interest income), amortization expense (including amortization of deferred
financing costs) and depreciation expense and (iii) other non-cash items other
than non-cash interest reducing Consolidated Net Income (including, without
limitation, any non-cash charges in respect of post-employment benefits for
health care, life insurance and long-term disability benefits required in
accordance with GAAP) less other non-cash items increasing Consolidated Net
Income, all as determined on a consolidated basis for such person and its
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to
any person, the ratio of Consolidated EBITDA of such person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such person for the Four Quarter Period. For purposes of this definition, if the
Transaction Date occurs prior to the date on which four full fiscal quarters
have elapsed subsequent to the Issue Date and financial statements with respect
thereto are available, "Consolidated EBITDA" and "Consolidated Fixed Charges"
shall be calculated, in the case of the Company, after giving effect on a pro
forma basis to the issuance of the Securities and the application of the net
proceeds therefrom as if the Securities were issued on the first day of the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma
<PAGE>
-7-
basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such person or any of its Subsidiaries giving rise to the need
to make such calculation and any incurrence of other Indebtedness at any time on
or after the first day of the Four Quarter Period and on or prior to the
Transaction Date (the "Reference Period"), as if such incurrence occurred on the
first day of the Reference Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such person or one of its Subsidiaries
(including any person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the Reference Period, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness or Acquired Indebtedness) occurred on the first day of the
Reference Period. If such person or any of its Subsidiaries directly or
indirectly guarantees Indebtedness of a third person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
person or any Subsidiary of such person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Obligations, shall be
deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements. In calculating the Consolidated Fixed Charge
Coverage Ratio, and giving pro forma effect to any incurrence of Indebtedness
during the Reference Period, pro forma effect shall be given to the use of the
proceeds thereof to permanently repay or retire Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for
any period, the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of (i) Consolidated Interest Expense (net of any
interest income) less
<PAGE>
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non-cash amortization of deferred financing costs and (ii) the product of (x)
the amount of all dividends declared, paid or accrued on Preferred Stock of such
person during such period times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective
consolidated Federal, state, local and foreign tax rate (expressed as a decimal
number between 1 and 0) of such person during such period (as reflected in the
audited consolidated financial statements of such person for the most recently
completed fiscal year).
"Consolidated Interest Expense" means, with respect to any person
for any period, without duplication, the sum of (i) the interest expense of such
person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP consistently applied, including, without
limitation, (a) any amortization of debt discount, (b) the net cost under
Interest Rate Protection Obligations (including any amortization of discounts),
(c) the interest portion of any deferred payment obligation and (d) all accrued
interest, and (ii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any person for any
period, the net income (or loss) of such person and its Subsidiaries, on a
consolidated basis for such period determined in accordance with GAAP; provided
that (i) the net income of any person in which such person or any Subsidiary of
such person has an ownership interest with a third party shall be included only
to the extent of the amount that has actually been received by such person or
its wholly-owned Subsidiaries in the form of dividends or other distributions
during such period (subject to, in the case of any dividend or distribution
received by a wholly-owned Subsidiary of such person, the restrictions set forth
in clause (ii) below) and (ii) the net income of any Subsidiary of such person
that is subject to any restriction or limitation on the payment of dividends or
the making of other distributions shall be excluded to the extent of such
restriction or limitation; provided, further, that there shall be excluded (a)
the net income (or loss) of any person (acquired in a pooling of interests
transaction) accrued prior to the date it becomes a Subsidiary of such person or
is merged into or consolidated with such person or any Subsidiary of such
person, (b) any net gain (or loss) resulting from an Asset Sale by such person
or any of its Subsidiaries, (c) any extraordinary, unusual or nonrecurring gains
or losses (and related tax effects) in accordance with GAAP and (d)
<PAGE>
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any compensation-related expenses arising as a result of the Transactions.
"Consolidated Net Worth" means, with respect to any person at any
date, the sum of (i) the consolidated stockholders' equity of such person less
the amount of such stockholders' equity attributable to Disqualified Capital
Stock of such person and its Subsidiaries, as determined on a consolidated basis
in accordance with GAAP consistently applied, and (ii) the amount of any
Preferred Stock of such person not included in the stockholders' equity of such
person in accordance with GAAP, which Preferred Stock does not constitute
Disqualified Capital Stock.
"covenant defeasance" has the meaning provided in Section 8.01.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event or condition the occurrence of which is,
or would with the passage of time or the giving of notice or both become, an
Event of Default.
"Depository" means, with respect to the Securities issued in the
form of one or more Book-Entry Securities, The Depository Trust Company or
another person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
"Depository Securities Certification" has the meaning provided in
Section 2.01.
"Destruction" shall have the meaning assigned to such term in the
Mortgage.
"Disqualified Capital Stock" means any class of Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date.
"Dividend" has the meaning provided in clause (6) of the second
paragraph of Section 4.03.
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"Environmental Law" has the meaning assigned to such term in the
Mortgage.
"Equity Offering" means an offering of Qualified Capital Stock of
the Company (other than to any Subsidiary of the Company).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Offer" means the registration by the Company under the
Securities Act of all the Series B Notes pursuant to a registration statement
under which the Company offers each Holder of Series A Notes the opportunity to
exchange all Series A Notes held by such Holder for Series B Notes in an
aggregate principal amount equal to the aggregate principal amount of Series A
Notes held by such Holder, all in accordance with the terms and conditions of
the Registration Rights Agreement.
"Excluded Asset" means any structure, equipment, facility,
improvement, apparatus or other property acquired or constructed by the Company
after the Issue Date which is (i) located at the Mortgaged Property, (ii) not
necessary for the proper and efficient operation of the Mortgaged Property or
for the compliance by the Mortgaged Property with any applicable law, code or
ordinance, including, without limitation, any Environmental Law and (iii) not an
integral part (or the replacement of an integral part) of the Company's
operations as conducted at the Mortgaged Property as of the Issue Date.
"Existing Indenture" means the Indenture, dated as of December 14,
1993, by and among Renco Steel, Inc. (which was subsequently merged into the
Company), the Company and Shawmut Bank Connecticut, National Association (now
known as Fleet National Bank), pursuant to which the Existing Securities were
issued.
"Existing Securities" means the Company's 10-1/2% Senior Notes Due
March 1, 2002 issued, authenticated and delivered under
<PAGE>
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the Existing Indenture, as amended or supplemented from time to time pursuant to
the terms thereof.
"Fair Market Value" or "fair value" means, with respect to any
asset, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value of any asset of the Company and its Subsidiaries shall be
determined by the Board of Directors of the Company acting in good faith and
shall be evidenced by a Board Resolution thereof delivered to the Trustee;
provided, however, that with respect to any Asset Sale which involves property
or assets which could reasonably be expected to have a value in excess of
$5,000,000, the Fair Market Value or fair value of any such asset or assets (i)
shall be determined by an Independent Financial Advisor and (ii) any
determination of Fair Market Value or fair value with respect to any parcel of
Real Property constituting a part of, or proposed to be made a part of, the
Collateral shall be made by an Appraiser.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"Global Security" means a Security evidencing all or a part of the
Securities to be issued as Book-Entry Securities, issued to the Depository in
accordance with Section 2.02 and bearing the legend or legends prescribed in
Exhibit C to this Indenture.
"Holder" or "Securityholder" means the person in whose name a
Security is registered on the Registrar's books.
"Holdings" means WCI Steel Holdings, Inc., a Delaware corporation.
"Indebtedness" means with respect to any person, without
duplication, (i) all obligations of such person for borrowed money, (ii) all
obligations of such person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such person,
(iv) all obligations of such person issued or assumed as the deferred purchase
price of property or services, all conditional sale obligations and all
obligations
<PAGE>
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under any title retention agreement (but excluding trade accounts payable,
accrued expenses and deferred taxes arising in the ordinary course of business),
(v) all obligations of such person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction entered into
in the ordinary course of business, (vi) all obligations of any other person of
the type referred to in clauses (i) through (v) which are secured by any Lien on
any property or asset of such first person and the amount of such obligation
shall be the lesser of the value of such property or asset or the amount of the
obligation so secured, (vii) all guarantees of Indebtedness by such person,
(viii) Disqualified Capital Stock valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued and unpaid dividends,
(ix) all obligations under Interest Rate Protection Obligations of such person
and (x) any amendment, supplement, modification, deferral, renewal, extension or
refunding of any liability of the types referred to in clauses (i) through (ix)
above. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value to be determined in good faith by the
Board of Directors of the person issuing such Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable and good faith judgment of the Board of Directors of the Company,
qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Intercreditor Agreement" means the Intercreditor Agreement, dated
as of November 27, 1996, by and between the Collateral Agent and Congress
Financial Corporation, as agent under the WCI Revolving Credit Facility, as
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof or any replacement thereof.
<PAGE>
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"Intercreditor Agreements" means, collectively, the Intercreditor
Agreement and the VEBA Intercreditor Agreement.
"Interest Payment Date" means the stated maturity of an installment
of interest on the Securities.
"Interest Rate Protection Obligations" means the obligations of any
person, pursuant to any arrangement with any other person, whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any person, any direct or
indirect advance, loan, guarantee or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others or
otherwise), or any purchase or acquisition by such person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other person. Investments shall exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices. For the
purposes of Section 4.03, the amount of any Investment shall be the original
cost of such Investment plus the cost of all additional Investments by the
Company or any of its Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment.
"Issue Date" means the date of first issuance of the Securities
under this Indenture.
"legal defeasance" has the meaning provided in Section 8.02.
"Legal Holiday" has the meaning provided in Section 12.07.
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"Lien" means (x) any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute and (y) any agreement to enter into any of the foregoing.
"Management Consultant Agreement" means the management agreement
effective October 1, 1992 between Renco and the Company.
"Maturity Date" means December 1, 2004.
"Merger" means the merger of Holdings with and into the Company on,
or as soon as reasonably practicable after, the Issue Date (provided that
Holdings has no Indebtedness outstanding other than Indebtedness owing to the
Company not to exceed $60 million).
"Mortgage" means the mortgage dated as of the date hereof between
the Company and the Collateral Agent, as the same may be amended, amended and
restated, supplemented or otherwise modified from time to time.
"Mortgaged Property" has the meaning assigned to such term in the
Mortgage.
"Net Award" shall have the meaning assigned to such term in the
Mortgage and shall include any amounts received in respect of personal property
pursuant to the Security Agreement or otherwise.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) net of (i)
brokerage commissions and other reasonable fees and expenses (including fees and
expenses of legal counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes payable as a direct result of such Asset Sale and
(iii) appropriate amounts to be provided by the Company or any Subsidiary of the
Company, as the case may be, as a reserve required in accordance with GAAP
consistently applied against any liabilities associated with such Asset Sale and
retained by the Company or any Subsidiary of the Company, as the case may be,
after such Asset Sale, including, without limitation, pension and other
postemployment benefit
<PAGE>
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liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate delivered to the Trustee.
"Net Proceeds" shall have the meaning assigned to such term in the
Mortgage and shall include any amounts received in respect of personal property
pursuant to the Security Agreement or otherwise.
"Non-Collateral Proceeds" has the meaning provided in Section 4.16.
"Obligations" means any principal, interest, penalties, fees and
other liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Controller, the Treasurer, or the Secretary of such
person.
"Officers' Certificate" means, with respect to any person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such person and otherwise complying with
the requirements of Sections 12.04 and 12.05.
"Operating Lease" means, as applied to any person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that person is the lessor.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee complying with the requirements of Sections 12.04
and 12.05. Unless otherwise required by the TIA, the legal counsel may be an
employee of or counsel to the Company.
"Owner Securities Certification" has the meaning provided in Section
2.01.
"Paying Agent" has the meaning provided in Section 2.03.
"Permanent Regulation S Global Security" has the meaning
provided in Section 2.01.
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"Permitted Holders" means Ira Leon Rennert and his Affiliates,
estate, heirs and legatees, and the legal representatives of any of the
foregoing, including, without limitation, the trustee of any trust of which one
or more of the foregoing are the sole beneficiaries.
"Permitted Indebtedness" means (i) any Indebtedness of the Company
and its Subsidiaries under the WCI Revolving Credit Facility in an aggregate
amount not to exceed $100 million in aggregate principal amount at any time
outstanding plus any interest, fees and expenses from time to time owed
thereunder less the amount of any Indebtedness under the WCI Revolving Credit
Facility required to be repaid and repaid with the net cash proceeds of an asset
sale pursuant to the terms of the WCI Revolving Credit Facility and such
repayment effects a permanent reduction in the commitment thereunder; provided
that at no time shall the sum of the aggregate principal amount outstanding
under the WCI Revolving Credit Facility pursuant to this clause (i) and the
amount outstanding under clause (iii) below exceed $100 million in the
aggregate, (ii) the Securities and any Existing Securities outstanding on the
Issue Date, (iii) all obligations of the Company and its Subsidiaries for the
reimbursement of any obligor on any letter of credit not to exceed $20 million
at any time outstanding; provided that at no time shall the sum of the amount
outstanding under this clause (iii) and the aggregate principal amount
outstanding under the WCI Revolving Credit Facility pursuant to clause (i) above
exceed $100 million in the aggregate, (iv) the subordinated note of the Company
payable to LTV Steel Company, Inc. in the principal amount of approximately $1.9
million less any principal payments thereof, (v) Indebtedness of the Youngstown
Sinter Company represented by the State Economic Development Revenue Bonds (Ohio
Enterprise Bond Fund), Series 1990-2 (Youngstown Sinter Company Project) as in
effect on the Issue Date in the principal amount of approximately $1.9 million
less any principal payments thereof, (vi) Indebtedness of the Youngstown Sinter
Company represented by the Urban Development Action Grant as in effect on the
Issue Date in the principal amount of approximately $1.6 million less any
principal payments thereof, (vii) purchase money Indebtedness and any
Indebtedness incurred for Capitalized Lease Obligations not to exceed $10
million in the aggregate at any time outstanding, (viii) Interest Rate
Protection Obligations to the extent the notional principal amount of such
Interest Rate Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate, (ix)
additional Indebtedness not to exceed $20 million in the aggregate at any time
outstanding, (x) Indebtedness owed by the Company or any of its wholly-owned
Subsidiaries to any wholly-owned Subsidiary of the Company or any Indebtedness
owed to
<PAGE>
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the Company by a wholly-owned Subsidiary of the Company; provided that in the
case of Indebtedness owed by the Company to any wholly-owned Subsidiary of the
Company, such Indebtedness is subordinated to the Securities, (xi) any renewals,
extensions, substitutions, refundings, refinancings or replacements of any
Indebtedness described in the preceding clauses (i) and (ii) above and this
clause (xi), so long as such renewal, extension, substitution, refunding,
refinancing or replacement does not result in an increase in the aggregate
principal amount of the outstanding Indebtedness represented thereby (except if
such Indebtedness refinances Indebtedness under the WCI Revolving Credit
Facility or any other agreement providing for subsequent borrowings, does not
result in an increase in the maximum commitment under the WCI Revolving Credit
Facility or such other agreement), (xii) any guarantees of the foregoing and
(xiii) trade accounts payable to the extent they constitute Indebtedness.
"Permitted Investment" means (i) cash and Cash Equivalents, (ii) any
Investment by the Company or any of its Subsidiaries in the Company or any
wholly-owned Subsidiary of the Company, (iii) any Related Business Investment in
assets other than the type described in clause (iv) below, (iv) Related Business
Investments by the Company or any of its Subsidiaries in joint ventures,
partnerships or persons that are not wholly-owned Subsidiaries in an amount not
to exceed $25 million in the aggregate; provided that in no event shall such
Related Business Investments pursuant to this clause (iv) exceed $5 million in
any one fiscal year, (v) Investments by the Company or any Subsidiary of the
Company in another person, if as a result of such Investment (a) such other
person becomes a wholly-owned Subsidiary of the Company or (b) such other person
is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a wholly-owned Subsidiary of
the Company, (vi) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers, in each case
arising in the ordinary course of business, (vii) the non-cash proceeds of any
Asset Sale and (viii) loans and advances to employees of the Company and its
Subsidiaries made in the ordinary course of business.
"Permitted Liens" means (i) pledges or deposits by such person under
worker's compensation laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such person is a party, or
deposits to secure public statutory obligations of such person or deposits to
secure surety or appeal bonds to which such person is
<PAGE>
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a party, or deposits as security for contested taxes or import duties or for the
payment of rent, (ii) Liens imposed by law, such as landlords', carriers',
warehousemen's and mechanics' Liens or bankers' Liens incurred in the ordinary
course of business for sums which are not yet due or are being contested in good
faith and for which adequate provision has been made, (iii) Liens for taxes not
yet subject to penalties for non-payment or which are being contested in good
faith and by appropriate proceedings, if adequate reserve, as may be required by
GAAP, shall have been made therefor, (iv) Liens in favor of issuers of surety
bonds or appeal bonds issued pursuant to the request of and for the account of
such person in the ordinary course of its business, (v) Liens to support trade
letters of credit issued in the ordinary course of business, (vi) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions on the use of real property,
(vii) Liens securing Indebtedness permitted under clause (vii) of the definition
of Permitted Indebtedness; provided that the Fair Market Value of the asset at
the time of the incurrence of the Indebtedness subject to the Lien shall not
exceed the principal amount of the Indebtedness secured, (viii) Liens with
respect to Acquired Indebtedness permitted to be incurred in accordance with
Section 4.12; provided that such Liens secured such Acquired Indebtedness at the
time of the incurrence of such Acquired Indebtedness by the Company and were not
incurred in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company; provided, further, that such Liens do not
extend to or cover any property or assets of the Company other than the property
or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company and are no more
favorable to the lienholders than those securing the Acquired Indebtedness prior
to the incurrence of such Acquired Indebtedness by the Company, (ix) Liens
arising from judgments, decrees or attachments in circumstances not constituting
an Event of Default, (x) Liens in favor of the trustee of the VEBA Trust
existing on the Issue Date or thereafter arising pursuant to agreements in
effect on the Issue Date, (xi) Liens on assets or property (including any real
property upon which such assets or property are or will be located) securing
Indebtedness incurred to purchase or construct such assets or property, which
Indebtedness is permitted to be incurred under Section 4.12 and (xii) Liens
permitted by the Collateral Documents.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
<PAGE>
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"Plan of Liquidation" means, with respect to any person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such person to holders of
Capital Stock of such person.
"Preferred Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated) of
such person's preferred or preference stock, whether outstanding on the date
hereof or issued after the date of this Indenture, and including, without
limitation, all classes and series of preferred or preference stock of such
person.
"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus the premium, if any, on such Indebtedness.
"Prior Liens" has the meaning assigned to such term in the Mortgage.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act.
"Qualified Capital Stock" means, with respect to any person, any
Capital Stock of such person that is not Disqualified Capital Stock or
convertible into or exchangeable or exercisable for Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Real Property" means any interest in any real property or any
portion thereof whether owned in fee or leased or otherwise owned.
"Real Property Release Notice" has the meaning provided in Section
10.03.
"Real Property Valuation Date" has the meaning provided in Section
10.03.
<PAGE>
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"Record Date" means the Record Dates specified in the Securities;
provided that if any such date is a Legal Holiday, the Record Date shall be the
first day immediately preceding such specified day that is not a Legal Holiday.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Securities.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement by and between the Company and the Initial Purchaser, dated as of
November 27, 1996, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Related Business Investment" means any Investment, Capital
Expenditure or other expenditure by the Company or any Subsidiary of the Company
which is related to the business of the Company and its Subsidiaries as it is
conducted on the Issue Date.
"Released Assets" has the meaning provided in Section 10.03.
"Released Real Property" means any portion of the Real Property
which constitutes Mortgaged Property upon which an Excluded Asset is or is
intended to be situated so long as (i) such Released Real Property is not (x)
necessary for the proper and efficient operation of the Mortgaged Property or
for the compliance by the Mortgaged Property with any applicable law, code or
ordinance, including, without limitation, any Environmental Law, or (y) an
integral part of the Company's operations as conducted at the Mortgaged Property
on the Issue Date and (ii) the release of such Released Real Property will not
interfere with or impair the Trustee's ability to realize the value of the
remaining Collateral.
"Released Trust Moneys" has the meaning provided in Section 11.04.
<PAGE>
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"Renco" means The Renco Group, Inc., a New York corporation, which
is the ultimate parent of the Company, or any successor thereto.
"Restricted Global Security" has the meaning provided in Section
2.01.
"Restricted Payment" has the meaning provided in Section 4.03.
"Restricted Period" has the meaning provided in Section 2.01.
"Restricted Security" has the meaning provided in Rule
144(a)(3) under the Securities Act.
"Sale/leaseback" means any lease, whether an Operating Lease or a
Capital Lease, whereby the Company or any of its Subsidiaries, directly or
indirectly, becomes or remains liable as lessee or as guarantor or other surety,
of any property (whether real or personal or mixed) whether now owned or
hereafter acquired, (i) that the Company or its Subsidiaries, as the case may
be, has sold or transferred or is to sell or transfer to any other person (other
than the Company), or (ii) that the Company or its Subsidiaries, as the case may
be, intends to use for substantially the same purpose as any other property that
has been or is to be sold or transferred by the Company or any such Subsidiary
to any person (other than the Company) in connection with such lease.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Notes and the Series B Notes.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Security Agreement" means the Security Agreement dated as of the
date hereof between the Company and the Collateral Agent, as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with its terms.
"Series A Notes" means the Company's 10% Senior Secured Notes due
2004, Series A, as amended or supplemented from time to time in accordance with
the terms hereof, that are issued pursuant to this Indenture.
<PAGE>
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"Series B Notes" means the Company's 10% Senior Secured Notes due
2004, Series B, as amended or supplemented from time to time in accordance with
the terms hereof, that are issued pursuant to this Indenture.
"Significant Subsidiary" means any Subsidiary of the Company that
satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(v)
of Regulation S-X under the Securities Act.
"Subsidiary" of any person means (i) any corporation of which the
outstanding capital stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such person or (ii) any other person of
which at least a majority of the voting interest under ordinary circumstances is
at the time owned, directly or indirectly, by such person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 2.07 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Survey" means a survey of any parcel of real property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state where such property is located, (ii) dated (or
redated) not earlier than six months prior to the date of delivery thereof
(unless there shall have occurred within six months prior to such date of
delivery any exterior construction on the site of such property, in which event
such survey shall be dated (or redated) after the completion of such
construction or if such construction shall not have been completed as of such
date of delivery, not earlier than 20 days prior to such date of delivery),
(iii) certified by the surveyor (in a manner reasonably acceptable to the title
company providing title insurance) and (iv) complying in all respects with the
minimum detail requirements of the American Land Title Association, or local
equivalent, as such requirements are in effect on the date of preparation of
such survey, or that is otherwise reasonably
<PAGE>
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acceptable to the Trustee (giving consideration to the applicable transaction).
"Taking" shall have the meaning assigned to such term in the
Mortgage.
"Temporary Regulation S Global Security" has the meaning provided in
Section 2.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA.
"Transactions" means (i) the offering by the Company of the
Securities issued hereunder, (ii) the tender offer by the Company commenced on
October 23, 1996 to purchase for cash up to all of the $206.4 million aggregate
principal amount outstanding of the Existing Securities and a related consent
solicitation for amendment of the Existing Indenture, (iii) the tender offer by
Holdings commenced on October 28, 1996 to purchase for cash all of the
outstanding shares of common stock, no par value, $.01 stated value, of the
Company, (iv) the Merger and (v) the Dividend.
"Transferee Certificate" means the Transferee Letter of
Representation attached as Exhibit D to this Indenture.
"Transferee Securities Certification" has the meaning provided in
Section 2.06(g).
"Trust Moneys" has the meaning provided in Section 11.01.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"U.S. Government Obligations" has the meaning provided in Section
8.01.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
<PAGE>
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"Valuation Date" has the meaning provided in Section 10.03.
"VEBA Intercreditor Agreement" means the VEBA Intercreditor
Agreement, dated as of November 27, 1996, by and between the Collateral Agent
and Bank One Trust Company, N.A., as trustee for the VEBA Trust (the "VEBA
Trustee"), as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof or any replacement thereof.
"VEBA Mortgage" means the mortgage dated as of the date hereof
between the Company and the VEBA Trustee, as the same may be amended, amended
and restated, supplemented or otherwise modified from time to time.
"VEBA Security Agreement" means the security agreement dated as of
the date hereof between the Company and the VEBA Trustee, as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time.
"VEBA Trust" means a Voluntary Employee Beneficiaries Association
trust fund established under that certain 501(c)(9) Trust Agreement, dated
October 1, 1988, between Warren Consolidated Industries, Inc. and Bank One Trust
Company, N.A. to hold Company contributions to fund postretirement health care
and life insurance obligations for the benefit of certain hourly employees of
the Company.
"WCI Revolving Credit Facility" means the Amended and Restated Loan
and Security Agreement dated as of December 29, 1992, as amended, among the
Company, the lending institutions named therein and Congress Financial
Corporation, as agent, as the same may be amended, restated, supplemented or
otherwise modified from time to time, and includes any agreement renewing,
refinancing or replacing all or any portion of the Indebtedness under such
agreement.
"wholly-owned Subsidiary" means, with respect to any person, any
Subsidiary of such person all of the shares of Capital Stock (other than
directors' qualifying shares) of which are owned directly by such person or
another wholly-owned Subsidiary of such person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of,
<PAGE>
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this Indenture. The following TIA terms used in this Indenture
have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
<PAGE>
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication with
respect thereto shall be substantially in the form of Exhibit A or Exhibit B
hereto, as the case may be. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company and the
Trustee shall approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of its
authentication, shall bear interest from the applicable date and shall be
payable on the Interest Payment Dates and the Maturity Date.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Securities offered and sold in their initial distribution in
reliance on Regulation S may be initially issued in the form of temporary Global
Securities in fully registered form without interest coupons, substantially in
the form of Exhibit A, with such applicable legends as are provided for in
Exhibit A or Exhibit C. Such temporary Global Securities may be registered in
the name of the Depository or its nominee and deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided, for credit by the Depository to the
respective accounts of the beneficial owners of the Securities represented
thereby (or such other accounts as they may direct), provided that upon such
deposit all such Securities shall be credited to or through accounts maintained
at the Depository by or on behalf of Euroclear or CEDEL. Until such time as the
Restricted Period (as defined below) shall have expired, such temporary Global
Securities, together with their Successor Securities which are Global Securities
other than the Restricted Global Security, shall be referred to herein as a
"Temporary Regulation S Global Security." After such time as the Restricted
Period shall have expired and the certifications referred to below in the next
succeeding paragraph shall have been provided, interests in such Temporary
Regulation S Global Securities shall be exchanged for interests in like Global
<PAGE>
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Securities, referred to herein collectively as the "Permanent Regulation S
Global Security," substantially in the form of Security set forth in Exhibit A,
with such applicable legends as are provided for in Exhibit A or Exhibit C. Such
Permanent Regulation S Global Securities shall be registered in the name of the
Depository or its nominee and deposited with the Trustee, as custodian for the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided, for credit to the respective accounts of the beneficial
owners of the Securities represented thereby (or such other accounts as they may
direct). The aggregate principal amount of the Temporary Regulation S Global
Security or the Permanent Regulation S Global Security may be increased or
decreased from time to time by adjustments made on the records of the Trustee,
as custodian for the Depository, as hereinafter provided. As used herein, the
term "Restricted Period" means the period of 40 days commencing on the day after
the latest of (a) the day on which the Securities are first offered to persons
other than distributors (as defined in Regulation S) in reliance on Regulation S
and (b) the date of this Indenture.
Interests in a Temporary Regulation S Global Security may be
exchanged for interests in a Permanent Regulation S Global Security only after
(a) the expiration of the Restricted Period, (b) delivery by a beneficial owner
of an interest therein to Euroclear or CEDEL of a written certification (an
"Owner Securities Certification") substantially in the form of Annex E hereto,
and (c) upon delivery by Euroclear or CEDEL to the Trustee of a written
certification (a "Depository Securities Certification") substantially in the
form attached hereto as Annex F. Upon satisfaction of such conditions, the
Trustee will exchange the portion of the Temporary Regulation S Global Security
covered by such certification for interests in a Permanent Regulation S Global
Security. The delivery by such Holder of a beneficial interest in such Temporary
Regulation S Global Security of such certification shall constitute an
irrevocable instruction by such holder to Euroclear or CEDEL, as the case may
be, to exchange such Holder's beneficial interest in the Temporary Regulation S
Global Security for a beneficial interest in the Permanent Regulation S Global
Security upon the expiration of the Restricted Period in accordance with the
next succeeding paragraph.
Upon:
(i) the expiration of the Restricted Period;
(ii) receipt by Euroclear or CEDEL, as the case may be, of Owner
Securities Certifications described in the preceding paragraph;
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(iii) receipt by the Depository of:
(1) written instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Depository to credit or cause to
be credited to a specified Agent Member's account a beneficial interest in a
Permanent Regulation S Global Security in a principal amount equal to that of
the beneficial interest in a corresponding Temporary Regulation S Global
Security for which the necessary certifications have been delivered; and
(2) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Agent Member, and
the Euroclear or CEDEL account for which such Agent Member's account is held, to
be credited with, and the account of the Agent Member to be debited for, such
beneficial interest; and
(iv) receipt by the Trustee of notification from the Depository of
the transactions described in (iii) above and from Euroclear or CEDEL, as
the case may be, of Depository Securities Certifications,
the Trustee, as Registrar, shall instruct the Depository to reduce the principal
amount of such Temporary Regulation S Global Security and to increase the
principal amount of such Permanent Regulation S Global Security, by the
principal amount of the beneficial interest in such Temporary Regulation S
Global Security to be so transferred, and to credit or cause to be credited to
the account of the person specified in such instructions a beneficial interest
in such Permanent Regulation S Global Security having a principal amount equal
to the amount by which the principal amount of such Temporary Regulation S
Global Security was reduced upon such transfer.
Securities offered and sold in their initial distribution in
reliance on Rule 144A under the Security Act and other than in reliance on Rule
144A under the Securities Act or Regulation S shall be issued in the form of one
or more Global Securities (collectively, and, together with their Successor
Securities, the "Restricted Global Security") in fully registered form without
interest coupons, substantially in the form of Security set forth in Exhibit A,
with such applicable legends as are provided for in Exhibit A or Exhibit C,
except as otherwise permitted herein. Such Restricted Global Security shall be
registered in the name of the Depository or its nominee and deposited with the
Trustee, as custodian for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided, for credit by the
Depository to the respective accounts of beneficial owners of
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the Securities represented thereby (or such other accounts as they may direct).
The aggregate principal amount of the Restricted Global Security may be
increased or decreased from time to time by adjustments made on the records of
the Trustee, as custodian for the Depository, in connection with a corresponding
decrease or increase in the aggregate principal amount of the Temporary
Regulation S Global Security or the Permanent Regulation S Global Security, as
hereinafter provided.
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign,
or one Officer shall sign and one Officer or an Assistant Secretary (each of
whom shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $300,000,000 upon receipt of a written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $300,000,000, except
as provided in Section 2.07. Upon the written order of the Company in the form
of an Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of the
Company.
Series B Notes may be issued only in exchange for a like principal
amount of Series A Notes pursuant to an Exchange Offer.
The principal and interest on Book-Entry Securities shall be payable
to the Depository or its nominee, as the case may be, as the sole registered
owner and the sole holder of the Book-Entry Securities represented thereby. The
principal and interest on
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Securities in certificated form shall be payable at the office of the Paying
Agent.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
If the Securities are to be issued in the form of one or more Global
Securities, then the Company shall execute and the Trustee shall authenticate
and deliver one or more Global Securities that shall represent and shall be in
minimum denominations of $1,000.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company may also from time to time designate one or
more other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. Neither
the Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more co-
Registrars and one or more additional paying agents reasonably acceptable to the
Trustee. The term "Paying Agent" includes any additional paying agent. The
Company initially appoints the Trustee as Registrar and Paying Agent until such
time as the Trustee has resigned or a successor has been appointed.
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The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee, in advance, of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as
such.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Securities (whether such assets
have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee of any Default by the Company (or any
other obligor on the Securities) in making any such payment. The Company at any
time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
(a) Beneficial interests in a Global Security may, subject to the
restrictions on the transferability of the Securities and upon delivery of a
certificate in the form of Exhibit D, be exchanged for certificated Securities
upon request but only upon at least 20 days' prior written notice given to the
Trustee by or on behalf of the Depository (in accordance with the
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Depository's customary procedures) and will bear the applicable legends set
forth in Exhibit A.
(b) If any Global Security is to be exchanged for other Securities
or cancelled in whole, it shall be surrendered by or on behalf of the Depository
or its nominee to the Trustee, as Registrar, for exchange or cancellation as
provided in this Article II. If any Global Security is to be exchanged for other
Securities or cancelled in part, or if another Security is to be exchanged in
whole or in part for a beneficial interest in any Global Security, such Global
Security shall be so surrendered for exchange or cancellation as provided in
this Article II or, if the Trustee is acting as custodian for the Depository or
its nominee (or is party to a similar arrangement) with respect to such Global
Security, the principal amount thereof shall be reduced or increased by an
amount equal to the portion thereof to be so exchanged or cancelled, or the
principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, in each case by means of an appropriate
adjustment made on the records of the Trustee, whereupon the Trustee, in
accordance with the Applicable Procedures, shall instruct the Depository or its
authorized representatives to make a corresponding adjustment to its records
(including by crediting or debiting any Agent Member's account as necessary to
reflect any transfer or exchange of a beneficial interest). Upon any such
surrender or adjustment of a Global Security, the Trustee shall, subject to this
Article II, authenticate and deliver any Securities issuable in exchange for
such Global Security (or any portion thereof) to or upon the order of, and
registered in such names as may be directed by, the Depository or its authorized
representative. Upon the request of the Trustee in connection with the
occurrence of any of the events specified in the preceding paragraph or in
paragraph (r) below, the Company shall promptly make available to the Trustee a
reasonable supply of Securities that are not in the form of Global Securities.
The Trustee shall be entitled to rely upon any order, direction or request of
the Depository or its authorized representative which is given or made pursuant
to this Article II if such order, direction or request is given or made in
accordance with the Applicable Procedures.
(c) Subject to the provisions in the legends required by this
Indenture, the registered Holder may grant proxies and otherwise authorize any
Person, including Agent Members and Persons who may hold interests in Agent
Members, to take any action that such Holder is entitled to take under this
Indenture.
(d) Neither Agent Members nor any other Person on whose behalf Agent
Members may act shall have any rights under this
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Indenture with respect to any Global Security held on their behalf by the
Depository or under the Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security. With respect to any Global Security deposited with the Trustee as
custodian for the Depository for credit to their respective accounts (or to such
other accounts as they may direct) at Euroclear or CEDEL, the provisions of the
"Operating Procedures of the Euroclear System" and the "Terms and Conditions
Governing Use of Euroclear", and the "Management Regulations" and "Instructions
to Participants" of CEDEL, respectively, shall be applicable to such Global
Security.
(e) Upon presentation for transfer or exchange of any Security at
the office of the Trustee, as Registrar, located in The City of New York,
accompanied by a written instrument of transfer or exchange in the form approved
by the Company (it being understood that, until notice to the contrary is given
to holders of Securities, the Company shall be deemed to have approved the form
of instrument of transfer or exchange, if any, printed on any Security),
executed by the registered Holder, in person or by such Holder's attorney
thereunto duly authorized in writing, and upon compliance with this Section
2.06, such Security shall be transferred upon the Register, and a new Security
shall be authenticated and issued in the name of the transferee. Notwithstanding
any provision to the contrary herein or in the Securities, transfers of a Global
Security, in whole or in part, and transfers of interests therein of the kind
described in this Section 2.06, shall only be made in accordance with this
Section 2.06. Transfers and exchanges subject to this Section 2.06 shall also be
subject to the other provisions of this Indenture that are not inconsistent with
this Section 2.06.
(f) General. A Global Security may not be transferred, in whole or
in part, to any Person other than the Depository or a nominee thereof, and no
such transfer to any such other Person may be registered; provided, however,
that this clause (f) shall not prohibit any transfer of a Security that is
issued in exchange for a Global Security but is not itself a Global Security. No
transfer of a Security to any Person shall be effective under this Indenture or
the Securities unless and until such Security has been registered in the name of
such Person. Nothing in this clause (f)
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shall prohibit or render ineffective any transfer of a beneficial interest in a
Global Security effected in accordance with the other provisions of this Section
2.06.
(g) Temporary Regulation S Global Security. If the holder of a
beneficial interest in a Temporary Regulation S Global Security wishes at any
time to transfer such interest to a Person who wishes to take delivery thereof
in the form of a beneficial interest in such Temporary Regulation S Global
Security, such transfer may be effected, subject to the rules and procedures of
the Depository, Euroclear and CEDEL, in each case to the extent applicable and
as in effect from time to time (the "Applicable Procedures"), only in accordance
with this clause (g). Upon delivery (i) by a beneficial owner of an interest in
a Temporary Regulation S Global Security to Euroclear or CEDEL, as the case may
be, of an Owner Securities Certification, (ii) by the transferee of such
beneficial interest in the Temporary Regulation S Global Security to Euroclear
or CEDEL, as the case may be, of a written certification (a "Transferee
Securities Certification") substantially in the form of Exhibit G hereto and
(iii) by Euroclear or CEDEL, as the case may be, to the Trustee, as Registrar,
of a Depository Securities Certification, the Trustee may direct either
Euroclear or CEDEL, as the case may be, to reflect on its records the transfer
of a beneficial interest in the Temporary Regulation S Global Security from the
beneficial owner providing the Owner Securities Certification to the Person
providing the Transferee Securities Certification.
(h) Restricted Global Security to Temporary Regulation S Global
Security. If the holder of a beneficial interest in the Restricted Global
Security wishes at any time to transfer such interest to a Person who wishes to
take delivery thereof in the form of a beneficial interest in the Temporary
Regulation S Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with the provisions of this clause (h)
and clause (n) below. Upon receipt by the Trustee, as Registrar, of (A) written
instructions given by or on behalf of the Depository in accordance with the
Applicable Procedures directing the Trustee to credit or cause to be credited to
a specified Agent Member's account a beneficial interest in the Temporary
Regulation S Global Security in a specified principal amount and to cause to be
debited from another specified Agent Member's account a beneficial interest in
the Restricted Global Security in an equal principal amount and (B) a
certificate in substantially the form set forth in Exhibit H signed by or on
behalf of the holder of such beneficial interest in the Restricted Global
Security, the Trustee, as Security Registrar, shall, subject to clause (n)
below, reduce the principal amount of the Restricted Global Security, and
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increase the principal amount of the Temporary Regulation S Global Security by
such specified principal amount.
(i) Restricted Global Security to Permanent Regulation S Global
Security. If the holder of a beneficial interest in the Restricted Global
Security wishes at any time to transfer such interest to a Person who wishes to
take delivery thereof in the form of a beneficial interest in the Permanent
Regulation S Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this clause (i). Upon receipt by
the Trustee, as Security Registrar, of (A) written instructions given by or on
behalf of the Depository in accordance with the Applicable Procedures directing
the Trustee to credit or cause to be credited to a specified Agent Member's
account a beneficial interest in the Permanent Regulation S Global Security in a
specified principal amount and to cause to be debited from another specified
Agent Member's account a beneficial interest in the Restricted Global Security
in an equal principal amount and (B) a certificate in substantially the form set
forth in Exhibit I signed by or on behalf of the holder of such beneficial
interest in the Restricted Global Security, the Trustee, as Registrar, shall
reduce the principal amount of a Restricted Global Security, and increase the
principal amount of the Permanent Regulation S Global Security by such specified
principal amount.
(j) Temporary Regulation S Global Security or Permanent Regulation S
Global Security to Restricted Global Security. If the holder of a beneficial
interest in the Temporary Regulation S Global Security or the Permanent
Regulation S Global Security at any time, wishes to transfer such interest to a
Person who wishes to take delivery thereof in the form of a beneficial interest
in the Restricted Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this clause (j) and clause (n)
below; provided that with respect to any transfer of a beneficial interest in a
Temporary Regulation S Global Security, the transferor and Euroclear or CEDEL,
as the case may be, must have previously delivered an Owner Securities
Certification and a Depository Securities Certification respectively, with
respect to such beneficial interest. Upon receipt by the Trustee, as Registrar,
of (A) written instructions given by or on behalf of the Depository in
accordance with the Applicable Procedures directing the Trustee to credit or
cause to be credited to a specified Agent Member's account a beneficial interest
in the Restricted Global Security in a specified principal amount and to cause
to be debited from another specified Agent Member's account a beneficial
interest in the Temporary Regulation S Global Security or the Permanent
Regulation S Global Security, as the case may be, in an equal principal amount
and (S) a certificate
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in substantially the form set forth in Exhibit J signed by or on behalf of the
holder of such beneficial interest in the Temporary Regulation S Global Security
or the Permanent Regulation S Global Security, as the case may be, the Trustee,
as Security Registrar, shall, subject to clause (n) below, reduce the principal
amount of such Temporary Regulation S Global Security or Permanent Regulation S
Global Security, as the case may be, and increase the principal amount of the
Restricted Global Security by such specified principal amount.
(k) Non-Global Restricted Security to Global Security. If the holder
of a Restricted Security (other than a Global Security) wishes at any time to
transfer all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in the Restricted Global
Security, the Temporary Regulation S Global Security or the Permanent Regulation
S Global Security, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with this clause (k) and clause (n) below. Upon
receipt by the Trustee, as Registrar, of (A) such Security and written
instructions given by or on behalf of such Holder as provided in this Section
2.06 directing the Trustee to credit or cause to be credited to a specified
Agent Member's account a beneficial interest in the Restricted Global Security,
the Temporary Regulation S Global Security or the Permanent Regulation S Global
Security, as the case may be, in a specified principal amount equal to the
principal amount of the Restricted Security (or portion thereof) to be so
transferred, and (B) an appropriately completed certificate substantially in the
form set forth in Exhibit K-1 hereto, if the specified account is to be credited
with a beneficial interest in the Restricted Global Security, or Exhibit K-2
hereto, if the specified account is to be credited with a beneficial interest in
the Temporary Regulation S Global Security or the Permanent Regulation S Global
Security, signed by or on behalf of such Holder, then the Trustee, as Registrar,
shall, subject to clause (n) below, cancel such Restricted Security (and issue a
new Security in respect of any untransferred portion thereof) as provided in
this Section 2.06 and increase the principal amount of the Restricted Global
Security, Temporary Regulation S Global Security or Permanent Regulation S
Global Security, as the case may be, by the specified principal amount.
(l) Non-Global Permanent Regulation S Security to Restricted Global
Security or Permanent Regulation S Global Security. If the Holder of a Permanent
Regulation S Security (other than a Global Security) wishes at any time to
transfer all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in the
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Restricted Global Security or the Permanent Regulation S Global Security, as the
case may be, such transfer may be effected only in accordance with this clause
(l) and subject to the Applicable Procedures. Upon receipt by the Trustee, as
Registrar, of (A) such Security and instructions given by or on behalf of such
Holder as provided in this Section 2.06 directing the Trustee to credit or cause
to be credited to a specified Agent Member's account a beneficial interest in
the Restricted Global Security or the Permanent Regulation S Global Security, as
the case may be, in a principal amount equal to the principal amount of the
Security (or portion thereof) to be so transferred, and (B)(i) with respect to a
transfer which is to be delivered in the form of a beneficial interest in the
Restricted Global Security, a certificate in substantially the form set forth in
Exhibit L-1, signed by or on behalf of such Holder, and (ii) with respect to a
transfer which is to be delivered in the form of a beneficial interest in the
Permanent Regulation S Global Security, a certificate in substantially the form
set forth in Exhibit L-2, signed by or on behalf of such Holder, then the
Trustee, as Registrar, shall, subject to Clause (9) below, cancel such Security
(and issue a new Security in respect of any untransferred portion thereof) as
provided in this Section 2.06 and increase the principal amount of the
Restricted Global Security, or the Permanent Regulation S Global Security, as
the case may be, by the specified principal.
(m) Other Exchanges. Securities that are not Global Securities may
be exchanged (on transfer or otherwise) for Securities that are not Global
Securities or for beneficial interests in a Global Security (if any is then
outstanding) only in accordance with such procedures, which shall be
substantially consistent with the provisions of clauses (f) through (l) above
(including the certification requirements intended to insure that transfers of
beneficial interests in a Global Security comply with Rule 144A under the
Securities Act, Rule 144 under the Securities Act or Regulation S, as the case
may be) and any Applicable Procedures, as may be from time to time adopted by
the Company and the Trustee.
(n) Interests in Temporary Regulation S Global Security to be Held
Through Euroclear or CEDEL. Until the later of the expiration of the Restricted
Period and the provision of the Owner Securities Certification and the
Depository Securities Certification, beneficial interests in any Temporary
Regulation S Global Security may be held only in or through accounts maintained
at the Depository by Euroclear or CEDEL (or by Agent Members acting for the
account thereof).
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(o) When Securities in certificated form are presented to the
Registrar or a co-Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal principal amount of
Securities of other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transaction are met; provided, however, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registrations of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Registrar's or co-Registrar's request. No service charge shall
be made for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.02, 2.10, 3.07, 4.15, 4.16 or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Security being redeemed in part.
(p) If a Series A Note is a Restricted Security in certificated
form, then as provided in this Indenture and subject to the limitations herein
set forth, the Holder, provided it is a Qualified Institutional Buyer, may
exchange such Security for a Book-Entry Security by instructing the Trustee (by
completing the Transferee Certificate in the form of Exhibit D hereto) to
arrange for such Series A Note to be represented by a beneficial interest in a
Global Security in accordance with the customary procedures of the Depository.
(q) Upon any exchange provided for in Section 2.06(a), the Company
shall execute and the Trustee shall authenticate and deliver to the person
specified by the Depository a new Series A Note or Notes registered in such
names and in such authorized denominations as the Depository, pursuant to the
instructions of the beneficial owner of the Securities requesting the exchange,
shall instruct the Trustee. Thereupon, the beneficial ownership of such Global
Security shown on the records maintained by the Depository or its nominee shall
be reduced by the amounts so exchanged and an appropriate endorsement shall be
made by or on
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behalf of the Trustee on the Global Security. Any such exchange shall be
effected through the Depository in accordance with the procedures of the
Depository therefor.
(r) Notwithstanding the foregoing, no Global Security shall be
registered for transfer or exchange, or authenticated and delivered, whether
pursuant to this Section, Section 2.07, 2.10 or 3.07 or otherwise, in the name
of a person other than the Depository for such Global Security or its nominee
until (i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time the Depository
ceases to be a clearing agency registered under the Exchange Act, and a
successor depository is not appointed by the Company within 30 days, (ii) the
Company executes and delivers to the Trustee a Company order that all such
Global Securities shall be exchangeable or (iii) there shall have occurred and
be continuing an Event of Default. Upon the occurrence in respect of any Global
Security representing the Series A Notes of any one or more of the conditions
specified in clause (i), (ii) or (iii) of the preceding sentence, such Global
Security may be registered for transfer or exchange for Series A Notes
registered in the names of, authenticated and delivered to, such persons as the
Trustee or the Depository, as the case may be, shall direct.
(s) Except as provided above, any Security authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
any Global Security, whether pursuant to this Section, Section 2.07, 2.10 or
3.07 or otherwise, shall also be a Global Security and bear the legend specified
in Exhibit C.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Security is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Security, including reasonable
fees and expenses of counsel. Every replacement Security shall constitute an
additional obligation of the Company.
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SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding. A
Security does not cease to be outstanding because the Company or any of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Securities payable on that date, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue; provided, however, that to the extent the Trustee is enjoined
from making payments to the Holders, interest will continue to accrue until such
time as the Trustee is not so enjoined.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or an Affiliate of the Company shall be disregarded, except
that, for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities that the
Trustee knows are so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall
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authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Securities
to replace Securities that it has paid or delivered to the Trustee for
cancellation. If the Company shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities,
it shall, unless the Trustee fixes another record date pursuant to Section 6.10,
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest to the persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date fixed
by the Company for the payment of defaulted interest or the next succeeding
Business Day if such date is not a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder, with a
copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities may use a CUSIP number or
numbers, and if so, the Trustee shall use the CUSIP number or numbers in notices
of redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number or numbers printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities.
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SECTION 2.14. Designation.
The Indebtedness evidenced by the Securities is hereby irrevocably
designated as "senior indebtedness" or such other term denoting seniority (i)
for all purposes of the provisions defining subordination contained in
agreements that provide that the Indebtedness of the Company issued pursuant to
such agreements is subordinate to Indebtedness designated as senior indebtedness
and (ii) for the purposes of any future Indebtedness of the Company which the
Company expressly makes subordinate to any senior indebtedness or such other
term denoting seniority. In connection with the issuance of any such future
subordinated Indebtedness, the Company shall take all necessary steps to
effectuate the foregoing.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Optional Redemption.
(a) The Securities will be subject to redemption, in whole or in
part, at the option of the Company, at any time on or after December 1, 2001, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued interest to the redemption date, if redeemed during the 12
month period beginning on December 1 of the years indicated below:
Year Percentage
2001.................................................... 105.000%
2002.................................................... 103.333%
2003.................................................... 101.000%
(b) In addition, at any time prior to December 1, 1999, the Company
may redeem up to 33-1/3% of the aggregate principal amount of the Securities
originally issued with the proceeds of one or more Equity Offerings at a
redemption price (expressed as a percentage of principal amount) of 109% plus
accrued interest to the redemption date; provided that at least $200 million
aggregate principal amount of Securities remains outstanding immediately after
any such redemption. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Equity Offering.
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SECTION 3.02. Notices to Trustee.
If the Company elects to redeem Securities pursuant to this
Indenture and the Securities, it shall notify the Trustee and the Paying Agent
in writing of the Redemption Date and the principal amount of the Securities to
be redeemed and whether it wants the Trustee to give notice of redemption to the
Holders (at the Company's expense) at least 35 days (unless a shorter notice
shall be satisfactory to the Trustee) but not more than 60 days before the
Redemption Date. Any such notice may be cancelled at any time prior to notice of
such redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.03. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed at any time,
the Trustee shall select the Securities to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which the
Securities being redeemed are listed or, if the Securities are not listed on a
national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee shall deem fair and appropriate.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 or less may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. If a redemption is to be made with the
proceeds of an Equity Offering pursuant to Section 3.01, selection of the
Securities for redemption shall be made by the Trustee only on a pro rata basis
unless such method is otherwise prohibited. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption.
SECTION 3.04. Notice of Redemption.
Except as otherwise provided in Section 3.01, at least 30 days but
not more than 60 days before a Redemption Date the Company shall mail a notice
of redemption by first class mail to each Holder whose Securities are to be
redeemed, with a copy to the Trustee. At the Company's request, the Trustee
shall give the notice of redemption in the Company's name and at the Company's
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expense. Each notice for redemption shall identify the Securities to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in the aggregate principal amount equal to the unredeemed
portion thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption; and
(8) the CUSIP number, if any, relating to such Securities.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price. Upon surrender to the Trustee or Paying Agent, such
Securities called for redemption shall be paid at the Redemption Price plus
accrued interest to the Redemption Date, but interest installments whose
maturity is on or prior to such Redemption Date will be payable on the relevant
Interest Payment Dates to the Holders of record at the
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close of business on the relevant Record Dates referred to in the Securities.
SECTION 3.06. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of all
Securities to be redeemed on that date (other than Securities or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation). The Paying Agent shall promptly return
to the Company any U.S. Legal Tender so deposited which is not required for that
purpose upon the written request of the Company, except with respect to monies
owed as obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless
the Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Securities are presented for payment.
SECTION 3.07. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent holds on that date
U.S. Legal Tender designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and (to the
extent permitted by law) on overdue installments of interest at a rate equal to
12% per annum.
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SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, the office or agency required under Section 2.03. The Company shall
give prior notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 12.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby initially designates the office of Fleet National
Bank, c/o First Chicago Trust Company, 14 Wall Street, 8th Floor, Window No. 2,
New York, New York 10005, as such office of the Company in accordance with this
Section 4.02.
SECTION 4.03. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, after the Issue Date (a) declare or pay any dividend
or make any distribution on the Company's Capital Stock or make any payment to
holders of such Capital Stock (other than dividends or distributions payable in
Qualified Capital Stock of the Company), (b) purchase, redeem or otherwise
acquire or retire for value any Qualified Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, other than the exchange of such Capital Stock for Qualified
Capital Stock, (c) purchase, redeem, prepay, defease or otherwise acquire or
retire for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, Disqualified Capital Stock of the Company or
Indebtedness of the Company that is expressly subordinate in right of payment to
the Securities or (d) make any Investment (excluding any Permitted Investment)
(each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if at the time of
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such Restricted Payment or immediately after giving effect thereto, (i) a
Default or an Event of Default shall have occurred and be continuing or (ii)
Restricted Payments made subsequent to the Issue Date (the amount expended for
such purposes, if other than in cash, shall be the Fair Market Value of such
property proposed to be transferred by the Company or such Subsidiary, as the
case may be, pursuant to such Restricted Payment) shall exceed the sum of:
(x) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company
earned subsequent to October 31, 1996 and prior to the date the Restricted
Payment occurs (treating such period as a single accounting period);
(y) 100% of the aggregate net proceeds, including the Fair Market
Value of property other than cash, received by the Company from any person
(other than a Subsidiary of the Company) from the issuance and sale subsequent
to the Issue Date of Qualified Capital Stock of the Company (excluding (A)
Qualified Capital Stock paid as a dividend on any Capital Stock or as interest
on any Indebtedness, (B) any net proceeds from issuances and sales financed
directly or indirectly using funds borrowed from the Company or any Subsidiary
of the Company, until and to the extent such borrowing is repaid and (C) any net
proceeds from any Equity Offering which are used to redeem Securities pursuant
to, and in accordance with, the provisions described in Section 3.01); and
(z) 100% of the aggregate net proceeds, including the Fair Market
Value of property other than cash, received by the Company from any person
(other than a Subsidiary of the Company) from the issuance and sale of
Disqualified Capital Stock and/or Indebtedness, in each case that has been
converted into or exchanged for Qualified Capital Stock of the Company after the
Issue Date.
The foregoing provisions shall not prohibit: (1) the payment of any
dividend within 60 days after the date of its declaration if the dividend would
have been permitted on the date of declaration; (2) the acquisition of Capital
Stock of the Company or Indebtedness of the Company either (i) solely in
exchange for shares of Qualified Capital Stock or (ii) through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock; (3) the
acquisition of Indebtedness of the Company that is expressly subordinate in
right of payment to the Securities either (i) solely in exchange for
Indebtedness of the Company which is expressly subordinate in right of payment
to the Securities at
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least to the extent that the Indebtedness being acquired is subordinated to the
Securities and has no scheduled principal prepayment dates prior to the
scheduled final maturity date of the Indebtedness being exchanged or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of Indebtedness of the Company
which is expressly subordinate in right of payment to the Securities at least to
the extent that the Indebtedness being acquired is subordinated to the
Securities and has no scheduled principal prepayment dates prior the scheduled
final maturity date of the Indebtedness being refinanced; (4) the making of
payments by the Company to Renco (A) no earlier than ten days prior to the date
on which Renco is required to make its payments to the Internal Revenue Service
or the applicable state taxing authority, as the case may be, pursuant to a tax
sharing agreement between the Company and Renco (which tax sharing agreement
provides that the payments thereunder shall not exceed the amount the Company
would have been required to pay for taxes on a stand-alone basis, except that
the Company will not have the benefit of any of its tax loss carryforwards
unless such tax losses were a result of timing differences between the Company's
accounting for tax and financial reporting purposes, and which tax sharing
agreement also provides that transactions between the Company and Renco and its
other subsidiaries are accounted for on a cash basis and not on an accrual
basis) and (B) to reimburse Renco for out of pocket insurance payments made by
Renco on behalf of the Company and its Subsidiaries; (5) the payment by the
Company or any of its Subsidiaries of a management fee to Renco in an amount not
to exceed $100,000 in any month; (6) the payment by the Company of a dividend
(the "Dividend") to Renco on or about the Issue Date not to exceed $108 million;
and (7) the making of a loan to Holdings on the Issue Date not to exceed $60
million which loan will be extinguished upon consummation of the Merger;
provided that in the case of clauses (2), (3) and (5), no Default or Event of
Default shall have occurred and be continuing at the time of such payment or as
a result thereof.
In determining the aggregate amount of Restricted Payments
permissible under clause (ii) of the first paragraph of this section, amounts
expended, incurred or outstanding pursuant to clauses (1) and (2) (but not
pursuant to clauses (3), (4), (5), (6) or (7)) of the second paragraph of this
section shall be included as Restricted Payments; provided that any proceeds
received from the issuance of Qualified Capital Stock pursuant to clause (2) of
the second paragraph of this section shall be included in calculating the amount
referred to in clause (y) or clause (z), as the case may be, of the first
paragraph of this section.
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Prior to any Restricted Payment under the first paragraph of this
Section 4.03, the Company shall deliver to the Trustee an Officers' Certificate
setting forth the computation by which the amount available for Restricted
Payments pursuant to such paragraph was determined. The Trustee shall have no
duty or responsibility to determine the accuracy or correctness of this
computation and shall be fully protected in relying on such Officers'
Certificate.
SECTION 4.04. Corporate Existence.
Except as otherwise permitted by Article Five and except in
connection with the Merger, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate or other existence of each of its Subsidiaries in accordance
with the respective organizational documents of each such Subsidiary and the
rights (charter and statutory) and franchises of the Company and each such
Subsidiary; provided, however, that the Company shall not be required to
preserve, with respect to itself, any right or franchise, and with respect to
any of its Subsidiaries any such existence, right or franchise, if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and will not be
adverse in any material respect to the Holders.
SECTION 4.05. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon it or any of its
Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might by law become a
Lien upon the property of it or any of its Subsidiaries; provided, however,
that, subject to the terms of the applicable Collateral Document, the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim if either (a) the amount, applicability or
validity thereof is being contested in good faith by appropriate proceedings and
an adequate reserve has been established therefor to the extent required by GAAP
or (b) the failure to make such payment or effect such discharge (together with
all other such failures) would not have a material adverse effect on the
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole.
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SECTION 4.06. Maintenance of Properties and Insurance.
(a) Subject to the applicable provisions of the Collateral
Documents, the Company shall cause all properties used or useful in the conduct
of its business or the business of any of its Subsidiaries to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its judgment may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times unless the failure to so
maintain such properties (together with all other such failures) would not have
a material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries taken as a whole; provided, however, that
nothing in this Section 4.06 shall prevent the Company or any Subsidiary of the
Company from discontinuing the operation or maintenance of any of such
properties (other than properties constituting items of Collateral except to the
extent permitted by Section 10.04), or disposing of any of them (other than
properties constituting items of Collateral except to the extent permitted by
Section 10.04), if such discontinuance or disposal is either (i) in the ordinary
course of business, (ii) in the good faith judgment of the Board of Directors of
the Company or the Subsidiary concerned, or of the senior officers of the
Company or such Subsidiary, as the case may be, desirable in the conduct of the
business of the Company or such Subsidiary, as the case may be, or (iii) is
otherwise permitted by this Indenture.
(b) The Company shall provide or cause to be provided, for itself
and each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company are adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with reputable insurers
or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the reasonable, good faith opinion of the
Company, for companies similarly situated in the industry, unless the failure to
provide such insurance (together with all other such failures) would not have a
material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
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SECTION 4.07. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 60 days after
the end of the Company's fiscal quarters and within 90 days after the end of the
Company's fiscal year, an Officers' Certificate stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
period has been made under the supervision of the signing Officers with a view
to determining whether it has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge, the Company during
such preceding fiscal period has kept, observed, performed and fulfilled each
and every such covenant and no Default or Event of Default occurred during such
period and at the date of such certificate there is no Default or Event of
Default that has occurred and is continuing or, if such signers do know of such
Default or Event of Default, the certificate shall describe the Default or Event
of Default and its status with particularity. The Officers' Certificate shall
also include all calculations necessary to show covenant compliance. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the Company shall
deliver to the Trustee within 90 days after the end of each fiscal year a
written statement by the Company's independent certified public accountants
stating (A) that their audit examination has included a review of the terms of
this Indenture and the Securities as they relate to accounting matters, and (B)
whether, in connection with their audit examination, any Default or Event of
Default has come to their attention and if such a Default or Event of Default
has come to their attention, specifying the nature and period of existence
thereof.
(c) The Company will deliver to the Trustee as soon as possible, and
in any event within 10 days after the Company becomes aware or should reasonably
have become aware of the occurrence of any Default or Event of Default, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.
SECTION 4.08. Compliance with Laws.
The Company shall comply, and shall cause each of its Subsidiaries
to comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of
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America, all states and municipalities thereof, and of any governmental
department, commission, board, regulatory authority, bureau, agency and
instrumentality of the foregoing, in respect of the conduct of their respective
businesses and the ownership of their respective properties, except such as are
being contested in good faith and by appropriate proceedings and except for such
noncompliances as would not in the aggregate have a material adverse effect on
the financial condition or results of operations of the Company and its
Subsidiaries taken as a whole.
SECTION 4.09. SEC Reports and Other Information.
(a) At all times when the Company is required or permitted
voluntarily to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act or this Indenture is qualified under the TIA, the Company (at its own
expense) shall file with the SEC and shall file with the Trustee and mail or
cause the Trustee to mail to the Holders at their addresses set forth in the
register of Securities within 15 days after it files them with the SEC copies of
the annual reports, quarterly reports and the information, documents, and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) to be filed pursuant to Section 13 or 15(d) of
the Exchange Act. If the Company is not subject to the requirements of such
Section 13 or 15(d) of the Exchange Act and not permitted to voluntarily file
and this Indenture has not been qualified under the TIA, the Company (at its own
expense) shall file with the Trustee and mail or cause the Trustee to mail to
the Holders at their addresses set forth in the register of Securities, within
15 days after it would have been required to file such information with the SEC,
all information and financial statements, including any notes thereto and with
respect to annual reports, quarterly reports, an auditors' report by an
accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations," both
comparable to the disclosure that the Company would have been required to
include in such annual reports, quarterly reports, information, documents or
other reports, as if the Company was subject to the requirements of such Section
13 or 15(d) of the Exchange Act, in each case in the form that would have been
required by the SEC. Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of TIA ss. 314(a).
(b) At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, upon the request of a Holder of a Series A Note, the
Company will promptly furnish or cause to be furnished such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
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provision thereto) to such Holder or to a prospective purchaser of such Series A
Note designated by such Holder, as the case may be, in order to permit
compliance by such Holder with Rule 144A under the Securities Act.
SECTION 4.10. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.11. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with or for the
benefit of, an Affiliate of the Company or any Subsidiary of the Company (other
than transactions between the Company and a wholly-owned Subsidiary of the
Company or between wholly-owned Subsidiaries of the Company) (an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under (b) below
and (y) Affiliate Transactions (including lease transactions) on terms that are
no less favorable to the Company or the relevant Subsidiary in the aggregate
than those that might reasonably have been obtained in a comparable transaction
by the Company or such Subsidiary on an arm's-length basis (as determined in
good faith by the Board of Directors of the Company, as evidenced by a Board
Resolution) from a person that is not an Affiliate; provided that except as
otherwise provided by (b) below, neither the Company nor any of its Subsidiaries
shall enter into an Affiliate Transaction or series of related Affiliate
Transactions involving or having a value of more than $5.0 million unless the
Company or such Subsidiary, as the case may be, has received an opinion from an
Independent Financial Advisor, with a copy thereof to the Trustee, to the effect
that the financial terms of such Affiliate Transaction are fair and reasonable
to the Company or
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such Subsidiary, as the case may be, and such terms are no less favorable to the
Company or such Subsidiary, as the case may be, than those that could be
obtained in a comparable transaction on an arm's-length basis with a person that
is not an Affiliate.
(b) The foregoing provisions shall not apply to (i) any Restricted
Payment that is made in compliance with Section 4.03, (ii) the payment by the
Company or any of its Subsidiaries of a management fee to Renco in an amount not
to exceed $100,000 in any month and any other amounts payable under the
Management Consultant Agreement as in effect on the Issue Date and (iii)
reasonable and customary regular fees to directors of the Company who are not
employees of the Company.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
(a) The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
become liable, contingently or otherwise, with respect to, or otherwise become
responsible for the payment of (collectively "incur") any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness; provided
that the Company may incur Indebtedness (including Acquired Indebtedness) if:
(A) no Default or Event of Default shall have occurred and be continuing at the
time of the proposed incurrence thereof or shall occur as a result of such
proposed incurrence, and (B) after giving effect to such proposed incurrence,
the Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to
2.5 to 1.0. Notwithstanding the foregoing, a Subsidiary of the Company may incur
Acquired Indebtedness to the extent such Indebtedness could have been incurred
by the Company pursuant to the proviso in the immediately preceding sentence.
(b) The Company shall not, directly or indirectly, in any event
incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated to any other Indebtedness of the
Company unless such Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) made expressly subordinated to the
Securities to the same extent and in the same manner as such Indebtedness is
subordinated to such other Indebtedness of the Company.
SECTION 4.13. Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause
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or suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to: (a) pay dividends or make any other
distributions on its Capital Stock, or any other interest or participation in,
or measured by, its profits, owned by the Company or by any Subsidiary of the
Company, or pay any Indebtedness owed to the Company or a Subsidiary of the
Company; (b) make loans or advances to the Company or a Subsidiary of the
Company; or (c) transfer any of its properties or assets to the Company or to
any Subsidiary of the Company, except for such encumbrances or restrictions
existing under or by reason of: (i) applicable law; (ii) this Indenture and the
Existing Indenture; (iii) customary nonassignment provisions of any lease
governing a leasehold interest of the Company or any Subsidiary of the Company;
(iv) any instrument governing Indebtedness of a person acquired by the Company
or any Subsidiary of the Company at the time of such acquisition, which
encumbrance or restriction is not applicable to any person, or the properties or
assets of any person, other than the person or its Subsidiaries so acquired; (v)
any written agreement existing on the Issue Date; provided that the term of any
such agreement shall not be extended beyond the term as in effect on the Issue
Date and no such agreement shall be modified or amended in such a manner as to
make the encumbrance or restriction more restrictive than as in effect on the
Issue Date; (vi) Indebtedness existing and as in effect on the Issue Date,
including, without limitation, the WCI Revolving Credit Facility or any
refinancing, refunding, replacement or extensions thereof; provided that any
such encumbrance or restriction contained in any refinancing, refunding,
replacement or extension of the WCI Revolving Credit Facility shall be no more
restrictive than such encumbrance or restriction contained in the WCI Revolving
Credit Facility as in effect on the Issue Date; and (vii) Indebtedness incurred
in accordance with this Indenture; provided that such encumbrance or restriction
shall be no more restrictive than any encumbrance or restriction contained in
the WCI Revolving Credit Facility as in effect on the Issue Date.
SECTION 4.14. Limitation on Liens.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Liens
(i) upon any item of Collateral other than the Liens created by the Securities,
this Indenture and the Collateral Documents and the Liens expressly permitted by
the applicable Collateral Document, including the Liens, if any, on the Issue
Date in favor of the holders of the Existing Securities and the Liens in favor
of the VEBA Trust and (ii) upon any other properties or assets of the Company
(including, without limitation, any Capital Stock of a Subsidiary) or any of
their Subsidiaries
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whether owned on the Issue Date or acquired after the Issue Date, or on any
income or profits therefrom, or assign or otherwise convey any right to receive
income or profits thereon other than (a) Liens existing on the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date, including,
without limitation, Liens securing Indebtedness under the WCI Revolving Credit
Facility as of the Issue Date and (b) Permitted Liens.
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase all outstanding Securities pursuant to
the offer described in paragraph (b), below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, to the date of purchase. Within 10 days after the date upon
which the Change of Control occurred (the "Change of Control Date") requiring
the Company to make a Change of Control Offer pursuant to this Section 4.15, the
Company shall so notify the Trustee.
(b) The notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Change of Control Offer. Within 30 days following any Change of Control Date,
the Company shall send, by first class mail, a notice to each Holder, with
copies to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Securities tendered will be accepted for
payment;
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 45 days nor later
than 60 days following the Change of Control Date, other than as may be
required by law) (the "Change of Control Payment Date");
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
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(5) that Holders electing to have a Security purchased pursuant to a
Change of Control Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the last page of
the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than two Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price of all Securities so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders new Securities equal in principal
amount to any unpurchased portion of the Securities surrendered. Any Securities
not so accepted shall be promptly mailed by the Company to the Holder thereof.
The Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date. The Company
shall comply, to the extent applicable, with the requirements of Section 14(e)
of the Exchange Act and any other securities laws or regulations in connection
with the repurchase of securities pursuant to a Change of Control Offer. The
Change of Control Offer shall remain open for at least 20 Business Days and
until the close of business on the Change of Control Payment Date. For purposes
of this Section 4.15, the Trustee shall act as the Paying Agent.
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SECTION 4.16. Limitation on Asset Sales.
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate any Asset Sale, unless (i) the Company or the
applicable Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of, (ii) at least 80% of the consideration received by the
Company or such Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents, (iii) if such Asset Sale involves
Collateral it shall be in compliance with the provisions of this Indenture and
the Collateral Documents, and (iv) the Company or such Subsidiary shall apply
the Net Cash Proceeds of such Asset Sale within 180 days of receipt thereof, as
follows:
(A) first, to the extent such Net Cash Proceeds are received from an
Asset Sale not involving the sale, transfer or disposition of Collateral
("Non-Collateral Proceeds"), to repay (and, in the case of a revolving
credit facility, effect a permanent reduction in the commitment
thereunder) any Indebtedness secured by the assets involved in such Asset
Sale or otherwise required to be repaid with the proceeds thereof
(including repurchasing any Existing Securities required to be repurchased
pursuant to the Existing Indenture), and
(B) second, with respect to any Non-Collateral Proceeds remaining
after application pursuant to the preceding paragraph (A) and any Net Cash
Proceeds received from an Asset Sale involving Collateral (after
repurchasing any Existing Securities required to be repurchased pursuant
to the Existing Indenture) ("Collateral Proceeds" and, together with such
remaining Non-Collateral Proceeds, the "Available Amount"), the Company
shall make an offer to purchase (the "Asset Sale Offer") from all Holders
of Securities, up to a maximum principal amount (expressed as a multiple
of $1,000) of Securities equal to the Available Amount at a purchase price
equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however, that
the Company will not be required to apply pursuant to this paragraph (B)
Net Cash Proceeds received from any Asset Sale if, and only to the extent
that, such Net Cash Proceeds are applied to a Related Business Investment
within 180 days of such Asset Sale and, if the Net Cash Proceeds so
invested were Collateral Proceeds, the property and assets constituting
such Related Business Investment and any other non-cash consideration
received as a result of such Asset Sale are made subject to the Lien of
this Indenture and the applicable Collateral Documents pursuant to
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the provisions of this Indenture and the applicable Collateral Documents;
provided, further, that to the extent any such assets subject to an Asset
Sale constituted Collateral, any property and assets constituting a
Related Business Investment and any other non-cash consideration received
as a result of such Asset Sale shall not consist of inventory or
receivables and shall constitute Collateral under the terms hereof and
under the terms of the Collateral Documents; provided, further, that if at
any time any non-cash consideration received by the Company or any
Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash,
then such conversion or disposition shall be deemed to constitute an Asset
Sale hereunder and the Net Cash Proceeds thereof shall be applied in
accordance with this Section 4.16; and provided, further, that the Company
may defer the Asset Sale Offer until there is an aggregate unutilized
Available Amount equal to or in excess of $5 million resulting from one or
more Asset Sales (at which time the entire unutilized Available Amount,
and not just the amount in excess of $5 million, shall be applied as
required pursuant to this paragraph). To the extent the Asset Sale Offer
is not fully subscribed to by Holders of the Securities, the Company may
obtain a release of the unutilized portion of the Available Amount from
the lien of the Collateral Documents in accordance with Section 11.03.
All Net Cash Proceeds received from the sale of assets constituting Collateral
shall constitute Trust Moneys and shall be delivered by the Company (or the
applicable Subsidiary of the Company) to the Trustee and be deposited in the
Collateral Account in accordance with this Indenture. Net Cash Proceeds so
deposited may be withdrawn from the Collateral Account in accordance with
Section 11.03 or 11.04.
(b) The Company shall provide the Trustee with prompt notice of the
occurrence of an Asset Sale Offer. Such notice shall be accompanied by an
Officers' Certificate setting forth (i) a statement to the effect that the
Company or a Subsidiary of the Company has made an Asset Sale and (ii) the
aggregate principal amount of Securities offered to be purchased and the basis
of calculation in determining such aggregate principal amount.
(c) The notice of an Asset Sale Offer shall be sent, by first class
mail, by the Company (or caused to be mailed by the Company) with a copy to the
Trustee to all Holders of Securities not less than 30 days nor more than 60 days
before the Asset Sale Payment Date at their last registered addresses. The Asset
Sale Offer shall remain open from the time of mailing until three days
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before the Asset Sale Offer Payment Date. The notice to the Holders shall
contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Asset Sale Offer. Such notice shall state:
(1) that the Asset Sale Offer is being made pursuant to Section
4.16;
(2) the purchase price (including an amount of accrued interest) and
the Asset Sale Offer Payment Date;
(3) that any Security not tendered will continue to accrue interest;
(4) that unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Asset Sale Offer shall cease
to accrue interest after the Asset Sale Offer Payment Date;
(5) that Holders electing to have a Security purchased pursuant to
an Asset Sale Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the last page of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day prior to the
Asset Sale Offer Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, no later than two Business Days prior to the Asset
Sale Offer Payment Date, a telegram, telex, facsimile transmission or
letter stating fully the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased;
(7) that if Securities in a principal amount in excess of the
principal amount of the Securities to be acquired pursuant to the Asset
Sale Offer are tendered and not withdrawn pursuant to the Asset Sale
Offer, the Company shall purchase Securities on a pro rata basis (with
such adjustment as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or integral multiples of $1,000
shall be so acquired); and
(8) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered.
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On or before an Asset Sale Offer Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the Asset
Sale Offer (on a pro rata basis if required pursuant to paragraph (7) above),
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate identifying the Securities or portions thereof accepted for payment
by the Company. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail or deliver to such Holders new
Securities equal in principal amount to any unpurchased portion of the
Securities surrendered. Any Securities not so accepted shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Asset Sale Offer as promptly as practicable
following the Asset Sale Offer Payment Date. The Company shall comply, to the
extent applicable, with the requirements of Section 14(e) of the Exchange Act
and any other securities laws or regulations in connection with the repurchase
of Securities pursuant to an Asset Sale Offer.
(d) In the event of the transfer of substantially all (but not all)
of the property and assets of the Company and its Subsidiaries as an entirety to
a person in a transaction permitted under Article Five hereof, the successor
corporation shall be deemed to have sold the properties and assets of the
Company and its Subsidiaries not so transferred for purposes of this Section
4.16, and shall comply with the provisions of this covenant with respect to such
deemed sale as if it were an Asset Sale. In addition, the Fair Market Value of
such properties and assets of the Company or its Subsidiaries deemed to be sold
shall be deemed to be Net Cash Proceeds for purposes of this Section 4.16.
SECTION 4.17. Limitation on Sale/leaseback Transactions.
The Company shall not, and shall not permit any of its Subsidiaries
to, enter into any Sale/leaseback. Notwithstanding the foregoing, the Company
and its Subsidiaries may enter into a Sale/leaseback involving only the sale or
transfer of assets acquired after the Issue Date and not constituting Collateral
if (i) after giving pro forma effect to any such Sale/leaseback, the Company
shall be in compliance with Section 4.12, (ii) the sale price in such
Sale/leaseback is at least equal to the Fair Market Value of such property and
(iii) the Company or such Subsidiary shall apply the Net Cash Proceeds of the
sale as provided pursuant to Section 4.16, to the extent required.
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SECTION 4.18. Limitation on Preferred Stock of Subsidiaries.
The Company will not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or to a wholly-owned Subsidiary of
the Company) or permit any person (other than the Company or a wholly-owned
Subsidiary of the Company) to hold any Preferred Stock of any Subsidiary of the
Company.
SECTION 4.19. Future Guarantees.
The Company or any of its wholly-owned Subsidiaries may transfer, in
one transaction or a series of related transactions, any Collateral to any
wholly-owned Subsidiary of the Company, if such transferee wholly-owned
Subsidiary shall (i) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such
wholly-owned Subsidiary shall unconditionally guarantee on a senior secured
basis (secured by the Collateral so transferred) all of the Company's
obligations under the Securities and this Indenture, (ii) take all necessary
action to cause the Lien of the Collateral Documents on such Collateral in favor
of the Trustee to remain in full force and effect at all times, (iii) deliver to
the Trustee an opinion of counsel that such supplemental indenture and any other
documents required to comply with clause (ii) above have been duly authorized,
executed and delivered by such wholly-owned Subsidiary and the supplemental
indenture and each such other document constitutes a legal, valid, binding and
enforceable obligation of such wholly-owned Subsidiary and (iv) take such
further action and execute and deliver such other documents specified in this
Indenture or otherwise reasonably requested by the Trustee to effectuate the
foregoing.
SECTION 4.20. Impairment of Security Interest.
The Company shall not, and shall not permit any of its Subsidiaries
to, take or omit to take any action, which action or omission might or would
have the result of affecting or impairing the security interest in favor of the
Collateral Agent, on behalf of the Trustee and the Holders, with respect to the
Collateral, and the Company shall not grant to any person (other than the
Collateral Agent on behalf of the Trustee and the Holders) any interest
whatsoever in the Collateral, except, in either case, as expressly permitted by
this Indenture and the Collateral Documents.
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SECTION 4.21. Amendment to Collateral Documents.
The Company will not amend, modify or supplement, or permit or
consent to any amendment, modification or supplement of, the Collateral
Documents in any way which would be adverse to the Holders.
SECTION 4.22. Inspection and Confidentiality.
(a) The Company shall, and shall cause each of its Subsidiaries to,
permit authorized representatives of the Trustee and the Collateral Agent to
visit and inspect the properties of the Company or its Subsidiaries, and any or
all books, records and documents in the possession of the Company relating to
the Collateral, and to make copies and take extracts therefrom and to visit and
inspect the Collateral, all upon reasonable prior notice and at such reasonable
times during normal business hours and as often as may be reasonably requested.
(b) The Trustee and the Collateral Agent and their respective
authorized representatives referred to in Section 4.22(a) agree not to use any
information obtained pursuant to this Section 4.22 for any unlawful purpose and
to keep confidential and not to disclose any such information to any person
except that (i) the recipient of the information may disclose any information
that becomes publicly available other than as a result of disclosure by such
recipient, (ii) the recipient of the information may disclose any information
that its counsel reasonably concludes is necessary to be disclosed by law,
pursuant to any court or administrative order or ruling or in any pending legal
or administrative proceeding or investigation after prior written notice,
reasonable under the circumstances, to the Company, and (iii) the recipient of
the information may disclose any information necessary to be disclosed pursuant
to any provision of the TIA or pursuant to this Indenture.
SECTION 4.23. Release of Released Real Property.
The Company shall have the right to obtain the release of any
Collateral constituting Released Real Property upon the satisfaction of the
conditions precedent set forth in Section 10.03(c) hereof.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.
(a) Other than the Merger, the Company will not, in a single
transaction or through a series of related transactions, (i) consolidate or
merge with or into any other person, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties and assets as an
entirety or substantially as an entirety to another person or group of
affiliated persons or (ii) adopt a Plan of Liquidation, unless, in either case:
(1) either the Company is the surviving or continuing person, or the
person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which all or substantially all of the
properties and assets of the Company as an entirety or substantially as an
entirety are transferred (or, in the case of a Plan of Liquidation, any
person to which assets are transferred) (the Company or such other person
being hereinafter referred to as the "Surviving Person") is a corporation
organized and validly existing under the laws of the United States, any
State thereof or the District of Columbia, and expressly assumes, by an
indenture supplemental hereto, executed and delivered to the Trustee on or
prior to the consummation of such transaction, in form satisfactory to the
Trustee, all the obligations of the Company under the Securities and this
Indenture;
(2) immediately after giving effect to such transaction or series of
transactions on a pro forma basis and the assumption of obligations
contemplated by clause (1) above (including any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction but prior to any purchase accounting
adjustments relating to such transaction), the Consolidated Net Worth of
the Surviving Person would be equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction;
(3) immediately after giving effect to such transaction on a pro
forma basis and the assumption of obligations contemplated by clause (1)
above (including any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction
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and assuming a market rate of interest with respect thereto), the
Surviving Person shall be able to incur $1 of additional Indebtedness
(other than Permitted Indebtedness) under Section 4.12;
(4) immediately before and immediately after giving effect to such
transaction and the assumption of the obligations as set forth in clause
(1) above and the incurrence or anticipated incurrence of any Indebtedness
and Acquired Indebtedness to be incurred in connection therewith, no
Default or Event of Default shall have occurred and be continuing;
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (which counsel shall not be in-house
counsel), each stating that such consolidation, merger, transfer or
adoption and such supplemental indenture, if required, comply with this
Article Five, that the Surviving Person agrees to be bound hereby, and
that all conditions precedent herein provided relating to such transaction
have been satisfied;
(6) the Company has delivered to the Trustee a certificate from its
independent certified public accountants stating that the Company has made
the calculations required by clauses (2) and (3) above in accordance with
the terms of this Indenture; and
(7) none of the Company, any Subsidiary of the Company or the
Surviving Person would thereupon become obligated with respect to any
Indebtedness (including Acquired Indebtedness) nor would any of its assets
or properties become subject to a Lien, unless the Company, any Subsidiary
of the Company or the Surviving Person could incur such Indebtedness
(including Acquired Indebtedness) or create such Lien under this Indenture
(after giving effect to such person being bound by all the terms of this
Indenture).
(b) For purposes of the foregoing, the transfer (by sale,
assignment, lease, conveyance or other disposition, in a single transaction or
series of transactions) of all or substantially all of the properties or assets
of one or more Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the Company
shall be deemed to be the transfer of all or substantially all of the properties
and assets of the Company.
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(c) The Merger shall occur on, or as soon as reasonably practicable
after, the Issue Date (provided that Holdings has no Indebtedness outstanding
other than Indebtedness owing to the Company not to exceed $60 million).
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of assets in
accordance with Section 5.01, the successor person formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
person had been named as the Company herein. When a successor corporation
assumes all of the obligations of the Company hereunder and under the Securities
and agrees to be bound hereby and thereby, the predecessor shall be released
from such obligations.
ARTICLE SIX
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Securities when the same becomes due and payable and the Default continues
for a period of 30 days;
(2) the Company defaults in the payment of the stated principal
amount of any Securities when the same becomes due and payable at
maturity, upon acceleration or redemption pursuant to an offer to purchase
required hereunder or otherwise;
(3) the Company fails to comply in all material respects with any of
its other agreements contained in the Securities, this Indenture
(including, without limitation, under Sections 4.15, 4.16 and 5.01) or the
Collateral Documents and to the extent applicable, the Default continues
for the period and after the notice specified below;
(4) there shall be any default or defaults in the payment of
principal or interest under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under
which the Company or any Subsidiary of
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the Company then has outstanding Indebtedness in excess of $7,500,000,
individually or in the aggregate;
(5) there shall be any default or defaults under one or more
agreements, instruments, mortgages, bonds, debentures or other evidences
of Indebtedness under which the Company or any Subsidiary of the Company
then has outstanding Indebtedness in excess of $7,500,000, individually or
in the aggregate, and such default or defaults have resulted in the
acceleration of the maturity of such Indebtedness;
(6) the Company or any of its Subsidiaries fails to perform any
term, covenant, condition or provision of one or more agreements,
instruments, mortgages, bonds, debentures or other evidences of
Indebtedness under which the Company or any of its Subsidiaries then has
outstanding Indebtedness in excess of $7,500,000, individually or in the
aggregate, and such failure to perform results in the commencement of
judicial proceedings to foreclose upon any assets of the Company or any of
its Subsidiaries securing such Indebtedness or the holders of such
Indebtedness shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu
of foreclosure;
(7) one or more judgments, orders or decrees for the payment of
money which either individually or in the aggregate at any one time
exceeds $7,500,000 shall be rendered against the Company or any of its
Subsidiaries by a court of competent jurisdiction and shall remain
undischarged and unbonded for a period (during which execution shall not
be effectively stayed) of 60 consecutive days after such judgment becomes
final and nonappealable;
(8) the Company or any Significant Subsidiary of the Company (A)
admits in writing its inability to pay its debts generally as they become
due, (B) commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (C) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (D) consents to the appointment of a Custodian of it or
for substantially all of its property, (E) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(F) makes a general assignment for the benefit of its creditors, or (G)
takes any corporate action to authorize or effect any of the foregoing;
(9) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any
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Significant Subsidiary of the Company in an involuntary case or proceeding
under any Bankruptcy Law, which shall (A) approve as properly filed a
petition seeking reorganization, arrangement, adjustment or composition in
respect of the Company or any Significant Subsidiary of the Company, (B)
appoint a Custodian of the Company, or any Significant Subsidiary of the
Company or for substantially all of its property or (C) order the
winding-up or liquidation of its affairs; and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(10) any Collateral Document (other than the Intercreditor
Agreement) ceases to be in full force and effect or any person acting on
behalf of the Company shall deny or disaffirm its obligations under any
Collateral Document or the secured obligations under the Collateral
Documents cease to be secured by a perfected security interest in any
portion of the Collateral purported to be pledged under the Collateral
Documents with respect thereto (other than in accordance with the terms
thereof).
A Default under clause (3) above (other than in the case of any
Default under Sections 4.15, 4.16, 4.17 and 5.01, which Defaults shall be Events
of Default without the notice and without the passage of time specified in this
paragraph) is not an Event of Default until the Trustee notifies the Company, or
the Holders of at least 25% in principal amount of the outstanding Securities
notify the Company and the Trustee of the Default, and the Company does not cure
the Default within 30 days after receipt of the notice. The notice must specify
the Default, demand that it be remedied and state that the notice is a "Notice
of Default." Such notice shall be given by the Trustee if so requested by the
Holders of at least 25% in principal amount of the Securities then outstanding.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(8) or (9)) occurs and is continuing, the Trustee may, by notice to
the Company, or the Holders of at least 25% in principal amount of the
Securities then outstanding may, by written notice to the Company and the
Trustee, and the Trustee shall, upon the request of such Holders, declare the
aggregate principal amount of the Securities outstanding, together with accrued
but unpaid interest thereon to the date of payment, to be due and payable and,
upon any such declaration, the same shall become and be due and payable;
provided, however, that the Trustee shall be under no obligation to follow any
request of any of the
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Holders unless such Holders shall have offered to the Trustee, after request by
the Trustee, reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred by it in compliance with such request, order
or direction. If an Event of Default specified in Section 6.01(8) or (9) as to
the Company occurs, all unpaid principal, premium, if any, and accrued interest
on the Securities then outstanding shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Securityholder. Upon payment of such principal amount and interest, all
of the Company's obligations under the Securities and this Indenture, other than
obligations under Section 7.07, shall terminate. The Holders of a majority in
principal amount of the Securities then outstanding by notice to the Trustee may
rescind an acceleration and its consequences if (i) all existing Events of
Default, other than the non-payment of the principal and interest on the
Securities which have become due solely by such declaration of acceleration,
have been cured or waived, (ii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, and (iii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction. No such rescission shall affect any
subsequent default or impair any right consequent thereto. In the event that a
declaration of acceleration under either Section 6.01(4) or 6.01(5) above has
occurred and is continuing, such declaration of acceleration shall be
automatically annulled if the Indebtedness that is the subject of such Event of
Default has been discharged or paid or the holders of such Indebtedness shall
have rescinded their declaration of acceleration in respect of such Indebtedness
within 60 days thereafter and no other Event of Default has occurred during such
60-day period which has not been cured or waived.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture and may
instruct the Collateral Agent to take any action under the Collateral Documents
as may be required or permitted thereunder.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an
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Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default in the payment of principal of or interest on any Security as specified
in clauses (1) and (2) of Section 6.01 or in respect of any provision hereof
which cannot be modified or amended without the consent of the Holder so
affected pursuant to Section 9.02. When a Default or Event of Default is so
waived, it shall be deemed cured and cease to exist.
SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount of the outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it including, without limitation, any remedies provided for in
Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to follow
any direction that conflicts with any law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another Securityholder, or
that may involve the Trustee in personal liability; provided that the Trustee
may take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee reasonable indemnity against
any loss, liability or expense to be incurred in compliance with such
request;
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(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer of satisfactory indemnity; and
(5) during such 30-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder except to the extent
that the institution or prosecution of such suit or the entry of judgment
therein would, under applicable law, result in the surrender, impairment, waiver
or loss of the Lien of this Indenture and the Collateral Documents upon the
Collateral.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of principal
and accrued interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
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Securityholders allowed in any judicial proceedings relating to the Company or
any other obligor upon the Securities, any of their respective creditors or any
of their respective property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Securityholder to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 and then to
the Collateral Agent for amounts due under the Collateral Documents;
Second: to Holders for interest accrued on the Securities, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for interest;
Third: to Holders for principal amounts owing under the Securities
and other amounts owing to the Holders with respect to the Securities,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and other amounts
owing to the Holders with respect to the Securities; and
Fourth: to the Company or any other obligor on the Securities, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
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SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed.
SECTION 7.01. Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
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determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree with the Company. Assets
held in trust by the Trustee need not be segregated from other assets except to
the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 12.04 and 12.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon reasonable
notice to the Company, to examine the books, records, and premises of the
Company, personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Subsidiary of the Company or their respective Affiliates with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Securityholder, as
their names and addresses appear on the Securityholder list described in Section
2.05, notice of the uncured Default or Event of Default within 90 days after the
Trustee obtains actual knowledge that such Default or Event of Default has
occurred. Except in the case of a Default or an Event of Default in payment of
principal of, or interest on, any Security, and a Default that resulted from the
failure to comply with Sections 4.15, 4.16 or 5.01, the Trustee may withhold the
notice if and so long as its board of directors, the executive committee of its
board of directors or a committee of its directors and/or Trust Officers in good
faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA, and, until such qualification,
this Indenture shall be construed as if this Section 7.06 were not contained
herein.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall, to the extent that any of the
events described in TIA ss. 313(a) occurred within the previous twelve months,
but not otherwise, mail to each Securityholder a brief report dated as of such
May 15 that complies with TIA ss. 313(a). The Trustee also shall comply with TIA
ss.ss. 313(b) and 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any securities exchange.
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SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services as the Company and the Trustee may agree. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all tax obligations imposed on the Trustee related to this Indenture
and all reasonable out-of-pocket expenses incurred or made by it. Such expenses
shall include the reasonable fees and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee and its agents for, and hold
them harmless against, any loss, liability or expense incurred by them except
for such actions to the extent caused by any negligence or bad faith on their
part, arising out of or in connection with the administration of this trust
including the reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of any of
their rights, powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity, but the Trustee's failure to so notify the Company shall not affect
the Company's obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel;
provided that the Company will not be required to pay such fees and expenses if
it assumes the Trustee's defense and there is no conflict of interest between
the Company and the Trustee in connection with such defense as reasonably
determined by the Trustee. The Company need not pay for any settlement made
without its written consent. The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Securities on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except assets or
money held in trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(8) or (9) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
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SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Securities may remove the
Trustee by so notifying the Company and the Trustee and may appoint a successor
trustee with the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Any resignation or removal of the Trustee pursuant to this Indenture
shall be deemed to be a resignation or removal of
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the Trustee in its capacity as Collateral Agent under the Collateral Documents
and any appointment of a successor Trustee pursuant to this Indenture shall be
deemed to be appointment of a successor Collateral Agent under the Collateral
Documents and such successor shall assume all of the obligations of the Trustee
in its capacity as Collateral Agent under the Collateral Documents.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1) and 310(a)(5). The Trustee (or in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding company,
shall meet the capital requirements of TIA ss. 310(a)(2). The Trustee shall
comply with TIA ss. 310(b); provided, however, that there shall be excluded from
the operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations.
The Company may terminate its obligations under the Securities and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities which have been
replaced or paid and Securities for whose payment money has heretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by it
hereunder, or if:
(a) pursuant to Article Three, the Company shall have given notice
to the Trustee and mailed a notice of redemption to each Holder of the
redemption of all of the Securities under arrangements satisfactory to the
Trustee for the giving of such notice;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money or direct non-callable
obligations of, or non-callable obligations guaranteed by, the United
States of America for the payment of which guarantee or obligation the
full faith and credit of the United States is pledged ("U.S. Government
Obligations") maturing as to principal and interest in such amounts and at
such times as are sufficient without consideration of any reinvestment of
such interest, to pay principal of and interest on the outstanding
Securities to redemption as certified to the Trustee by a nationally
recognized firm of independent public accountants designated by the
Company; provided that the Trustee shall have been irrevocably instructed
to apply such money or the proceeds of such U.S. Government Obligations to
the payment of said principal and interest with respect to the Securities;
and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of
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the Company's obligation under the Securities and this Indenture have been
complied with.
Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 7.08, 8.04 and 8.05 shall
survive until the Securities are no longer outstanding. After the Securities are
no longer outstanding, the Company's obligations in Sections 7.07, 8.04 and 8.05
shall survive.
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations
specified above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either paragraph (b) or paragraph
(c) below be applied to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred to in (i) and
(ii) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of and interest on such Securities when such payments
are due, (ii) the Company's obligations with respect to such Securities under
Sections 2.05, 2.06, 2.07, 2.08, 4.02, 7.07, 7.08, 8.04 and 8.05, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv)
this Section 8.02. Subject to compliance with this Section 8.02, the Company may
exercise its
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option under this paragraph (b) notwithstanding the prior exercise of its option
under paragraph (c) below with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article Five and in
Sections 4.03, 4.07, 4.09 and 4.11 through 4.22 with respect to the outstanding
Securities on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and the Securities shall thereafter be
deemed to be not "outstanding" for the purpose of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the outstanding Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01, but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal of and interest in respect thereof in
accordance with their terms will provide, not later than one day before
the due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge
principal of, premium, if any, and interest on the outstanding Securities
on the Maturity Date of such principal or installment of principal or
interest in
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accordance with the terms of this Indenture and of such Securities;
provided, however, that the Trustee (or other qualifying trustee) shall
have received an irrevocable written order from the Company instructing
the Trustee (or other qualifying trustee) to apply such money or the
proceeds of such U.S. Government Obligations to said payments with respect
to the Securities;
(ii) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Securities shall have occurred and be continuing on the
date of such deposit or, insofar as Sections 6.01(8) and (9) are
concerned, at any time during the period ending on the 91st day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(iii) such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a Default or Event of Default
under, this Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound;
(iv) in the case of an election under paragraph (b) above, the
Company shall have delivered to the Trustee an Opinion of Counsel stating
that (x) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (y) since the date of this
Indenture, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the outstanding Securities will not
recognize income, gain or loss for Federal income tax purposes as a result
of such legal defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such legal defeasance had not occurred;
(v) in the case of an election under paragraph (c) above, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
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(vi) in the case of an election under either paragraph (b) or (c)
above, an Opinion of Counsel to the effect that, (x) the trust funds will
not be subject to any rights of any other holders of Indebtedness of the
Company, and (y) after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable Bankruptcy Law;
provided, however, that if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Company,
no opinion needs to be given as to the effect of such laws on the trust
funds except the following: (A) assuming such trust funds remained in the
Trustee's possession prior to such court ruling to the extent not paid to
Holders of Securities, the Trustee will hold, for the benefit of the
Holders of Securities, a valid and enforceable security interest in such
trust funds that is not avoidable in bankruptcy or otherwise, subject only
to principles of equitable subordination, (B) the Holders of Securities
will be entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used, and (C) no property, rights in
property or other interests granted to the Trustee or the Holders of
Securities in exchange for or with respect to any of such funds will be
subject to any prior rights of any other Person, subject only to prior
Liens granted under Section 364 of Title 11 of the U.S. Bankruptcy Code
(or any section of any other Bankruptcy Law having the same effect), but
still subject to the foregoing clause (B); and
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (A) all
conditions precedent provided for relating to either the legal defeasance
under paragraph (b) above or the covenant defeasance under paragraph (c)
above, as the case may be, have been complied with and (B) if any other
Indebtedness of the Company shall then be outstanding, such legal
defeasance or covenant defeasance will not violate the provisions of the
agreements or instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (other than the Company or any of its Affiliates) as the Trustee
may determine, to the Holders of such
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Securities of all sums due and to become due thereon in respect of principal and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the outstanding Securities.
Anything in this Section 8.02 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
legal defeasance or covenant defeasance.
SECTION 8.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Securities.
SECTION 8.04. Repayment to Company.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee shall promptly
pay to the Company, upon receipt by the Trustee of an Officers' Certificate, any
excess money, determined in accordance with Sections 8.02(d)(i) and (e), held by
it at any time. The Trustee and the Paying Agent shall pay to the Company upon
receipt by the Trustee or the Paying Agent, as the case may be, of an Officers'
Certificate, any money held by it for the payment of principal or interest that
remains unclaimed for two years; provided, however, that the Trustee and the
Paying Agent before being required to make any payment may, but need not, at the
expense of the Company, cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein, which shall be at least 30 days from the date of such publication or
mailing, any
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unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Securityholders entitled to money must look solely
to the Company for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had been made pursuant to
this Indenture until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with this Indenture;
provided, however, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not adversely affect the rights of any
Holder;
(2) to comply with Article Five;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
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(4) to make any other change that does not materially adversely
affect the rights of any Securityholders hereunder or under the Collateral
Documents;
(5) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA; or
(6) to provide for future guarantees as provided by Section 4.19;
provided that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Securities, may amend or supplement this Indenture or the Securities, without
notice to any other Securityholders. Subject to Section 6.07, the Holder or
Holders of a majority in aggregate principal amount of the outstanding
Securities may waive compliance by the Company with any provision of this
Indenture or the Securities without notice to any other Securityholder. However,
without the consent of each Securityholder affected, no amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities or the Collateral Documents;
(2) reduce the rate of, or extend the time for payment of, interest,
including defaulted interest, on any Security;
(3) reduce the principal amount of any Security or any premium
thereon;
(4) change the Maturity Date of any Security, or alter the
redemption provisions or the repurchase provisions in this Indenture, the
Securities or the Collateral Documents in a manner adverse to any Holder;
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(5) waive a default in the payment of the principal of, interest on,
or redemption payment or repurchase payment required hereunder with
respect to, any Security, including without limitation, a failure to make
payment when required upon a Change of Control or after an Asset Sale;
(6) make any changes in any provisions relating to waivers of
defaults, the ability of the Holders to enforce their rights under this
Indenture, the Securities, the Collateral Documents or this Section 9.02;
(7) make the principal of, or the interest on any Security payable
in money other than as provided for in this Indenture and the Securities
as in effect on the date hereof;
(8) affect the ranking of the Securities in a manner adverse to the
Holders or release all or substantially all of the Collateral; or
(9) after the Company's obligation to purchase the Securities arises
thereunder, amend, modify or change the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of
Control or an Asset Sale Offer in the event of an Asset Sale or waive any
default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers.
In addition to the foregoing, except as expressly permitted by this
Indenture (including, without limitation, in Sections 10.03, 10.04 and 10.05),
no portion of the Collateral may be released without the consent of the Holders
of at least 75% in aggregate principal amount of the then outstanding
Securities.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
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SECTION 9.03. Compliance with TIA.
From the date on which the Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by notice to the
Trustee or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver. Notwithstanding the above, nothing in
this paragraph shall impair the right of any Securityholder under ss. 316(b) of
the TIA.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to revoke any consent previously given, whether or not such
persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (9) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to
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the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make the
appropriate notation or issue a new Security shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture.
ARTICLE TEN
COLLATERAL DOCUMENTS
SECTION 10.01. Collateral and Collateral Documents.
(a) In order to secure the due and punctual payment of principal of
and interest on the Securities when and as the same shall be due and payable,
whether on an Interest Payment Date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of and interest
(to the extent permitted by law), if any, on the Securities and performance of
all other obligations of the Company to the Holders or the Trustee under this
Indenture and the Securities, the Company and the Collateral Agent have
simultaneously with the execution of this Indenture entered into the Collateral
Documents, pursuant to which the Company has granted to the Collateral Agent for
the benefit of the Trustee and the Holders a second priority Lien on and
security interest in the Collateral (such Lien ranking junior in priority only
to the existing Lien on the Collateral for the benefit of the holders of any
outstanding Existing Securities). In addition, such second priority Lien granted
to the Collateral Agent will be pari passu with the Lien granted to the trustee
of the VEBA Trust pursuant to the VEBA Mortgage and the VEBA Security Agreement;
provided that at such time as no Existing Securities remain outstanding, the
security interest in the Collateral granted to the
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Collateral Agent for the benefit of the Trustee and the Holders shall become a
first priority Lien and the Lien granted to the VEBA Trustee pursuant to the
VEBA Mortgage and the VEBA Security Agreement shall remain a second priority
Lien, junior in priority to the Lien created by the Collateral Documents. The
Collateral Agent and the Company hereby agree that the Collateral Agent holds
the Collateral as a secured party or mortgagee, as the case may be, in trust for
the benefit of the Trustee, in its capacity as trustee, and for the ratable
benefit of the Holders pursuant to the terms of the Collateral Documents. The
Collateral Agent is authorized and directed to enter into each of (i) the
Intercreditor Agreement and (ii) the VEBA Intercreditor Agreement.
(b) Each Holder, by accepting a Security, consents and agrees to all
of the terms and provisions of the Collateral Documents, as the same may be in
effect from time to time or may be amended from time to time in accordance with
the provisions of the Collateral Documents and this Indenture, and authorizes
and directs the Collateral Agent to act as mortgagee or secured party with
respect thereto.
(c) As set forth in and governed by the Collateral Documents, as
among the Holders of Securities, the Collateral as now or hereafter constituted
shall be held for the equal and ratable benefit of the Holders of the Securities
without preference, priority or distinction of any thereof over any other by
reason of difference in time of issuance, sale or otherwise, as security for the
Securities.
SECTION 10.02. Recording; Priority; Opinions, Etc.
(a) The Company shall at its sole cost and expense perform any and
all acts and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable federal, state or local jurisdiction, including any
filings in local real estate land record offices, which are necessary or
advisable and shall do such other acts and execute such other documents as may
be required under any of the Collateral Documents, from time to time, in order
to grant, perfect and maintain in favor of the Collateral Agent for the benefit
of the Trustee and the Holders a valid and perfected Lien on the Collateral with
the priority set forth in Section 10.01(a), subject only to the Liens permitted
by the Collateral Documents and to fully preserve and protect the rights of the
Trustee and the Holders under this Indenture.
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The Company shall from time to time promptly pay and satisfy all
mortgage and financing and continuation statement recording and/or filing fees,
charges and taxes relating to this Indenture and the Collateral Documents, any
amendments thereto and any other instruments of further assurance. Without
limiting the generality of the foregoing covenant, in the event at any time the
Collateral Agent or the Trustee shall determine that additional mortgage
recording, transfer or similar taxes are required to be paid to perfect or
continue any Lien on any Collateral, the Company shall pay such taxes promptly
upon demand by the Collateral Agent or the Trustee.
(b) The Company shall, with respect to (i) below, promptly after the
initial issuance of the Securities, and with respect to (ii) below, upon
qualification of this Indenture under the TIA, furnish to the Trustee:
(i) Opinion(s) of Counsel either (a) to the effect that, in the
opinion of such counsel, this Indenture and the grant of a security
interest in the Collateral intended to be made by the Collateral Documents
and all other instruments of further assurance, including, without
limitation, financing statements, have been properly recorded and filed to
the extent necessary to perfect the Lien on the Collateral created by the
Collateral Documents and reciting the details of such action, and stating
that as to the Liens created pursuant to the Collateral Documents, such
recordings and filings are the only recordings and filings necessary to
give notice thereof and that no re-recordings or refilings are necessary
to maintain such notice (other than as stated in such opinion), or (b) to
the effect that, in the opinion of such counsel, no such action is
necessary to perfect such Lien;
(ii) on January 1 in each year beginning with January 1, 1998, an
Opinion of Counsel, dated as of such date, either (a) to the effect that,
in the opinion of such counsel, such action has been taken with respect to
the recordings, registerings, filings, re-recordings, re-registerings and
refilings of all financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of
each of the Collateral Documents and reciting with respect to such Liens
the details of such action or referencing prior Opinions of Counsel in
which such details are given, and stating that all financing statements
and continuation statements have been executed and filed that are
necessary fully to preserve and protect the rights of the Holders and the
Trustee hereunder and under each of the Collateral Documents with respect
to the Liens, or (b) to the
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effect that, in the opinion of such counsel, no such action is necessary
to maintain such Liens.
SECTION 10.03. Release of Collateral.
Except as otherwise permitted by Sections 10.04 and 10.05, the
Collateral Agent shall not release Collateral from the Lien of the Collateral
Documents unless such release is in accordance with the provisions of this
Section 10.03 and of the Collateral Documents. To the extent applicable, the
Company shall cause TIA ss. 314(d) relating to the release of property or Liens
to be complied with.
(a) Satisfaction and Discharge; Defeasance. The Company shall be
entitled to obtain a full release of all of the Collateral from the Lien
of this Indenture and the Collateral Documents upon compliance with all of
the conditions precedent for satisfaction and discharge of this Indenture
set forth in Section 8.01 or for defeasance pursuant to Section 8.02. Upon
delivery by the Company to the Trustee and to the Collateral Agent of an
Officers' Certificate and an Opinion of Counsel, each to the effect that
all of the conditions precedent have been complied with (which may be the
same Officers' Certificate and Opinion of Counsel required by Article
Eight), the Trustee shall take all necessary action, at the request and
expense of the Company, to release and reconvey to the Company all of the
Collateral, and shall deliver such Collateral in its possession to the
Company including, without limitation, the execution and delivery of
releases or waivers whenever necessary.
(b) Sales of Collateral Permitted by Section 4.16. The Company shall
be entitled to obtain a release of all or any part of the Collateral
(other than Trust Moneys) (the "Released Assets") subject to an Asset Sale
upon compliance with the condition precedent that the Company shall have
delivered to the Trustee and to the Collateral Agent the following:
(i) Release Notice. A notice (each, an "Asset Sale Release
Notice"), which shall (A) refer to this Section 10.03, (B) attach
all the documents referred to below, (C) describe with particularity
the Released Asset, (D) specify the value of such Released Asset on
a date within 60 days of the Asset Sale Release Notice (the
"Valuation Date"), (E) certify that the purchase price received is
equal to the Fair Market Value of the Released Asset as of the date
of such release, (F) state
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that the Released Asset will not interfere with or impede the
Trustee's ability to realize the value of the remaining Collateral
and will not impair the maintenance and operation of the remaining
Collateral, (G) confirm the sale of, or an agreement to sell, such
Released Interest in a bona fide sale to a Person that is not an
Affiliate of the Company or, in the event that such sale is to an
Affiliate, confirm that such sale is being made in accordance with
Section 4.11, (H) be accompanied by a counterpart of the instruments
proposed to give effect to the release fully executed and
acknowledged (if applicable) by all parties thereto other than the
Collateral Agent;
(ii) Officers' Certificate and Opinion of Counsel. An
Officers' Certificate and an Opinion of Counsel, each stating that
(A) such Asset Sale covers only the Released Asset and complies with
the terms and conditions of an Asset Sale pursuant to Section 4.16,
(B) all Net Cash Proceeds from the sale of the Released Asset will
be applied pursuant to Section 4.16, (C) there is no Default or
Event of Default in effect or continuing on the date thereof, (D)
the release of the Released Asset will not result in a Default or
Event of Default and (E) all conditions precedent to such release
have been complied with;
(iii) Regarding Real Property. If the Released Asset is only a
portion of a discrete parcel of Real Property, evidence that a title
company shall have committed to issue an endorsement to the title
insurance policy relating to the affected Mortgaged Property
confirming that after such release, the Lien of the applicable
Mortgage continues unimpaired as a perfected Lien having the
priority set forth in Section 10.01(a) upon the remaining Mortgaged
Property subject only to Prior Liens;
(iv) Proceeds of Asset Sale. The Net Cash Proceeds and other
non-cash consideration received from the Asset Sale required to be
delivered to the Trustee pursuant to Section 4.16; and
(v) Other Documents. Upon qualification of this Indenture
under the TIA, all documentation required by TIA ss. 314(d).
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(c) Release of Real Property Permitted by Section 4.23. The Company
shall be entitled to obtain a release of any part of the Collateral
constituting Released Real Property upon compliance with the condition
precedent that the Company shall have delivered to the Trustee and to the
Collateral Agent the following:
(i) Release Notice. A notice (each, a "Real Property Release
Notice") which shall (A) refer to this Section 10.03, (B) attach all
the documents referred to below, (C) describe with particularity the
Released Real Property, (D) specify the value of such Released Real
Property on a date within 60 days of the Real Property Release
Notice (the "Real Property Valuation Date"), (E) state that the
Released Real Property will not interfere with or impede the
Trustee's ability to realize the value of the remaining Collateral,
is not necessary for the proper and efficient operation of the
Mortgaged Property or for the compliance by the Mortgaged Property
with any applicable law, code or ordinance, including, without
limitation, any Environmental Law, and is not an integral part of
the Company's operations as conducted at the Mortgaged Property on
the Issue Date, and (F) be accompanied by a counterpart of the
instruments proposed to give effect to the release fully executed
and acknowledged (if applicable) by all parties thereto other than
the Collateral Agent;
(ii) Officers' Certificate and Opinion of Counsel. An
Officers' Certificate and an Opinion of Counsel, each stating that
(A) there is no Default or Event of Default in effect or continuing
on the date thereof, (B) the Real Property to be released
constitutes Released Real Property, (C) the release of the Released
Real Property will not result in a Default or Event to Default and
(D) all conditions precedent to such release have been complied
with;
(iii) Title Insurance. Evidence that a title company shall have
committed to issue an endorsement to the title insurance policy
relating to the affected Mortgaged Property confirming that after
such release, the Lien of the applicable Mortgage continues
unimpaired as a perfected Lien with the priority set forth in
Section 10.01(a) hereof upon the remaining Mortgaged Property,
subject only to Prior Liens; and
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(iv) Other Documents. Upon qualification of this Indenture
under the TIA, all documentation required by TIA ss. 314(d).
Upon compliance with the conditions set forth in (b) or (c) above,
and the delivery by the Company of such other documents that the Trustee or the
Collateral Agent may reasonably require, the Collateral Agent shall execute,
acknowledge (if applicable) and deliver to the Company such counterpart within
10 Business Days after receipt by the Trustee of an Asset Sale Release Notice or
Real Property Release Notice, as applicable, and the satisfaction of the
applicable requirements of this Section 10.03.
At any time when a Default or an Event of Default shall have
occurred and be continuing, no release of Collateral pursuant to the provisions
of this Indenture or the Collateral Documents shall be effective as against the
Holders of the Securities.
SECTION 10.04. Disposition of Collateral Without Release.
(a) So long as no Default or Event of Default shall have occurred
and be continuing, the Company may, without any release or consent by the
Collateral Agent or the Trustee, sell or otherwise dispose of any machinery,
equipment, furniture, apparatus, tools or implements or other similar property
which at such time is subject to the Lien of the Collateral Documents, which may
have become worn out or obsolete, not exceeding individually, in Fair Market
Value, $250,000, subject in all cases to the requirements of and restrictions
contained in the TIA.
(b) In the event that the Company has sold, exchanged, or otherwise
disposed of or proposes to sell, exchange or otherwise dispose of any portion of
the Collateral which under the provisions of this Section 10.04 may be sold,
exchanged or otherwise disposed of by the Company without any release or consent
of the Collateral Agent or the Trustee, and the Company requests the Collateral
Agent or the Trustee to furnish a written disclaimer, release or quitclaim of
any interest in such property under any of the Collateral Documents, the
Collateral Agent shall promptly execute (or, if so requested by the Company,
shall promptly instruct the Trustee to execute) such an instrument upon delivery
to the Trustee of (i) an Officers' Certificate by the Company reciting the sale,
exchange or other disposition made or proposed to be made and describing in
reasonable detail the property affected thereby, and stating and demonstrating
that such property is property which by the provisions of this Section 10.04 may
be sold, exchanged or otherwise disposed of or dealt with by the Company without
any release or consent of the Collateral Agent or the Trustee and
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(ii) an Opinion of Counsel stating that the sale, exchange or other disposition
made or proposed to be made was duly made by the Company in conformity with
Section 10.04(a) and that the execution of such written disclaimer, release or
quitclaim is appropriate to confirm the propriety of such sale, exchange or
other disposition under this Section 10.04. Notwithstanding the preceding
sentence, all purchasers and grantees of any property or rights purporting to be
released herefrom shall be entitled to rely upon any release executed by the
Collateral Agent or the Trustee hereunder as sufficient for the purposes of this
Indenture.
SECTION 10.05. Eminent Domain and Other Governmental Takings.
Subject to the provisions of the Collateral Documents, upon the
occurrence of a Taking or should any of the Collateral be sold pursuant to the
exercise by the United States of America or any State, municipality or other
governmental authority of any right which any of them may then have to purchase,
or to designate a purchaser or to order a sale of, all or any part of the
Collateral, the Trustee shall release the property subject to such Taking or
purchase, but only upon receipt by the Trustee of the following:
(a) an Officers' Certificate stating that a Taking has occurred with
respect to such property and the amount of the Net Award therefor, or that
such property has been sold pursuant to a right vested in the United
States of America or a state, municipality or other governmental authority
to purchase, or to designate a purchaser or order a sale of such property
and the amount of the proceeds of such sale, and that all conditions
precedent herein provided for relating to such release have been complied
with;
(b) any Net Award, to be held as Trust Moneys subject to the
disposition thereof pursuant to Article Eleven and the applicable
Collateral Documents; provided, however, that in lieu of all or any part
of such Net Award, the Company shall have the right to deliver to the
Trustee a certificate of the trustee, mortgagee or other holder of a Prior
Lien on all or any part of the property to be released, stating that such
Net Award, or a specified portion thereof, has been deposited with such
trustee, mortgagee or other holder pursuant to the requirements of such
Prior Lien, in which case the balance of the award, if any, shall be
delivered to the Trustee; and
(c) an Opinion of Counsel substantially to the effect:
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(i) that a Taking has occurred with respect to such property
or such property has been sold pursuant to the exercise of a right
vested in the United States of America or a State, municipality or
other governmental authority to purchase, or to designate a
purchaser or order a sale of, such property;
(ii) in the case of any Taking, that the Net Award for the
property so taken has become final or that the Board of Directors of
the Company has determined that an appeal from such award is not
advisable in the interests of the Company or the Holders of the
Securities;
(iii) in the case of any such sale, that the amount of the
proceeds of the property so sold is not less than the amount to
which the Company is legally entitled under the terms of such right
to purchase or designate a purchaser, or under the order or orders
directing such sale, as the case may be;
(iv) in the event that, pursuant to Section 10.05(b), the Net
Award for such property or the proceeds of such sale, or a specified
portion thereof, shall be certified to have been deposited with the
trustee, mortgagee or other holder of a Prior Lien, that the
property to be released, or a specified portion thereof, is or
immediately before such Taking or purchase was subject to such Prior
Lien, and that such deposit is required by such Prior Lien; and
(v) that the instrument or the instruments and the Net Award
or proceeds of such sale which have been or are therewith delivered
to and deposited with the Trustee conform to the requirements of
this Indenture and any of the Collateral Documents and that, upon
the basis of such application, the Collateral Agent and the Trustee
are permitted by the terms hereof and of the Collateral Documents to
execute and deliver the release requested, and that all conditions
precedent herein provided for relating to such release have been
complied with.
In any proceedings for the Taking or purchase or sale of any part of
the Collateral, by eminent domain or by virtue of any such right to purchase or
designate a purchaser or to order a sale, the Trustee may be represented by
counsel who may be counsel for the Company. Subject to the provisions of the
Collateral Documents, all cash or Cash Equivalents received by the Trustee
pursuant to this Section 10.05 shall be held by the Trustee as
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Trust Moneys under Article Eleven subject to application as therein provided.
Subject to the provisions of the Collateral Documents, all purchase money and
other obligations received by the Trustee pursuant to this Section 10.05 shall
be held by the Trustee as Collateral subject to application as provided in
Section 10.13.
SECTION 10.06. Trust Indenture Act Requirements.
The release of any Collateral, whether pursuant to any provision of
this Article Ten or Article Eleven, from any of the Collateral Documents or the
release of, in whole or in part, the Liens created by any of the Collateral
Documents, will not be deemed to impair the Lien of the Collateral Documents in
contravention of the provisions hereof if and to the extent the Collateral or
Liens are released pursuant to the applicable Collateral Documents and pursuant
to the terms hereof. The Trustee and each of the Holders acknowledge that a
release of Collateral or Liens strictly in accordance with the terms of the
Collateral Documents and the terms hereof will not be deemed for any purpose to
be an impairment of the Liens created pursuant to the Collateral Documents in
contravention of the terms of this Indenture. Without limitation, the Company
and each other obligor on the Securities shall cause TIA ss. 314(d) relating to
the release of property or securities from the Liens of each hereof and of the
Collateral Documents to be complied with. Any certificate or opinion required by
TIA ss. 314(d) may be made by an officer of the Company, except in cases which
TIA ss. 314(d) requires that such certificate or opinion be made by an
independent person.
SECTION 10.07. Suits To Protect Collateral.
Subject to the provisions of the Collateral Documents, the Trustee
shall have power to institute and to maintain such suits and proceedings as it
may deem expedient to prevent any impairment of the Collateral by any acts which
may be unlawful or in violation of any of the Collateral Documents or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Holders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the Collateral or be prejudicial to the interests of the Holders or
the Trustee).
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SECTION 10.08. Purchaser Protected.
In no event shall any purchaser in good faith of any property
purported to be released hereunder be bound to ascertain the authority of the
Collateral Agent or the Trustee to execute the release or to inquire as to the
satisfaction of any conditions required by the provisions hereof for the
exercise of such authority or to see to the application of any consideration
given by such purchaser or other transferee; nor shall any purchaser or other
transferee of any property or rights permitted by this Article Ten to be sold be
under obligation to ascertain or inquire into the authority of the Company to
make any such sale or other transfer.
SECTION 10.09. Powers Exercisable by Receiver or Trustee.
In case the Collateral shall be in the possession of a receiver or
trustee, lawfully appointed, the powers conferred in this Article Ten upon the
Company with respect to the release, sale or other disposition of such property
may be exercised by such receiver or trustee, and an instrument signed by such
receiver or trustee shall be deemed the equivalent of any similar instrument of
the Company or of any officer or officers thereof required by the provisions of
this Article Ten.
SECTION 10.10. Determinations Relating to Collateral.
In the event (i) the Trustee or the Collateral Agent shall receive
any written request from the Company under any Collateral Document for consent
or approval with respect to any matter or thing relating to any Collateral or
the Company's obligations with respect thereto (including, without limitation,
the determination as to whether any portion of the Collateral constitutes
Released Collateral) or (ii) there shall be due to or from the Trustee or the
Collateral Agent under the provisions of any Collateral Document any performance
or the delivery of any instrument or (iii) the Trustee or the Collateral Agent
shall become aware of any nonperformance by the Company of any covenant or any
breach of any representation or warranty of the Company set forth in any
Collateral Document, then, in each such event, the Trustee or the Collateral
Agent, as applicable, shall be entitled to hire experts, consultants, agents and
attorneys to advise the Trustee on the manner in which the Trustee should
respond to such request or render any requested performance or response to such
nonperformance or breach. The Trustee shall be fully protected in the taking of
any action recommended or approved by any such expert, consultant, agent or
attorney or agreed to by a majority of Holders pursuant to Section 6.05.
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SECTION 10.11. Form and Sufficiency of Release.
In the event that the Company has sold, exchanged, or otherwise
disposed of or propose to sell, exchange or otherwise dispose of any portion of
the Collateral which under the provisions of Sections 10.03 and 10.05 may be
sold, exchanged or otherwise disposed of by the Company, and the Company
requests the Trustee or the Collateral Agent to furnish a written disclaimer,
release or quitclaim of any interest in such property under any of the
Collateral Documents, the Collateral Agent shall promptly execute (or, if so
requested by the Company, shall promptly instruct the Trustee to execute) such
an instrument promptly after satisfaction of the conditions set forth herein for
delivery of such release. Notwithstanding the preceding sentence, all purchasers
and grantees of any property or rights purporting to be released herefrom shall
be entitled to rely upon any release executed by the Trustee hereunder as
sufficient for the purposes of this Indenture and as constituting a good and
valid release of the property therein described from the Lien of this Indenture
and the Collateral Documents.
SECTION 10.12. Possession and Use of Collateral.
Subject to and in accordance with the provisions of this Indenture
and the Collateral Documents, so long as no Default or Event of Default shall
have occurred and be continuing, the Company shall have the right to remain in
possession and retain exclusive control of the Collateral, to operate, manage,
develop, use and enjoy the Collateral and to collect, receive, use, invest and
dispose of the reversions, remainders, rates, interest, rents, issues, profits,
revenues, proceeds and other income thereof (other than Trust Moneys).
SECTION 10.13. Disposition of Obligations Received.
All purchase money or other obligations received by the Trustee
under this Article Ten shall be held by the Trustee, as a part of the
Collateral. Upon payment in cash or Cash Equivalents by or on behalf of the
Company or the obligor thereof to the Trustee of the entire unpaid principal
amount of any such obligation, to the extent not constituting Net Cash Proceeds
from an Asset Sale which may possibly be required, through the passage of time
or otherwise, to be used to purchase Securities pursuant to Section 4.16, the
Trustee shall promptly release and transfer such obligation and any mortgage
securing the same upon receipt of any documentation that the Trustee may
reasonably require. Any cash or Cash Equivalents received by the Trustee in
respect of the principal of any such obligations shall be held by the Trustee as
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Trust Moneys under Article Eleven subject to application as therein provided.
Unless and until the Securities are accelerated pursuant to Section 6.02, all
interest and other income on any such obligations, when received by the Trustee,
shall be paid to the Company from time to time in accordance with Section 11.07.
If the Securities have been accelerated pursuant to Section 6.02, any such
interest or other income not theretofore paid, when collected by the Trustee,
shall be applied by the Trustee, as the case may be, in accordance with Section
6.10.
SECTION 10.14. Release upon Termination of the Company's Obligations.
In the event that the Company delivers an Officers' Certificate
certifying that the provisions of Sections 8.01 or 8.02 have been complied with,
the Trustee shall (i) execute and deliver such releases, termination statements
and other instruments as the Company may reasonably request evidencing the
termination of the Liens created by the Collateral Documents and (ii) not be
deemed to hold the Liens for the benefit of the Holders.
ARTICLE ELEVEN
APPLICATION OF TRUST MONEYS
SECTION 11.01. "Trust Moneys" Defined.
Subject to the provisions of the VEBA Intercreditor Agreement, all
cash or Cash Equivalents received by the Trustee in accordance with the terms of
this Indenture and the Collateral Documents:
(a) upon the release of property from the Lien of the Collateral
Documents, including, without limitation, all moneys received in respect
of the principal of all purchase money, governmental or other obligations;
or
(b) as Net Proceeds upon the Destruction of all or any part of the
Collateral (other than any liability insurance proceeds payable to the
Trustee for any loss, liability or expense incurred by it); or
(c) as a Net Award or Net Awards upon the Taking of all or any part
of the Collateral; or
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(d) as proceeds of any other sale or other disposition of all or any
part of the Collateral by or on behalf of the Trustee or any collection,
recovery, receipt, appropriation or other realization of or from all or
any part of the Collateral pursuant to the Collateral Documents or
otherwise; or
(e) pursuant to the Mortgage; or
(f) for application under this Article Eleven as elsewhere provided
in this Indenture or the Collateral Documents, or whose disposition is not
elsewhere otherwise specifically provided for herein or in the Collateral
Documents;
(all such moneys being herein sometimes called "Trust Moneys"; provided,
however, that Trust Moneys shall not include any property deposited with the
Trustee pursuant to Section 3.06 or Article Eight or delivered to or received by
the Trustee for application in accordance with Section 6.10) shall be held by
the Trustee for the benefit of the Holders as a part of the Collateral and, upon
any entry upon or sale or other disposition of the Collateral or any part
thereof pursuant to the Collateral Documents, said Trust Moneys shall be applied
in accordance with Section 6.10; but, prior to any such entry, sale or other
disposition, all or any part of the Trust Moneys may be withdrawn, and shall be
released, paid or applied by the Trustee, from time to time as provided in this
Article Eleven.
On the Issue Date there shall be established and, at all times
hereafter until this Indenture shall have terminated, there shall be maintained
with the Trustee an account which shall be entitled the "Collateral Account"
(the "Collateral Account"). The Collateral Account shall be established and
maintained by the Trustee at its corporate trust offices. All Trust Moneys which
are received by the Trustee shall be deposited in the Collateral Account and
thereafter shall be held, applied and/or disbursed by the Trustee in accordance
with the terms of this Article Eleven.
SECTION 11.02. Withdrawals of Insurance Proceeds and Condemnation Awards.
Subject to the provisions of the Collateral Documents, to the extent
that any Trust Moneys consist of either (i) any Net Proceeds or (ii) any Net
Award or the proceeds for any of the Collateral subject to a Taking sold
pursuant to the exercise by the United States of America or any state,
municipality or other governmental authority of any right which it may then have
to purchase, or to designate a purchaser or to order a sale of any
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part of the Collateral, such Trust Moneys may be withdrawn by the Company and
shall be paid by the Trustee upon a request by a Company Order to reimburse the
Company for expenditures made, or to pay costs incurred, by the Company to
repair, rebuild or replace the property destroyed, damaged or taken, upon
receipt by the Trustee of the following:
(a) an Officers' Certificate of the Company, dated not more than 30
days prior to the date of the application for the withdrawal and payment
of such Trust Moneys:
(i) that expenditures have been made, or costs incurred, by
the Company in a specified amount for the purpose of making certain
repairs, rebuildings and replacements of the Collateral, which shall
be briefly described, and stating the fair value thereof to the
Company at the date of the expenditure or incurrence thereof by the
Company;
(ii) that no part of such expenditures or costs has been or is
being made the basis for the withdrawal of any Trust Moneys in any
previous or then pending application pursuant to this Section 11.02;
(iii) that there is no outstanding Indebtedness, other than
costs for which payment is being requested, for the purchase price
or construction of such repairs, rebuildings or replacements, or for
labor, wages, materials or supplies in connection with the making
thereof, which, if unpaid, might become the basis of a vendors',
mechanics', laborers', materialmen's, statutory or other similar
Lien upon any of such repairs, rebuildings or replacements, which
Lien might, in the opinion of the signers of such certificate,
materially impair the security afforded by such repairs, rebuildings
or replacements;
(iv) that the property to be repaired, rebuilt or replaced is
necessary or desirable in the conduct of the Company's business;
(v) whether any part of such repairs, rebuildings or
replacements within six months before the date of acquisition
thereof by the Company has been used or operated by any person other
than the Company in a business similar to that in which such
property has been or is to be used or operated by the Company, and
whether the fair value to the Company, at the date of such
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acquisition, of such part of such repairs, rebuildings or
replacement is at least $25,000, and 1% of the aggregate principal
amount of the outstanding Securities and, if all of such facts are
present, such part of said repairs, rebuildings or replacements
shall be separately described and it shall be stated that an
Appraiser's or Independent Financial Adviser's certificate as to the
fair value to the Company of such separately described repairs,
rebuildings or replacements will be furnished under paragraph (b) of
this Section 11.02;
(vi) that no Default or Event of Default shall have occurred
and be continuing; and
(vii) that all conditions precedent herein provided for
relating to such withdrawal and payment have been complied with;
(b) all documentation required under TIA ss. 314(d);
(c) (i) In case any part of such repairs, rebuildings or
replacements constitutes Real Property:
(1) with respect to any such repairs, rebuildings or
replacements that are not encompassed within or are not erected upon
Mortgaged Property, an instrument or instruments in recoverable form
sufficient for the Lien of this Indenture and any mortgage to cover
such repairs, rebuildings or replacements which, if such repairs,
rebuildings or replacements include leasehold or easement interests,
shall include normal and customary provisions with respect thereto
and evidence of the filing of all such documents as may be necessary
to perfect such Liens;
(2) a policy of title insurance (or a commitment to issue
title insurance) insuring that the Lien of this Indenture and any
Mortgage constitutes a direct and valid and perfected mortgage Lien
(of the priority contemplated in Section 10.01(a) hereof) on such
repairs, rebuildings or replacements in an aggregate amount equal to
the fair value of such repairs, rebuildings or replacements,
together with such endorsements and other opinions as are
contemplated in Section 10.02(b), or with respect to any such
repairs, rebuildings or replacements that are encompassed within or
erected upon Mortgaged Property an endorsement to the title
insurance policy issued pursuant to Section 10.02(b) regarding the
affected Mortgaged
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Property confirming that such repairs, rebuildings or replacements
are encumbered by the Lien of the applicable Mortgage;
(3) in the event that such repairs, rebuildings or
replacements have a fair value in excess of $250,000, a Survey with
respect thereto; and
(4) evidence of payment or a closing statement indicating
payments to be made by the Company of all title premiums, recording
charges, transfer taxes and other costs and expenses, including
reasonable legal fees and disbursements of counsel for the Trustee
(and any local counsel), that may be incurred to validly and
effectively subject such repairs, rebuildings or replacements to the
Lien of any applicable Collateral Document and to perfect such Lien;
and
(ii) in case any part of such repairs, rebuildings or replacements
constitutes personal property interests:
(1) an instrument in recoverable form sufficient for the Lien
of the Security Agreement to cover such repairs, rebuildings or
replacements; and
(2) evidence of payment or a closing statement indicating
payments to be made by the Company of all filing fees, recording
charges, transfer taxes and other costs and expenses, including
reasonable legal fees and disbursements of counsel for the Trustee
(and any local counsel), that may be incurred to validly and
effectively subject such repairs, rebuildings or replacements to the
Lien of any Collateral Document; and
(d) an Opinion of Counsel substantially stating:
(i) that the instruments that have been or are therewith
delivered to the Trustee conform to the requirements of this
Indenture and the Collateral Documents, and that, upon the basis of
such request of the Company and the accompanying documents specified
in this Section 11.02, all conditions precedent herein provided for
relating to such withdrawal and payment have been complied with, and
the Trust Moneys whose withdrawal is then requested may be lawfully
paid over under this Section 11.02;
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(ii) that the Company has acquired title to said repairs,
rebuildings and replacements at least equivalent to its title to the
property destroyed, damaged or taken, and that the same and every
part thereof are free and clear of all Liens prior to the Lien of
any Collateral Documents, except Liens of the type permitted under
the applicable Collateral Document to which the property so
destroyed, damaged or taken shall have been subject at the time of
such destruction, damage or taken;
(iii) that all of the Company's right, title and interest in
and to said repairs, rebuildings or replacements, or combination
thereof, are then subject to the Lien of the Collateral Documents.
Upon compliance with the foregoing provisions of this Section 11.02,
the Trustee shall pay on the written request of the Company an amount of Trust
Moneys of the character aforesaid equal to the amount of the expenditures or
costs stated in the Officers' Certificate required by clause (i) of subsection
(a) of this Section 11.02, or the fair value to the Company of such repairs,
rebuildings and replacements stated in such Officers' Certificate (or in such
Appraiser's or Independent Financial Advisor's certificate, if required),
whichever is less.
SECTION 11.03. Withdrawal of Trust Moneys on Basis of Retirement of Securities.
(a) Except with respect to Trust Moneys received pursuant to Section
10.03(b) and subject to release pursuant to Section 11.03(b) and Section 11.04,
and as otherwise permitted or required by the Collateral Documents, the Trustee
shall apply Trust Moneys from time to time to the payment of the principal of
and interest on any Securities, on any Maturity Date or to the redemption
thereof or the purchase thereof upon tender or in the open market or at private
sale or upon any exchange or in any one or more of such ways, including, without
limitation, pursuant to a Change of Control Offer under Section 4.15 or an Asset
Sale Offer pursuant to Section 4.16, as the Company shall request in writing,
upon receipt by the Trustee of the following:
(i) a Board Resolution of the Company directing the application
pursuant to this Section 11.03 of a specified amount of Trust Moneys and,
if any such moneys are to be applied to payment, designating the
Securities so to be paid and, in case any such moneys are to be applied to
the purchase of Securities, prescribing the method of purchase, the price
or prices to be paid and the maximum principal amount of
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Securities to be purchased and any other provisions of this Indenture
governing such purchase;
(ii) cash in the maximum amount of the accrued interest, if any,
required to be paid in connection with any such purchase, which cash shall
be held by the Trustee, in trust for such purpose;
(iii) an Officers' Certificate, dated not more than 5 Business Days
prior to the date of the relevant application, stating (A) that no Default
or Event of Default exists unless such Default or Event of Default would
be cured thereby, and (B) that all conditions precedent and covenants
herein provided for relating to such application of Trust Moneys have been
complied with; and
(iv) an Opinion of Counsel stating that the documents and the cash
or Cash Equivalents, if any, which have been or are therewith delivered to
and deposited with the Trustee conform to the requirements of this
Indenture and that all conditions precedent herein provided for relating
to such application of Trust Moneys have been complied with.
Upon compliance with the foregoing provisions of this Section
11.03(a), the Trustee shall apply Trust Moneys as directed and specified by such
Board Resolution, up to, but not exceeding, the principal amount of the
Securities so paid or purchased, using the cash deposited pursuant to paragraph
(ii) of this Section 11.03(a), to the extent necessary, to pay any accrued
interest required in connection with such purchase.
(b) To the extent that any Trust Moneys consist of Trust Moneys
received by the Trustee pursuant to the provisions of Section 4.16 and the
Company has made an Asset Sale Offer which is not fully subscribed to by the
Holders, the Trust Moneys remaining after completion of the Asset Sale Offer may
be withdrawn by the Company and shall be paid by the Trustee to the Company (or
as otherwise directed by the Company) upon a Company Order to the Trustee and
upon receipt by the Trustee of the following:
(i) A notice which shall (A) refer to this Section 11.03(b) and (B)
describe with particularity the Asset Sale from which such Trust Moneys
were held as Collateral, the amount of Trust Moneys applied to the
purchase of Securities pursuant to the Asset Sale Offer and the remaining
amount of Trust Moneys to be released to the Company;
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(ii) An Officer's Certificate certifying that (A) the release of the
Trust Moneys complies with the terms and conditions of Section 4.16, (B)
there is no Default or Event of Default in effect or continuing on the
date thereof, (C) the release of the Trust Moneys will not result in a
Default or Event of Default hereunder, and (D) all conditions precedent
and covenants herein provided relating to such release have been complied
with;
(iii) All documentation required under TIA 314(d); and
(iv) An Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee conform
to the requirements of this Indenture and that all conditions precedent
herein provided for relating to such application of Trust Moneys have been
complied with.
SECTION 11.04. Withdrawal of Trust Moneys for Reinvestment.
To the extent that any Trust Moneys consist of Net Cash Proceeds
received by the Trustee pursuant to the provisions of Section 4.16, and the
Company intends to reinvest such Net Cash Proceeds in a Related Business
Investment (the "Released Trust Moneys"), such Trust Moneys may be withdrawn by
the Company and shall be paid by the Trustee to the Company (or as otherwise
directed by the Company) upon a Company Order to the Trustee and upon receipt by
the Trustee of the following:
(a) A notice which shall (i) refer to this Section 11.04, (ii)
contain all documents referred to below, (iii) describe with particularity
the Released Trust Moneys and the Asset Sale from which such Released
Trust Moneys were held as Collateral, (iv) describe with particularity the
Related Business Investment to be made with respect to the Released Trust
Moneys and (v) be accompanied by a counterpart of the instruments proposed
to give effect to the release fully executed and acknowledged (if
applicable) by all parties thereto other than the Trustee;
(b) An Officer's Certificate certifying that (i) the release of the
Released Trust Moneys complies with the terms and conditions of Section
4.16, (ii) there is no Default or Event of Default in effect or continuing
on the date thereof, (iii) the release of the Released Trust Moneys will
not result in a Default or Event of Default hereunder and (iv) all
conditions precedent and covenants herein provided for
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relating to such release and application of the Released Trust Moneys have
been complied with;
(c) If the Related Business Investment to be made is an investment
in Real Property:
(i) an instrument or instruments in recordable form
sufficient for the Lien of any Mortgage to cover such Real Property
which, if the Real Property is a leasehold or easement interest,
shall include normal and customary provisions with respect thereto
and evidence of the filing of all such financing statements and
other instruments as may be necessary to perfect such Liens;
(ii) a policy of title insurance (or a commitment to issue
title insurance) insuring that the Lien of this Indenture and any
Mortgage constitutes a direct and valid and perfected mortgage Lien
of the priority contemplated in Section 10.01(a) on such Real
Property in an aggregate amount equal to the fair value of the Real
Property, together with an Officers' Certificate stating that any
specific exceptions to such title insurance are Permitted Liens,
together with such endorsements and other opinions as are
contemplated by Section 11.2(b)(ii);
(iii) in the event such Real Property has a fair value in
excess of $250,000, a Survey with respect thereto; and
(iv) evidence of payment or a closing statement indicating
payments to be made by the Company of all title premiums, recording
charges, transfer taxes and other costs and expenses, including
reasonable legal fees and disbursements of one counsel for the
Trustee (and any local counsel), that may be incurred to validly and
effectively subject the Real Property to the Lien of any applicable
Collateral Document to perfect such Lien; and
(d) If the Related Business Investment is a personal property
interest:
(i) an instrument in recordable form, if necessary, sufficient
for the Lien of any applicable Collateral Document to cover such
personal property interest; and
(ii) evidence of payment or a closing statement indicating
payments to be made by the Company of all filing fees, recording
charges, transfer taxes and other
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costs and expenses, including reasonable legal fees and
disbursements of one counsel for the Trustee (and any local
counsel), that may be incurred to validly and effectively subject
the Related Business Investment to the Lien of any Collateral
Document.
(e) All documentation required under TIA ss. 314(d); and
(f) An opinion of counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee conform
to the requirements of this Indenture and that all conditions precedent
herein provided for relating to such application of Trust Moneys have been
complied with.
Upon compliance with the foregoing provisions of this Section, the
Trustee shall apply the Released Trust Moneys as directed and specified by the
Company.
SECTION 11.05. Powers Exercisable Notwithstanding Default or Event of Default.
In case a Default or an Event of Default shall have occurred and
shall be continuing, the Company, while in possession of the Collateral (other
than cash, Cash Equivalents, securities and other personal property held by, or
required to be deposited or pledged with, the Trustee hereunder or under the
Collateral Documents), may do any of the things enumerated in Sections 11.02,
11.03 and 11.04 if the Holders of a majority in aggregate principal amount of
the Securities outstanding, by appropriate action of such Holders, shall consent
to such action, in which event any certificate filed under any of such Sections
shall omit the statement to the effect that no Default or Event of Default has
occurred and is continuing. This Section 11.05 shall not apply, however, during
the continuance of an Event of Default of the type specified in Section 6.01(1)
or (2).
SECTION 11.06. Powers Exercisable by Trustee or Receiver.
In case the Collateral (other than any cash, Cash Equivalents,
securities and other personal property held by, or required to be deposited or
pledged with, the Trustee hereunder or under the Collateral Documents) shall be
in the possession of a receiver or trustee lawfully appointed, the powers
hereinbefore in this Article Eleven conferred upon the Company with respect to
the withdrawal or application of Trust Moneys may be exercised by such receiver
or trustee, in which case a certificate signed by such receiver or trustee shall
be deemed the equivalent of any Officers'
<PAGE>
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Certificate required by this Article Eleven. If the Trustee shall be in
possession of any of the Collateral hereunder or under any of the Collateral
Documents, such powers may be exercised by the Trustee, in its discretion.
SECTION 11.07. Investment of Trust Moneys.
All or any part of any Trust Moneys held by the Trustee shall from
time to time be invested or reinvested by the Trustee in any Cash Equivalents
pursuant to the written direction of the Company, which shall specify the Cash
Equivalents in which such Trust Moneys shall be invested and the maturity date
of such investment. Unless an Event of Default occurs and is continuing, any
interest on such Cash Equivalents (in excess of any accrued interest paid at the
time of purchase) that may be received by the Trustee shall be forthwith paid to
the Company. Such Cash Equivalents shall be held by the Trustee as a part of the
Collateral, subject to the same provisions hereof as the cash used by it to
purchase such Cash Equivalents.
The Trustee shall not be liable or responsible for any loss
resulting from such investments or sales except only for its own grossly
negligent action, its own grossly negligent failure to act or its own willful
misconduct in complying with this Section 11.07.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 12.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, or overnight courier addressed as follows:
<PAGE>
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if to the Company:
WCI Steel, Inc.
1040 Pine Avenue SE
Warren, Ohio 44483-6528
Attention: Bret W. Wise
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Michael C. Ryan, Esq., c/o Managing
Attorneys' Office
if to the Trustee or the Collateral Agent:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06108
Attention: Corporate Trust Administration
Each of the Company, the Trustee and the Collateral Agent by written
notice to each other such person may designate additional or different addresses
for notices to such person. Any notice or communication to the Company, the
Trustee or the Collateral Agent shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if faxed; and five (5) calendar days after
mailing, if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder, including
any notice delivered in connection with TIA ss. 310(b), TIA ss. 313(c), TIA ss.
314(a) and TIA ss. 315(b), shall be mailed to him by first class mail or other
equivalent means at his address as it appears on the registration books of the
Registrar and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or
<PAGE>
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communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 12.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA ss. 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
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(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Securityholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.08. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
SECTION 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. No Recourse Against Others.
A director, officer, employee, stockholder or Affiliate, as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. Each Securityholder by
accepting a Security waives and releases all such liability. Such waiver and
release are part of the consideration for the issuance of the Securities.
<PAGE>
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SECTION 12.11. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 12.13. Severability.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, in any respect for any reason, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
<PAGE>
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
WCI STEEL, INC.,
as Issuer
By: /s/ Bret W. Wise
-----------------------------------
Name: Bret W. Wise
Title: VP, Finance and Chief
Financial Officer
FLEET NATIONAL BANK,
as Trustee and as Collateral
Agent
By: /s/ Philip G. Kane, Jr.
-----------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
<PAGE>
EXHIBIT A
[FORM OF SERIES A NOTE]
[If a restricted security, then insert -- THE NOTE (OR ITS PREDECESSOR)
EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER
OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PURCHASER IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND,
IN THE CASE OF CLAUSE (b), (c) OR (d), BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTE EVIDENCED HEREBY
OR ANY NOTE ISSUED IN EXCHANGE FOR OR IN SUBSTITUTION OF THIS NOTE OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.]
[If a Temporary Regulation S Global Security, then insert -- THIS SECURITY IS A
TEMPORARY REGULATION S GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
REFERRED TO HEREINAFTER. EXCEPT IN THE CIRCUMSTANCES DESCRIBED IN SECTION 2.06
OF THE INDENTURE, INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY MAY
NOT BE OFFERED OR SOLD TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S.
PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE
INDENTURE), AND NO TRANSFER OR EXCHANGE OF AN INTEREST IN THIS TEMPORARY
REGULATION S GLOBAL SECURITY MAY BE MADE FOR AN INTEREST IN A RESTRICTED GLOBAL
SECURITY OR IN A PERMANENT REGULATION S GLOBAL SECURITY UNTIL AFTER THE LATER OF
THE DATE OF EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE OWNER
SECURITIES CERTIFICATION AND THE DEPOSITORY SECURITIES CERTIFICATION RELATING TO
SUCH INTEREST HAVE BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE INDENTURE,
TO THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S.
PERSONS.]
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<PAGE>
[If a Permanent Regulation S Security, then insert -- THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
A-2
<PAGE>
WCI STEEL, INC.
10% Senior Secured Note
due 2004, Series A
No. $
WCI STEEL, INC., an Ohio corporation (the "Company," which term
includes any successor entity), for value received promises to pay to or
registered assigns, the principal sum of Dollars, on December 1, 2004.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
To the extent set forth in the Collateral Documents, payment hereof
is secured, on an equal and ratable basis with all other Securities, by a valid,
perfected security interest in the Collateral (as defined in the Indenture) with
the priority contemplated in Section 10.01(a) of the Indenture, the terms of
which security interest are more fully set forth in the Collateral Documents.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated: November 27, 1996
WCI STEEL, INC.
By:_________________________________________
Name:
Title:
By:_________________________________________
Name:
Title:
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
FLEET NATIONAL BANK,
as Trustee
By_________________________________________
Authorized Signatory
A-5
<PAGE>
WCI STEEL, INC.
10% Senior Secured Note
due 2004, Series A
1. Interest.
WCI STEEL, INC., an Ohio corporation (the "Company"), promises to
pay cash interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semi-annually in arrears on June 1
and December 1 of each year (the "Interest Payment Date"), commencing June 1,
1997. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at a rate equal to 12%
per annum.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address. Notwithstanding the foregoing, the Company shall pay or cause to be
paid all amounts payable with respect to Restricted Securities or non-DTC
eligible Securities by wire transfer of Federal funds to the account of the
Holders of such Securities. If this Security is a Global Security, all payments
in respect of this Security will be made to the Depository or its nominee in
immediately available funds in accordance with customary procedures established
from time to time by the Depository.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders.
A-6
<PAGE>
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
November 27, 1996 (the "Indenture"), by and between the Company and the Trustee.
This Security is one of a duly authorized issue of Securities of the Company
designated as its 10% Senior Secured Notes due 2004, Series A (the "Series A
Securities"), limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $300,000,000. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders of Securities are referred to the Indenture and said Act for a
statement of them. The Securities are general secured obligations of the Company
limited in aggregate principal amount to $300,000,000.
5. Registration Rights.
Pursuant to the Registration Rights Agreement by and between the
Company and the initial purchaser of the Series A Securities, the Company will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Security shall have the right to exchange this Security for 10% Senior
Secured Notes due 2004, Series B, of the Company (the "Series B Securities"),
which have been registered under the Securities Act, in like principal amount
and having identical terms as the Series A Securities. The Holders of Series A
Securities shall be entitled to receive certain additional interest payments in
the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement. The Series A Securities and the Series B Securities are
together referred to herein as the "Securities."
6. Optional Redemption.
The Securities will be subject to redemption, in whole or in part,
at the option of the Company, at any time on or after December 1, 2001, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued interest to the redemption date, if redeemed during the 12-month
period beginning on December 1 of the years indicated below:
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<PAGE>
Year Percentage
2001.................................................... 105.000%
2002.................................................... 103.333%
2003.................................................... 101.000%
In addition, at any time prior to December 1, 1999, the Company may
redeem up to 33-1/3% of the aggregate principal amount of the Securities
originally issued with the proceeds of one or more Equity Offerings at a
redemption price (expressed as a percentage of principal amount) of 109% plus
accrued interest to the redemption date; provided that at least $200 million
aggregate principal amount of Securities remains outstanding immediately after
any such redemption. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Equity Offering.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent for redemption on such Redemption
Date, then, unless the Company defaults in the payment of such Redemption Price,
the Securities called for redemption will cease to bear interest and the only
right of the Holders of such Securities will be to receive payment of the
Redemption Price.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, upon the satisfaction of
the conditions set forth in the Indenture, the Company shall be required to
offer to purchase all of the then outstanding Securities pursuant to a Change of
Control Offer at a purchase price equal to 101% of the principal amount thereof
plus accrued interest, if any, to the date of purchase. Holders of Securities
which are the subject of such an offer to repurchase shall receive an offer to
repurchase and may elect to have such Securities repurchased in accordance with
the provisions of the Indenture pursuant to and in accordance with the terms of
the Indenture.
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<PAGE>
9. Limitation on Disposition of Assets.
Under certain circumstances, the Company is required to apply the
net proceeds from Asset Sales to repurchase Securities at a price equal to 100%
of the aggregate principal amount thereof, plus accrued interest to the date of
purchase.
10. Collateral Documents.
In order to secure the due and punctual payment of the principal of
and interest on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same will be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Company has granted security
interests in and Liens on the Collateral owned by it to the Trustee for the
benefit of the Holders of Securities pursuant to the Indenture and the
Collateral Documents. The Securities will be secured by Liens on and security
interests in the Collateral with the priority contemplated in Section 10.01(a)
of the Indenture and are subject to certain permitted encumbrances.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Collateral Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Collateral Documents and the terms and provisions of the Indenture will not
be deemed for any purpose to be an impairment of the security under the
Indenture.
11. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any registration of transfer or exchange or redemption
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
A-9
<PAGE>
12. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
With respect to Global Securities, the Depository may grant proxies
and otherwise authorize Holders of Book-Entry Securities to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action which a Holder of a Security is entitled to give or take under this
Indenture.
13. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent will pay the money back to the
Company at its request. After that, all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity.
The Company's obligations pursuant to the Indenture will be
discharged, except for obligations pursuant to certain sections thereof, subject
to the terms of the Indenture, upon the payment of all the Securities or upon
the irrevocable deposit with the Trustee of money or U.S. Government Obligations
sufficient to pay when due principal of, and premium, if any, and interest on
the Securities to maturity or redemption, as the case may be.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities, comply with Article Five of the Indenture or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not adversely affect the
rights of any Holder of a Security.
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<PAGE>
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to, among other things, incur additional
Indebtedness or Liens, make payments in respect of its Capital Stock and merge
or consolidate with any other person and sell, lease, transfer or otherwise
dispose of substantially all of certain of its properties or assets. The
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
17. Successors.
When a successor assumes all the obligations of its predecessor
under the Securities and the Indenture, the predecessor will be released from
those obligations.
18. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable in the manner,
at the time and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
19. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
20. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The
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<PAGE>
waiver and release are part of the consideration for the issuance of the
Securities.
21. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
22. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
23. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
24. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
25. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of
the terms and provisions of the Indenture, as the same may be amended from time
to time.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to: WCI
STEEL, INC., 1040 Pine Avenue SE, Warren, OH 44483-6528, Attn.: Bret W. Wise.
26. Certain Information Obligations.
At any time when the Company is not subject to Section 13 or 15(d)
of the Securities Exchange Act of 1934, upon the request of a Holder of a Series
A Security, the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto) to such Holder or to a prospective
A-12
<PAGE>
purchaser of such Series A Security designated by such Holder, as the case may
be, in order to permit compliance by such Holder with Rule 144A under the
Securities Act.
[The form of reverse of a Temporary Regulation S Global Security shall be as set
forth below --
Until this Temporary Regulation S Global Security is exchanged for a
Permanent Regulation S Global Security, the Holder hereof shall not be entitled
to receive payments of interest hereon; until so exchanged in full, this
Temporary Regulation S Global Security shall in all other respects be entitled
to the same benefits as other Securities under the Indenture.
This Temporary Regulation S Global Security is exchangeable in whole
or in part for one or more Permanent Regulation S Global Securities or
Restricted Global Securities only (i) on or after the expiration of the
Restricted Period and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article II of the Indenture. Upon
exchange of this Temporary Regulation S Global Security for one or more
Permanent Regulation S Global Securities or Restricted Global Securities, the
Trustee shall cancel this Temporary Regulation S Global Security.
This Temporary Regulation S Global Security shall not become valid
or obligatory until the certificate of authentication hereon shall have been
duly manually signed by the Trustee in accordance with the Indenture. This
Temporary Regulation S Global Security shall be governed by and construed in
accordance with the laws of the State of New York.
SCHEDULE OF EXCHANGES FOR GLOBAL SECURITIES
The following exchanges of a part of this Temporary Regulation S
Global Security for other Global Securities have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Global Security Signature of
Principal Amount of Principal Amount of following such decrease authorized officer
Date of Exchange this Global Security this Global Security (or increase) of Trustee ]
- ---------------- -------------------- -------------------- ----------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Dated:____________________ Signed:____________________________
______________________________________________________________
(Sign exactly as your name appears on
the front of this Security)
Signature Guarantee:__________________________________________
A-14
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$
Date:__________ Signature:____________________________
(Sign exactly as your name
appears on the front of
this Security)
Signature Guarantee:______________________________________
A-15
<PAGE>
EXHIBIT B
[FORM OF SERIES B NOTE]
WCI STEEL, INC.
10% Senior Secured Note
due 2004, Series B
No. $
WCI STEEL, INC., an Ohio corporation (the "Company," which term
includes any successor entity), for value received promises to pay to or
registered assigns, the principal sum of Dollars, on December 1, 2004.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
To the extent set forth in the Collateral Documents, payment hereof
is secured, on an equal and ratable basis with all other Securities, by a valid,
perfected security interest in the Collateral (as defined in the Indenture) with
the priority contemplated in Section 10.01(a) of the Indenture, the terms of
which security interest are more fully set forth in the Collateral Documents.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
WCI STEEL, INC.
By:_________________________________________
Name:
Title:
By:_________________________________________
Name:
Title:
B-1
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
FLEET NATIONAL BANK,
as Trustee
By:_____________________________________
Authorized Signatory
B-2
<PAGE>
WCI STEEL, INC.
10% Senior Secured Note
due 2004, Series B
1. Interest.
WCI STEEL, INC., an Ohio corporation (the "Company"), promises to
pay cash interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semi-annually in arrears on June 1
and December 1 of each year (the "Interest Payment Date"), commencing June 1,
1997. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at a rate equal to 12%
per annum.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of Federal funds, or interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
November 27, 1996 (the "Indenture"), by and between the Company and the Trustee.
This Security is one of a duly authorized issue of Securities of the Company
designated as its 10% Senior Secured Notes due 2004, Series B (the "Series B
Securities"),
B-3
<PAGE>
limited (except as otherwise provided in the Indenture) in aggregate principal
amount to $300,000,000. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and said Act for a statement of them.
The Securities are general secured obligations of the Company limited in
aggregate principal amount to $300,000,000.
5. Exchange Offer.
The Series B Securities were issued pursuant to an exchange offer
pursuant to which 10% Senior Secured Notes due 2004, Series A, of the Company
(the "Series A Securities"), in like principal amount and having substantially
identical terms as the Series B Securities, were exchanged for the Series B
Securities. The Series A Securities and the Series B Securities are together
referred to herein as the "Securities."
6. Optional Redemption.
The Securities will be subject to redemption, in whole or in part,
at the option of the Company, at any time on or after December 1, 2001, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued interest to the redemption date, if redeemed during the 12-month
period beginning on December 1 of the years indicated below:
Year Percentage
2001.................................................... 105.000%
2002.................................................... 103.333%
2003.................................................... 101.000%
In addition, at any time prior to December 1, 1999, the Company may
redeem up to 33-1/3% of the aggregate principal amount of the Securities
originally issued with the proceeds of one or more Equity Offerings at a
redemption price (expressed as a percentage of principal amount) of 109% plus
accrued interest to the redemption date; provided that at least $200 million
aggregate principal amount of Securities remains outstanding immediately after
any such redemption. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Equity Offering.
B-4
<PAGE>
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent for redemption on such Redemption
Date, then, unless the Company defaults in the payment of such Redemption Price,
the Securities called for redemption will cease to bear interest and the only
right of the Holders of such Securities will be to receive payment of the
Redemption Price.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, upon the satisfaction of
the conditions set forth in the Indenture, the Company shall be required to
offer to purchase all of the then outstanding Securities pursuant to a Change of
Control Offer at a purchase price equal to 101% of the principal amount thereof
plus accrued interest, if any, to the date of purchase. Holders of Securities
which are the subject of such an offer to repurchase shall receive an offer to
repurchase and may elect to have such Securities repurchased in accordance with
the provisions of the Indenture pursuant to and in accordance with the terms of
the Indenture.
9. Limitation on Disposition of Assets.
Under certain circumstances, the Company is required to apply the
net proceeds from Asset Sales to repurchase Securities at a price equal to 100%
of the aggregate principal amount thereof, plus accrued interest to the date of
purchase.
10. Collateral Documents.
In order to secure the due and punctual payment of the principal of
and interest on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same will be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Company has granted security
interests in and Liens on the Collateral owned by it to the Trustee for the
benefit of the Holders of Securities pursuant to the Indenture and the
Collateral Documents. The Securities will be secured by Liens on and security
interests in the Collateral with the priority
B-5
<PAGE>
contemplated in Section 10.01(a) of the Indenture and are subject to certain
permitted encumbrances.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Collateral Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Collateral Documents and the terms and provisions of the Indenture will not
be deemed for any purpose to be an impairment of the security under the
Indenture.
11. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No service
charge shall be made for any registration of transfer or exchange or redemption
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
12. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
With respect to Global Securities, the Depository may grant proxies
and otherwise authorize Holders of Book-Entry Securities to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action which a Holder of a Security is entitled to give or take under this
Indenture.
13. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent will pay the money back to the
Company at its request. After that, all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
B-6
<PAGE>
14. Discharge Prior to Redemption or Maturity.
The Company's obligations pursuant to the Indenture will be
discharged, except for obligations pursuant to certain sections thereof, subject
to the terms of the Indenture, upon the payment of all the Securities or upon
the irrevocable deposit with the Trustee of money or U.S. Government Obligations
sufficient to pay when due principal of, and premium, if any, and interest on
the Securities to maturity or redemption, as the case may be.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities, comply with Article Five of the Indenture or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not adversely affect the
rights of any Holder of a Security.
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to, among other things, incur additional
Indebtedness or Liens, make payments in respect of its Capital Stock and merge
or consolidate with any other person and sell, lease, transfer or otherwise
dispose of substantially all of certain of its properties or assets. The
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
17. Successors.
When a successor assumes all the obligations of its predecessor
under the Securities and the Indenture, the predecessor will be released from
those obligations.
18. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the
B-7
<PAGE>
Securities to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Securities unless it has received
indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of any continuing Default or Event of Default (except a Default in
payment of principal or interest) if it determines that withholding notice is in
their interest.
19. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
20. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
21. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
22. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
23. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
B-8
<PAGE>
24. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
25. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of
the terms and provisions of the Indenture, as the same may be amended from time
to time.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to: WCI
STEEL, INC., 1040 Pine Avenue SE, Warren, OH 44483-6528, Attn.: Bret W. Wise.
B-9
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Dated:____________________ Signed:____________________________
___________________________________________________________
(Sign exactly as your name appears on
the front of this Security)
Signature Guarantee:__________________________________________
B-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$
Date:__________ Signature:____________________________
(Sign exactly as your name
appears on the front of
this Security)
Signature Guarantee:______________________________________
B-11
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
C-1
<PAGE>
EXHIBIT D
Transferee Letter of Representation
WCI Steel, Inc.
c/o Fleet National Bank,
as Trustee
777 Main Street
Hartford, Connecticut 06108
Dear Sirs:
In connection with our proposed purchase of $ aggregate principal
amount of the 10% Senior Secured Notes due 2004 (the "Notes") of WCI Steel,
Inc., an Ohio corporation (the "Company"), we confirm that:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Notes to offer, sell or otherwise transfer such Notes prior to the
date which is three years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the owner of
such Notes (or any predecessor thereto) (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement which
has been declared effective under the Securities Act, (c) so long as the Notes
are eligible for resale pursuant to Rule 144A under the Securities Act, to a
person we reasonably believe is a qualified institutional buyer under Rule 144A
(a "QIB") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule 144A,
(d) pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is purchasing for his own account or
for the account of such an institutional "accredited investor," in each case in
a minimum principal amount of Notes of $500,000, (f) in an offshore transaction
pursuant to Regulation S of the Securities Act or (g) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e)
D-1
<PAGE>
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act and that it is acquiring
such Notes for investment purposes and not for distribution in violation of the
Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Notes pursuant to clause (c), (d) or (f)
above to require the delivery of an opinion of counsel, certifications and/or
other information satisfactory to the Company and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Notes for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in violation
of the Securities Act and we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.
3. We are acquiring at least $500,000 principal amount of the Notes
and we are acquiring the Notes purchased by us for our own account or for one or
more accounts as to each of which we exercise sole investment discretion.
D-2
<PAGE>
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
_______________________________
(Name of Purchaser)
By: ___________________________
Date: _________________________
Upon transfer the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ______________________________
Address: ___________________________
Taxpayer ID Number: ________________
D-3
<PAGE>
EXHIBIT E
[FORM OF CERTIFICATION TO BE GIVEN BY HOLDERS OF
BENEFICIAL INTEREST IN A TEMPORARY
REGULATION S GLOBAL SECURITY
TO EUROCLEAR OR CEDEL]
OWNER SECURITIES CERTIFICATION
WCI STEEL, INC.
10% Senior Secured Notes due 2004
CUSIP No.______
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This is to certify that, as of the date hereof, $___________ of the
above-captioned Securities (the "Securities") are beneficially owned by non-U.S.
person(s). As used in this paragraph, the term "U.S. person" has the meaning
given to it by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or prior to
the date on which you intend to submit your certification relating to the
Securities held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer and the Initial Purchasers.
Dated: __________, ____
By:_______________________________________________
As, or as agent for, the beneficial
owner(s) of the Securities to which
this certificate relates.
E-1
<PAGE>
EXHIBIT F
[FORM OF CERTIFICATION TO BE GIVEN
BY THE EUROCLEAR OPERATOR OR
CEDEL BANK, SOCIETE ANONYME]
DEPOSITORY SECURITIES CERTIFICATION
WCI STEEL, INC.
10% Senior Secured Notes due 2004
CUSIP No. ________
Reference is hereby made to the Indenture, dated as of November 27, 1996 (the
"Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet National
Bank, as Trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This is to certify that, with respect to U.S.$__________ principal amount of the
above-captioned Securities (the "Securities"), except as set forth below, we
have received in writing, by tested telex or by electronic transmission, from
member organizations appearing in our records as persons being entitled to a
portion of the principal amount of the Securities (our "Member Organizations"),
certifications with respect to such portion, substantially to the effect set
forth in the Indenture.(1)
We further certify (i) that we are not making available herewith for exchange
(or, if relevant, exercise of any rights or collection of any interest) any
portion of the Temporary Regulation S Global Security (as defined in the
Indenture) excepted in such certifications and (ii) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by such Member Organizations with respect to
any portion of the part submitted herewith for exchange (or, if relevant,
exercise of any rights or collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
- --------
(1) Unless Morgan Guaranty Trust Company of New York, London Branch is
otherwise informed by the Agent, the long form certificate set out in the
Operating Procedures will be deemed to meet the requirements of this
sentence.
F-1
<PAGE>
We understand that this certification is required in connection with certain
securities laws of the United States. In connection therewith, if administrative
or legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification to any interested party in such proceedings. This certificate
and the statements contained herein are made for your benefit and the benefit of
the Issuer and the Initial Purchasers.
Dated: ___________, ____
Yours faithfully,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as operator of the
Euroclear System]
or
[CEDEL BANK, SOCIETE ANONYME]
By:___________________________________
F-2
<PAGE>
EXHIBIT G
[FORM OF CERTIFICATION TO BE GIVEN BY
TRANSFEREE OF BENEFICIAL INTEREST IN A
TEMPORARY REGULATION S GLOBAL SECURITY]
TRANSFEREE SECURITIES CERTIFICATION
WCI STEEL, INC.
10% Senior Secured Notes due 2004
CUSIP No._________
Reference is hereby made to the Indenture, dated as of November 27, 1996 (the
"Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet National
Bank, as Trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
For purposes of acquiring a beneficial interest in the Temporary Regulation S
Global Security, the undersigned certifies that it is not a U.S. Person as
defined by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or prior to the date on
which you intend to submit your certification relating to the Securities held by
you in which we intend to acquire a beneficial interest in accordance with your
operating procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection with certain
securities laws of the United States. In connection therewith, if administrative
or legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate to any interested party in such proceeding. This certificate
and the statements contained herein are made for your benefit and the benefit of
the Issuer and the Initial Purchaser.
Dated: _____________, ____
By:_________________________________________
As, or as agent for, the beneficial
acquiror of the Securities to which
this certificate relates.
G-1
<PAGE>
EXHIBIT H
FORM OF CERTIFICATION FOR TRANSFER OR
EXCHANGE OF RESTRICTED GLOBAL SECURITY
TO TEMPORARY REGULATION S GLOBAL SECURITY
Fleet National Bank,
as Trustee
777 Main Street
Hartford, CT 06108
Attention: Corporate Trust Administration
Re: WCI Steel, Inc.
10% Senior Secured Notes
due 2004 (the "Securities")
---------------------------
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to U.S. $_____________ aggregate principal
amount of Securities which are held in the form of the Restricted Global
Security (CUSIP No. ) with the Depository in the name of [insert name of
transferor] (the "Transferor"). The Transferor has requested a transfer of such
beneficial interest in the Securities to a Person who will take delivery thereof
in the form of an equal aggregate principal amount of Securities evidenced by
the Temporary Regulation S Global Security (CUSIP No._____) to be held with the
Depository in the name of [Euroclear] [Cedel Bank, societe anonyme].
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Securities and
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and accordingly the Transferor does
hereby certify that:
(1) the offer of the Securities was not made to a person in the
United States;
[(2) at the time the buy order was originated, the transferee was
outside the United States or the Transferor
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<PAGE>
and any person acting on its behalf reasonably believed that the
transferee was outside the United States;]1
[(2) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the Transferor nor
any person acting on our behalf knows that the transaction was
pre-arranged with a buyer in the United States;(1)
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903 (b) or 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest
being transferred as described above is to be held with the Depository in
the name of [Euroclear] [Cedel Bank, societe anonyme].
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer and the Initial Purchaser.
[Insert Name of Transferor]
By:___________________________________
Name:
Title:
Dated: _____________________________
CC: WCI Steel, Inc.
- --------
(1) Insert one of these two provisions, which come from the definition of
"offshore transaction" in Regulation S.
H-2
<PAGE>
EXHIBIT I
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
RESTRICTED GLOBAL SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
Fleet National Bank,
as Trustee
777 Main Street
Hartford, CT 06108
Attention: Corporate Trust Administration
Re: WCI Steel, Inc.
10% Senior Secured Notes
due 2004 (the "Securities")
---------------------------
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to U.S.$____________ aggregate principal amount
of Securities which are held in the form of the Restricted Global Security
(CUSIP No. ) with the Depository in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Securities to a Person who will take delivery thereof in the
form of an equal aggregate principal amount of Securities evidenced by the
Permanent Regulation S Global Security (CUSIP No._____).
In connection with such request, and in respect of such Securities,
the Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Securities and,
(1) with respect to transfers made in reliance on Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), the Transferor does
hereby certify that:
(A) the offer of the Securities was not made to a person in the
United States;
[(B at the time the buy order was originated, the transferee was
outside the United States or the Transferor
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<PAGE>
and any person acting on its behalf reasonably believed that the
transferee was outside the United States;]1
[(B) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the Transferor nor
any person acting on our behalf knows that the transaction was
pre-arranged with a buyer in the United States;(1)
(C) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
and
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(2) with respect to transfers made in reliance on Rule 144 under the Securities
Act, the Transferor does hereby certify that the Securities are being
transferred in a transaction permitted by Rule 144 under the Securities Act.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer and the Initial Purchaser.
[Insert Name of Transferor]
By:_________________________________________
Name:
Title:
Dated: _________________________
CC: WCI Steel, Inc.
- --------
(1) Insert one of these two provisions, which come from the definition of
"offshore transactions" in Regulation S.
I-2
<PAGE>
EXHIBIT J
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
TEMPORARY REGULATION S GLOBAL SECURITY
OR PERMANENT REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
Fleet National Bank,
as Trustee
777 Main Street
Hartford, CT 06108
Attention: Corporate Trust Administration
Re: WCI Steel, Inc.
10% Senior Secured Notes
due 2004 (the "Securities")
---------------------------
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to U.S.$_______ principal amount of Securities
which are evidenced by an aggregate [Temporary Regulation S Global Security
(CUSIP No._______] [Permanent Regulation S Global Security (CUSIP No._______]
and held with the Depository through [Euroclear] [Cedel] (Common Code _______)
in the name of [insert name of transferor] (the "Transferor"). The Transferor
has requested a transfer of such beneficial interest in Securities to a person
that will take delivery thereof in the form of an equal principal amount of
Securities evidenced by a Restricted Global Security of the same series and of
like tenor as the Securities (CUSIP No._______).
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that such transfer is being effected pursuant
to and in accordance with Rule 144A under the Securities Act and, accordingly,
the Transferor does hereby further certify that the Securities are being
transferred to a person that the Transferor reasonably believes is purchasing
the Securities for its own account, or for one or more accounts
J-1
<PAGE>
with respect to which such person exercises sole investment discretion, and such
person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A and in accordance with any applicable securities laws of any state of
the United States.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer and the Initial Purchaser.
[Insert Name of Transferor]
By:___________________________________
Name:
Title:
Dated: ________________________
CC: WCI Steel, Inc.
J-2
<PAGE>
EXHIBIT K-1
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
RESTRICTED GLOBAL SECURITY
Fleet National Bank,
as Trustee
777 Main Street
Hartford, CT 06108
Attention: Corporate Trust Administration
Re: WCI Steel, Inc.
10% Senior Secured Notes
due 2004 (the "Securities")
---------------------------
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to $_______ principal amount of Restricted
Securities held in definitive form (CUSIP No._______) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with Rule 144A or Rule 144 under the
United States Securities Act of 1933, as amended (the "Securities Act") and
accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 144A:
(A) the Securities are being transferred to a person that the
Transferor reasonably believes is purchasing the Securities for its
own account, or for one or more accounts with respect to which such
Person exercises sole investment discretion;
(B) such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A; and
K-1-1
<PAGE>
(C) the Securities have been transferred in a transaction
meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer and the Initial Purchaser.
Dated: _____________, ____
[Insert Name of Transferor]
By:_________________________________________
Name:
Title:
cc: WCI Steel, Inc.
K-1-2
<PAGE>
EXHIBIT K-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
OR TEMPORARY REGULATION S GLOBAL SECURITY
Fleet National Bank,
as Trustee
777 Main Street
Hartford, CT 06108
Attention: Corporate Trust Administration
Re: WCI Steel, Inc.
10% Senior Secured Notes
due 2004 (the "Securities")
---------------------------
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to $ principal amount of Restricted Securities
held in definitive form (CUSIP No. ) by [insert name of transferor] (the
"Transferor"). The Transferor has requested an exchange or transfer of such
Securities.
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under
the Securities Act of 1933, as amended (the "Act"), or (b) Rule 144 under the
Act, and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or
Rule 904:
(A) the offer of the Securities was not made to a person in the
United States;
(B) either;
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf
K-2-1
<PAGE>
reasonably believed that the transferee was outside the United
States, or
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was pre-arranged with a buyer in
the United States;
(C) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of Regulation
S, as applicable;
(D) the transaction is not part of a plan or scheme to evade
the registration requirements of the Act; and
(E) if such transfer is to occur during the Restricted Period,
upon completion of the transaction, the beneficial interest being
transferred as described above was held with the Depository through
[Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer and the Initial Purchaser.
Dated: ____________, ____
[Insert Name of Transferor]
By:___________________________________
Name:
Title:
CC: WCI Steel, Inc.
K-2-2
<PAGE>
EXHIBIT L-1
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO RESTRICTED GLOBAL SECURITY
Fleet National Bank,
as Trustee
777 Main Street
Hartford, CT 06108
Attention: Corporate Trust Administration
Re: WCI Steel, Inc.
10% Senior Secured Notes
due 2004 (the "Securities")
---------------------------
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to $_______ principal amount of Restricted
Securities held in definitive form (CUSIP No._______) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended, and accordingly the Transferor does
hereby further certify that the Securities are being transferred to a person
that the Transferor reasonably believes is purchasing the Securities for its own
account, or for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in each case in
a transaction meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce
L-1-1
<PAGE>
this certificate to any interested party in such proceeding. This certificate
and the statements contained herein are made for your benefit and the benefit of
the Issuer and the Initial Purchaser.
Dated: _______________, ____
[Insert Name of Transferor]
By:_________________________________________
Name:
Title:
CC: WCI Steel, Inc.
L-1-2
<PAGE>
EXHIBIT L-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO PERMANENT REGULATION S GLOBAL SECURITY
Fleet National Bank,
as Trustee
777 Main Street
Hartford, CT 06108
Attention: Corporate Trust Administration
Re: WCI Steel, Inc.
10% Senior Secured Notes
due 2004 (the "Securities")
---------------------------
Reference is hereby made to the Indenture, dated as of November 27,
1996 (the "Indenture"), by and between WCI Steel, Inc., as Issuer, and Fleet
National Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to $______________ principal amount of
Restricted Securities held in definitive form (CUSIP No._______) by __________
[insert name of transferor] (the "Transferor"). The Transferor has requested an
exchange or transfer of such Securities.
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under
the Securities Act of 1933, as amended (the "Act"), or (b) Rule 144 under the
Act, and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or
Rule 904:
(A) the offer of the Securities was not made to a person
in the United States;
(B) either;
(i) at the time the buy order was originated, the
transferee was outside the United States or the
Transferor and any person
L-2-1
<PAGE>
acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or
through the facilities of a designated offshore
securities market and neither the Transferor nor any
person acting on its behalf knows that the transaction
was pre-arranged with a buyer in the United States;
(C) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904 (b) of
Regulation S, as applicable;
(D) the transaction is not part of a plan or scheme to
evade the registration requirements of the Act; and
(E) if such transfer is to occur during the Restricted
Period, upon completion of the transaction, the beneficial
interest being transferred as described above was held with
the Depository through [Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of
the closing of the initial placement of the Securities
pursuant to the Purchase Agreement; and
(B) the Securities have been transferred in a
transaction permitted by Rule 144 and made in accordance with
any applicable securities laws of any state of the United
States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are
L-2-2
<PAGE>
commenced or threatened in connection with which this certificate is or would be
relevant, we irrevocably authorize you to produce this certificate to any
interested party in such proceeding. This certificate and the statements
contained herein are made for your benefit and the benefit of the Issuer and the
Initial Purchaser.
Dated: ______________, ____
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
CC: WCI Steel, Inc.
L-2-3
<PAGE>
WCI STEEL, INC.
10% Senior Secured Notes due 2004
PURCHASE AGREEMENT
November 22, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies & Gentlemen:
WCI Steel, Inc., an Ohio corporation ("Company"), agrees with you as
follows:
1. Issuance of Securities. The Company proposes to issue and sell to
Donaldson, Lufkin & Jenrette Securities Corporation ("Purchaser"), an aggregate
of $300,000,000 principal amount of 10% Senior Secured Notes due 2004, Series A
(the "Series A Notes"). The Series A Notes are to be issued pursuant to an
indenture (the "Note Indenture") to be dated as of November 27, 1996 by and
between the Company and Fleet National Bank, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Note Indenture.
The Series A Notes will be offered and sold to you pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Act"). The Company has prepared a preliminary offering
memorandum, dated November 6, 1996 (the "Preliminary Offering Memorandum"), and
a final offering memorandum, dated November 22, 1996 (the "Offering
Memorandum"), relating to the Company and the Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series A Notes
(and all securities issued in exchange therefor or in substitution thereof)
shall bear the following legend:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
<PAGE>
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE NOTE
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH NOTE
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PURCHASER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF
CLAUSE (b), (c) OR (d), BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTE EVIDENCED
HEREBY OR ANY NOTE ISSUED IN EXCHANGE FOR OR IN SUBSTITUTION HEREOF OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
You have advised the Company that you will make offers (the "Exempt
Resales") of the Series A Notes purchased hereunder on the terms set forth in
the Offering Memorandum, as amended or supplemented, solely to persons whom you
reasonably believe to be "qualified institutional buyers," as defined in Rule
144A under the Act ("QIBs"), to a limited number of institutional "Accredited
Investors" referred to in Rule 501(a)(1), (2), (3) or (7) under the Act (each,
an "Accredited Investor") and outside the United States in compliance with
Regulation S under the Act to foreign purchasers ("Regulation S Purchasers") who
are not U.S. persons (as such term is defined in Regulation S under the Act).
The QIBs, the Accredited Investors and the Regulation S Purchasers are
collectively referred to herein as the "Eligible Purchasers." You will offer the
Series A Notes to such Eligible Purchasers initially at a price equal to 100% of
the principal amount thereof. Such price may be changed at any time without
notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), to be dated the Closing Date, for
so long as such Series A Notes constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Company will agree to file with the Securities and
Exchange Commission (the "Commission"), under the circumstances set forth
therein, (i) a
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registration statement under the Act (the "Exchange Offer Registration
Statement") relating to the 10% Senior Secured Notes due 2004, Series B (the
"Series B Notes") to be offered in exchange for the Series A Notes (the
"Exchange Offer"), and/or (ii) if required under the Registration Rights
Agreement, a shelf registration statement pursuant to Rule 415 under the Act
(the "Shelf Registration Statement") relating to the resale by certain holders
of the Series A Notes, and to use reasonable efforts to cause such Registration
Statements to be declared effective. The Series A Notes and the Series B Notes
are collectively referred to herein as the "Securities." This Purchase Agreement
(this "Agreement"), the Securities, the Note Indenture, the Supplemental
Indenture (as defined), each of the Collateral Documents and the Registration
Rights Agreement are hereinafter sometimes referred to collectively as the
"Operative Documents."
On October 23, 1996, an offer (the "Offer") was commenced by the Company
to purchase for cash up to all (but not less than a majority in principal amount
outstanding) of the Company's outstanding 10 1/2% Senior Notes Due 2002 (the
"Existing Notes") and a related solicitation (the "Consent Solicitation") of
consents to delete and modify certain terms of the indenture, as amended,
governing the Existing Notes (the "Existing Notes Indenture"). Upon receipt of
the Requisite Consents (as such term is defined in the Offer to Purchase and
Consent Solicitation Statement, dated October 23, 1996 (as supplemented, the
"Statement")), the Company and Fleet National Bank, as trustee, will execute a
supplemental indenture (the "Supplemental Indenture"), giving effect to the
proposed amendments to the Existing Notes Indenture. Fleet National Bank acted
as depositary (the "Depositary") in connection with the Offer and the Consent
Solicitation.
On October 28, 1996, an offer (the "Equity Offer") was commenced by WCI
Steel Holdings, Inc., a Delaware corporation ("Holdings"), to purchase for cash
all of the outstanding shares of common stock, no par value, $.01 stated value
(the "Common Stock"), of the Company. The Equity Offer is conditioned upon,
among other things, the Public Acceptance Condition (as defined in the Offer to
Purchase for Cash, dated October 28, 1996 (as supplemented, the "Equity
Statement"). American Stock Transfer & Trust Company acted as depositary (the
"Equity Depositary") in connection with the Equity Offer.
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell to you, and the Purchaser
agrees to purchase from the Company, $300,000,000 aggregate principal amount of
the Series A Notes. The purchase price for the Series A Notes shall be 97.12% of
their principal amount.
3. Delivery and Payment. Delivery to the Purchaser of, and payment for,
the Series A Notes shall be made at 9:00 a.m., New York City time, on November
27, 1996 (the "Closing Date") at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, or such other time or place as you and the
Company shall designate.
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One or more of the Series A Notes in definitive form, registered in the
name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), having
an aggregate principal amount corresponding to the aggregate principal amount of
the Series A Notes sold pursuant to Exempt Resales to QIBs and Accredited
Investors (collectively, the "Master Note") and one or more Series A Notes in
definitive form registered in the names of the nominees of the Euroclear System
("Euroclear") and Cedel, S.A. ("Cedel") (collectively, the "Regulation S Note"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Series A Notes sold pursuant to Exempt Resales to Regulation S
Purchasers, shall be delivered by the Company to you (or as you direct), against
payment by you of the purchase price therefor by wire transfer of immediately
available (Federal) funds. The Master Note and the Regulation S Note shall be
made available to you for inspection not later than 9:30 a.m. on the business
day immediately preceding the Closing Date.
4. Agreements of the Company. The Company agrees with you as follows:
(a) To advise you promptly and, if requested by the Purchaser,
confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any of the Series A Notes for offering or
sale in any jurisdiction, or the initiation of any proceeding for such
purpose by any state securities commission or other regulatory authority,
and (ii) of the happening of any event that makes any statement of a
material fact made in the Offering Memorandum untrue or that requires the
making of any additions to or changes in the Offering Memorandum in order
to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Company shall use its best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any of the Series A Notes under any state
securities or Blue Sky laws, and if at any time any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption of any of the Series A Notes under any
state securities or Blue Sky laws, the Company shall use its best efforts
to obtain the withdrawal or lifting of such order at the earliest possible
time.
(b) To furnish you, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as you may reasonably request. The
Company consents to the lawful use of the Preliminary Offering Memorandum
and the Offering Memorandum, and any amendments and supplements thereto,
by you in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum prior to the Closing Date unless you shall
previously have been advised thereof and shall not have objected thereto
after being furnished a copy thereof. The Company shall promptly prepare,
upon your request, any amendment or supplement to the Preliminary Offering
Memorandum or the Offering Memorandum that may be reasonably necessary or
advisable in connection with Exempt Resales.
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(d) If, after the date hereof and prior to consummation of any
Exempt Resales, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of your counsel, it
becomes necessary to amend or supplement the Offering Memorandum in order
to made the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered to an Eligible Purchaser which is a
prospective purchaser, not misleading, or if it is necessary to amend or
supplement the Offering Memorandum to comply with applicable law,
forthwith to prepare an appropriate amendment or supplement to the
Offering Memorandum so that statements therein as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Offering Memorandum will comply
with applicable law.
(e) To cooperate with you and your counsel in connection with the
qualification of the Series A Notes under the securities or Blue Sky laws
of such jurisdictions as you may request and to continue such
qualification in effect so long as required for the Exempt Resales;
provided, however, that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to the
service of process in suits or taxation, other than as to matters and
transactions relating to the Exempt Resales, in any jurisdiction where it
is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to
pay all costs, expenses, fees and taxes incident to and in connection
with: (i) the preparation, printing, filing and distribution of the
Preliminary Offering Memorandum and the Offering Memorandum (including,
without limitation, financial statements and exhibits) and all amendments
and supplements thereto, (ii) the preparation (including, without
limitation, word processing and duplication costs) and delivery of this
Agreement and the other Operative Documents and all preliminary and final
Blue Sky memoranda and all other agreements, memoranda, correspondence and
other documents prepared and delivered in connection herewith and with the
Exempt Resales, (iii) the issuance and delivery by the Company of the
Securities, (iv) the qualification of the Securities for offer and sale
under the securities or Blue Sky laws of the several states (including,
without limitation, the reasonable fees and disbursements of your counsel
relating to such registration or qualification), (v) furnishing such
copies of the Preliminary Offering Memorandum and the Offering Memorandum,
and all amendments and supplements thereto, as may be reasonably requested
for use in connection with Exempt Resales, (vi) the preparation of
certificates for the Securities (including, without limitation, printing
and engraving thereof), (vii) the fees, disbursements and expenses of the
Company's counsel and accountants, (viii) all expenses and listing fees in
connection with the application for quotation of the Series A Notes in the
National Association of Securities Dealers, Inc. ("NASD") Automated
Quotation System - PORTAL ("PORTAL"), (ix) all fees and expenses
(including fees and expenses of counsel) of the Company in connection with
approval of the Securities by DTC, Euroclear or Cedel for "book-entry"
transfer and (x)
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the performance by the Company of its other obligations under this
Agreement and the other Operative Documents.
(g) To use the proceeds from the sale of the Series A Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any
Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent on its part to the delivery of the Series
A Notes.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Notes in a manner
that would require the registration under the Act of the sale to you or
Eligible Purchasers of the Series A Notes.
(k) For so long as any of the Securities remain outstanding and
during any period in which the Company is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available to any QIB or beneficial owner of Series A Notes
in connection with any sale thereof and any prospective purchaser of such
Series A Notes from such QIB or beneficial owner, the information required
by Rule 144A(d)(4) under the Act.
(l) To cause the Exchange Offer to be made in the appropriate form
to permit registration of the Series B Notes to be offered in exchange for
the Series A Notes and to comply in all material respects with all
applicable federal and state securities laws in connection with the
Exchange Offer.
(m) To comply in all material respects with all of its agreements
set forth in the Registration Rights Agreement, and all agreements set
forth in the representation letter of the Company to DTC relating to the
approval of the Securities by DTC for "book-entry" transfer and any
similar such letter, if any, with Euroclear or Cedel.
(n) To use reasonable efforts to effect the inclusion of the Series
A Notes in PORTAL.
(o) During a period of five years following the date of this
Agreement, to deliver to you promptly upon their becoming available,
copies of all current, regular and periodic reports filed by the Company
with the Commission or any securities exchange or with any governmental
authority succeeding to any of the Commission's functions.
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(p) The Company agrees to do or cause to be done such further acts
and things and deliver or cause to be delivered to the Trustee, and file
or cause to be filed, such additional instruments, documents, forms
(including, without limitation, Uniform Commercial Code ("UCC") forms) and
assurances as the Purchaser or the Trustee may reasonably require or deem
advisable to give the Trustee a valid and perfected lien on the Collateral
with the priority contemplated in Section 10.01(a) of the Indenture.
(q) The Company and Holdings shall effect the Merger on, or within
two business days after, the Issue Date.
5. Representations and Warranties. (a) The Company represents and
warrants to you that:
(i) The Preliminary Offering Memorandum and the Offering Memorandum
have been prepared in connection with the Exempt Resales. The Preliminary
Offering Memorandum as of its date did not, and the Offering Memorandum
does not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (i) shall not
apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating
to you furnished to the Company in writing by you expressly for use
therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated
by this Agreement are subject to the registration requirements of the Act,
has been issued. Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the
Act.
(ii) When the Series A Notes are issued and delivered pursuant to
this Agreement, none of the Series A Notes will be of the same class
(within the meaning of Rule 144A under the Act) as securities of the
Company that are listed on a national securities exchange registered under
Section 6 of the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system.
(iii) The Company and each of its subsidiaries has been duly
organized, is validly existing as a corporation in good standing under the
laws of its respective jurisdiction of incorporation, has all requisite
corporate power and authority to carry on its business as it is currently
being conducted and as described in the Offering Memorandum and to own,
lease and operate its properties, and is duly qualified and in good
standing as a foreign corporation authorized to do business in each
jurisdiction in
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which the nature of its business or its ownership or leasing of property
requires such qualification.
(iv) The entities listed on Schedule I hereto are the only
subsidiaries, direct or indirect, of the Company. The Company owns,
directly or indirectly through other subsidiaries, 100% of the outstanding
capital stock or other securities evidencing equity ownership of such
subsidiaries, free and clear of any security interest, claim, lien,
limitation on voting rights or encumbrance; and all of such securities
have been duly authorized, validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or
similar rights. There are no outstanding subscriptions, rights, warrants,
calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such shares of capital stock or
other equity interest of such subsidiaries.
(v) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Note Indenture, the Supplemental Indenture, each of the Collateral
Documents, the Registration Rights Agreement and the other Operative
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, with
respect to the Company, the corporate power and authority to issue, sell
and deliver the Securities as provided herein and therein.
(vi) This Agreement has been duly and validly authorized, executed
and delivered by the Company and is the legally valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms.
(vii) The Note Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be the
legally valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. The Note Indenture, when
executed and delivered, will conform to the description thereof in the
Offering Memorandum. The Depositary has received validly tendered and not
validly withdrawn consents from holders of at least a majority of the
aggregate principal amount of Existing Notes outstanding pursuant to the
Consent Solicitation. The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Supplemental Indenture. The Supplemental Indenture has been duly and
validly authorized by the Company and, when duly executed and delivered by
the Company, will be the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. Upon the
effectiveness of the Supplemental Indenture, the Existing Notes Indenture,
as supplemented by the Supplemental Indenture, will comply with the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Supplemental Indenture conforms to the description thereof in the
Statement.
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<PAGE>
(viii) The Series A Notes have been duly and validly authorized for
issuance and sale to you by the Company pursuant to this Agreement and,
when issued and authenticated in accordance with the terms of the Note
Indenture and delivered against payment therefor in accordance with the
terms hereof, will be the legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Note Indenture. The Series A Notes,
when issued, authenticated and delivered, will conform to the description
thereof in the Offering Memorandum.
(ix) The Series B Notes have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in accordance
with the terms of the Note Indenture, the Registration Rights Agreement
and the Exchange Offer, will be the legally valid and binding obligations
of the Company, enforceable against the Company in accordance with their
terms and entitled to the benefits of the Note Indenture.
(x) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The
Registration Rights Agreement, when executed and delivered, will conform
to the description thereof in the Offering Memorandum.
(xi) Each of the Collateral Documents has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. Upon
execution of the Indenture and each of the Collateral Documents, and, with
respect to Collateral (as defined in the Indenture), filings under the UCC
in all required jurisdictions and recording of the Mortgage in the
appropriate recording office, the holders of the Securities will have a
valid and perfected lien on the Collateral with the priority contemplated
in Section 10.01(a) of the Indenture subject to no other lien, charge,
encumbrance or interest (other than as permitted by each Collateral
Document).
(xii) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or bylaws or is in default in the
performance of any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which it is a party or by which
it is bound or to which any of its properties is subject, or is in
violation of any law, statute, rule, regulation, judgment or court decree
applicable to the Company, any of its subsidiaries or their assets or
properties. There exists no condition that, with notice, the passage of
time or otherwise, would constitute a default under any such document or
instrument.
(xiii) Except for the amendment (the "Amendment") to the WCI
Revolving Credit Facility contemplated in connection with the transactions
referred to in the Offering Memorandum and intended to be entered into on
or prior to the Closing Date,
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<PAGE>
the execution, delivery and performance by the Company of this Agreement
and the other Operative Documents to which it is a party, the issuance and
sale of the Securities, and the consummation of the transactions
contemplated hereby and thereby will not violate, conflict with or
constitute a breach of any of the terms or provisions of, or a default
under (or an event that with notice or the lapse of time, or both, would
constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of the Company or
any of its subsidiaries, or an acceleration of indebtedness pursuant to,
(i) the charter or bylaws of the Company or any of its subsidiaries, (ii)
any bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which any of them or their property is or may be bound,
(iii) any statute, rule or regulation applicable to the Company, any of
its subsidiaries or any of their assets or properties, or (iv) any
judgment, order or decree of any court or governmental agency or authority
having jurisdiction over the Company, any of its subsidiaries or their
assets or properties. No consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, any
court or governmental agency, body or administrative agency is required
for the execution, delivery and performance of this Agreement and the
other Operative Documents and the consummation of the transactions
contemplated hereby and thereby, except such as have been obtained and
made (or, in the case of the Registration Rights Agreement, will be
obtained and made) under the Act, the Trust Indenture Act, and state
securities or Blue Sky laws and regulations or such as may be required by
the NASD. No consents or waivers from any other person are required for
the execution, delivery and performance of this Agreement and the other
Operative Documents and the consummation of the transactions contemplated
hereby and thereby, other than such consents and waivers as have been
obtained (or, in the case of the Registration Rights Agreement, will be
obtained).
(xiv) There is (i) other than matters set forth in the letters from
the law firm of Wechsler Harwood Halebian & Feffer LLP, no action, suit or
proceeding before or by any court, arbitrator or governmental agency, body
or official, domestic or foreign, now pending or threatened or
contemplated to which the Company or any of its subsidiaries is or may be
a party or to which the business or property of the Company or any of its
subsidiaries is or may be subject, (ii) no statute, rule, regulation, or
order that has been enacted, adopted or issued by any governmental agency
or that has been proposed by any governmental body, (iii) no injunction,
restraining order or order of any nature by a federal or state court or
foreign court of competent jurisdiction to which the Company or any of its
subsidiaries is or may be subject issued that, in the case of clauses (i),
(ii) and (iii) above, (x) might, singly or in the aggregate, result in a
material adverse effect on the properties, business, results of
operations, condition (financial or otherwise), affairs or prospects of
the Company and its subsidiaries, taken as a whole (a "Material Adverse
Effect"), (y) would interfere with or adversely affect the issuance of the
Securities or (z) in any manner draw into question the validity of this
Agreement, the Note Indenture, the Supplemental Indenture, the
Registration Rights Agreement, any of the Collateral Documents or any
other Operative Document.
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<PAGE>
(xv) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Securities; no injunction, restraining order
or order of any nature by a federal or state court of competent
jurisdiction has been issued that prevents the issuance of the Securities
or suspends the sale of the Securities in any jurisdiction referred to in
Section 4(e) hereof; and other than matters set forth in the letters from
the law firm of Wechsler Harwood Halebian & Feffer LLP, no action, suit or
proceeding is pending against or affecting or, to the best knowledge of
the Company and any of its subsidiaries, threatened against, the Company
or any of its subsidiaries before any court or arbitrator or any
governmental body, agency or official which, if adversely determined,
would prohibit, interfere with or adversely affect the issuance or
marketability of the Securities or in any manner draw into question the
validity of any Operative Document; and every request of any securities
authority or agency of any jurisdiction for additional information has
been complied with in all material respects.
(xvi) There is (i) no significant unfair labor practice complaint
pending against the Company or any of its subsidiaries nor, to the best
knowledge of the Company and its subsidiaries, threatened against any of
them, before the National Labor Relations Board, any state or local labor
relations board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under
any collective bargaining agreement is so pending against the Company or
any or its subsidiaries or, to the best knowledge of the Company and its
subsidiaries, threatened against any of them, (ii) no significant strike,
labor dispute slowdown or stoppage pending against the Company or any of
its subsidiaries nor, to the best knowledge of the Company and its
subsidiaries, threatened against the Company or any of its subsidiaries
and (iii) to the best knowledge of the Company and its subsidiaries, no
union representation question existing with respect to the employees of
the Company and its subsidiaries and, to the best knowledge of the Company
and its subsidiaries, no union organizing activities are taking place.
Neither the Company nor any of its subsidiaries has violated any federal,
state or local law or foreign law relating to discrimination in hiring,
promotion or pay of employees, nor any applicable wage or hour laws, nor
any provision of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules and regulations thereunder, which might
result in a Material Adverse Effect.
(xvii) In the ordinary course of its business, each of the Company
and its subsidiaries conducts periodic reviews of the effect of
Environmental Laws (as defined herein) and the handling, storage,
transport, treatment and disposal of Hazardous Materials (as defined
herein) on the business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, all
capital and operating expenditures required for response and corrective
actions, closure of properties and compliance with Environmental Laws, all
permits, licenses and approvals, all related constraints on operating
activities and all potential liabilities to third parties). On the basis
of such
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reviews, the Company has reasonably concluded that such associated costs
and liabilities would not have a Material Adverse Effect other than as
disclosed in the Offering Memorandum. Neither the Company nor any of its
subsidiaries has violated any Environmental Law applicable to it or its
business or property, or is subject to any liability under any
Environmental Law, lacks any permit, license or other approval required of
them under applicable Environmental Laws or is violating any Environmental
Law or term or condition of such permit, license or approval which might
have a Material Adverse Effect, in each case, other than as disclosed in
the Offering Memorandum. For the purposes of this Agreement,
"Environmental Laws" shall mean any Federal, state and local laws, rules
or regulations, any orders, decrees, judgments or injunctions and the
common law relating to pollution or protection of human health, safety or
the environment, including, without limitation, ambient air, indoor air,
soil, surface water, ground water, wetlands, land or subsurface strata,
including, without limitation, those relating to releases or threatened
releases of Hazardous Materials into the environment, or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials. For the purposes of this Agreement, "Hazardous Material" shall
mean any pollutant, contaminant, toxic, hazardous or extremely hazardous
substance, constituent or waste, or any other constituent, waste,
material, compound or substance, including, without limitation, petroleum
including crude oil and any fraction thereof, or any petroleum product,
subject to regulation under any Environmental Law.
(xviii) Each of the Company and its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the
Offering Memorandum or as would not have a Material Adverse Effect, (ii)
peaceful and undisturbed possession under all leases to which it is party
as lessee, (iii) all licenses, certificates, permits, authorizations,
approvals, franchises and other rights from, and has made all declarations
and filings with, all federal, state and local authorities, all
self-regulatory authorities and all courts and other tribunals (each an
"Authorization") necessary to engage in the business currently conducted
by it in the manner described in the Offering Memorandum, except where
failure to hold such Authorizations would not have a Material Adverse
Effect and (iv) no reason to believe that any governmental body or agency
is considering limiting, suspending or revoking any such Authorization.
All such Authorizations are valid and in full force and effect and the
Company and its subsidiaries are in compliance in all material respects
with the terms and conditions of all such Authorizations and with the
rules and regulations of the regulatory authorities having jurisdiction
with respect thereto. All leases to which the Company or any of its
subsidiaries is a party are valid and binding and no default by the
Company or any of its subsidiaries has occurred and is continuing
thereunder, and no material defaults by the landlord are existing under
any such lease.
(xix) All tax returns required to be filed by the Company or any of
its subsidiaries, in all jurisdictions, have been so filed. All taxes,
including withholding
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taxes, penalties and interest, assessments, fees and other charges due or
claimed to be due from such entities or that are due and payable have been
paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without
penalty or interest. Neither the Company nor any of its subsidiaries knows
of any material proposed additional tax assessments against it or any of
its subsidiaries.
(xx) Neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or analogous foreign laws and regulations, or
(ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(xxi) There are no holders of securities of the Company who, by
reason of the execution by the Company of this Agreement or any other
Operative Document to which it is a party or the consummation of the
transactions contemplated hereby and thereby, have the right to request or
demand that the Company register under the Act or analogous foreign laws
and regulations securities held by them.
(xxii) The authorized, issued and outstanding capital stock of the
Company has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of or subject to any
preemptive or similar rights. The Company and its subsidiaries had at July
31, 1996, an authorized and outstanding capitalization as set forth in the
Offering Memorandum.
(xxiii) Each certificate signed by any officer of the Company and
delivered to the Purchaser or counsel for the Purchaser shall be deemed to
be a representation and warranty by the Company to the Purchaser as to the
matters covered thereby.
(xxiv) The Company and each of its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect thereto.
(xxv) The Company and each of its subsidiaries maintains insurance
covering their properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect the Company and its
subsidiaries and their businesses. Neither the Company nor
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any of its subsidiaries has received notice from any insurer or agent of
such insurer that substantial capital improvements or other expenditures
will have to be made in order to continue such insurance. All such
insurance is outstanding and duly in force on the date hereof and will be
outstanding and duly in force on the Closing Date.
(xxvi) Neither the Company nor any of its subsidiaries has (i)
taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company or any of its
subsidiaries to facilitate the sale or resale of the Securities or (ii)
since the date of the Preliminary Offering Memorandum (A) sold, bid for,
purchased or paid any person any compensation for soliciting purchases of,
the Securities or (B) paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company or
any of its subsidiaries.
(xxvii) No registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Purchaser as
contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Series A Senior Notes in the Exempt Resales are
either QIBs, Accredited Investors (up to a maximum of 35 such Accredited
Investors) or Regulation S Purchasers and (ii) the accuracy of the
Purchaser's representations regarding the absence of general solicitation
in connection with the sale of Series A Notes to the Purchaser and the
Exempt Resales contained herein. No form of general solicitation or
general advertising was used by the Company or any of its representatives
in connection with the offer and sale of any of the Series A Notes or in
connection with Exempt Resales, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising. No securities of the same class as the Series A Notes
have been issued and sold by the Company within the six-month period
immediately prior to the date hereof.
(xxviii) Set forth on Exhibit A hereto is a list of each employee
pension or benefit plan with respect to which the Company or any
corporation considered an affiliate of the Company within the meaning of
Section 407(d)(7) of ERISA (an "Affiliate") is a party in interest or
disqualified person. The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Series A Notes to be
purchased by the Eligible Purchasers will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Internal Revenue Code of 1986, as amended. The representation made by
the Company in the preceding sentence is made in reliance upon and subject
to the accuracy of, and compliance with, the representations and covenants
made or deemed made by the Eligible Purchasers as set forth in the
Offering Memorandum under the Section entitled "Notices to Investors."
(xxix) Subsequent to the respective dates as of which information is
given in the Offering Memorandum and up to the Closing Date, except as set
forth in the Offering
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Memorandum, neither the Company nor any of its subsidiaries has incurred
any liabilities or obligations, direct or contingent, which are material
to the Company and its subsidiaries taken as a whole, nor entered into any
transaction not in the ordinary course of business, there has not been,
singly or in the aggregate, any material adverse change, or any
development which may reasonably be expected to involve a material adverse
change, in the properties, business, results of operations, condition
(financial or otherwise), affairs or prospects of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Change") and there
have not been dividends or distributions of any kind declared, paid or
made by the Company or any of its subsidiaries on any class of its capital
stock.
(xxx) Neither the Company nor any agent thereof acting on the behalf
of the Company has taken, and the Company will not take, any action that
might cause this Agreement or the issuance or sale of the Securities to
violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part
224) of the Board of Governors of the Federal Reserve System or analogous
foreign laws and regulations.
(xxxi) The accountants who have certified or shall certify the
financial statements and supporting schedules included or to be included
as part of the Offering Memorandum are independent accountants. The
consolidated historical statements fairly present the consolidated
financial condition and results of operations of the Company and its
subsidiaries at the respective dates and for the respective periods
indicated, in accordance with generally accepted accounting principles
consistently applied throughout such periods, except as stated therein.
The pro forma financial statements have been prepared on a basis
consistent with such historical statements, except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly the historical and proposed
transactions contemplated by this Agreement and the other Operative
Documents. Other financial and statistical information and data included
in the Offering Memorandum, historical and pro forma, are accurately
presented and prepared on a basis consistent with such financial
statements and the books and records of the Company and its subsidiaries.
(xxxii) The present fair salable value of the assets of the Company
exceeds the amount that will be required to be paid on or in respect of
the existing debts and other liabilities (including contingent
liabilities) of each such person as they become absolute and matured. The
assets of the Company do not constitute unreasonably small capital to
carry out its businesses as conducted or as proposed to be conducted. The
Company does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay such debts as they mature. Upon the issuance of
the Series A Notes, the present fair saleable value of the assets of the
Company will exceed the amount that will be required to be paid on or in
respect of the existing debts and other liabilities (including contingent
liabilities) of the Company as they become absolute and matured. The
assets of the Company, upon the issuance of the Series A Notes, will not
constitute unreasonably
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small capital to carry out its businesses as now conducted, including the
capital needs of the Company, taking into account the projected capital
requirements and capital availability of the Company.
(xxxiii) There are no contracts, agreements or understandings
between the Company or any of its subsidiaries and any person that would
give rise to a valid claim against the Company, its subsidiaries or the
Purchaser for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Securities.
The Company acknowledges that the Purchaser and, for purposes of the
opinions to be delivered to the Purchaser pursuant to Section 7 hereof, counsel
to the Company and counsel to the Purchaser will rely upon the accuracy and
truth of the foregoing representations and hereby consent to such reliance.
(b) The Purchaser represents and warrants to the Company and agrees that:
(i) It is a QIB, with such knowledge and experience in financial and
business matters as are necessary in order to evaluate the merits and
risks of an investment in the Series A Notes.
(ii) It (A) is not acquiring the Series A Notes with a view to any
distribution thereof that would violate the Act or the securities laws of
any state of the United States or any other applicable jurisdiction and
(B) will be reoffering and reselling the Series A Notes only to QIBs in
reliance on the exemption from the registration requirements of the Act
provided by Rule 144A, to Accredited Investors in a private placement
exempt from the registration requirements of the Act and in offshore
transactions in compliance with Regulation S under the Act.
(iii) No form of general solicitation or general advertising has
been or will be used by it or any of its representatives in connection
with the offer and sale of any of the Series A Notes, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(iv) It agrees that, in connection with the Exempt Resales, it will
solicit offers to buy the Series A Notes only from, and will offer to sell
the Series A Notes only to, QIBs, a total of no more than 35 Accredited
Investors and to Regulation S Purchasers in offshore transactions in
compliance with Regulation S under the Act. It further agrees (A) that it
will offer to sell the Series A Notes only to, and will solicit offers to
buy the Series A Notes only from (1) QIBs who in purchasing such Series A
Notes will be deemed to have represented and agreed that they are
purchasing the Series A Notes for their own account or accounts with
respect to which they exercise sole investment
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discretion and that they or such accounts are QIBs, (2) Accredited
Investors who make the representations contained in, and execute and
return to the Purchaser, a certificate in the form of Annex A attached to
the Offering Memorandum and (3) to Regulation S Purchasers in offshore
transactions in compliance with Regulation S under the Act and (B) that,
in the case of such QIBs, Accredited Investors and Regulation S
Purchasers, acknowledges and agrees that such Series A Notes will not have
been registered under the Act and may be resold, pledged or otherwise
transferred only (x)(I) to a person who the seller reasonably believes is
a QIB in a transaction meeting the requirements of Rule 144A, (II) in a
transaction meeting the requirements of Rule 144, (III) to a foreign
person in a transaction meeting the requirements of Rule 904 under the Act
or (IV) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel if the
Company so requests), (y) to the Company, (z) pursuant to an effective
registration statement under the Act and, in each case, in accordance with
any applicable securities laws of any state of the United States or any
other applicable jurisdiction and (C) that the holder will, and each
subsequent holder is required to, notify any purchaser from it of the
security evidenced thereby of the resale restrictions set forth in (B)
above.
(v) It will comply with the applicable provisions of Rule 144A under
the Act and Regulation S under the Act.
(vi) It also understands that the Company and, for purposes of the
opinions to be delivered to you pursuant to Section 7 hereof, counsel to
the Company and counsel to the Purchaser will rely upon the accuracy and
truth of the foregoing representations and hereby consents to such
reliance.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) the
Purchaser and (ii) each person, if any, who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the Purchaser
(any of the persons referred to in this clause (ii) being hereinafter
referred to as a "controlling person"), and (iii) the respective officers,
directors, partners, employees, representatives and agents of the
Purchaser or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Person")
to the fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of
counsel to any Indemnified Person) directly or indirectly caused by,
related to, based upon, arising out of or in connection with any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto), or any omission or alleged omission to
state therein a material
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<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or
alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to the Purchaser furnished in writing
to the Company by the Purchaser expressly for use therein; provided,
however, that the foregoing indemnity agreement with respect to any
Preliminary Offering Memorandum shall not inure to the benefit of the
Purchaser from whom the person asserting any such losses, claims, damages,
liabilities, judgments, actions or expenses purchased Series A Notes, or
any person controlling such Purchaser, if a copy of the Offering
Memorandum (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of the Purchaser to such person, at or prior to the written
confirmation of the sale of the Series A Notes to such person, and if the
Offering Memorandum (as so amended and supplemented) would have cured the
defect giving rise to such loss, claim, damage, liability, judgment,
action or expense. The Company shall notify you promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involves the Company or an Indemnified
Person.
(b) In case any action or proceeding (including any governmental
investigation) shall be brought or asserted against any of the Indemnified
Persons with respect to which indemnity may be sought against the Company,
such Indemnified Person shall promptly notify the Company in writing
(provided, that the failure to give such notice shall not relieve the
Company of its obligations pursuant to this Agreement unless it shall have
been determined by a court of competent jurisdiction, by a final judgment
not subject to appeal or review, that such failure shall have resulted in
a material adverse effect upon the Company). Such Indemnified Person shall
have the right to employ its own counsel in any such action and the fees
and expenses of such counsel shall be paid, as incurred, by the Company;
provided, however, that the Company shall be entitled to participate in
such action or proceeding and, to the extent that the Company shall wish
to assume the defense thereof (provided that any such participation or
assumption shall be permitted only upon written notice to the Indemnified
Person which notice is received within 10 days of the Company's actual
knowledge of such action or proceeding), with counsel satisfactory to such
Indemnified Person (which counsel shall not, except with the consent of
the Indemnified Person, be counsel to the Company), at the Company's
expense, and after notice from the Company to such Indemnified Person of
the Company's election so to assume the defense thereof, the Company shall
not be liable to such Indemnified Person under this Section 6(b) for any
legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such Indemnified Person, in connection with the
defense thereof other than reasonable costs of investigation; provided,
further, that the Company shall not be entitled to control the defense of,
or investigation by, such Indemnified Person if such Indemnified Person
has been advised by its counsel that there could reasonably be expected to
be a conflict of interest between the Company and such Indemnified Person
under applicable standards of professional responsibility. The
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<PAGE>
Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any
time for the Indemnified Persons, which firm shall be designated by
Donaldson, Lufkin & Jenrette Securities Corporation. The Company shall be
liable for any settlement of any such action or proceeding effected with
the Company's prior written consent, which consent will not be
unreasonably withheld, and the Company agrees to indemnify and hold
harmless any Indemnified Person from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected
with the written consent of the Company. Notwithstanding the immediately
preceding sentence, if at any time an Indemnified Person shall have
requested an indemnifying party to reimburse the Indemnified Person for
fees and expenses of counsel as contemplated by the second sentence of
this paragraph, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent if
(i) such settlement is entered into more than twenty business days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. The
Company shall not, without the prior written consent of an Indemnified
Person (which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Person is a party
thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of such Indemnified Person from all
liability arising out of such action, claim, litigation or proceeding.
(c) The Purchaser agrees to indemnify and hold harmless the Company,
any person controlling (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) the Company, and their respective
officers, directors, partners, employees, representatives and agents
(collectively, the "Indemnified Company Persons"), to the same extent as
the foregoing indemnity from the Company to each of the Indemnified
Persons, but only with respect to claims and actions based on information
relating to the Purchaser furnished in writing by the Purchaser to the
Company expressly for use in the Preliminary Offering Memorandum or the
Offering Memorandum.
The statements in the Offering Memorandum in the paragraph under the
pricing table on the cover page of the Offering Memorandum and in the
third paragraph under the caption "Plan of Distribution" constitute the
only information heretofore furnished to the Company in writing by the
Purchaser expressly for use in the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto.
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<PAGE>
(d) In case any action (including any governmental investigation)
shall be brought against any Indemnified Company Person based on the
Offering Memorandum or the Preliminary Offering Memorandum and in respect
of which indemnity may be sought against the Purchaser, the Purchaser
shall have the rights and duties given to the Company (except that if the
Company shall have assumed the defense thereof, the Purchaser shall not be
required to do so, but may employ separate counsel therein and participate
in the defense thereof but the fees and expenses of such counsel shall be
at the expense of the Purchaser), and the Indemnified Company Person shall
have the rights and duties given to the Purchaser by Section 6(b) hereof.
(e) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other hand from the offering of the Series A Notes or (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) above but also the relative fault of
the indemnifying party and the indemnified party, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Purchaser, on the other hand, shall be
deemed to be in the same proportion as the total proceeds from the
offering of the Series A Notes (net of commissions but before deducting
expenses) received by the Company and the total commissions received by
the Purchaser bear to the total price of the Series A Notes paid in the
Exempt Resales, in each case as set forth in the pricing table on the
cover page of the Offering Memorandum. The relative fault of the Company,
on the one hand, and the Purchaser, on the other hand, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact related to information supplied by the Company, on the one
hand, and the Purchaser, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The indemnity set forth herein shall
be in addition to any liability or obligation the Company may otherwise
have to any Indemnified Person.
The Company and the Purchaser agree that it would not be just and
equitable if contribution to this Section 6(e) were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or expenses referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or
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claim. Notwithstanding the provisions of this Section 6, the Purchaser
(nor the related Indemnified Persons) shall not be required to contribute,
in the aggregate, any amount in excess of the amount by which the total
discounts and commissions received by the Purchaser with respect to the
Series A Notes, exceeds the amount of any damages which the Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) The Company hereby designates The Renco Group, Inc., a New York
corporation, as its authorized agent upon whom process may be served in
any action, suit or proceeding that may be instituted in any state or
federal court in the State of New York by the Purchaser or any person
controlling the Purchaser asserting a claim for indemnification or
contribution under or pursuant to this Section 6, and the Company will
accept the jurisdiction of such court in such action, and waive, to the
fullest extent permitted by applicable law, any defense based upon lack of
personal jurisdiction or venue. A copy of any such process shall be sent
or given to the Company and counsel to the Company at their respective
address for notices specified in Section 9 hereof.
7. Conditions of Purchaser's Obligations. The obligations of the Purchaser
under this Agreement are subject to the satisfaction of each of the following
conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof
and on the Closing Date with the same force and effect as if made on and
as of the date hereof and the Closing Date, respectively. The Company
shall have performed or complied with all of the agreements herein
contained and required to be performed or complied with by it at or prior
to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Eligible Purchasers to whom the Purchaser intends to
resell in Exempt Resales the Series A Notes on the Closing Date not later
than 10:00 a.m., New York City time, on the date of this Agreement or at
such later date and time as to which you may agree, and no stop order
suspending the qualification or exemption from qualification of any of the
Series A Notes in any jurisdiction referred to in Section 4(e) shall have
been issued and no proceeding for that purpose shall have been commenced
or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance of any of
the Series A Notes; no action, suit or proceeding shall be pending against
or affecting or, to the knowledge of the Company, threatened against, the
Company or any of its subsidiaries before any court or arbitrator or any
governmental body, agency or official that, if adversely determined, would
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prohibit, interfere with or adversely affect the issuance of the Series A
Notes or would have a Material Adverse Effect, or in any manner draw into
question the validity of any of the Operative Documents; and no stop order
preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration
requirements of the Act shall have been issued.
(d) Since the dates as of which information is given in the Offering
Memorandum and other than as contemplated in the Offering Memorandum, (i)
there shall not have been any material change, or any development that is
reasonably likely to result in a material change, in the capital stock or
the long-term debt, or material increase in the short-term debt, of the
Company or any of its subsidiaries from that set forth in the Offering
Memorandum, (ii) no dividend or distribution of any kind shall have been
declared, paid or made by the Company or any of its subsidiaries on any
class of its capital stock, and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the
Company and its subsidiaries, taken as a whole, and that are required to
be disclosed on a balance sheet in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet
included in the Offering Memorandum. Since the date hereof and since the
dates as of which information is given in the Offering Memorandum, there
shall not have been any Material Adverse Change.
(e) You shall have received certificates, dated the Closing Date,
signed by (i) the President or any Vice President and (ii) a principal
financial or accounting officer of the Company confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 7.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of
Cadwalader, Wickersham & Taft, counsel for the Company to the effect that:
(i) The Company and each of its subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of its respective jurisdiction of incorporation, has
all requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as it is
currently being conducted and as described in the Offering
Memorandum, and is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which
the ownership, leasing and operating of its property and the conduct
of its business requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect.
(ii) The entities listed on Schedule I hereto are the only
subsidiaries, direct or indirect, of the Company. The Company owns,
directly or indirectly
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through other subsidiaries, 100% of the outstanding capital stock or
other securities evidencing equity ownership of such subsidiaries,
free and clear of any security interest, claim, lien, limitation on
voting rights or encumbrance; and all of such securities have been
duly authorized, validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar
rights. There are no outstanding subscriptions, rights, warrants,
calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such shares of capital
stock or other equity interest of such subsidiaries.
(iii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, the Note Indenture, the Supplemental Indenture, the
Registration Rights Agreement, each of the Collateral Documents and
the other Operative Documents to which it is a party and to
consummate the transactions contemplated hereby or thereby,
including, without limitation, with respect to the Company, the
corporate power and authority to issue, sell and deliver the
Securities as provided herein.
(iv) The Company has duly and validly authorized, executed and
delivered this Agreement.
(v) The Company has duly and validly authorized, executed and
delivered the Note Indenture and (assuming the due authorization,
execution and delivery thereof by the Trustee) the Note Indenture is
the legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights and remedies generally, (ii) as to general principles of
equity, regardless of whether enforcement is sought in a proceeding
at law or in equity, and (iii) to the extent that a waiver of rights
under any usury laws may be unenforceable. The Note Indenture
conforms to the description thereof in the Offering Memorandum.
(vi) The Series A Notes have been duly and validly authorized
for issuance and sale to you by the Company pursuant to this
Agreement and, when issued and authenticated in accordance with the
terms of the Note Indenture and delivered against payment therefor
in accordance with the terms hereof, will be the legally valid and
binding obligations of the Company, enforceable against the Company
in accordance with their terms and entitled to the benefits of the
Note Indenture, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, (ii) as to
general principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity, and (iii) to the extent
that a waiver of rights under any usury laws may be unenforceable.
The
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Series A Notes, when issued, authenticated and delivered, will
conform to the description thereof in the Offering Memorandum.
(vii) The Series B Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Note Indenture, the Registration
Rights Agreement and the Exchange Offer, will be the legally valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits
of the Note Indenture, except (i) as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally, (ii) as to
general principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity, and (iii) to the extent
that a waiver of rights under any usury laws may be unenforceable.
(viii) The Company has duly and validly authorized, executed
and delivered the Supplemental Indenture and (assuming the due
authorization, execution and delivery thereof by the Trustee) the
Supplemental Indenture is the legally valid and binding obligation
of the Company, enforceable against the Company in accordance with
its terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, (ii) as to
general principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity, and (iii) to the extent
that a waiver of rights under any usury laws may be unenforceable.
The Supplemental Indenture conforms to the description thereof in
the Statement.
(ix) Each of the Collateral Documents has been duly and
validly authorized by the Company and, when duly executed and
delivered by the Company (assuming the due authorization, execution
and delivery thereof by the other parties thereto), will be the
legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights and remedies generally, (ii) as to general principles of
equity, regardless of whether enforcement is sought in a proceeding
at law or in equity, and (iii) to the extent that a waiver of rights
under any usury laws may be unenforceable.
(x) The Registration Rights Agreement has been duly and
validly authorized, by the Company and, when duly executed and
delivered by the Company (assuming the due authorization, execution
and delivery thereof by Purchaser), will be the legally valid and
binding obligation of the Company, enforceable against the Company
in accordance with its terms, except (i) as such enforcement may be
limited by bankruptcy, insolvency, reorganization,
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moratorium or similar laws affecting creditors' rights and remedies
generally and (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity.
The Registration Rights Agreement, when executed and delivered, will
conform to the description thereof in the Offering Memorandum.
(xi) When the Series A Notes are issued and delivered pursuant
to this Agreement, none of the Series A Notes will be of the same
class (within the meaning of Rule 144A under the Act) as securities
of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in
a United States automated inter-dealer quotation system.
(xii) No registration under the Act of any of the Series A
Notes is required for the sale of the Series A Notes to you as
contemplated hereby or for the Exempt Resales assuming (i) that each
of the Eligible Purchasers is a QIB, an Accredited Investor or a
Regulation S Purchaser, (ii) the accuracy of your representations
regarding the absence of general solicitation in connection with the
sale of the Series A Notes to you and the Exempt Resales contained
herein and (iii) the accuracy of the representations made by each
Accredited Investor as set forth in the letters of representation
executed by such Accredited Investor in the form of Annex A to the
Offering Memorandum.
(xiii) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or bylaws or, to such counsel's
knowledge, is in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any other agreement, indenture,
mortgage or deed of trust or other material agreement to which it is
a party or by which it is bound or to which any of its properties is
subject or is in violation of any law, statute, rule, regulation,
judgment or court decree applicable to the Company or its
subsidiaries and there exists no condition that, with notice, the
passage of time or otherwise, would constitute such default under
any such document or instrument, which any such default would result
in a Material Adverse Effect.
(xiv) The execution, delivery and performance by the Company
of this Agreement and the other Operative Documents to which it is a
party, the issuance and sale of the Securities, and the consummation
of the transactions contemplated hereby and thereby will not
violate, conflict with or constitute a breach of any of the terms or
provisions of, or a default under (or an event that with notice or
the lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien or encumbrance
on any properties of the Company or any of its subsidiaries, or an
acceleration of indebtedness pursuant to, (i) the charter or bylaws
of the Company or any of its subsidiaries, (ii) to the best of such
counsel's knowledge, any bond, debenture, note, indenture,
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mortgage, deed of trust or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which any of
them or their property is or may be bound, (iii) any statute, rule
or regulation applicable to the Company, any of its subsidiaries or
their assets or properties (except (with respect to this clause
(iii)) such violations, conflicts, breaches or defaults as could not
reasonably be expected to have a Material Adverse Effect), or (iv)
to the best of such counsel's knowledge, any judgment, order or
decree of any court or governmental agency or authority having
jurisdiction over the Company, any of its subsidiaries or their
assets or properties. To such counsel's knowledge, no consent,
approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is required for
the execution, delivery and performance of this Agreement and the
other Operative Documents and the consummation of the transactions
contemplated hereby and thereby, except such as have been obtained
and made (or, in the case of the Registration Rights Agreement, will
be obtained and made) under the Act, the Trust Indenture Act and
state securities or Blue Sky laws and regulations or such as may be
required by NASD. To such counsel's knowledge, no consents or
waivers from any other person are required for the execution,
delivery and performance of this Agreement and the other Operative
Documents and the consummation of the transactions contemplated
hereby and thereby, other than such consents and waivers as have
been obtained (or, in the case of the Registration Rights Agreement,
will be obtained).
(xv) To the best knowledge of such counsel, no action has been
taken and no statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency that prevents the
issuance of the Securities; no injunction, restraining order or
order of any nature by a federal or state court of competent
jurisdiction has been issued that prevents the issuance of the
Securities or suspends the sale of the Securities in any
jurisdiction referred to in Section 4(e) hereof; and (other than
matters set forth in letters from the law firm of Wechsler Harwood
Halebian & Feffer LLP) no action, suit or proceeding is pending
against or affecting or, to the best knowledge of such counsel,
threatened against, the Company or any of its subsidiaries before
any court or arbitrator or any governmental body, agency or official
which, if adversely determined, would prohibit, interfere with or
adversely affect the issuance or marketability of the Securities or
in any manner draw into question the validity of any Operative
Document; and every request of any securities authority or agency of
any jurisdiction for additional information has been complied with
in all material respects.
(xvi) To the best knowledge of such counsel, the Company and
each of its subsidiaries has (i) good and marketable title to all of
the properties and assets described in the Offering Memorandum as
owned by it, free and clear of all liens, charges, encumbrances and
restrictions, except such as are described in the
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Offering Memorandum or as would not have a Material Adverse Effect,
(ii) peaceful and undistributed possession under all leases to which
it is party as lessee, (iii) all Authorizations necessary to engage
in the business currently conducted by it in the manner described in
the Offering Memorandum, except where failure to hold such
Authorizations would not have a Material Adverse Effect and (iv) no
reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such Authorization.
To the best knowledge of such counsel, all such Authorizations are
valid and in full force and effect and the Company and its
subsidiaries are in compliance in all material respects with the
terms and conditions of all such Authorizations and with the rules
and regulations of the regulatory authorities having jurisdiction
with respect thereto. To the best knowledge of such counsel, all
leases to which the Company or any of its subsidiaries is a party
are valid and binding and no default by the Company or any of its
subsidiaries has occurred and is continuing thereunder, and no
material defaults by the landlord are existing under any such lease.
(xvii) To the best knowledge of such counsel, other than as
disclosed in the Offering Memorandum neither the Company nor any of
its subsidiaries has violated any Environmental Laws, lacks any
permits, licenses or other approvals required of them under
applicable Environmental Laws or is violating any terms and
conditions of any such permit, license or approval, nor has the
Company or any of its subsidiaries violated any federal, state,
local or foreign law relating to discrimination in the hiring,
promotion or pay of employees nor any applicable wage or hourly
laws, nor any provisions of ERISA or the rules and regulations
promulgated thereunder, which in each case would result in a
Material Adverse Effect.
(xviii) Neither the Company nor any of its subsidiaries is (i)
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940 or
analogous foreign laws and regulations, or (ii) a "holding company"
or a "subsidiary company" or an "affiliate" of a holding company
within the meaning of the Public Utility Holding Company Act of
1935, as amended.
(xix) Prior to the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, the Note
Indenture is not required to be qualified under the Trust Indenture
Act of 1939.
(xx) The Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date (except for the
financial statements, including the notes thereto, and supporting
schedules and other financial, statistical and accounting data
included therein or omitted therefrom, as to which no opinion need
be expressed), contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
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(xxi) The authorized, issued and outstanding capital stock of
the Company has been duly and validly authorized and issued, is
fully paid and nonassessable and was not issued in violation of or
subject to preemptive or similar rights. The Company and its
subsidiaries had at July 31, 1996, an authorized and outstanding
capitalization as set forth in the Offering Memorandum.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, your
representatives and your counsel in connection with the preparation of the
Offering Memorandum and has considered the matters required to be stated therein
and the statements contained therein and, although such counsel has not
independently verified the accuracy, completeness or fairness of such statements
(except as indicated above), such counsel advises you that, on the basis of the
foregoing, no facts came to its attention that caused it to believe that the
Offering Memorandum (as amended or supplemented, if applicable), at the time
such Offering Memorandum was circulated or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may further state that
they assume no responsibility for, and have not independently verified, the
accuracy, completeness or fairness of the financial statements, notes and
schedules and other financial data included in the Offering Memorandum.
In rendering such opinion, such counsel may rely (i) as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, (ii) as to matters of Ohio law and
environmental law, on an opinion or opinions of Squire, Sanders & Dempsey L.L.P.
satisfactory to the Purchaser and counsel to the Purchaser and (iii) as to
matters of labor law, on an opinion of Bryan Cave LLP satisfactory to the
Purchaser and counsel to the Purchaser.
The opinions of such counsel described in this paragraph shall be rendered
to you at the request of the Company and shall so state therein.
(g) You shall have received an opinion, dated the Closing Date, of Cahill
Gordon & Reindel, your counsel, in form and substance reasonably satisfactory to
you, covering such matters as are customarily covered in such opinions.
(h) At the time this Agreement is executed and delivered by the Company
and on the Closing Date, you shall have received letters, substantially in the
form previously approved by you, from KPMG Peat Marwick LLP, independent
certified public accountants, with respect to the financial statements and
certain financial information contained in Offering Memorandum.
(i) The Company and the Trustee shall have entered into the Note Indenture
and you shall have received counterparts, conformed as executed, thereof.
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(j) The Company shall have entered into the Registration Rights Agreement
and you shall have received counterparts, conformed as executed, thereof.
(k) On or before the Closing Date, the Purchaser and counsel for the
Purchaser shall have received an opinion from Houlihan, Lokey, Howard & Zukin,
in form and substance satisfactory to the Purchaser and counsel for the
Purchaser, with respect to the solvency of the Company upon issuance of the
Series A Notes and the consummation of the other transactions contemplated in
this Agreement, the other Operative Documents and the Offering Memorandum.
(l) The Offer shall have been consummated in accordance with the terms of
the Statement, and the Depositary shall have received the Requisite Consents.
(m) The Amendment shall have been duly authorized, executed and delivered
by the Company and Congress Financial Corporation. The Purchaser shall have
received true and correct copies of the Amendment and there exists as of the
Closing Date (after giving effect to the transactions contemplated by this
Agreement and the application of the proceeds received by the Company from the
sale of the Series A Notes) no condition that would constitute a Default or an
Event of Default (each as defined in the WCI Revolving Credit Facility) under
the WCI Revolving Credit Facility.
(n) The Company shall not have failed at or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company at or prior to the Closing Date.
(o) The Equity Offer shall have been consummated in accordance with the
terms of the Equity Statement, and the Public Acceptance Condition shall have
been met, as confirmed by the Equity Depositary.
(p) Each of the Collateral Documents shall be satisfactory in form and
substance to the Purchaser and counsel to the Purchaser and shall have been
executed and delivered by all the respective parties thereto.
(q) Bryan Cave LLP shall have delivered to the Company or its counsel its
opinion to the effect that the Company is not in default in the performance of
the agreements between the Company and the United Steelworkers of America (the
"VEBA Term Sheet") related to the VEBA Trust, and there exists no condition
that, with notice, the passage of time or otherwise, would constitute such
default under the VEBA Term Sheet.
(r) On or before the Closing Date, the Purchaser shall have received:
(i) The Security Agreement (as defined in the Indenture), duly
executed by the Company and dated on or before the Closing Date, together
with:
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A. acknowledgment copies of appropriate UCC-1 financing
statements or other documents under the provisions of the UCC or any
other applicable state law filed in each office where such filing is
necessary or appropriate to grant to the Trustee a lien of the
character contemplated by the Security Agreement and the priority
contemplated in Section 10.01(a) of the Indenture; and
B. evidence that all other actions necessary to perfect and
protect the liens created by the Security Agreement have been taken.
(ii) With respect to the Mortgaged Property (as defined in the
Indenture):
A. a Mortgage (as defined in the Indenture), duly executed and
acknowledged by the owner or holder of the fee interest constituting
the Mortgaged Property, dated on or before the Closing Date and
otherwise in form for recording in the appropriate recording office
of the political subdivision where the Mortgaged Property is
situated, together with such certificates, affidavits,
questionnaires or returns as shall be required in connection with
the recording or filing thereof and such UCC-1 financing statements
and other similar statements as are contemplated in respect of the
Mortgage by the local counsel opinion referred to in paragraph (w),
and any other instruments necessary to grant the interests purported
to be granted by the Mortgage under the laws of any applicable
jurisdiction, which Mortgage and financing statements and other
instruments shall be effective to create a lien on the Mortgaged
Property in favor of the Trustee, subject to no liens other than
liens permitted to be outstanding pursuant to the Mortgage or
permitted to be pari passu pursuant to Section 10.01(a) of the
Indenture;
B. such consents, approvals, amendments, supplements,
estoppels, tenant subordination agreements or other instruments as
shall be necessary in order for the owner or holder of the fee
interest to grant the lien contemplated by the Mortgage with respect
to the Mortgaged Property;
C. with respect to the Mortgage, a policy of title insurance
(or a commitment to issue such a policy) insuring (or committing to
insure) the lien of the Mortgage as a valid mortgage lien on the
real property and fixtures described therein with the priority
contemplated in Section 10.01(a) of the Indenture in respect of the
Securities in an amount not less than 100% of the fair market value
thereof which policy (or commitment) shall (a) be issued by First
American Title Insurance Company, (b) include such reinsurance
arrangements (with provisions for direct access) as shall be
acceptable to the Purchaser, (c) have been supplemented by such
endorsements, or, where such endorsements are not available at
commercially reasonable premium costs, opinion letters of special
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counsel, architects or other professionals, which counsel,
architects or other professionals shall be acceptable to the
Purchaser, as shall be requested by the Purchaser (including,
without limitation, endorsements or opinion letters on matters
relating to usury, first loss, zoning, non-imputation, public road
access, contiguity (where appropriate), cluster, survey, variable
rate and so-called comprehensive coverage over covenants and
restrictions) and (d) contain only such exceptions to title as shall
be agreed to by the Purchaser prior to the Closing Date with respect
to the Mortgaged Property;
D. a survey of the Mortgaged Property complying with the
minimum detail requirements of the American Land Title Association
(as such requirements are in effect on the date of delivery of such
survey) certified to the Trustee and dated (or redated) not earlier
than six months prior to the date of delivery thereof, unless there
shall have occurred any exterior change in the property affected
thereby during such period, in which event such survey shall be
dated or redated to a date after the completion of such change,
which survey shall locate all improvements, public streets and
recorded easements affecting the Mortgaged Property;
E. policies or certificates of insurance as required by the
Mortgage, which policies or certificates shall bear mortgagee
endorsements of the character required by the Mortgage;
F. UCC, judgment and tax lien searches confirming that the
personal property comprising a part of the Mortgaged Property is
subject to no liens other than Prior Liens (as defined in the
Mortgage);
G. such affidavits, certificates and instruments of
indemnification as shall be required to induce the title company to
issue the policy or policies (or commitment) contemplated in
subparagraph (C) above;
H. checks payable to the appropriate public officials in
payment of all recording costs and transfer taxes (or checks or wire
transfers to the title insurance company in respect of such amounts)
due in respect of the execution, delivery or recording of the
Mortgage, together with a check or wire transfer for the title
insurance company in payment of its premium, search and examination
charges, survey costs and any other amounts due in connection with
the issuance of its policies (or commitments);
I. copies of all Leases (as defined in the Mortgage), all of
which Leases shall be satisfactory to the Purchaser; and
J. a certificate of an officer of the Company certifying that,
as of the date of delivery of such certificate, there is not
outstanding any citation, violation
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or similar notice indicating that such real property contains
conditions which are not in compliance with local codes or
ordinances relating to building or fire safety or structural
soundness (other than any provisions of such codes or ordinances the
validity or applicability of which is being contested in good faith
by appropriate proceedings diligently prosecuted and as to which
enforcement proceedings have not been instituted or, if instituted,
have been stayed).
(iii) The VEBA Security Agreement (as defined in the Indenture),
duly executed by the Company and dated on or before the Closing Date,
together with:
A. acknowledgment copies of appropriate UCC-1 financing
statements or other documents under the provisions of the UCC or any
other applicable state law filed in each office where such filing is
necessary or appropriate to grant to the VEBA Trustee a lien of the
character contemplated by the VEBA Security Agreement and the
priority contemplated in Section 10.01(a) of the Indenture; and
B. evidence that all other actions necessary to perfect and
protect the liens created by the VEBA Security Agreement have been
taken.
(iv) With respect to the Mortgaged Property:
A. a VEBA Mortgage (as defined in the Indenture), duly
executed and acknowledged by the owner or holder of the fee interest
constituting the Mortgaged Property, dated on or before the Closing
Date and otherwise in form for recording in the appropriate
recording office of the political subdivision where the Mortgaged
Property is situated, together with such certificates, affidavits,
questionnaires or returns as shall be required in connection with
the recording or filing thereof and such UCC-1 financing statements
and other similar statements as are contemplated in respect of the
VEBA Mortgage by the local counsel opinion referred to in paragraph
(w), and any other instruments necessary to grant the interests
purported to be granted by the VEBA Mortgage under the laws of any
applicable jurisdiction, which VEBA Mortgage and financing
statements and other instruments shall be effective to create a lien
on the Mortgaged Property in favor of the VEBA Trustee (as defined
in the Mortgage), subject to no liens other than liens permitted to
be outstanding pursuant to the VEBA Mortgage;
B. with respect to the VEBA Mortgage, a policy of title
insurance (or a commitment to issue such a policy) insuring (or
committing to insure) the lien of the VEBA Mortgage as a valid
mortgage lien on the real property and fixtures described therein
with the priority contemplated in Section 10.01(a) of the Indenture
in respect of the Obligations (as defined in the VEBA Mortgage) in
an amount not less than $10,000,000 which policy (or commitment)
shall (a) be issued by First American Title Insurance Company and
(b) contain customary provisions and endorsements;
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C. a survey of the Mortgaged Property complying with the
minimum detail requirements of the American Land Title Association
(as such requirements are in effect on the date of delivery of such
survey) certified to the VEBA Trustee and dated (or redated) not
earlier than six months prior to the date of delivery thereof,
unless there shall have occurred any exterior change in the property
affected thereby during such period, in which event such survey
shall be dated or redated to a date after the completion of such
change, which survey shall locate all improvements, public streets
and recorded easements affecting the Mortgaged Property;
D. policies or certificates of insurance as required by the
VEBA Mortgage, which policies or certificates shall bear mortgagee
endorsements of the character required by the VEBA Mortgage;
E. UCC, judgment and tax lien searches confirming that the
personal property comprising a part of the Mortgaged Property is
subject to no liens other than those liens permitted to be superior
to the VEBA Mortgage by the terms thereof;
F. such affidavits, certificates and instruments of
indemnification as shall be required to induce the title company to
issue the policy or policies (or commitment) contemplated in
subparagraph (B) above;
G. checks payable to the appropriate public officials in
payment of all recording costs and transfer taxes (or checks or wire
transfers to the title insurance company in respect of such amounts)
due in respect of the execution, delivery or recording of the VEBA
Mortgage, together with a check or wire transfer for the title
insurance company in payment of its premium, search and examination
charges, survey costs and any other amounts due in connection with
the issuance of its policies (or commitments); and
H. a certificate of an officer of the Company certifying that,
as of the date of delivery of such certificate, there is not
outstanding any citation, violation or similar notice indicating
that such real property contains conditions which are not in
compliance with local codes or ordinances relating to building or
fire safety or structural soundness (other than any provisions of
such codes or ordinances the validity or applicability of which is
being contested in good faith by appropriate proceedings diligently
prosecuted and as to which enforcement proceedings have not been
instituted or, if instituted, have been stayed).
(s) The Purchaser shall have received an opinion, dated the Closing Date,
from Squire, Sanders and Dempsey L.L.P., local Ohio counsel, substantially in
the form of Exhibit B hereto.
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(t) On or before the Closing Date, the Purchaser and counsel for the
Purchaser shall have received such further certificates, documents or other
information as they may have reasonably requested from the Company.
All opinions, certificates, letters and other documents required by this
Section 7 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to you. The Company will furnish the Purchaser with such conformed copies of
such opinions, certificates, letters and other documents as they shall
reasonably request.
8. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the execution hereof.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by notice to the Company if any of the following has occurred: (i)
subsequent to the date information is provided in the Offering Memorandum, any
Material Adverse Change which, in your judgment, materially impairs the
investment quality of any of the Series A Notes, (ii) any outbreak or escalation
of hostilities or other national or international calamity or crisis or material
adverse change in the financial markets of the United States or elsewhere, or
any other substantial national or international calamity or emergency if the
effect of such outbreak, escalation, calamity, crisis, crisis, material adverse
change or emergency would, in your judgment, make it impracticable or
inadvisable to market any of the Series A Notes or to enforce contracts for the
sale of any of the Series A Notes, (iii) any suspension or limitation of trading
generally in securities on the New York Stock Exchange or in the
over-the-counter markets or any setting of minimum prices for trading on such
exchange or markets, (iv) any declaration of a general banking moratorium by
either federal or New York authorities, (v) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs that in your judgment has a material adverse effect on the
financial markets in the United States, and would, in your judgment, make it
impracticable or inadvisable to market any of the Series A Notes or to enforce
contracts for the sale of any of the Series A Notes, (vi) the enactment,
publication, decree, or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which, in
your judgment, would have a Material Adverse Effect, or (vii) any securities of
the Company or any of its subsidiaries shall have been downgraded or placed on
any "watch list" for possible downgrading by any nationally recognized
statistical rating organization.
The indemnities and contribution provisions and the other agreements,
representations and warranties of the Company, its officers and directors and of
the Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Series A Notes, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of the Purchaser or by or on behalf of
the Company, the officers or directors of the Company or controlling person of
the Company, (ii) acceptance of the Series A Notes and payment for them
hereunder and (iii) termination of this Agreement.
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If this Agreement shall be terminated by the Purchaser pursuant to clauses
(i) or (vii) of the first paragraph of this Section 8 or because of the failure
or refusal on the part of the Company to comply with the terms or to fulfill any
of the conditions of this Agreement, the Company agrees to reimburse you for all
out-of-pocket expenses (including the reasonable fees and disbursements of
counsel) incurred by you. Notwithstanding any termination of this Agreement, the
Company shall be liable for all expenses which it has agreed to pay pursuant to
Section 4(f) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Purchaser, any
Indemnified Person referred to herein and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
terms "successors and assigns" shall not include a purchaser of any of the
Series A Notes from the Purchaser merely because of such purchase.
9. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, WCI Steel, Inc.,
1040 Pine Avenue, S.E., Warren, Ohio 44483-6528, Attention: Bret W. Wise, with a
copy to Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York
10038, Attention: Michael C. Ryan, Esq., c/o Managing Attorneys' Office, and (b)
if to the Purchaser, c/o Donaldson, Lufkin & Jenrette Securities Corporation,
277 Park Avenue, New York, New York 10172, Attention: Ramsey Frank, with, a copy
to Cahill Gordon & Reindel, 80 Pine Street, New York, New York, 10005 Attention:
William M. Hartnett, Esq., or in any case to such other address as the person to
be notified may have requested in writing.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
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Please confirm that the foregoing correctly sets forth the Agreement by
and between the Company and the Purchaser.
Very truly yours,
WCI STEEL, INC.
By: /s/ Bret W. Wise
-----------------------------
Name: Bret W. Wise
Title: VP, Finance and Chief
Financial Officer
Accepted and agreed to as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ John Bowman
------------------------------
Name: John Bowman
Title: Senior Vice President
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SCHEDULE I
Niles Properties, Inc.
Youngstown Sinter Company
<PAGE>
EXHIBIT A
WCI Steel, Incorporated USWA Defined Benefit Pension Plan
WCI Steel, Incorporated USWA Pension Plan
WCI Steel, Incorporated Retirement and Capital Accumulation Plan
WCI Steel, Incorporated Voluntary Employees Beneficiary Association
Youngstown Sinter Company - USWA Pension Plan
<PAGE>
EXHIBIT B
[FORM OF OPINION OF LOCAL COUNSEL]
November 27, 1996
Fleet National Bank, N.A.,
as Collateral Agent,
and
The Purchasers Party to the Purchase
Agreement Referenced Below
Ladies and Gentlemen:
We have acted as special counsel in the State of Ohio to WCI Steel,
Inc. ("WCI"), an Ohio corporation, in connection with the execution and delivery
today of and the consummation of the transactions contemplated by (i) a purchase
agreement dated as of November 22, 1996 (as at any time amended, the "Purchase
Agreement"; unless otherwise defined herein, capitalized terms used herein have
the meanings assigned to them in the Purchase Agreement), among WCI and
Donaldson, Lufkin & Jenrette Securities Corporation (the "Purchasers") and (ii)
each of the Collateral Documents, including, without limitation, the UCC-1
financing statements (collectively, the "Financing Statements") relating to the
Collateral naming WCI as debtor thereunder and Fleet National Bank, N.A. as
collateral agent and secured party thereunder (the "Collateral Agent").
There has been furnished to us for review the final forms of (i) the
Purchase Agreement, (ii) the Collateral Documents and (iii) the Financing
Statements (collectively, the "Documents"). We have reviewed the returns of
Uniform Commercial Code searches of _____________ relating to WCI, dated
_______________, 1996 (collectively, "UCC Searches"), copies of which are
attached hereto as Schedule A, and such other instruments, documents and
agreements as we have deemed necessary or appropriate to enable us to render the
opinions hereinafter set forth.
In rendering the opinions hereinafter set forth, we have assumed
that (a) there has occurred due execution and delivery of the Documents and all
documentation in connection therewith and (b) WCI owns the Collateral.
In addition, the opinions contained in Paragraphs 2 and 3 below are
qualified to the extent that enforceability of any of the Documents may be
limited by (i) bankruptcy,
<PAGE>
insolvency, moratorium, reorganization or other laws relating to creditors'
rights generally, and (ii) general principles of equity, whether considered in
an action at law or in equity.
Subject to the foregoing assumptions and qualifications, we are of
the opinion that:
1. Neither Collateral Agent nor the Purchaser is required (a) to be
qualified to transact business, file any designation for service of process, or
file any reports or pay any taxes in the State of Ohio, (b) to comply with any
statutory or regulatory requirement applicable only to financial institutions
chartered or qualified to do business in the State of Ohio or required to be
chartered or qualified to do business in the State of Ohio, in each case, solely
by reason of the execution and delivery, or filing or recording, of any of the
Documents or by reason of the participation in any of the transactions under or
contemplated by the Documents, including, without limitation, the extension of
any credit contemplated thereby, the making and receipt of payments pursuant
thereto and the exercise of any remedy thereunder. If it were determined that
any such qualification, filing or payment were required, the validity of the
Documents would not be affected thereby, but if the Collateral Agent or the
Purchasers were not qualified, the Collateral Agent or the Purchasers, as the
case may be, would be precluded from enforcing their respective rights in the
courts of the State of Ohio until such time as they are qualified to transact
business in the State of Ohio.
2. The Mortgage creates and constitutes (i) a valid mortgage lien on
the real property described therein (the "Real Property"), (ii) a valid security
interest in such of the Mortgaged Property (the "UCC Property") as is subject to
the provisions of Article 9 of the Uniform Commercial Code as in effect in the
State of Ohio (the "UCC") and (iii) a valid common law lien on or pledge of such
of the Mortgaged Property as is not UCC Property or Real Property (such
property, together with the UCC Property, the "Personal Property"). The Mortgage
is enforceable against the mortgagor named therein in accordance with its terms.
The Mortgage is in proper form under applicable laws of the State of Ohio to be
accepted for recording by the Recorder of Trumbull County. [Describe
limitations, if any, to foreclosure or exercise of remedies.]
3. The Security Agreement creates and constitutes a valid security
interest in, lien on or pledge of the Pledged Collateral (as defined therein)
and, to the extent that the laws of the State of Ohio are applied thereto, each
Collateral Document is enforceable against the pledgor named therein in
accordance with its terms.
4. The Financing Statements relating to (i) the Mortgage have been
properly filed with the Office of the Secretary of State of Ohio and with the
Recorder of Trumbull County and (ii) each other Collateral Document has been
properly filed with the Office of the Secretary of State of Ohio and with the
Recorder of Trumbull County. The security interest, lien or pledge created by
each Collateral Document (assuming that the Mortgage has been duly recorded) is
duly perfected.
-2-
<PAGE>
5. The recording of the Mortgage and the filing of the Financing
Statements with the recorders and in the offices described above are the only
actions, recordings or fillings necessary to publish notice and protect the
validity of and to establish of record the rights of the parties under the
Documents, except (i) that continuation statements under the UCC are required to
be filed within ________ months prior to the expiration of _____ years from the
date of filing of the Financing Statements, and (ii) that a security interest in
or pledge of [specify collateral] cannot be perfected by filing Financing
Statements or recording a Mortgage, but must be perfected by taking physical
possession thereof.
6. The execution, delivery, recordation and performance by the
Collateral Agent, the Purchaser and WCI of the Documents to which each is a
party (i) will not violate any existing law, governmental rule or regulation of
the State of Ohio and (ii) do not require any license, permit, authorization,
consent or other approval of any court, administrative agency or other
governmental authority of the State of Ohio.
7. Neither the Collateral Agent nor the Purchaser shall be liable
for any loss, cost, expense or liability (including, without limitation,
clean-up, corrective action or response costs, penalties, fines or other
impositions of governmental agencies and judgments of private or public
litigants) in respect of any matter arising out of or relating to or under any
Environmental Laws of the State of Ohio by reason of the execution and delivery
of or participation in any of the transactions under or contemplated by any of
the Documents, including, without limitation, the extension of any credit
contemplated thereby, the making and receipt of payments pursuant thereto and
the exercise of any remedy under any of the Documents. The laws of the State of
Ohio do not provide for a statutory or regulatory lien in favor of any
governmental entity for liability under the Environmental Laws of the State of
Ohio. Under the laws of the State of Ohio, there are no statutory or regulatory
requirements which will be imposed on the Collateral Agent or the Purchasers
relating to the granting of a mortgage or security interest in the Real Property
that (i) require any notification or certification to the State of Ohio or any
applicable political subdivision thereof of such mortgage or security interest,
or (ii) in the event of a discharge of any Hazardous Materials (as defined in
the Mortgages), impose responsibility or liability on the part of the Collateral
Agent or any of the Purchasers for the undertaking of remedial measures to
alleviate environmental contamination resulting from such discharge.
8. The Collateral Agent is permitted under the laws of the State of
Ohio without naming all of the Purchasers in any applicable legal proceeding to
exercise remedies under the Documents for the realization of any of the
Collateral in its own name, as collateral agent.
9. No taxes or other charges, including, without limitation,
intangible or documentary stamp taxes, mortgage or recording taxes, transfer
taxes or similar charges, are payable to the State of Ohio, Trumbull County or
to any jurisdiction therein on account of the execution and delivery of the
Documents or the creation of the indebtedness evidenced or
-3-
<PAGE>
secured by any of the Documents or the recording by any of the Documents or the
recording or filing of any of the Collateral Documents, except for nominal
filing or recording fees, which filing or recording fees have been paid.
We are admitted to practice in the State of Ohio. We express no
opinion as to matters under or involving the laws of any jurisdiction other than
the laws of the United States and the State of Ohio and its political
subdivisions.
The foregoing opinions may be relied on by any successor or assignee
of your interest under the Documents, but may not be relied upon or distributed
to any other person without our consent.
-4-
<PAGE>
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of November 27, 1996
by and between
WCI Steel, Inc.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 27, 1996, by and between WCI Steel, Inc., an Ohio
corporation (the "Company"), and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), who has agreed to purchase the Company's
10% Senior Secured Notes due 2004, Series A (the "Series A Senior Notes")
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated as
of November 22, 1996 (the "Purchase Agreement"), by and between the Company and
the Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Series A Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser under the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Broker-Dealer Transfer Restricted Securities: Series B Notes that
are acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its affiliates).
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes tendered by
Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
<PAGE>
-2-
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser
proposes to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, to certain "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3), or (7) under
the Act and outside the United States in compliance with Regulation S under the
Act.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated the Closing Date, by and between the
Company and Fleet National Bank, as trustee (the "Trustee"), pursuant to which
the Notes are to be issued, as such Indenture is amended or supplemented from
time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) which is filed pursuant
<PAGE>
-3-
to the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds
Broker-Dealer Transfer Restricted Securities.
Series B Notes: The Company's 10% Senior Secured Notes due 2004,
Series B to be issued pursuant to the Indenture (i) in the Exchange Offer or
(ii) upon the request of any Holder of Series A Notes covered by a Shelf
Registration Statement, in exchange for such Series A Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such Note
has been disposed of in accordance with a Shelf Registration Statement, (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law, the Company shall (i) cause to be filed with the Commission as soon
as practicable after the Closing Date, but in no event later than 45 days after
the Closing Date, the Exchange Offer Registration Statement, (ii) use reasonable
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 120 days after the
Closing Date, (iii) in connection with the foregoing, (A) file all pre-effective
amendments to such Exchange Offer Registration Statement as may be necessary in
order to cause such Exchange Offer Registration Statement to become effective,
(B) file, if applicable, a post-effective amendment to such Exchange Offer
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings, if any, in connection with the registration
<PAGE>
-4-
and qualification of the Series B Notes to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Exchange Offer Registration
Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall
be on the appropriate form permitting registration of the Series B Notes to be
offered in exchange for the Series A Notes that are Transfer Restricted
Securities and to permit sales of Broker-Dealer Transfer Restricted Securities
by Restricted Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to be effective continuously, and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
Business Days. The Company shall cause the Exchange Offer to comply in all
material respects with all applicable federal and state securities laws. No
securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Company shall use reasonable efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Restricted Broker-Dealer who holds Series A Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Series B Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company shall use reasonable efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms in all material respects with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of 180 days from the date on which the
Exchange Offer is Consummated.
The Company shall promptly provide sufficient copies of the latest
version of such Prospectus to such Restricted Broker-Dealers promptly upon
request, and in no event later than one Business Day after such request, at any
time during such 180-day period in order to facilitate such sales.
<PAGE>
-5-
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file
an Exchange Offer Registration Statement with respect to the Series B Notes
because the Exchange Offer is not permitted by applicable law or (ii) if any
Holder of Transfer Restricted Securities shall notify the Company within 20
Business Days following the Consummation of the Exchange Offer that (A) such
Holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a
Broker-Dealer and holds Series A Notes acquired directly from the Company or one
of its affiliates, then the Company shall (x) cause to be filed on or prior to
30 days after the date on which the Company determines that it is not required
to file the Exchange Offer Registration Statement pursuant to clause (i) above
or 30 days after the date on which the Company receives the notice specified in
clause (ii) above a shelf registration statement pursuant to Rule 415 under the
Act (which may be an amendment to the Exchange Offer Registration Statement (in
either event, the "Shelf Registration Statement")), relating to all Transfer
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof, and shall (y) use reasonable efforts
to cause such Shelf Registration Statement to become effective on or prior to 90
days after the date on which the Company becomes obligated to file such Shelf
Registration Statement. If, after the Company has filed an Exchange Offer
Registration Statement which satisfies the requirements of Section 3(a) above,
the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer shall not be permitted under
applicable federal law, then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above. Such
an event shall have no effect on the requirements of clause (y) above. The
Company shall use reasonable efforts to keep the Shelf Registration Statement
discussed in this Section 4(a) continuously effective, supplemented and amended
as required by and subject to the provisions of Sections 6(b) and (c) hereof to
the extent necessary to ensure that it is available for sales of Transfer
Restricted Securities by the Holders thereof entitled to the benefit of this
Section 4(a), and to ensure that it conforms in all material respects with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least three
years (as extended pursuant to Section 6(c)(i)) following the date on which such
Shelf Registration Statement first becomes effective under the Act or such
shorter period that will terminate when all the Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold pursuant thereto or
are, in the written opinion of counsel to the Company, eligible for sale under
Rule 144(k) under the Act.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information specified in Item 507 of Regulation S-K under the Act for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein or Prospectus supplement. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have used its best efforts
to provide all such
<PAGE>
-6-
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "Registration Default"), then the Company hereby agrees to pay liquidated
damages to each Holder of Transfer Restricted Securities with respect to the
first 90-day period immediately following the occurrence of such Registration
Default, in an amount equal to $.05 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the liquidated
damages shall increase by an additional $.05 per week per $1,000 in principal
amount of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of $.50 per week per $1,000 principal amount of Transfer
Restricted Securities. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the beneficial
holders of interests in the Global Security (as defined in the Indenture) by
wire transfer of immediately available funds and to Holders of Securities (as
defined in the Indenture) in certificated form by mailing checks to their
registered addresses on each Damages Payment Date. All obligations of the
Company set forth in the preceding paragraph that are outstanding with respect
to any Transfer Restricted Security at the time such security ceases to be a
Transfer Restricted Security shall survive until such time as all such
obligations with respect to such security shall have been satisfied in full.
<PAGE>
-7-
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply in all material respects with all
applicable provisions of Section 6(c) below, shall use reasonable efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply in all material respects with all of the
following provisions:
(i) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written representation
to the Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding
with any Person to participate in, a distribution of the Series B Notes to
be issued in the Exchange Offer and (C) it is acquiring the Series B Notes
in its ordinary course of business. Each Holder hereby acknowledges and
agrees that any Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated
in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered
by an effective registration statement containing the selling security
holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Series B Notes obtained by such
Holder in exchange for Series A Notes acquired by such Holder directly
from the Company or an affiliate thereof.
(ii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co.,
Inc. (available June 5, 1991) and (B) including a representation that the
Company has not entered into any arrangement or understanding with any
Person to distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Company's information and belief, each
Holder participating in the Exchange Offer is acquiring the Series B Notes
in its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B Notes
received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use reasonable efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company will prepare and file
<PAGE>
-8-
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company shall:
(i) use reasonable efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to
such Registration Statement, (1) in the case of clause (A), correcting any
such misstatement or omission, and (2) in the case of clauses (A) and (B),
use reasonable efforts to cause such amendment to be declared effective
and such Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable thereafter.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply in all
material respects with Rules 424, 430A and 462, as applicable, under the
Act in a timely manner; and comply in all material respects with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the
<PAGE>
-9-
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company shall use its best efforts
to obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) furnish to the Initial Purchaser(s), each selling Holder
named in any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the reasonable review and comment of such Holders and
underwriter(s) in connection with such sale, if any, for a period of at
least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably
object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply in all material respects with
the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of such underwriter(s), all
pertinent financial and other records, corporate documents and properties
of the Company and cause the Company's officers, directors and employees
to supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness;
<PAGE>
-10-
(vii) if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include in
any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer Restricted
Securities being sold to such underwriter(s), the purchase price being
paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as soon
as practicable after the Company is notified of the matters to be included
in such Prospectus supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all exhibits;
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby
consents to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale
of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an underwriting
agreement) and make such representations and warranties and take all such
other actions in connection therewith in order to expedite or facilitate
the disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Transfer Restricted Securities or underwriter
in connection with any sale or resale pursuant to any Registration
Statement contemplated by this Agreement, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company shall:
(A) furnish (or in the case of paragraphs (2) and (3), use
reasonable efforts to furnish) to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement and to each Restricted Broker-Dealer upon
Consummation of the Exchange Offer:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed on behalf
of the Company by (x) the President or any Vice President and
(y) a principal financial or accounting officer of the Company
confirming, as of the date thereof, the matters set forth in
paragraphs (a) through (d) of Section 7 of the Purchase
Agreement and such other similar matters as the
<PAGE>
-11-
Holders, underwriter(s) and/or Restricted Broker Dealers may
reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company covering matters similar to those set forth in
paragraph (f) of Section 7 of the Purchase Agreement and such
other matters as the Holders, underwriters and/or Restricted
Broker Dealers may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the
basis of the foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by officers and
other representatives of the Company and without independent
check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the
applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial data included in any Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement or the date
of Consummation of the Exchange Offer, as the case may be,
from the Company's independent accountants, in the customary
form and covering matters of the type customarily covered in
comfort letters to underwriters in connection with primary
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 7 of the
Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or
resale pursuant to any Shelf Registration Statement
<PAGE>
-12-
the indemnification provisions and procedures of Section 8 hereof
with respect to all parties to be indemnified pursuant to said
Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if
any, and Restricted Broker Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company pursuant to this clause (x).
The above shall be done at each closing under such underwriting or
similar agreement, if any, as and to the extent required thereunder, and
if at any time the representations and warranties of the Company
contemplated in (A)(1) above cease to be true and correct, the Company
shall so advise the underwriter(s), if any, the selling Holders and each
Restricted Broker-Dealer promptly and if requested by such Persons, shall
confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities
or Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may request and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would subject
it to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such Holder;
such Series B Notes to be registered in the name of such Holder or in the
name of the purchaser(s) of such Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Securities to be sold and
not bearing any restrictive legends; and to register such Transfer
Restricted Securities in such denominations and such names as the Holders
or the underwriter(s), if any, may request at least two Business Days
prior to such sale of Transfer Restricted Securities;
(xiv) use reasonable efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
<PAGE>
-13-
or the underwriter(s), if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in clause
(xi) above;
(xv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(xvi) provide a CUSIP number or numbers for all Transfer
Restricted Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that
is required to be retained in accordance with the rules and regulations of
the NASD, and use reasonable efforts to cause such Registration Statement
to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xviii) otherwise use reasonable efforts to comply in all
material respects with all applicable rules and regulations of the
Commission, and make generally available to its security holders with
regard to any applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158 under
the Act (which need not be audited) covering a twelve-month period
beginning after the effective date of the Registration Statement (as such
term is defined in paragraph (c) of Rule 158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute and use reasonable efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act.
<PAGE>
-14-
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement and Prospectus contained therein until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xv) hereof, or until it is advised in writing by
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (the "Advice"). If so directed by the Company, each
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 Transfer Restricted Securities that was current at the time of
receipt of either such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, 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 6(c)(i) or Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the
Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and reasonable expenses
(including filings made by the Initial Purchaser or any Holder with the NASD
(and, if applicable, the reasonable fees and expenses of any "qualified
independent underwriter") and its counsel that may be required by the rules and
regulations of the NASD); (ii) all reasonable fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii) all
reasonable expenses of printing (including printing certificates for the Series
B Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all reasonable fees and
disbursements of counsel for the Company and the Holders of Transfer Restricted
Securities; (v) all application and filing fees, if any, in connection with
listing the Notes on a national securities exchange or automated quotation
system pursuant to the requirements hereof; and (vi) all reasonable fees and
disbursements of independent certified public accountants of the Company
(including the reasonable expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and/or the Shelf Registration Statement), the Company will reimburse
the Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution"
<PAGE>
-15-
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder and (ii) each Person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) any Holder (any of the Persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any Person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
or 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,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Company by any of the
Holders expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any Registration Statement, preliminary
Prospectus or Prospectus (or any amendment or supplement thereto) shall not
inure to the benefit of any Holder from whom the Person asserting any such
losses, claims, damages, liabilities, judgments, actions or expenses purchased
Series B Notes, or any Person controlling such Holder, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Holder to such Person, at or prior to the written confirmation of the sale
of the Series B Notes to such Person, and if the Prospectus (as so amended and
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability, judgment, action or expense.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Company, such Indemnified Holder (or the Indemnified Holder controlled by
such controlling person) shall promptly notify the Company in writing (provided,
that the failure to give such notice shall not relieve the Company of its
obligations pursuant to this Agreement unless it shall have been determined by a
court of competent jurisdiction, by a final judgment not subject to appeal or
review, that such failure shall have resulted in a material adverse effect upon
the Company). Such Indemnified Holder shall have the right to employ its own
counsel in any such action and the reasonable fees and expenses of such counsel
shall be paid, as incurred, by the Company; provided, however, that the Company
shall be entitled to participate in such action or proceeding and, to the extent
<PAGE>
-16-
that the Company shall wish to assume the defense thereof (provided that any
such participation or assumption shall be permitted only upon written notice to
the Indemnified Holder which notice is received within 10 days of the Company's
actual knowledge of such action or proceeding), with counsel satisfactory to
such Indemnified Holder (which counsel shall not, except with the consent of the
Indemnified Holder, be counsel to the Company), at the Company's expense, and
after notice from the Company to such Indemnified Holder of the Company's
election so to assume the defense thereof, the Company shall not be liable to
such Indemnified Holder under this Section 8(a) for any legal expenses of other
counsel or any other expenses, in such case subsequently incurred by such
Indemnified Holder, in connection with the defense thereof other than reasonable
costs of investigation; provided, further, that the Company shall not be
entitled to control the defense of, or investigation by, such Indemnified Holder
if such Indemnified Holder has been advised by its counsel that there could
reasonably be expected to be a conflict of interest between the Company and such
Indemnified Holder under applicable standards of professional responsibility.
The Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for such Indemnified
Holders, which firm shall be designated by the Holders. The Company shall be
liable for any settlement of any such action or proceeding effected with the
Company's prior written consent, which consent shall not be withheld
unreasonably, and the Company agrees to indemnify and hold harmless each
Indemnified Holder from and against any loss, claim, damage, liability or
expense by reason of any settlement of any action effected with the written
consent of the Company. The Company shall not, without the prior written consent
of each Indemnified Holder (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Holder from all liability arising out of such action, claim,
litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company, any Person
controlling (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, and their respective officers, directors, partners,
employees, representatives and agents (collectively, "Indemnified Company
Persons"), to the same extent as the foregoing indemnity from the Company to
each of the Indemnified Holders, but only with respect to claims and actions
based on information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against any Indemnified Company Person in respect of
which indemnity may be sought against a Holder of Transfer Restricted
Securities, such Holder shall have the rights and duties given the Company, and
the Indemnified Company Person shall have the rights and duties given to each
Indemnified Holder by Section 8(a). In no event shall any Holder be liable or
responsible for any amount in excess of the amount by which the total received
by such Holder with respect to its sale of Transfer Restricted Securities
pursuant to a Registration Statement exceeds (i) the amount paid by such Holder
for such Transfer Restricted Securities and (ii) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
<PAGE>
-17-
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Holders, on the other hand, from their sale of
Transfer Restricted Securities or if such allocation is not permitted by
applicable law, the relative fault of the Company, on the one hand, and of the
Indemnified Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and of the Indemnified Holder, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Indemnified Holder and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company and each Holder of Transfer Restricted Securities agree
that it would not be just and equitable if contribution pursuant to this Section
8(c) were determined by pro rata allocation (even if the Holders were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no Holder or
its related Indemnified Holders shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Transfer Restricted Securities
pursuant to a Registration Statement exceeds the sum of (A) the amount paid by
such Holder for such Transfer Restricted Securities plus (B) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Series A Notes held by each of the Holders hereunder and not
joint.
<PAGE>
-18-
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company is not subject to Section 13 or 15(d) of the Securities Exchange
Act, to make available, upon request of any Holder of Transfer Restricted
Securities, to any Holder or beneficial owner of Transfer Restricted Securities
in connection with any sale thereof and any prospective purchaser of such
Transfer Restricted Securities designated by such Holder or beneficial owner,
the information required by Rule 144A(d)(4) under the Act in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering. Such investment bankers and managers are referred to herein as
the "underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. Each party hereto, in addition to being entitled to
exercise all rights provided herein, in the Indenture, the Purchase Agreement or
granted by law, including recovery of liquidated or other damages, to the extent
applicable to such party, will be entitled to specific performance of its rights
under this Agreement. Each party hereto agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company has not
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
<PAGE>
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(c) Adjustments Affecting the Notes. The Company will not take any
action, or voluntarily permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
WCI Steel, Inc.
1040 Pine Avenue, S.E.
Warren, Ohio 44483-6528
Telecopier No.: (330) 841-8387
Attention: Bret W. Wise
With a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Telecopier No.: (212) 504-6666
Attention: Michael C. Ryan, Esq.,
c/o Managing Attorneys' office
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next Business Day, if
timely delivered to an air courier guaranteeing overnight delivery.
<PAGE>
-20-
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICTS OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE>
-21-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
WCI STEEL, INC.
By: /s/ Bret W. Wise
----------------------------
Name: Bret W. Wise
Title: VP, Finance and Chief
Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ John Bowman
-------------------------
Name: John Bowman
Title: Senior Vice President
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10% SENIOR SECURED NOTES DUE 2004, SERIES A
OF
WCI STEEL, INC.
PURSUANT TO
PROSPECTUS DATED , 1997
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 4:00 P.M., NEW YORK CITY TIME ON
, 1997, UNLESS EXTENDED. TENDERS OF 10% SENIOR
SECURED NOTES DUE 2004, SERIES A MAY ONLY BE WITHDRAWN UNDER THE
CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND HEREIN.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
FLEET NATIONAL BANK
FACSIMILE TRANSMISSION:
(860) 986-7908
CONFIRM BY TELEPHONE:
(860) 986-1271
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Fleet National Bank Fleet National Bank
Corporate Trust Administration c/o First Chicago Trust Company
777 Main Street - CTMO0238 of New York
Hartford, Connecticut 06115 14 Wall Street
Attention: Robert Reynolds 8th Floor - Window No. 2
New York, New York 10005
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------
Name(s) and Address(es) of Holder(s) Old Notes Tendered
(Please fill in, if blank, exactly as (Attach additional schedule, if
name(s) appear(s) on Old Notes) necessary)
- --------------------------------------------------------------------------------
(1) (2) (3)
----------------------------------------
Certificate Total Principal
Number(s) Amount
of Old Notes
Tendered
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Total
- --------------------------------------------------------------------------------
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED
, 1997 (THE "PROSPECTUS"), OF WCI STEEL, INC., AN OHIO
CORPORATION (THE "COMPANY"), RELATING TO THE OFFER (THE "EXCHANGE OFFER") OF THE
COMPANY, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE
PROSPECTUS AND HEREIN AND THE INSTRUCTIONS HERETO, TO EXCHANGE $1,000 PRINCIPAL
AMOUNT OF ITS 10% SENIOR SECURED NOTES DUE 2004, SERIES B (THE "EXCHANGE NOTES")
FOR EACH $1,000 PRINCIPAL AMOUNT OF THE OUTSTANDING 10% SENIOR SECURED NOTES DUE
2004, SERIES A (THE "OLD NOTES"), OF WHICH $300 MILLION AGGREGATE PRINCIPAL
AMOUNT IS OUTSTANDING. THE MINIMUM PERMITTED TENDER IS $1,000 PRINCIPAL AMOUNT
OF OLD NOTES, AND ALL OTHER TENDERS MUST BE IN INTEGRAL MULTIPLES OF $1,000.
<PAGE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION BY
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Offer will expire at 4:00 p.m., New York City time, on
, 1997 (the "Expiration Date"), unless extended.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER THEIR OLD NOTES TO THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal should be used only to exchange the Old Notes,
pursuant to the Exchange Offer as set forth in the Prospectus.
This Letter of Transmittal is to be used (a) if Old Notes are to be
physically delivered to the Exchange Agent or (b) if delivery of Old Notes is to
be made by book-entry transfer to the account maintained by the Exchange Agent
at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering." Delivery of documents to the
Book-Entry Transfer Facility does not constitute deliver to the Exchange Agent.
Holders whose Old Notes are not available or who cannot deliver their Old
Notes and all other documents required hereby to the Exchange Agent on or prior
to the Expiration Date nevertheless may tender their Old Notes in accordance
with the guaranteed delivery procedures set forth in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction
1.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF OLD NOTES
FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN
WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE
WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.
HOLDERS WHO WISH TO EXCHANGE THEIR OLD NOTES MUST COMPLETE THE BOX BELOW
ENTITLED "METHOD OF DELIVERY," COMPLETE COLUMNS (1) THROUGH (3) IN THE BOX ON
THE COVER ENTITLED "DESCRIPTION OF OLD NOTES TENDERED" AND SIGN IN THE
APPROPRIATE BOX(ES) BELOW.
2
<PAGE>
METHOD OF DELIVERY
- --------------------------------------------------------------------------------
/ / CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY SPECIFIED ABOVE AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
---------------------------------------------
Name of Book-Entry Transfer Facility:
/ / The Depository Trust Company
Account Number: Transaction Code Number:
------------------- ----------------
- --------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4):
Name(s) of Registered Holder(s):
-------------------------------------------
Window Ticket Number (if any):
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Name of Eligible Institution which Guaranteed Delivery:
--------------------
IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, CHECK BOX OF BOOK-ENTRY
TRANSFER FACILITY:
/ / The Depository Trust Company
Account Number: Transaction Code Number:
------------------- ----------------
- --------------------------------------------------------------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN ADDITIONAL
COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
---------------------------------------------------------------------------
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated in the box on the cover entitled "Description of Old Notes Tendered."
Subject to, and effective upon, the acceptance for exchange of the Old Notes
tendered hereby, the undersigned hereby irrevocably sells, assigns and transfers
to or upon the order of the Company all right, title and interest in and to such
Old Notes, and hereby irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that said Exchange Agent also acts as the agent of the Company and as
Trustee under the indenture governing the Old Notes and the Exchange Notes) with
respect to such Old Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver certificates representing such Old Notes, and to deliver all
accompanying evidences of transfer and authenticity to or upon the order of the
Company upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon the acceptance by the
Company of such Old Notes for exchange pursuant to the Exchange Offer, (b)
receive all benefits and otherwise to exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of the Exchange
Offer, and (c) present such Old Notes for transfer on the register for such Old
Notes.
The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Old Notes or the Exchange Notes. If a market for
the Exchange Notes should develop, the Exchange Notes could trade at a discount
from their principal amount. The undersigned is aware that the Company does not
intend to list the Exchange Notes on a national securities exchange and that
there can be no assurance that an active market for the Exchange Notes will
develop.
The undersigned also acknowledges that this Exchange Offer is being made
in reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by any person receiving such Exchange Notes
whether or not such person is the holder thereof, (other than any such holder
or other person which is (i) a broker-dealer that receives Exchange Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired
by such broker-dealer as a result of market-making or other trading
activities, or (ii) an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act of 1933, as amended (the "Securities Act"))
without compliance with the registration and prospectus delivery provisions
of the Securities Act provided that such Exchange Notes are acquired in the
ordinary course of business of such holder or other person, such holder or
other person is not engaged in or intending to engage in a distribution of
the Exchange Notes, and such holder or other person has no arrangement with
any person to participate in the distribution of such Exchange Notes. See
Morgan Stanley & Co. Incorporated, SEC No-Action Letter (available June 5,
1991) and Exxon Capital Holdings Corporation, SEC No-Action Letter (available
May 13, 1988).
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes,
it represents that the Old Notes to be exchanged for Exchange Notes were
acquired as a result of market-making activities or other trading activities and
it acknowledges that it will deliver a prospectus in connection with any resale
of such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR
ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE MAKING
OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF
SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY PROVISION OF
ANY APPLICABLE SECURITY LAW.
The undersigned represents that (a) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
undersigned or other person receiving such Exchange Notes, (b) neither the
undersigned nor any such other person is engaged in or intends to engage in a
distribution of such Exchange Notes, (c) neither the undersigned nor any such
4
<PAGE>
other person has any arrangement or understanding with any person to participate
in a distribution of the Exchange Notes and (d) neither the undersigned nor any
such other person is an "affiliate" as defined under Rule 405 of the Securities
Act, of the Company or The Renco Group, Inc., the parent corporation of the
Company, or if such holder is such an affiliate, that such holder will comply
with the registration and the prospectus delivery requirements of the Securities
Act in connection with the disposition of any Exchange Notes to the extent
applicable.
The undersigned understands and acknowledges that the Company reserves the
right in its sole discretion to purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date or, as set forth in the
Prospectus under the caption "Conditions of the Exchange Offer," to terminate
the Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers will differ from the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Exchange Offer, has full power and authority to
tender, exchange, assign and transfer the Old Notes tendered hereby, and that
when the same are accepted for exchange by the Company, the Company will acquire
good and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim or right. The
undersigned will, upon request, execute and deliver any additional documents
deeded by the Exchange Agent or the Company to be necessary or desirable to
complete the sale, assignment and transfer of the Old Notes tendered hereby.
The undersigned agrees that all authority conferred or agreed to be conferred
by this Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors, administrators,
trustees in bankruptcy and legal representatives of the undersigned and shall
not be affected by, and shall survive, the death or incapacity of the
undersigned. The undersigned also agrees that, except as stated in the
Prospectus, the Old Notes tendered hereby cannot be withdrawn.
The undersigned understands that tenders of the Old Notes pursuant to any one
of the procedures described in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering" and in the instructions hereto will constitute
a binding agreement between the undersigned and the Company in accordance with
the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that by tendering Old Notes pursuant to one of
the procedures described in the Prospectus and the instructions thereto, the
tendering holder will be deemed to have waived the right to receive any payment
in respect of interest on the Old Notes accrued up to the date of issuance of
the Exchange Notes.
The undersigned recognizes that, under certain circumstances set forth in the
Prospectus, the Company may not be required to accept for exchange any of the
Old Notes tendered. Old Notes not accepted for exchange or withdrawn will be
returned to the undersigned at the address set forth below unless otherwise
indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, Exchange Notes, and Old Notes not validly tendered or
accepted for exchange, will be issued in the name of the undersigned.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, Exchange Notes, and Old Notes not validly tendered or
accepted for exchange, will be delivered to the undersigned at the address shown
below the signature of the undersigned. The undersigned recognizes that the
Company has no obligation pursuant to the "Special Issuance Instructions" to
transfer any Old Notes from the name of the registered holder thereof if the
Company does not accept for exchange any of the principal amount of such Old
Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any irregularities or conditions of tender as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in this Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent
nor any other person shall be under any duty to give notification of defects or
5
<PAGE>
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost to such holder by the Exchange Agent to the
tendering holders of Old Notes, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
6
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ON THE COVER ENTITLED "DESCRIPTION OF
OLD NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO
HAVE TENDERED THE OLD NOTES AND MADE CERTAIN REPRESENTATIONS (INCLUDING AS TO
FINANCIAL STATUS) DESCRIBED IN THE PROSPECTUS AND HEREIN.
- --------------------------------------------------------------------------------
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Must be signed by the registered holder(s) of Old Notes exactly as their
name(s) appear(s) on certificate(s) for the Old Notes or by person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, agent or other person acting in a fiduciary or representative
capacity, please provide the following information. See Instruction 3.
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
----------------------------------------------------
SIGNATURE GUARANTEE
(SEE INSTRUCTION 3)
- --------------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURE(S))
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NO., INCLUDING AREA CODE, OF FIRM)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(PRINTED NAME)
- --------------------------------------------------------------------------------
(TITLE)
Date: , 1996
-------------
- --------------------------------------------------------------------------------
7
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for Old Notes in a principal amount not
exchanged and/or certificates for Exchange Notes are to be issued in the name of
someone other than the undersigned, or if Old Notes are to be returned by credit
to an account maintained by the Book-Entry Transfer Facility.
Issue (check appropriate box)
/ / Exchange Notes to:
/ / Old Notes to:
Name:
--------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------
--------------------------------------------------------------------------
Zip Code
--------------------------------------------------------------------------
Taxpayer Identification Number
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
Credit unaccepted Old Notes tendered by book-entry transfer to:
/ / The Depository Trust Company
account set forth below
--------------------------------------------------------------------------
(DTC ACCOUNT NUMBER)
SPECIAL DELIVER INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for Old Notes in a principal
amount not exchanged and/or certificates for Exchange Notes are to be
sent to someone other than the undersigned at an address other than
that shown above.
Deliver (check appropriate box)
/ / Exchange Notes to:
/ / Old Notes to:
Name:
--------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------
--------------------------------------------------------------------------
Zip Code
--------------------------------------------------------------------------
Taxpayer Identification Number
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. To be effectively tendered pursuant to the Exchange Offer,
the Old Notes, together with a properly completed Letter of Transmittal (or
facsimile thereof), duly executed by the registered holder thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the front page of this
Letter of Transmittal. If the beneficial owner of any Old Notes is not the
registered holder, then such person may validly tender his or her Old Notes only
by obtaining and submitting to the Exchange Agent a properly completed Letter of
Transmittal from the registered holder. OLD NOTES SHOULD BE DELIVERED ONLY TO
THE EXCHANGE AGENT AND NOT TO THE COMPANY OR TO ANY OTHER PERSON.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER, BUT IF SUCH DELIVERY
IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED OR
CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED. INSTEAD OF DELIVERY BY MAIL, IT
IS RECOMMENDED THAT OLD NOTES BE DELIVERED BY HAND OR BY COURIER.
IF CERTIFICATES FOR OLD NOTES ARE SENT BY MAIL, IT IS SUGGESTED THAT THE
MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT
DELIVERY TO THE EXCHANGE AGENT PRIOR TO 4:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
If a holder desires to tender Old Notes and such holder's Old Notes are not
immediately available or time will not permit such holder's Letter of
Transmittal, Old Notes or other required documents to reach the Exchange Agent
on or before the Expiration Date, such holder's tender may be effected if:
(a) such tender is made by or through an Eligible Institution (as
defined);
(b) on or prior to the Expiration Date, the Exchange Agent has
received a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) from such
Eligible Institution setting forth the name and address of the holder of
such Old Notes, the certificate numbers of such Old Notes (if available)
and the principal amount of Old Notes tendered and stating that the tender
is being made thereby and guaranteeing that, within three business days
after the Expiration Date, a duly executed Letter of Transmittal, or
facsimile thereof, together with the Old Notes, and any other documents
required by this Letter of Transmittal and the instructions hereto, will be
deposited by such Eligible Institution with the Exchange Agent; and
(c) this Letter of Transmittal (or facsimile thereof), a Notice of
Guaranteed Delivery and Old Notes, in proper form for transfer, and all
other required documents are received by the Exchange Agent within three
business days after the date of such telegram, facsimile transmission or
letter.
2. WITHDRAWAL OF TENDERS. Tendered Old Notes may be withdrawn at any
time prior to 4:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 4:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange, (b)
specify the name of the person who tendered the Old Notes, (c) contain the
description of the Old Notes to be withdrawn, the certificate numbers shown on
the particular certificates evidencing such Old Notes and the aggregate
principal amount represented by such Old Notes and (d) be signed by the holder
of such Old Notes in the same manner as the original signature appears on this
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the holder
withdrawing the tender. The signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Old Notes have been tendered
(a) by a registered holder of Old Notes who has not completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt)of such withdrawal notices shall be
9
<PAGE>
determined by the Company, whose determination shall be final and binding on all
parties. If the Old Notes to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, a signed notice of withdrawal is effective
immediately upon receipt by the Exchange Agent of a written or facsimile
transmission notice of withdrawal even if physical release is not yet effected.
In addition, such notice must specify, in the case of Old Notes tendered by
delivery of certificates for such Old Notes, the name of the registered holder
(if different from that of the tendering holder) to be credited with the
withdrawn Old Notes. Withdrawals may not be rescinded, and any Old Notes
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer. However, properly withdrawn Old Notes may be retendered by
following one of the procedures described under "The Exchange Offer--Procedures
for Tendering" in the Prospectus at any time on or prior to the applicable
Expiration Date.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this letter of Transmittal is signed
by the registered holder(s) of the Old Notes tendered hereby, the signature must
correspond exactly with the name(s) as written on the face of the certificates
without any change whatsoever.
If any Old Notes tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any Old Notes tendered hereby are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder or holders
specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Exchange Notes are to be issued, or
certificates for any untendered principal amount of Old Notes are to be
reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of any certificate(s) specified herein such certificates(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, proper evidence satisfactory to the
Company of their authority so to act must be submitted.
Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal or a notice of
withdrawal, as the case may be, need not be guaranteed if the Old Notes tendered
pursuant hereto are tendered (a) by a registered holder of Old Notes who has not
completed either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b)
for the account of an Eligible Institution. In the event that signatures on
this Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Delivers, Inc. or by a commercial bank or trust
company having an office or correspondent in the Untied States (each as
"Eligible Institutions").
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Exchange Notes and/or substitute certificates evidencing Old Notes for the
principal amounts not exchanged are to be issued or sent, if different from the
name and address of the person signing this Letter of Transmittal. In the case
of issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no such instructions are
given, any Old Notes not exchanged will be returned to the name and address of
the person signing this Letter of Transmittal.
10
<PAGE>
5. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax
law of the United States requires that a holder of Old Notes whose Old Notes are
accepted for exchange provide the Company with his correct taxpayer
identification number, which, in the case of a holder who is an individual, is
his or her social security number, or otherwise establish an exemption from
backup withholding. If the Company is not provided with the correct taxpayer
identification number, the exchanging holder of Old Notes may be subject to a
$50 penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
interest on the Exchange Notes acquired pursuant to the Exchange Offer may be
subject to backup withholding in an amount equal to 31% of any interest payment.
If withholding occurs and results in an overpayment of taxes, a refund may be
obtained.
To prevent backup withholding, each exchange holder of Old Notes subject to
backup withholding must provide his correct taxpayer identification number by
completing the Substitute Form W-9 provided in this Letter of Transmittal,
certifying that the taxpayer identification number provided is correct (or that
the exchanging holder of Old Notes is awaiting a taxpayer identification number)
and that either (a) the exchanging holder has not yet notified by the IRS that
such holder is subject to backup withholding as a result of failure to report
all interest or dividends or (b) the IRS has notified the exchanging holder that
such holder is no longer subject to backup withholding.
Certain exchanging holders of Old Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding requirements. A foreign individual and other exempt holders (I.E.
corporations) should certify, in accordance with the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9," to such
exempt status on the Substitute Form W-9 provided in this Letter of Transmittal.
6. TRANSFER TAXES. Holders tendering pursuant to the Exchange Offer will
not be obligated to pay brokerage commissions or fees or to pay transfer taxes
with respect to their exchange under the Exchange Offer unless the box entitled
"Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Exchange Notes are to be issued to any person other
than the holder of the Old Notes tendered for exchange. The Company will pay
all other charges or expenses in connection with the Exchange Offer. If holders
tender Old Notes for exchange and the Exchange Offer is not consummated,
certificates representing the Old Notes will be returned to the holders at the
Company's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
7. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of the Old Notes being tendered and the certificate
numbers (if available) should be listed on a separate schedule attached hereto
and separately signed by all parties required to sign this Letter of
Transmittal.
8. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Old Notes, fill in the principal amount
of Old Notes which are tendered in column (3) in the box on the cover entitled
"Description of Old Notes Tendered." In the case of partial tenders, new
certificates representing the Old Notes in fully registered form for the
remainder of the principal amount of the Old Notes will be sent to the person(s)
signing this Letter of Transmittal, unless otherwise indicated in the
appropriate place on this Letter of Transmittal, as promptly as practicable
after the expiration or termination of the Exchange Offer.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or additional copies of the Prospectus or this Letter of Transmittal may be
obtained from the Exchange Agent at its telephone number set forth on the cover.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PAYER'S NAME: FLEET NATIONAL BANK
SUBSTITUTE Part I--PLEASE PROVIDE
Form W-9 YOUR TIN IN THE BOX AT ------------------------------
Department of the Treasury RIGHT AND CERTIFY BY Social Security Number
Internal Revenue Service SIGNING AND DATING OR
Payer's Request for Taxpayer BELOW. -----------------------------
Identification Number (TIN) Employer Identification Number
CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because: (a) I am exempt from backup
withholding; or (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
PART II--AWAITING TIN / / PART III--EXEMPT / /
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
under-reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS stating that you are no longer subject to backup
withholding, do not cross out item (2). If you are exempt from backup withholding,
check the box in Part III.
Signature Date
------------------------------------------- ----------------------------
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
Please fill out your name and address below:
Name
- ----------------------------------------------------------------------------------------
Address (Number and street)
- ----------------------------------------------------------------------------------------
City, State and Zip Code
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF
31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE SOLICITATION.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART II
OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not
been issued to me, and either (a) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer identification
number to the payor by the time of payment, 31% of all reportable payments made to me
will be withheld until I provide a number and that, if I do not provide my taxpayer
identification number within 60 days, such retained amounts shall be remitted to the IRS
as backup withholding.
Signature Date
------------------------------------------- ----------------------------
</TABLE>
12
<PAGE>
EXHIBIT 5.1
[Letterhead of Cadwalader, Wickersham & Taft]
December 17, 1996
WCI Steel, Inc.
1040 Pine Avenue, S.E.
Warren, OH 44483-6528
Re: REGISTRATION STATEMENT ON FORM S-4 RELATED TO 10% SENIOR SECURED
NOTES DUE 2004
Gentlemen:
We have acted as special counsel for WCI Steel, Inc., an Ohio
corporation (the "Company"), in connection with the preparation of the
Company's Registration Statement on Form S-4 pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), being filed with the Securities
and Exchange Commission (the "Commission") on the date hereof and to which
this opinion letter is an exhibit. The Registration Statement relates to the
Company's offer to exchange its 10% Senior Secured Notes due 2004, Series B
(the "Exchange Notes") for any and all of its outstanding 10% Senior Secured
Notes due 2004, Series A (the "Old Notes"). The Old Notes were issued, and
the Exchange Notes are to be issued, under an indenture, dated as of November
27, 1996 (the "Indenture"), between the Company, as issuer, and Fleet
National Bank, as trustee.
In rendering the opinions expressed below, we have examined and
relied upon, among other things, (a) the Registration Statement, including
the Prospectus constituting a part thereof, (b) the Indenture filed as an
exhibit to the Registration Statement and (c) originals or copies, certified
or otherwise identified to our satisfaction, of such certificates, corporate,
public or other records, and other documents as we have deemed appropriate
for the purpose of rendering this opinion letter. In connection with such
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents and instruments of all documents and instruments submitted
to us as copies or specimens, and the authenticity of the originals of such
documents and instruments submitted to us as copies or specimens. We have
also made such investigations of law as we have deemed appropriate. In
addition, we have assumed that the Exchange Notes
<PAGE>
WCI Steel, Inc. -2- December 17, 1996
will be executed and delivered in substantially the form in which they are
filed as an exhibit to the Registration Statement.
We are members of the Bar of the State of New York, and in
rendering the opinions below, we do not purport to be an expert in, or
express any opinion concerning, the laws of any jurisdiction other than the
substantive laws of the State of New York and, where expressly referred to
below, the substantive federal laws of the United States of America (in each
case without regard to conflicts of law principles).
Based upon the foregoing and subject to the qualifications set
forth herein, we are of the opinion that:
1. The Exchange Notes will be legally and validly issued and
binding obligations of the Company (except to the extent enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of
equity, regardless of whether enforceability is considered in a proceeding in
equity or at law), when (a) the Registration Statement, as finally amended,
shall have become effective under the Securities Act and the Indenture shall
have been qualified under the Trust Indenture Act of 1939, as amended, and
(b) the Exchange Notes shall have been duly executed, authenticated and
delivered as contemplated in the Registration Statement.
2. The statements made in the Prospectus constituting a part of
the Registration Statement under the caption "Certain Federal Income Tax
Considerations," insofar as such statements purport to summarize certain
federal income tax laws of the United States of America, constitute a fair
summary of the principal federal income tax consequences of an investment in
Exchange Notes.
We hereby consent to the filing of this opinion letter as an
exhibit to the Registration Statement and to the reference to this Firm in
the Prospectus constituting a part of the Registration Statement under the
caption "Legal Matters," without admitting that we are "experts" within the
meaning of the Securities Act or the rules and regulations of the Commission
issued thereunder with respect to any part of the Registration Statement,
including this exhibit.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
<PAGE>
Amended and Restated Net Worth Appreciation Agreement
Effective November 1, 1995
In connection with your employment by WCI Steel, Inc. ("Company"), this amended
and restated Net Worth Appreciation Agreement ("Agreement") confirms the full
agreement for your compensation and your obligations under the Agreement and
supersedes the previous agreements with you dated September 1, 1988 ("Original
Effective Date"), November 15, 1993, June 1, 1994 and January 5, 1995.
1. There is hereby established for your benefit an unfunded deferred
compensation account (the "Account"). Initially, there shall be credited to the
Account the sum of $2,747,948 representing 1.25% and .75% of the increase in the
net worth of the Company from September 1, 1988 and June 1, 1994, respectively,
through October 31, 1995 computed as provided in your agreements dated September
1, 1988, November 15, 1993, June 1, 1994 and January 5, 1995. Beginning
November 1, 1995, and continuing for so long as you are employed by the Company,
as soon as practicable after the close of each fiscal quarter of the Company,
there shall be credited (charged) to the Account 2% (your "Full Percentage") of
the change in the "Net Worth" of the Company for the quarter then ended computed
as described herein. For purposes of this Agreement, the "Net Worth" of the
Company shall be deemed to be the amount of shareholders' equity determined in
accordance with Generally Accepted Accounting Principles used in the preparation
of the Company's consolidated financial statements and as filed with the
Securities and Exchange Commission, except that the amount of reported
shareholders' equity shall be
1
<PAGE>
adjusted to eliminate the charge for the net worth appreciation program and to
restate inventories on the first in- first out basis, including applicable
income tax effects and will not reflect any changes of the nature described in
the first sentence of paragraph 10. There shall be charged to the Account
payments made to you as provided in paragraphs 4, 6, 8, 10 and 14 of this
Agreement.
2. In connection with this Agreement, you agree to provide 30 days prior
written notice of your intention to voluntarily terminate your employment or
retire. In the event you voluntarily leave the Company's employ, the
"Measurement Date" for purposes of measuring compensation under this Agreement
shall be the end of the Company's fiscal quarter in which the 30-day notice
period ends. In the event your employment is terminated involuntarily by the
Company, the Measurement Date of the termination of your employment shall be the
end of the fiscal quarter preceding the termination of your employment.
3. Your interest in the Account is vested in full with respect to 1.25% of the
change in the Net Worth of the Company from September 1, 1988. With respect to
amounts in your Account related to .75% of the change in the Net Worth of the
Company beginning June 1, 1994 your interest vests as to 60% as of June 1, 1997
and vests as to an additional 20% on each of June 1, 1998 and June 1, 1999
provided that you are still employed by the Company at such dates. If your
employment is voluntarily terminated by you or if you are terminated for
"Cause", prior to June 1, 1999, the calculation of amounts payable to you shall
be based on your vested percentage. If your employment is terminated without
cause, by reason of your death, or by your serious disability rendering you
unable to perform your duties for the Company, you shall be deemed vested in 60%
of the .75% grant beginning June 1, 1994 if such event takes place
2
<PAGE>
before June 1, 1997 and an additional 20% for each full or fractional year
thereafter, up to a maximum vesting of 100%. For purposes of this provision,
termination shall be deemed to be for "Cause" only if the grounds therefor are
one or more of the following: (a) material conduct contrary to the best
interests of WCI, (b) continuing refusal or inability to perform the duties of
your position (other than for reasons of disability), or (c) illegal conduct
having a material impact on WCI.
4. During the term of your employment, you will receive a distribution in each
fiscal year equal to 5% of the balance of your Account at the end of the
previous fiscal year, commencing with the fiscal year ended October 31, 1995,
calculated as if you had retired on that date and your percentage was fully
vested. This distribution will be made as soon as practicable after March 1 in
each fiscal year and will reduce the balance in your Account by the amount of
the distribution. This distribution will be at least $150,000 for each fiscal
year (provided that there is an adequate balance in your Account at the relevant
fiscal year end) and will be subject to a maximum of $300,000 for any fiscal
year when combined with payments received by you on account of dividends,
management fees paid to Renco in excess of $1,200,000 or other distributions to
shareholders for such fiscal year (see paragraph 5 below). Because the 5%
payment may be made before all dividend related payments for the fiscal year are
known, payments made to you under this provision may be subsequently reduced if
the amount of payment received when combined with the amount received pursuant
to paragraph 5 below exceeds $300,000. In this event, the reduction of this
payment will be made by reducing or eliminating amounts you would have otherwise
received as a result of subsequent dividends paid by the Company or future
payments made pursuant to the first sentence of this paragraph. (For example,
assume that 5%
3
<PAGE>
of your Account balance at the end of the previous year was $200,000 which is
paid to you on March 1 of the current fiscal year pursuant to this paragraph,
and you were also entitled to receive payments related to dividends of $30,000
on each of January 1, April 1, July 1, and October 1. Under this scenario, you
would be paid $30,000 on January 1, $200,000 on March 1, $30,000 on April 1,
$30,000 on July 1, and $10,000 on October 1. The October 1 dividend related
payment was reduced from $30,000 to $10,000 because that amount resulted in the
total amount paid you for that fiscal year of $300,000). Nothing herein shall
limit the amount of payments you are entitled to receive solely as a result of
dividend payments, or other distributions made to shareholders (see paragraph
5). (For example, if in a given fiscal year you are entitled to receive
$350,000 solely as a result of dividends paid by the Company, you will receive
the full $350,000 as a result of dividends, but because the total payment
exceeds $300,000 you would not receive any payment as a result of the 5% of
prior years balance measurement as described in this paragraph.)
5. If during your term of employment by the Company, the Company pays
dividends to shareholders, or it pays management fees to Renco in excess of
$1,200,000 in any fiscal year, or any other form of distribution to The Renco
Group ("Renco") or any affiliate of Renco (this distribution shall include any
transfer of assets from the Company or its subsidiaries to Renco or any other
subsidiary of Renco in any form whether as cash or other form of value which
shall have the effect of reducing the shareholders' equity of the Company), then
you shall be entitled to receive a payment in an amount equal to your Full
Percentage of such cash dividend, management fees paid to Renco in excess of
$1,200,000 in the fiscal year, or other distribution to shareholders. Payments
made pursuant to this paragraph will be considered when determining
4
<PAGE>
whether the $150,000 minimum and $300,000 maximum described in paragraph 4 are
met. However, payments made pursuant to this paragraph are not subject to the
$300,000 maximum described in paragraph 4. Stock dividends (i.e., dividends
paid by the distributions of additional Company shares to shareholders) and
stock splits will not result in a distribution under this paragraph as no assets
are distributed to shareholders and shareholders' equity is not reduced. The
payment of cash dividends or other distributions to shareholders reduces the Net
Worth of the Company and thus will result in a reduction in your Account in an
amount equal to your Full Percentage of such dividends or distributions.
Because the balance of your Account is reduced as a result of the reduction in
shareholders' equity, it will not also be reduced by the related payment made to
you in such cases.
6. Except as provided in paragraph 7 below, if there is an "Organized Sale" of
the equity securities of the Company by the shareholders, you will be entitled
to a payment equal to your Full Percentage times the difference between the net
proceeds (net of any related expenses and retained liabilities) on the sale and
your "Base Net Worth Amount" for the interest sold (i.e., your "Base Net Worth
Amount" times the ratio of the number of shares sold in the Organized Sale
divided by the the total number of shares outstanding immediately before the
Organized Sale). For purposes of this Agreement, your "Base Net Worth Amount"
shall be $10,000,000 with respect to your 1.25% net worth grant effective
September 1, 1988 and a negative ($13,550,000) with respect to your .75% net
worth grant effective June 1, 1994. The payment due you will be paid by the
Company if all shareholders have the opportunity to participate in the Organized
Sale (whether they actually choose to participate or not) and by Renco if the
Organized Sale is limited to a sale by Renco, and not available on substantially
equal terms to all
5
<PAGE>
shareholders. In the event payments are made to you pursuant to this paragraph,
your Account will be reduced by the amount of the payment attributable to the
Net Worth of the Company (i.e., the balance of your Account times the ratio of
the number of shares of the Company sold in the Organized Sale to the total
number of shares outstanding immediately preceding the Organized Sale).
Payments made relating to the premium (i.e., amount of net proceeds in excess of
the Net Worth of the Company for the interest sold), if any, received on the
Organized Sale will not reduce your Account balance. For purposes of this
Agreement, an "Organized Sale" shall mean a transaction or series of
transactions whereby all shareholders are entitled to participate and sell their
shares or a transaction limited to the sale of shares by Renco only.
"Organized Sale" specifically does not include the normal buying and selling of
shares by individual investors in the market, except that it would include the
sale of shares in the market made by Renco to the extent the total shares sold
by Renco exceeds five percent on a cumulative basis (see paragraph 7 below).
7. Notwithstanding paragraph 6 above, you will not be entitled to any payment
due to the sale of equity securities of the Company to a third party by Renco,
until such transaction(s) made subsequent to the date hereof exceeds 5%, in the
aggregate, of the the shares held by Renco or Ira Leon Rennert on the date
hereof (i.e., 1,537,345 common shares which shall be adjusted for any stock
dividends or stock splits made subsequent to November 1, 1995), and then only to
the extent such sale transaction(s) and/or subsequent sale transactions exceeds
5%, in the aggregate, of the shares held by Renco or Ira Leon Rennert on the
hereof.
8. In addition to the above, if there is a "Change Of Control" (as defined in
paragraph 9 below), you will receive a payment at that time of the remaining
amount determined pursuant to
6
<PAGE>
paragraph 1. As a condition of this payment, you will be required to agree to
continued employment, on substantially the same or better terms to you than
those then in effect, for a period of up to one year following the transaction
which results in the Change Of Control. Following this period, you will be
entitled to leave the employ of the Company and be relieved of your non-compete
agreement. If Renco sells its interest in full, or if there is a Change Of
Control as described below, and upon payment in full of amounts due you pursuant
to this Agreement, the Company's and Renco's obligation to you under this
Agreement will be satisfied in full and the Agreement will terminate.
9. For purposes of this Agreement, Mr. Ira Leon Rennert shall be deemed to
"Control" the Company provided that he, his immediate family, and estate or
trusts for the benefit of his immediate family, own 20 percent or more of the
outstanding equity of the Company, and, for so long as he is physically able,
Mr. Rennert or any of his lineal descendants retains the position of Chairman of
the Board of the Company. A Change Of Control will be deemed to have occurred,
if the aforementioned conditions of Control are not met or if another
individual, entity, or affiliated individuals or entities, holds a greater
voting interest than Mr. Ira Leon Rennert, his immediate family, and estate or
trusts for the benefit of his immediate family.
10. The net worth Account will not be reduced by transactions the Company
enters into in its own securities (i.e., treasury stock transactions) nor will
it be increased by the issuance or sale, by the Company, of its own securities
(i.e., stock offerings whereby the proceeds of the offering are retained by the
Company for use in the business). No payment will be due you as a direct
result of the above described transactions unless such transactions result in an
effective distribution to shareholders, or an Organized Sale (as defined), or a
Change Of Control (as
7
<PAGE>
defined), in which case the provisions of paragraph 5,6 and/or, 8, if
applicable, shall apply. If the Company purchases shares held by Renco, you
will be entitled to a payment equal to your Full Percentage times the difference
between the amount paid for the shares and your Base Net Worth Amount for the
shares purchased (i.e. your Base Net Worth Amount times the ratio of the number
of shares purchased from Renco divided by the total number of shares outstanding
immediately before the share purchase). Any such purchase will reduce the
shareholders' equity of the Company and thus reduce your Account balance by an
amount equal to the payment made to you.
11. Upon termination of your employment with the Company, the vested balance of
your Account will be frozen (i.e., not subject to changes, either up or down, in
the Net Worth of the Company) as of the Measurement Date and quarterly payments,
without interest, equal to the balance of your Account divided by 40 will
commence upon the earliest of your age 62, ten years after the termination of
your employment, or twenty years after the date you were first employed by the
Company. In any event, quarterly payments (computed as described above) will
commence upon the earliest of (a) age 62, (b) twenty years after the date you
were first employed by the Company or (c) immediately if your service is
involuntarily terminated without Cause. The above described deferments in
payment would also not apply in event of your serious disability which prevents
you from performing your duties or in other cases of health or family crisis
which, in the sole discretion of the Compensation Committee, warrant waiver of
the deferment period and installment payments computed as described above will
then commence immediately. In the event of your death, your estate or
beneficiaries shall receive a payment, within 90 days of your death, equal to
the present value of the vested balance of your Account
8
<PAGE>
(pursuant to the vesting provisions of the third sentence of paragraph 3),
computed using (a) 40 equal quarterly installments if your Account is not in pay
status or the remaining payments due you under the Agreement if your Account is
in pay status, and (b) the discount rate used for computing the present value of
annuitized benefits under the provisions of the Internal Revenue Code of 1986
and the regulations thereunder and as same may be amended from time to time.
12. Payments made under this agreement are subject to your faithful adherence
to your confidentiality agreement and to your agreement, by your signature
below, to not enter into any arrangement, including employment arrangements,
with any organization that is a competitor of the Company until after the date
of the last scheduled payment due you under this Agreement, including any
waiting or deferment period as provided in paragraph 11 above. The non-compete
restrictions of this Agreement shall no longer apply if there is a Change Of
Control as defined in paragraph 9.
13. Your rights under this Agreement may not be assigned, transferred, pledged
or hypothecated without the prior approval of the Company, except that, upon
your death, your interest in the Account will vest in your estate or heirs and
that during your lifetime, you may assign your interest to a revocable or
irrevocable trust for the primary benefit of your spouse or any lineal
descendant or your or your spouse's grandparents.
14. Upon signing this Agreement, you will receive a one-time payment equal to
the greater of $150,000 or 10% of the balance of your Account
as of October 31, 1995. This payment is in addition to amounts that may be due
you as a result of other provisions of this Agreement and will not be considered
when determining whether the maximum annual payment described in paragraph 4 has
been met or exceeded. This payment will reduce the balance of your Account.
9
<PAGE>
Please confirm that the foregoing sets forth the full agreement with respect to
your net worth appreciation participation by signing and returning the enclosed
copy of this Agreement.
/s/ Patrick T. Kenney
--------------------------------------------
Patrick T. Kenney, Vice President Operations
WCI Steel, Inc.
By /s/ Edward R. Caine
--------------------------------------------
E. R. Caine, President and CEO
10
<PAGE>
Amended and Restated Net Worth Appreciation Agreement
Effective November 1, 1995
In connection with your employment by WCI Steel, Inc. ("Company"), this amended
and restated Net Worth Appreciation Agreement ("Agreement") confirms the full
agreement for your compensation and your obligations under the Agreement and
supersedes the previous agreements with you dated May 1, 1994 ("Original
Effective Date") and January 5, 1995.
1. There is hereby established for your benefit an unfunded deferred
compensation account (the "Account"). Initially, there shall be credited to the
Account the sum of $1,819,584 representing 2% (your "Full Percentage") of the
increase in the net worth of the Company from May 1, 1994 through October 31,
1995 computed as provided in your agreements dated May 1, 1994 and January 5,
1995. Beginning November 1, 1995, and continuing for so long as you are
employed by the Company, as soon as practicable after the close of each fiscal
quarter of the Company, there shall be credited (charged) to the Account 2% of
the change in the "Net Worth" of the Company for the quarter then ended computed
as described herein. For purposes of this Agreement, the "Net Worth" of the
Company shall be deemed to be the amount of shareholders' equity determined in
accordance with Generally Accepted Accounting Principles used in the preparation
of the Company's consolidated financial statements and as filed with the
Securities and Exchange Commission, except that the amount of reported
shareholders' equity shall be adjusted to eliminate the charge for the net worth
appreciation program and to restate inventories
1
<PAGE>
on the first in- first out basis, including applicable income tax effects and
will not reflect any changes of the nature described in the first sentence of
paragraph 10.
There shall be charged to the Account payments made to you as
provided in paragraphs 4, 6, 8, 10 and 14 of this Agreement.
2. In connection with this Agreement, you agree to provide 30 days prior
written notice of your intention to voluntarily terminate your employment or
retire. In the event you voluntarily leave the Company's employ, the
"Measurement Date" for purposes of measuring compensation under this Agreement
shall be the end of the Company's fiscal quarter in which the 30-day notice
period ends. In the event your employment is terminated involuntarily by the
Company, the Measurement Date of the termination of your employment shall be the
end of the fiscal quarter preceding the termination of your employment.
3. Your interest in the Account vests as to 60% as of May 1, 1997 and vests as
to an additional 20% on each of May 1, 1998 and May 1, 1999 provided that you
are still employed by the Company at such dates. If your employment is
voluntarily terminated by you or if you are terminated for "Cause", prior to the
fifth anniversary of your Original Effective Date, the calculation of amounts
payable to you shall be based on your vested percentage. If your employment is
terminated without cause, by reason of your death, or by your serious disability
rendering you unable to perform your duties for the Company, you shall be deemed
vested in 60% of the Account if such event takes place before the third
anniversary of the Original Effective Date of your Agreement and an additional
20% for each full or fractional year thereafter, up to a maximum vesting of
100%. For purposes of this provision, termination shall be deemed to be for
"Cause" only if the grounds therefor are one or more of the following: (a)
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material conduct contrary to the best interests of WCI, (b) continuing refusal
or inability to perform the duties of your position (other than for reasons of
disability), or (c) illegal conduct having a material impact on WCI.
4. During the term of your employment, you will receive a distribution in each
fiscal year equal to 5% of the balance of your Account at the end of the
previous fiscal year, commencing with the fiscal year ended October 31, 1995,
calculated as if you had retired on that date and your percentage was fully
vested. This distribution will be made as soon as practicable after March 1 in
each fiscal year and will reduce the balance in your Account by the amount of
the distribution. This distribution will be at least $150,000 for each fiscal
year (provided that there is an adequate balance in your Account at the relevant
fiscal year end) and will be subject to a maximum of $300,000 for any fiscal
year when combined with payments received by you on account of dividends,
management fees paid to Renco in excess of $1,200,000 or other distributions to
shareholders for such fiscal year (see paragraph 5 below). Because the 5%
payment may be made before all dividend related payments for the fiscal year are
known, payments made to you under this provision may be subsequently reduced if
the amount of payment received when combined with the amount received pursuant
to paragraph 5 below exceeds $300,000. In this event, the reduction of this
payment will be made by reducing or eliminating amounts you would have otherwise
received as a result of subsequent dividends paid by the Company or future
payments made pursuant to the first sentence of this paragraph. (For example,
assume that 5% of your Account balance at the end of the previous year was
$200,000 which is paid to you on March 1 of the current fiscal year pursuant to
this paragraph, and you were also entitled to receive payments related to
dividends of $30,000 on each of January 1, April 1, July 1, and
3
<PAGE>
October 1. Under this scenario, you would be paid $30,000 on January 1,
$200,000 on March 1, $30,000 on April 1, $30,000 on July 1, and $10,000 on
October 1. The October 1 dividend related payment was reduced from $30,000 to
$10,000 because that amount resulted in the total amount paid you for that
fiscal year of $300,000). Nothing herein shall limit the amount of payments
you are entitled to receive solely as a result of dividend payments, or other
distributions made to shareholders (see paragraph 5). (For example, if in a
given fiscal year you are entitled to receive $350,000 solely as a result of
dividends paid by the Company, you will receive the full $350,000 as a result of
dividends, but because the total payment exceeds $300,000 you would not receive
any payment as a result of the 5% of prior years balance measurement as
described in this paragraph.)
5. If during your term of employment by the Company, the Company pays
dividends to shareholders, or it pays management fees to Renco in excess of
$1,200,000 in any fiscal year, or any other form of distribution to The Renco
Group ("Renco") or any affiliate of Renco (this distribution shall include any
transfer of assets from the Company or its subsidiaries to Renco or any other
subsidiary of Renco in any form whether as cash or other form of value which
shall have the effect of reducing the shareholders' equity of the Company), then
you shall be entitled to receive a payment in an amount equal to your Full
Percentage of such cash dividend, management fees paid to Renco in excess of
$1,200,000 in the fiscal year, or other distribution to shareholders. Payments
made pursuant to this paragraph will be considered when determining whether the
$150,000 minimum and $300,000 maximum described in paragraph 4 are met.
However, payments made pursuant to this paragraph are not subject to the
$300,000 maximum described in paragraph 4. Stock dividends (i.e., dividends
paid by the distribution of additional
4
<PAGE>
Company shares to shareholders) and stock splits will not result in a
distribution under this paragraph as no assets are distributed to shareholders
and shareholders' equity is not reduced. The payment of cash dividends or
other distributions to shareholders reduces the Net Worth of the Company and
thus will result in a reduction in your Account in an amount equal to your Full
Percentage of such dividends or distributions. Because the balance of your
Account is reduced as a result of the reduction in shareholders' equity, it will
not also be reduced by the related payment made to you in such cases.
6. Except as provided in paragraph 7 below, if there is an "Organized Sale" of
the equity securities of the Company by the shareholders, you will be entitled
to a payment equal to your Full Percentage times the difference between the net
proceeds (net of any related expenses and retained liabilities) on the sale and
your "Base Net Worth Amount" for the interest sold (i.e., your "Base Net Worth
Amount" times the ratio of the number of shares sold in the Organized Sale
divided by the the total number of shares outstanding immediately before the
Organized Sale). For purposes of this Agreement your "Base Net Worth Amount"
shall be a negative ($17,557,000). The payment due you will be paid by the
Company if all shareholders have the opportunity to participate in the Organized
Sale (whether they actually choose to participate or not) and by Renco if the
Organized Sale is limited to a sale by Renco, and not available on substantially
equal terms to all shareholders. In the event payments are made to you
pursuant to this paragraph, your Account will be reduced by the amount of the
payment attributable to the Net Worth of the Company (i.e., the balance of your
Account times the ratio of the number of shares of the Company sold in the
Organized Sale to the total number of shares outstanding immediately preceding
the Organized Sale). Payments made relating to the premium (i.e.,
5
<PAGE>
amount of net proceeds in excess of the Net Worth of the Company for the
interest sold), if any, received on the Organized Sale will not reduce your
Account balance. For purposes of this Agreement, an "Organized Sale" shall
mean a transaction or series of transactions whereby all shareholders are
entitled to participate and sell their shares or a transaction limited to the
sale of shares by Renco only. "Organized Sale" specifically does not include
the normal buying and selling of shares by individual investors in the market,
except that it would include the sale of shares in the market made by Renco to
the extent the total shares sold by Renco exceeds five percent on a cumulative
basis (see paragraph 7 below).
7. Notwithstanding paragraph 6 above, you will not be entitled to any payment
due to the sale of equity securities of the Company to a third party by Renco,
until such transaction(s) made subsequent to the date hereof exceeds 5%, in the
aggregate, of the shares held by Renco or Ira Leon Rennert on the date hereof
(i.e., 1,537,345 common shares which shall be adjusted for any stock dividends
or stock splits made subsequent to November 1, 1995), and then only to the
extent such sale transaction(s) and/or subsequent sale transactions exceeds 5%,
in the aggregate, of the shares held by Renco or Ira Leon Rennert on the date
hereof.
8. In addition to the above, if there is a "Change Of
Control" (as defined in paragraph 9 below), you will receive a payment at that
time of the remaining amount determined pursuant to paragraph 1. As a
condition of this payment, you will be required to agree to continued
employment, on substantially the same or better terms to you than those then in
effect, for a period of up to one year following the transaction which results
in the Change Of Control. Following this period, you will be entitled to leave
the employ of the Company and be relieved of your non-compete agreement. If
Renco sells its interest in full, or if there is a Change Of
6
<PAGE>
Control as described below, and upon payment in full of amounts due you
pursuant to this Agreement, the Company's and Renco's obligation to you under
this Agreement will be satisfied in full and the Agreement will terminate.
9. For purposes of this Agreement, Mr. Ira Leon Rennert shall be deemed to
"Control" the Company provided that he, his immediate family, and estate or
trusts for the benefit of his immediate family, own 20 percent or more of the
outstanding equity of the Company, and, for so long as he is physically able,
Mr. Rennert or any of his lineal descendants retains the position of Chairman of
the Board of the Company. A "Change Of Control" will be deemed to have
occurred, if the aforementioned conditions of Control are not met or if another
individual, entity, or affiliated individuals or entities, holds a greater
voting interest than Mr. Ira Leon Rennert, his immediate family, and estate or
trusts for the benefit of his immediate family.
10. The net worth Account will not be reduced by transactions the Company
enters into in its own securities (i.e., treasury stock transactions) nor will
it be increased by the issuance or sale, by the Company, of its own securities
(i.e., stock offerings whereby the proceeds of the offering are retained by the
Company for use in the business). No payment will be due you as a direct
result of the above described transactions unless such transactions result in an
effective distribution to shareholders, or an Organized Sale (as defined), or a
Change Of Control (as defined), in which case the provisions of paragraph 5,6
and/or, 8, if applicable, shall apply. If the Company purchases shares held by
Renco, you will be entitled to a payment equal to your Full Percentage times the
difference between the amount paid for the shares and your Base Net Worth Amount
for the shares purchased (i.e. your Base Net Worth Amount times the ratio of the
number of shares purchased from Renco divided by the total number of shares
outstanding
7
<PAGE>
immediately before the share purchase). Any such purchase will reduce the
shareholders' equity of the Company and thus reduce your Account balance by an
amount equal to the payment made to you.
11. Upon termination of your employment with the Company, the vested balance of
your Account will be frozen (i.e., not subject to changes, either up or down, in
the Net Worth of the Company) as of the Measurement Date and quarterly payments,
without interest, equal to the balance of your Account divided by 40 will
commence upon the earliest of your age 62, ten years after the termination of
your employment, or twenty years after the date you were first employed by the
Company. In any event, quarterly payments (computed as described above) will
commence upon the earliest of (a) age 62, (b) twenty years after the date you
were first employed by the Company or (c) immediately if your service is
involuntarily terminated without Cause. The above described deferments in
payment would also not apply in event of your serious disability which prevents
you from performing your duties or in other cases of health or family crisis
which, in the sole discretion of the Compensation Committee, warrant waiver of
the deferment period and installment payments computed as described above will
then commence immediately. In the event of your death, your estate or
beneficiaries shall receive a payment, within 90 days of your death, equal to
the present value of the vested balance of your Account (pursuant to the vesting
provisions of the third sentence of paragraph 3), computed using (a) 40 equal
quarterly installments if your Account is not in pay status or the remaining
payments due you under the Agreement if your Account is in pay status, and (b)
the discount rate used for computing the present value of annuitized benefits
under the provisions of the Internal Revenue Code of 1986 and the regulations
thereunder and as same may be amended from time to time.
8
<PAGE>
12. Payments made under this agreement are subject to your faithful adherence
to your confidentiality agreement and to your agreement, by your signature
below, to not enter into any arrangement, including employment arrangements,
with any organization that is a competitor of the Company until after the date
of the last scheduled payment due you under this Agreement, including any
waiting or deferment period as provided in paragraph 11 above. The non-compete
restrictions of this Agreement shall no longer apply if there is a Change Of
Control as defined in paragraph 9.
13. Your rights under this Agreement may not be assigned, transferred, pledged
or hypothecated without the prior approval of the Company, except that, upon
your death, your interest in the Account will vest in your estate or heirs and
that during your lifetime, you may assign your interest to a revocable or
irrevocable trust for the primary benefit of your spouse or any lineal
descendant of your or your spouse's grandparents.
14. Upon signing this Agreement, you will receive a one-time payment equal to
the greater of $150,000 or 10% of the balance of your Account as of October 31,
1995. This payment is in addition to amounts that may be due you as a result
of other provisions of this Agreement and will not be considered when
determining whether the maximum annual payment described in paragraph 4 has been
met or exceeded. This payment will reduce the balance of your Account.
Please confirm that the foregoing sets forth the full agreement with respect to
your net worth appreciation participation by signing and returning the enclosed
copy of this Agreement.
9
<PAGE>
/s/ Patrick G. Tatom
-------------------------------------------
Patrick G. Tatom, Vice President Commercial
WCI Steel, Inc.
By /s/ Edward R. Caine
-------------------------------------------
E. R. Caine, President and CEO
10
<PAGE>
Amended and Restated Net Worth Appreciation Agreement
Effective November 1, 1995
In connection with your employment by WCI Steel, Inc. ("Company"), this amended
and restated Net Worth Appreciation Agreement ("Agreement") confirms the full
agreement for your compensation and your obligations under the Agreement and
supersedes the previous agreement with you dated August 1, 1994 ("Original
Effective Date").
1. There is hereby established for your benefit an unfunded deferred
compensation account (the "Account"). Initially, there shall be credited to the
Account the sum of $588,143 representing 2% (your "Full Percentage") of the
increase in the net worth of the Company from August 1, 1994 through October 31,
1995 computed as provided in your agreement dated August 1, 1994. Beginning
November 1, 1995, and continuing for so long as you are employed by the Company,
as soon as practicable after the close of each fiscal quarter of the Company,
there shall be credited (charged) to the Account 2% of the change in the "Net
Worth" of the Company for the quarter then ended computed as described herein.
For purposes of this Agreement, the "Net Worth" of the Company shall be deemed
to be the amount of shareholders' equity determined in accordance with Generally
Accepted Accounting Principles used in the preparation of the Company's
consolidated financial statements and as filed with the Securities and Exchange
Commission, except that the amount of reported shareholders' equity shall be
adjusted to eliminate the charge for the net worth appreciation program and to
restate inventories on the first in- first out basis, including applicable
income tax effects and will not reflect any changes of the nature described in
the first sentence of paragraph 10. There shall be charged to the Account
payments made to you as provided in paragraphs 4, 6, 8, 10 and 14 of this
Agreement.
2. In connection with this Agreement, you agree to provide 30 days prior
written notice of your intention to voluntarily terminate your employment or
retire. In the event you voluntarily
1
<PAGE>
leave the Company's employ, the "Measurement Date" for purposes of measuring
compensation under this Agreement shall be the end of the Company's fiscal
quarter in which the 30-day notice period ends. In the event your employment
is terminated involuntarily by the Company, the Measurement Date of the
termination of your employment shall be the end of the fiscal quarter preceding
the termination of your employment.
3. Your interest in the Account vests as to 60% as of September 1, 1997 and
vests as to an additional 20% on each of September 1, 1998 and September 1,
1999 provided that you are still employed by the Company at such dates. If
your employment is voluntarily terminated by you or if you are terminated for
"Cause", prior to the fifth anniversary of your Original Effective Date, the
calculation of amounts payable to you shall be based on your vested
percentage. If your employment is terminated without cause, by reason of your
death, or by your serious disability rendering you unable to perform your
duties for the Company, you shall be deemed vested in 60% of the Account if
such event takes place before the third anniversary of the Original Effective
Date of your Agreement and an additional 20% for each full or fractional year
thereafter, up to a maximum vesting of 100%. For purposes of this
provision, termination shall be deemed to be for "Cause" only if the grounds
therefor are one or more of the following: (a) material conduct contrary to
the best interests of WCI, (b) continuing refusal or inability to perform the
duties of your position (other than for reasons of disability), or (c)
illegal conduct having a material impact on WCI.
4. During the term of your employment, you will receive a distribution in each
fiscal year equal to 5% of the balance of your Account at the end of the
previous fiscal year, commencing with the fiscal year ended October 31, 1995,
calculated as if you had retired on that date and your percentage was fully
vested. This distribution will be made as soon as practicable after March 1 in
each fiscal year and will reduce the balance in your Account by the amount of
the distribution. This distribution will be at least $150,000 for each fiscal
year (provided that there is an adequate balance in your Account at the relevant
fiscal year end) and will be subject to a maximum of
2
<PAGE>
$300,000 for any fiscal year when combined with payments received by you on
account of dividends, management fees paid to Renco in excess of $1,200,000 or
other distributions to shareholders for such fiscal year (see paragraph 5
below). Because the 5% payment may be made before all dividend related
payments for the fiscal year are known, payments made to you under this
provision may be subsequently reduced if the amount of payment received when
combined with the amount received pursuant to paragraph 5 below exceeds
$300,000. In this event, the reduction of this payment will be made by
reducing or eliminating amounts you would have otherwise received as a result of
subsequent dividends paid by the Company or future payments made pursuant to the
first sentence of this paragraph. (For example, assume that 5% of your Account
balance at the end of the previous year was $200,000 which is paid to you on
March 1 of the current fiscal year pursuant to this paragraph, and you were
also entitled to receive payments related to dividends of $30,000 on each of
January 1, April 1, July 1, and October 1. Under this scenario, you would be
paid $30,000 on January 1, $200,000 on March 1, $30,000 on April 1, $30,000 on
July 1, and $10,000 on October 1. The October 1 dividend related payment was
reduced from $30,000 to $10,000 because that amount resulted in the total amount
paid you for that fiscal year of $300,000). Nothing herein shall limit the
amount of payments you are entitled to receive solely as a result of dividend
payments, or other distributions made to shareholders (see paragraph 5). (For
example, if in a given fiscal year you are entitled to receive $350,000 solely
as a result of dividends paid by the Company, you will receive the full $350,000
as a result of dividends, but because the total payment exceeds $300,000 you
would not receive any payment as a result of the 5% of prior years balance
measurement as described in this paragraph.)
5. If during your term of employment by the Company, the Company pays
dividends to shareholders, or it pays management fees to Renco in excess of
$1,200,000 in any fiscal year, or any other form of distribution to The Renco
Group ("Renco") or any affiliate of Renco (this distribution shall include any
transfer of assets from the Company or its subsidiaries to Renco or
3
<PAGE>
any other subsidiary of Renco in any form whether as cash or other form of
value which shall have the effect of reducing the shareholders' equity of the
Company), then you shall be entitled to receive a payment in an amount equal
to your Full Percentage of such cash dividend, management fees paid to Renco
in excess of $1,200,000 in the fiscal year, or other distribution to
shareholders. Payments made pursuant to this paragraph will be considered
when determining whether the $150,000 minimum and $300,000 maximum described
in paragraph 4 are met. However, payments made pursuant to this paragraph
are not subject to the $300,000 maximum described in paragraph 4. Stock
dividends (i.e., dividends paid by the distribution of additional Company
shares to shareholders) and stock splits will not result in a distribution
under this paragraph as no assets are distributed to shareholders and
shareholders' equity is not reduced. The payment of cash dividends or
other distributions to shareholders reduces the Net Worth of the Company and
thus will result in a reduction in your Account in an amount equal to your
Full Percentage of such dividends or distributions. Because the balance of
your Account is reduced as a result of the reduction in shareholders' equity,
it will not also be reduced by the related payment made to you in such cases.
6. Except as provided in paragraph 7 below, if there is an "Organized Sale" of
the equity securities of the Company by the shareholders, you will be entitled
to a payment equal to your Full Percentage times the difference between the net
proceeds (net of any related expenses and retained liabilities) on the sale and
your "Base Net Worth Amount" for the interest sold (i.e., your "Base Net Worth
Amount" times the ratio of the number of shares sold in the Organized Sale
divided by the total number of shares outstanding immediately before the
Organized Sale). For purposes of this Agreement your "Base Net Worth Amount"
shall be $32,867,000. The payment due you will be paid by the Company if all
shareholders have the opportunity to participate in the Organized Sale (whether
they actually choose to participate or not) and by Renco if the Organized Sale
is limited to a sale by Renco, and not available on substantially equal terms to
all shareholders. In the event payments are made to you pursuant to this
4
<PAGE>
paragraph, your Account will be reduced by the amount of the payment
attributable to the Net Worth of the Company (i.e., the balance of your
Account times the ratio of the number of shares of the Company sold in the
Organized Sale to the total number of shares outstanding immediately
preceding the Organized Sale). Payments made relating to the premium (i.e.,
amount of net proceeds in excess of the Net Worth of the Company for the
interest sold), if any, received on the Organized Sale will not reduce your
Account balance. For purposes of this Agreement, an "Organized Sale" shall
mean a transaction or series of transactions whereby all shareholders are
entitled to participate and sell their shares or a transaction limited to the
sale of shares by Renco only. "Organized Sale" specifically does not include
the normal buying and selling of shares by individual investors in the
market, except that it would include the sale of shares in the market made by
Renco to the extent the total shares sold by Renco exceeds five percent on a
cumulative basis (see paragraph 7 below).
7. Notwithstanding paragraph 6 above, you will not be entitled to any payment
due to the sale of equity securities of the Company to a third party by Renco,
until such transaction(s) made subsequent to the date hereof exceeds 5%, in the
aggregate, of the shares held by Renco or Ira Leon Rennert on the date hereof
(i.e., 1,537,345 common shares which shall be adjusted for any stock dividends
or stock splits made subsequent to November 1, 1995), and then only to the
extent such sale transaction(s) and/or subsequent sale transactions exceeds 5%,
in the aggregate, of the shares held by Renco or Ira Leon Rennert on the date
hereof.
8. In addition to the above, if there is a "Change Of Control" (as defined in
paragraph 9 below), you will receive a payment at that time of the remaining
amount determined pursuant to paragraph 1. As a condition of this payment,
you will be required to agree to continued employment, on substantially the same
or better terms to you than those then in effect, for a period of up to one year
following the transaction which results in the Change Of Control. Following
this period, you will be entitled to leave the employ of the Company and be
relieved of your non-compete agreement. If Renco sells its interest in full,
or if there is a Change Of
5
<PAGE>
Control as described below, and upon payment in full of amounts due you pursuant
to this Agreement, the Company's and Renco's obligation to you under this
Agreement will be satisfied in full and the Agreement will terminate.
9. For purposes of this Agreement, Mr. Ira Leon Rennert shall be deemed to
"Control" the Company provided that he, his immediate family, and estate or
trusts for the benefit of his immediate family, own 20 percent or more of the
outstanding equity of the Company, and, for so long as he is physically able,
Mr. Rennert or any of his lineal descendants retains the position of Chairman of
the Board of the Company. A "Change Of Control" will be deemed to have
occurred, if the aforementioned conditions of Control are not met or if another
individual, entity, or affiliated individuals or entities, holds a greater
voting interest than Mr. Ira Leon Rennert, his immediate family, and estate or
trusts for the benefit of his immediate family.
10. The net worth Account will not be reduced by transactions the Company
enters into in its own securities (i.e., treasury stock transactions) nor will
it be increased by the issuance or sale, by the Company, of its own securities
(i.e., stock offerings whereby the proceeds of the offering are retained by the
Company for use in the business). No payment will be due you as a direct
result of the above described transactions unless such transactions result in an
effective distribution to shareholders, or an Organized Sale (as defined), or a
Change Of Control (as defined), in which case the provisions of paragraph 5,6
and/or, 8, if applicable, shall apply. If the Company purchases shares held by
Renco, you will be entitled to a payment equal to your Full Percentage times the
difference between the amount paid for the shares and your Base Net Worth Amount
for the shares purchased (i.e. your Base Net Worth Amount times the ratio of the
number of shares purchased from Renco divided by the total number of shares
outstanding immediately before the share purchase). Any such purchase will
reduce the shareholders' equity of the Company and thus reduce your Account
balance by an amount equal to the payment made to you.
6
<PAGE>
11. Upon termination of your employment with the Company, the vested balance of
your Account will be frozen (i.e., not subject to changes, either up or down, in
the Net Worth of the Company) as of the Measurement Date and quarterly payments,
without interest, equal to the balance of your Account divided by 40 will
commence upon the earliest of your age 62, ten years after the termination of
your employment, or twenty years after the date you were first employed by the
Company. In any event, quarterly payments (computed as described above) will
commence upon the earliest of (a) age 62, (b) twenty years after the date you
were first employed by the Company or (c) immediately if your service is
involuntarily terminated without Cause. The above described deferments in
payment would also not apply in event of your serious disability which prevents
you from performing your duties or in other cases of health or family crisis
which, in the sole discretion of the Compensation Committee, warrant waiver of
the deferment period and installment payments computed as described above will
commence immediately. In the event of your death, your estate or beneficiaries
shall receive a payment, within 90 days of your death, equal to the present
value of the vested balance of your Account (pursuant to the vesting provisions
of the third sentence of paragraph 3), computed using (a) 40 equal quarterly
installments if your Account is not in pay status or the remaining payments due
you under the Agreement if your Account is in pay status, and (b) the discount
rate used for computing the present value of annuitized benefits under the
provisions of the Internal Revenue Code of 1986 and the regulations thereunder
and as same may be amended from time to time.
12. Payments made under this agreement are subject to your faithful adherence
to your confidentiality agreement and to your agreement, by your signature
below, to not enter into any arrangement, including employment arrangements,
with any organization that is a competitor of the Company until after the date
of the last scheduled payment due you under this Agreement, including any
waiting or deferment period as provided in paragraph 11 above. The non-compete
restrictions of this Agreement shall no longer apply if there is a Change Of
Control as defined in paragraph 9.
7
<PAGE>
13. Your rights under this Agreement may not be assigned, transferred, pledged
or hypothecated without the prior approval of the Company, except that, upon
your death, your interest in the Account will vest in your estate or heirs and
that during your lifetime, you may assign your interest to a revocable or
irrevocable trust for the primary benefit of your spouse or any lineal
descendant of your or your spouse's grandparents.
14. Upon signing this Agreement, you will receive a one-time payment equal to
the greater of $150,000 or 10% of the balance of your Account as of October 31,
1995. This payment is in addition to amounts that may be due you as a result
of other provisions of this Agreement and will not be considered when
determining whether the maximum annual payment described in paragraph 4 has been
met or exceeded. This payment will reduce the balance of your Account.
Please confirm that the foregoing sets forth the full agreement with respect to
your net worth appreciation participation by signing and returning the enclosed
copy of this Agreement.
/s/ Bret W. Wise
--------------------------------------------
Bret W. Wise, Vice President Finance and CFO
WCI Steel, Inc.
By /s/ E.R. Caine
--------------------------------------------
E. R. Caine, President CEO
8
<PAGE>
Net Worth Appreciation Agreement
April 1, 1996
In connection with your employment by WCI Steel, Inc. ("Company"), this Net
Worth Appreciation Agreement ("Agreement") confirms the full agreement for your
compensation and your obligations under the Agreement. The "Original Effective
Date" for purposes of this Agreement shall be April 1, 1996.
1. There is hereby established for your benefit an unfunded deferred
compensation account (the "Account"). Beginning April 1, 1996, and continuing
for so long as you are employed by the Company, as soon as practicable after the
close of each fiscal quarter of the Company, there shall be credited (charged)
to the Account 5% (your "Full Percentage") of the change in the "Net Worth" of
the Company for the quarter then ended (except for the fiscal quarter ended
April 30, 1996 for which the Account shall be credited with 5% of the change in
the Net Worth of the Company for the month of April 1996) computed as described
herein. For purposes of this Agreement, the "Net Worth" of the Company shall be
deemed to be the amount of shareholders' equity determined in accordance with
Generally Accepted Accounting Principles used in the preparation of the
Company's consolidated financial statements and as filed with the Securities and
Exchange Commission, except that the amount of reported shareholders' equity
shall be adjusted to eliminate the charge for the net worth appreciation program
and to restate inventories on the first in- first out basis, including
applicable income tax effects and will not reflect any changes of the nature
described in the first sentence of paragraph 10. There shall be charged to the
Account payments made to you as provided in paragraphs 4, 6, 8, 10 and 14 of
this Agreement.
2. In connection with this Agreement, you agree to provide 30 days prior
written notice of your intention to voluntarily terminate your employment or
retire. In the event you voluntarily leave the Company's employ, the
"Measurement Date" for purposes of measuring compensation
1
<PAGE>
under this Agreement shall be the end of the Company's fiscal quarter in which
the 30-day notice period ends. In the event your employment is terminated
involuntarily by the Company, the Measurement Date of the termination of your
employment shall be the end of the fiscal quarter preceding the termination of
your employment.
3. Your interest in the Account vests as to 60% as of April 1, 1999 and vests
as to an additional 20% on each of April 1, 2000 and April 1, 2001 provided that
you are still employed by the Company at such dates. If your employment is
voluntarily terminated by you or if you are terminated for "Cause", prior to the
fifth anniversary of your Original Effective Date, the calculation of amounts
payable to you shall be based on your vested percentage. If your employment is
terminated without cause, by reason of your death, or by your serious disability
rendering you unable to perform your duties for the Company, you shall be deemed
vested in 60% of the Account if such event takes place before the third
anniversary of the Original Effective Date of your Agreement and an additional
20% for each full or fractional year thereafter, up to a maximum vesting of
100%. For purposes of this provision, termination shall be deemed to be for
"Cause" only if the grounds therefor are one or more of the following: (a)
material conduct contrary to the best interests of WCI, (b) continuing refusal
or inability to perform the duties of your position (other than for reasons of
disability), or (c) illegal conduct having a material impact on WCI.
4. During the term of your employment, you will receive a distribution in each
fiscal year equal to 5% of the balance of your Account at the end of the
previous fiscal year calculated as if you had retired on that date and your
percentage was fully vested. This distribution will be made as soon as
practicable after March 1 in each fiscal year and will reduce the balance in
your Account by the amount of the distribution. This distribution will be at
least $150,000 for each fiscal year (provided that there is an adequate balance
in your Account at the relevant fiscal year end) and will be subject to a
maximum of $300,000 for any fiscal year when combined with payments received by
you on account of dividends, management fees paid to Renco in excess of
2
<PAGE>
$1,200,000 or other distributions to shareholders for such fiscal year (see
paragraph 5 below). Because the 5% payment may be made before all dividend
related payments for the fiscal year are known, payments made to you under this
provision may be subsequently reduced if the amount of payment received when
combined with the amount received pursuant to paragraph 5 below exceeds
$300,000. In this event, the reduction of this payment will be made by
reducing or eliminating amounts you would have otherwise received as a result of
subsequent dividends paid by the Company or future payments made pursuant to the
first sentence of this paragraph. (For example, assume that 5% of your Account
balance at the end of the previous year was $200,000 which is paid to you on
March 1 of the current fiscal year pursuant to this paragraph, and you were also
entitled to receive payments related to dividends of $30,000 on each of January
1, April 1, July 1, and October 1. Under this scenario, you would be paid
$30,000 on January 1, $200,000 on March 1, $30,000 on April 1, $30,000 on July
1, and $10,000 on October 1. The October 1 dividend related payment was
reduced from $30,000 to $10,000 because that amount resulted in the total amount
paid you for that fiscal year of $300,000). Nothing herein shall limit the
amount of payments you are entitled to receive solely as a result of dividend
payments, or other distributions made to shareholders (see paragraph 5). (For
example, if in a given fiscal year you are entitled to receive $350,000 solely
as a result of dividends paid by the Company, you will receive the full $350,000
as a result of dividends, but because the total payment exceeds $300,000 you
would not receive any payment as a result of the 5% of prior years balance
measurement as described in this paragraph.)
5. If during your term of employment by the Company, the Company pays
dividends to shareholders, or it pays management fees to Renco in excess of
$1,200,000 in any fiscal year, or any other form of distribution to The Renco
Group ("Renco") or any affiliate of Renco (this distribution shall include any
transfer of assets from the Company or its subsidiaries to Renco or any other
subsidiary of Renco in any form whether as cash or other form of value which
shall have the effect of reducing the shareholders' equity of the Company), then
you shall be entitled
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to receive a payment in an amount equal to your Full Percentage of such cash
dividend, management fees paid to Renco in excess of $1,200,000 in the fiscal
year, or other distribution to shareholders. Payments made pursuant to this
paragraph will be considered when determining whether the $150,000 minimum and
$300,000 maximum described in paragraph 4 are met. However, payments made
pursuant to this paragraph are not subject to the $300,000 maximum described in
paragraph 4. Stock dividends (i.e., dividends paid by the distribution of
additional Company shares to shareholders) and stock splits will not result in a
distribution under this paragraph as no assets are distributed to shareholders
and shareholders' equity is not reduced. The payment of cash dividends or
other distributions to shareholders reduces the Net Worth of the Company and
thus will result in a reduction in your Account in an amount equal to your Full
Percentage of such dividends or distributions. Because the balance of your
Account is reduced as a result of the reduction in shareholders' equity, it will
not also be reduced by the related payment made to you in such cases.
6. Except as provided in paragraph 7 below, if there is a "Organized Sale" of
the equity securities of the Company by the shareholders, you will be entitled
to a payment equal to your Full Percentage times the difference between the net
proceeds (net of any related expenses and retained liabilities) on the sale and
your "Base Net Worth Amount" for the interest sold (i.e., your "Base Net Worth
Amount" times the ratio of the number of shares sold in the Organized Sale
divided by the the total number of shares outstanding immediately before the
Organized Sale). Your "Base Net Worth Amount" for purposes of this Agreement
shall be deemed to be $66,109,000. The payment due you will be paid by the
Company if all shareholders have the opportunity to participate in the Organized
Sale (whether they actually choose to participate or not) and by Renco if the
Organized Sale is limited to a sale by Renco, and not available on substantially
equal terms to all shareholders. In the event payments are made to you
pursuant to this paragraph, your Account will be reduced by the amount of the
payment attributable to the Net Worth of the Company (i.e., the balance of your
Account times the ratio of the number of
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shares of the Company sold in the Organized Sale to the total number of shares
outstanding immediately preceding the Organized Sale). Payments made relating
to the premium (i.e., amount of net proceeds in excess of the Net Worth of the
Company for the interest sold), if any, received on the Organized Sale will not
reduce your Account balance. For purposes of this Agreement, an "Organized
Sale" shall mean a transaction or series of transactions whereby all
shareholders are entitled to participate and sell their shares or a transaction
limited to the sale of shares by Renco only. "Organized Sale" specifically
does not include the normal buying and selling of shares by individual investors
in the market, except that it would include the sale of shares in the market
made by Renco to the extent the total shares sold by Renco exceeds five percent
on a cumulative basis (see paragraph 7 below).
7. Notwithstanding paragraph 6 above, you will not be entitled to any payment
due to the sale of equity securities of the Company to a third party by Renco,
until such transaction(s) made subsequent to the date hereof exceeds 5%, in the
aggregate, of the shares held by Renco or Ira Leon Rennert on the date hereof
(i.e., 1,537,345 common shares which shall be adjusted for any stock dividends
or stock splits made subsequent to November 1, 1995), and then only to the
extent such sale transaction(s) and/or subsequent sale transactions exceeds 5%,
in the aggregate, of the shares held by Renco or Ira Leon Rennert on the date
hereof.
8. In addition to the above, if there is a "Change Of Control" (as defined in
paragraph 9 below), you will receive a payment at that time of the remaining
amount determined pursuant to paragraph 1. As a condition of this payment,
you will be required to agree to continued employment, on substantially the same
or better terms to you than those then in effect, for a period of up to one year
following the transaction which results in the Change Of Control. Following
this period, you will be entitled to leave the employ of the Company and be
relieved of your non-compete agreement. If Renco sells its interest in full,
or if there is a Change Of Control as described below, and upon payment in full
of amounts due you pursuant to this
5
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Agreement, the Company's and Renco's obligation to you under this Agreement
will be satisfied in full and the Agreement will terminate.
9. For purposes of this Agreement, Mr. Ira Leon Rennert shall be deemed to
"Control" the Company provided that he, his immediate family, and estate or
trusts for the benefit of his immediate family, own 20 percent or more of the
outstanding equity of the Company, and, for so long as he is physically able,
Mr. Rennert or any of his lineal discendants retains the position of Chairman of
the Board of the Company. A "Change Of Control" will be deemed to have
occurred, if the aforementioned conditions of Control are not met or if another
individual, entity, or affiliated individuals or entities, holds a greater
voting interest than Mr. Ira Leon Rennert, his immediate family, and estate or
trusts for the benefit of his immediate family.
10. The net worth Account will not be reduced by transactions the Company
enters into in its own securities (i.e., treasury stock transactions) nor will
it be increased by the issuance or sale, by the Company, of its own securities
(i.e., stock offerings whereby the proceeds of the offering are retained by the
Company for use in the business). No payment will be due you as a direct
result of the above described transactions unless such transactions result in an
effective distribution to shareholders, or an Organized Sale (as defined), or a
Change Of Control (as defined), in which case the provisions of paragraph 5,6
and/or, 8, if applicable, shall apply. If the Company purchases shares held by
Renco, you will be entitled to a payment equal to your Full Percentage times the
difference between the amount paid for the shares and your Base Net Worth Amount
for the shares purchased (i.e. your Base Net Worth Amount times the ratio of the
number of shares purchased from Renco divided by the total number of shares
outstanding immediately before the share purchase). Any such purchase will
reduce the shareholders' equity of the Company and thus reduce your Account
balance by an amount equal to the payment made to you.
11. Upon termination of your employment with the Company, the vested balance of
your Account will be frozen (i.e., not subject to changes, either up or down, in
the Net Worth of the
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Company) as of the Measurement Date and quarterly payments, without interest,
equal to the balance of your Account divided by 40 will commence upon the
earliest of your age 62, ten years after the termination of your employment, or
twenty years after the date you were first employed by the Company. In any
event, quarterly payments (computed as described above) will commence upon the
earliest of (a) age 62, (b) twenty years after the date you were first employed
by the Company or (c) immediately if your service is involuntarily terminated
without Cause. The above described deferments in payment would also not apply
in event of your serious disability which prevents you from performing your
duties or in other cases of health or family crisis which, in the sole
discretion of the Compensation Committee, warrant waiver of the deferment period
and installment payments computed as described above will then commence
immediately. In the event of your death, your estate or beneficiaries shall
receive a payment, within 90 days of your death, equal to the present value of
the vested balance of your Account (pursuant to the vesting provisions of the
third sentence of paragraph 3), computed using (a) 40 equal quarterly
installments if your Account is not in pay status or the remaining payments due
you under the Agreement if your Account is in pay status, and (b) the discount
rate used for computing the present value of annuitized benefits under the
provisions of the Internal Revenue Code of 1986 and the regulations thereunder
and as same may be amended from time to time.
12. Payments made under this agreement are subject to your faithful adherence
to your confidentiality agreement and to your agreement, by your signature
below, to not enter into any arrangement, including employment arrangements,
with any organization that is a competitor of the Company until after the date
of the last scheduled payment due you under this Agreement, including any
waiting or deferment period as provided in paragraph 11 above. The non-compete
restrictions of this Agreement shall no longer apply if there is a Change Of
Control as defined in paragraph 9.
13. Your rights under this Agreement may not be assigned, transferred, pledged
or hypothecated without the prior approval of the Company, except that, upon
your death, your
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interest in the Account will vest in your estate or heirs and that during your
lifetime, you may assign your interest to a revocable or irrevocable trust for
the primary benefit of your spouse or any lineal descendant of your or your
spouse's grandparents.
14. Upon signing this Agreement, you will receive a one-time payment equal to
$150,000. This payment is in addition to amounts that may be due you as a
result of other provisions of this Agreement and will not be considered when
determining whether the maximum annual payment described in paragraph 4 has been
met or exceeded. This payment will reduce the balance of your Account.
Please confirm that the foregoing sets forth the full agreement with respect to
your net worth appreciation participation by signing and returning the enclosed
copy of this Agreement.
/s/ Edward R. Caine
________________________________
Edward R. Caine, President and CEO
WCI Steel, Inc.
By /s/ Ira Leon Rennert
________________________________
Ira Leon Rennert, Chairman of the Board
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AMENDMENT NO. 7 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
November 27, 1996
WCI Steel, Inc.
1040 Pine Avenue, S.E.
Warren, Ohio 44483-6528
Gentlemen:
Congress Financial Corporation, a California corporation ("Congress") and
Security Pacific Business Credit Inc., a Delaware corporation ("Security
Pacific", and together with Congress, individually and collectively, "Lenders")
and Congress Financial Corporation, as agent for Lenders (in such capacity,
"Agent") have entered into financing arrangements with WCI Steel, Inc., an Ohio
corporation ("Borrower"), pursuant to which Agent on behalf of Lenders may make
loans and advances and provide other financial accommodations to Borrower, as
set forth in the Amended and Restated Loan and Security Agreement, dated as of
December 29, 1992, by and among Agent, Lenders and Borrower, as amended and
supplemented pursuant to Amendment No. 1 to Amended and Restated Loan and
Security Agreement, dated as of December 14, 1993, Amendment No. 2 to Amended
and Restated Loan and Security Agreement, dated as of July 13, 1994, Amendment
No. 3 to Amended and Restated Loan and Security Agreement, dated as of March 28,
1995, Amendment No. 4 to Amended and Restated Loan and Security Agreement, dated
as of February 23, 1996, Amendment No. 5 to Amended and Restated Loan and
Security Agreement, dated as of March 8, 1996, and Amendment No. 6 to Amended
and Restated Loan and Security Agreement, dated as of June 17, 1996 (as the same
is amended and supplemented hereby or may hereafter be further amended,
modified, supplemented, extended, renewed, restated or replaced, the "Loan
Agreement") and the other Financing Agreements (as such term is defined in the
Loan Agreement).
Borrower has requested that Agent and each of Lenders (a) consent to the
repurchase by Borrower of up to all of the Existing RSI Notes (as defined below)
pursuant to a tender offer and consent solicitation by Borrower, (b) permit
Borrower to incur certain indebtedness in connection with the issuance of the
New WCI Notes (as defined below), (c) permit Borrower to secure the New WCI
Notes by a lien on certain fixed assets of Borrower, (d) permit Borrower and
Niles Properties, Inc. to secure certain indebtedness in connection with the
VEBA Trust (as defined below) by a lien on certain fixed assets of Borrower, (e)
consent to a loan by Borrower to WCI Steel Holdings, Inc. (using a portion of
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the proceeds received by Borrower from the issuance of the New WCI Notes), the
proceeds of which loan by Borrower to WCI Holdings, Inc. are to be used by WCI
Steel Holdings, Inc. to purchase up to all of the issued and outstanding common
shares of capital stock of Borrower not owned by The Renco Group, Inc., (f)
consent to the merger of WCI Steel Holdings, Inc. with and into Borrower, with
Borrower as the surviving corporation, (g) permit the payment by Borrower to The
Renco Group, Inc. of a dividend in an amount not to exceed $108,000,000 (using a
portion of the proceeds received by Borrower from the issuance of the New WCI
Notes and existing cash balances of Borrower) and to waive the failure of
Borrower to provide five (5) business days' prior notice to Agent of the payment
of such dividend, (h) permit certain executive compensation payments pursuant to
certain contractual arrangements of Borrower, and (i) certain other amendments
to the Loan Agreement.
In consideration of the foregoing, the mutual agreements and covenants
contained herein, and other good and valuable consideration, the adequacy and
sufficiency of which is hereby acknowledged, Agent, Lenders, and Borrower agree
as follows:
1. Definitions.
(a) Additional Definitions. As used herein, the following terms
shall have the respective meanings given to them below and the Loan Agreement
shall be deemed and is hereby amended to include, in addition and not in
limitation of, each of the following definitions:
(i) "Existing RSI Note Agreements" shall mean, individually
and collectively, each and all of the following (as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced): (A) the Existing RSI Notes (B) the Indenture, dated as of December
14, 1993, between Borrower and the Existing RSI Note Trustee, as amended by the
First Supplemental Indenture, dated December 14, 1993, and the Second
Supplemental Indenture, dated of even date herewith, (C) the Open-End Mortgage,
Assignment of Rents, Security Agreement and Fixture Filing, dated as of December
14, 1993, by Borrower in favor of the Existing RSI Note Trustee, and (D) the
Security Agreement, dated as of December 14, 1993, between Borrower and the
Existing RSI Note Trustee.
(ii) "Existing RSI Notes" shall mean the 10 1/2% Senior Notes
due March 1, 2002, Series B issued by RSI (and assumed by Borrower as the
survivor of the Merger as such term is defined in Amendment No. 1 to Amended and
Restated Loan and Security Agreement, dated December 14, 1993) pursuant to the
Existing RSI Note Agreements in the original principal amount of $250,000,000,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
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(iii) "Existing RSI Note Trustee" shall mean Fleet National
Bank, formerly known as Shawmut Bank Connecticut, National Association, and its
successors and assigns, and any replacement or other trustee or collateral agent
under the Existing RSI Note Agreements.
(iv) "New WCI Note Agreements" shall mean, individually and
collectively, each and all of the following (as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced): (A) the New WCI Notes, (B) the New WCI Note Indenture, (C) the
Purchase Agreement, dated November 22, 1996, between Donaldson, Lufkin &
Jenrette Securities Corporation and Borrower with respect to the purchase from
Borrower of all of the New WCI Notes, (D) the New WCI Note Registration
Agreement, (E) the Open-End Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing, dated of even date herewith, by Borrower in favor of the New
WCI Note Trustee, (F) the Security Agreement, dated of even date herewith, by
Borrower in favor of the New WCI Note Trustee, and (G) the Intercreditor
Agreement, dated of even date herewith, between the VEBA Trustee and the New WCI
Note Trustee.
(v) "New WCI Note Indenture" shall mean the Indenture, dated
of even date herewith, between Borrower and the New WCI Note Trustee with
respect to the New WCI Notes, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(vi) "New WCI Note Registration Agreement" shall mean the
Registration Rights Agreement, dated as of November 27, 1996, between Borrower
and the Initial Purchaser as in effect on such date.
(vii) "New WCI Notes" shall mean, individually and
collectively, each and all of the following (as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced): (A) the 10% Senior Secured Notes due 2004, Series A (the "New WCI
Series A Notes") issued by Borrower pursuant to the New WCI Note Indenture in
the original principal amount of $300,000,000 and (B) the 10% Senior Secured
Notes due 2004, Series B (the "New WCI Series B Notes"), which have terms
identical to the terms of the New WCI Series A Notes offered to the holders of
the New WCI Series A Notes pursuant to a registration statement to be filed by
Borrower with the Securities and Exchange Commission.
(viii) "New WCI Note Trustee" shall mean Fleet National Bank,
and its successors and assigns, and any replacement or other trustee under the
New WCI Note Indenture.
(ix) "Niles" shall mean Niles Properties, Inc., an Ohio
corporation, and its successors and assigns.
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(x) "VEBA Trust" shall mean a Voluntary Employee Beneficiaries
Association trust fund established under that certain 501(c)(9) Trust Agreement,
dated October 1, 1988, between Warren Consolidated Industries and Bank One Trust
Company, N.A. to hold contributions by Borrower to fund postretirement health
care and life insurance obligations for the benefit of certain hourly employees
of Borrower.
(xi) "VEBA Trust Agreements" shall mean, individually and
collectively, each and all of the following (as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced): (A) the VEBA Term Sheet, dated October 24, 1995, between Borrower and
the United Steelworkers of America, AFL-CIO-CLC, (B) the Open-End Mortgage,
dated of even date herewith, by Borrower in favor of the VEBA Trustee with
respect to the Real Property of Borrower located in Trumbull County, Ohio, (C)
the Security Agreement, dated of even date herewith, between Borrower and the
VEBA Trustee, (D) the Intercreditor Agreement, dated of even date herewith,
between VEBA Trustee and the New WCI Note Trustee, and (E) the Open-End
Mortgage, dated of even date herewith, by Niles in favor of the VEBA Trustee
with respect to the real property of Niles located in Trumbull County, Ohio.
(xii) "VEBA Trustee" shall mean Bank One Trust Company, N.A.,
a national banking association, and its successors and assigns, and any
replacement or other trustee under the VEBA Trust Agreements.
(xiii) "WCI Debt Tender Offer" shall mean the offer by WCI to
purchase for cash of up to all of the Existing RSI Notes, plus accrued and
unpaid interest pursuant to the WCI Debt Tender Offer Agreements.
(xiv) "WCI Debt Tender Offer Agreements" shall mean,
individually and collectively, the Offer to Purchase and Consent Solicitation,
dated October 23, 1996, by Borrower with respect to the repurchase by Borrower
of the Existing RSI Notes, as amended pursuant to the First Supplement to Offer
to Purchase and Consent Solicitation Statement, dated November 6, 1996, and the
Second Supplement to Offer to Purchase and Consent Solicitation Statement, dated
November 8, 1996, and all other agreements, documents and instruments related
thereto, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(xv) "WCI Holdings" shall mean WCI Steel Holdings, Inc., a
Delaware corporation, and its successors and assigns.
(xvi) "WCI Holdings Equity Tender Agreements" shall mean,
individually and collectively, the Offer to Purchase
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For Cash, dated October 28, 1996, by WCI Holdings with respect to the offer to
purchase up to all of the WCI Public Shares at a price of $10.00 per share (net
to the seller), as amended pursuant to the First Supplement to Offer to Purchase
For Cash, dated November 18, 1996, and all agreements, documents and instruments
executed and/or delivered in connection therewith, as all of the foregoing now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(xvii) "WCI Holdings Equity Tender Offer" shall mean the offer
by WCI Holdings to purchase for cash up to all of the WCI Public Shares of
Borrower pursuant to the WCI Holdings Equity Tender Agreements.
(xviii) "WCI Holdings Merger" shall mean the merger of WCI
Holdings with and into Borrower with Borrower as the surviving corporation,
pursuant to the terms of the WCI Holdings Merger Agreements.
(xix) "WCI Holdings Merger Agreements" shall mean,
individually and collectively, the Agreement of Merger, dated as of November 26,
1996, by and between WCI Holdings and Borrower, the Certificate of Merger of
Borrower for filing with the Ohio Secretary of State with respect to the merger
of WCI Holdings and Borrower, the Certificate of Ownership and Merger of WCI
Holdings for filing with the Delaware Secretary of State with respect to the WCI
Holdings Merger, and all related agreements, documents and instruments, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(xx) "WCI Public Shares" shall mean all of the issued and
outstanding shares of common stock of Borrower which are not owned by Renco
Group.
(b) Amendments to Definitions.
(i) Section 1.4 of the Loan Agreement is hereby amended by
adding the following clause between the word "taxes" and the period appearing at
the end of such Section:
"provided, further, that, solely for purposes of Sections 7.5(c)(ii),
7.6(b)(iii) and 7.7(b) of the Loan Agreement, the charges in the amount
not to exceed $45,000,000 incurred by Borrower under the WCI Debt Tender
Offer, the WCI Holdings Equity Tender Offering and the issuance of the New
WCI Notes and in connection with contractual compensation payments to
certain executives of Borrower as permitted by Section 10 of Amendment No.
7 to Amended and Restated Loan and Security, dated November 27, 1996,
among Agent, Lenders and Borrower shall not be included in the calculation
of After-Tax Profits."
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(ii) All references to the term "Borrower" or "Debtor" in any
of the Financing Agreements shall be deemed and each such reference is hereby
amended to mean WCI Steel, Inc., an Ohio Corporation, as survivor of the WCI
Holdings Merger, and its successors and assigns.
(iii) All references to the term "Cash Equivalents" in any of
the Financing Agreements shall be deemed and each such reference is hereby
amended to mean: (A) evidence of indebtedness with a maturity of two (2) years
or less issued or directly and fully guaranteed or insured by the United States
of America or any agency or instrumentality thereof; provided, that, the full
faith and credit of the United States of America is pledged in support thereof,
except in the case of any such evidence of indebtedness issued by the Student
Loan Marketing Association, the Federal National Mortgage Association, a Federal
Farm Credit Bank or a Federal Home Loan Bank so long as any such evidence of
indebtedness issued by such federal governmental entity is rated at least A-1 by
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc., or at least P-1 by Moody's Investors Service, Inc.; provided, that, for
purposes of Section 7.5(b) of the Loan Agreement, up to twenty (20%) percent of
the aggregate amount of all Cash Equivalents may include evidence of
indebtedness issued by any such federal governmental entity and commercial paper
or other securities described in subsection (C) below rated not less than BBB by
Standard & Poor's Corporation or not less than Baa by Moody's Investors Service,
Inc.; (B) certificates of deposit or bankers' acceptances with a maturity of two
(2) years or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than Two Hundred Fifty Million Dollars ($250,000,000); (C) commercial paper
(including variable rate demand notes) with a maturity of two (2) years or less
issued by a corporation (except an Affiliate of Borrower) organized under the
laws of any State of the United States of America or the District of Columbia
and rated at least A-1 by Standard & Poor's Corporation or at least P-1 by
Moody's Investors Service, Inc.; provided, that, for purposes of Section 7.5(b)
of the Loan Agreement, up to twenty (20%) percent of the aggregate amount of all
Cash Equivalents may include evidence of indebtedness issued by the Student Loan
Marketing Association, the Federal National Mortgage Association, a Federal Farm
Credit Bank or a Federal Home Loan Bank and commercial paper or other securities
described in this subsection (C) rated not less than BBB by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc., or not less
than Baa by Moody's Investors Service, Inc.; (D) repurchase obligations with a
term of not more than thirty (30) days for underlying securities of the types
described in clause (A) above entered into with any bank meeting the
qualifications specified in clause (B) above; (E) repurchase agreements and
reverse repurchase agreements relating to
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marketable direct obligations issued or unconditionally guaranteed by the United
States of America or issued by any governmental agency thereof and backed by the
full faith and credit of the United States of America, in each case maturing
within two (2) years or less from the date of acquisition; provided, that, the
terms of such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the Comptroller of the Currency on October 31, 1985; and
(F) investments in money market funds and mutual funds which invest
substantially all of their assets in securities of the types described in
clauses (A) through (E) above.
(c) Interpretation. For purposes of this Amendment, unless otherwise
defined herein, all terms used herein, including, but not limited to, those
terms used and/or defined in the recitals hereto, shall have the respective
meanings assigned thereto in the Loan Agreement.
2. Consents. Subject to the terms and conditions contained herein, Agent
and Lenders hereby consent to: (a) the repurchase by Borrower of up to all of
the Existing RSI Notes (as in effect on the date hereof) by Borrower pursuant to
the WCI Debt Tender Offer Agreements (as in effect on the date hereof), using a
portion of the proceeds received by Borrower from the issuance of the New WCI
Notes (as in effect on the date hereof) to pay for the repurchase of the
Existing RSI Notes (as in effect on the date hereof), (b) the purchase by WCI
Holdings of the WCI Public Shares pursuant to the WCI Holdings Equity Tender
Agreements (as in effect on the date hereof) using the proceeds of a loan by
Borrower to WCI Holdings (which loan shall be made by Borrower to WCI Holdings
using a portion of the proceeds received by Borrower from the issuance of the
New WCI Notes as in effect on the date hereof and existing cash balances of
Borrower), (c) the declaration and payment from legally available funds by
Borrower to Renco Group of a dividend of up to $108,000,000 (using a portion of
the proceeds received by Borrower from the issuance of the New WCI Notes as in
effect on the date hereof and existing cash balances of Borrower), (d) the grant
by Borrower to the VEBA Trustee of a security interest in and lien upon
substantially all of the real property, plant and equipment of Borrower located
in Trumbull County, Ohio to secure obligations of Borrower arising under and
pursuant to the VEBA Trust Agreements (as in effect on the date hereof), (e) the
grant by Niles to the VEBA Trustee of a security interest and lien upon
substantially all of the real property, plant and equipment of Niles located in
Trumbull County, Ohio to secure obligations of Borrower arising under and
pursuant to the VEBA Trust Agreements (as in effect on the date hereof), (f) the
grant by Borrower to the New WCI Note Trustee of a security interest in and lien
upon substantially all of the real property, plant and equipment of Borrower
located in Trumbull, Ohio pursuant to the New WCI Note
-7-
<PAGE>
Agreements (as in effect on the date hereof) to secure the Indebtedness of
Borrower evidenced by the New WCI Notes (as in effect on the date hereof), (g)
the payment by Borrower to certain executives of Borrower of certain contractual
compensation pursuant to the terms and conditions of the agreements evidencing
such compensation, and (h) the WCI Holdings Merger pursuant to the WCI Holdings
Merger Agreements (as in effect on the date hereof).
3. Assumption and Acknowledgment.
(a) Contemporaneously with the effectiveness of the WCI Holdings
Merger, Borrower (as the survivor of the WCI Holdings Merger) hereby expressly
assumes, ratifies, restates and confirms the Obligations and the Financing
Agreements and confirms and ratifies its assumption of the Obligations and the
Financing Agreements pursuant to the WCI Holdings Merger Agreements and by
operation of law and its continuing liability in respect thereof as survivor of
the WCI Holdings Merger.
(b) Borrower as the survivor of the WCI Holdings Merger hereby
acknowledges, confirms and agrees that:
(i) Borrower is indebted to Lenders for loans and advances to
Borrower under the Financing Agreements, as of the close of business on November
26, 1996, in the aggregate principal amount of $ -0- and the aggregate amount of
$5,536,000 in respect of Letter of Credit Accommodations, together with all
interest accrued and accruing thereon (to the extent applicable), and all costs,
expenses and other charges relating thereto, all of which are unconditionally
owing by Borrower to Lenders, without offset, defense or counterclaim of any
kind, nature or description whatsoever; and
(ii) Agent and Lenders have and shall continue to have a
security interest in and lien upon the Collateral heretofore granted to Agent
and Lenders pursuant to the Financing Agreements to secure the Obligations, as
well as any Collateral otherwise granted to or held by Agent or Lenders.
(c) Without limiting the generality of the foregoing, (i) the WCI
Holdings Merger shall in no way, limit, impair or adversely affect the
Obligations now or hereafter owed to Agent or Lenders or any security interests
or liens of Agent or Lenders in the assets and properties of Borrower securing
the same and (ii) the security interests, liens and rights of Agent and Lenders
in and to such assets and properties of Borrower, as the surviving corporation
pursuant to the WCI Holdings Merger, shall continue to secure all Obligations of
Borrower arising prior to the effective time of the WCI Holdings Merger, in
addition to all other existing and future Obligations of Borrower to Agent and
Lenders arising thereafter or otherwise.
-8-
<PAGE>
4. Indebtedness.
(a) Effective upon the consummation of the WCI Debt Tender Offer to
the extent all of the Existing RSI Notes are not tendered, Section 7.3(d) of the
Loan Agreement shall be deleted in its entirety and replaced with the following:
"(d) all Indebtedness of Borrower not to exceed the principal amount
of $300,000 evidenced by the Existing RSI Notes, plus interest thereon at
the rate provided for in the Existing RSI Notes as in effect on November
27, 1996; provided, that: (i) Borrower shall only make regularly scheduled
payments of principal and interest or other mandatory payments in respect
of such Indebtedness in accordance with the terms of the Existing RSI Note
Agreements as in effect on November 27, 1996, except Borrower may prepay,
in whole or in part, the Existing RSI Notes as in effect on November 27,
1996 so long as (A) Borrower provides Agent with two (2) Business Days'
prior written notice of the intention of Borrower to make any such
prepayment, (B) as of the date of any such prepayment, and after giving
effect thereto, no Obligations (other than pursuant to Letter of Credit
Accommodations and the costs, expenses and other charges relating thereto)
shall be then outstanding, and (C) no Event of Default, or act, condition
or event which with notice or passage of time or both would constitute an
Event of Default, exists or has occurred and is continuing; (ii) Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the
terms of the Existing RSI Note Agreements or any agreements, documents or
instruments executed and/or delivered in connection therewith or (B)
redeem, retire, defease, purchase or otherwise deposit or invest any sums
for such purpose, except for (1) mandatory repurchases of Existing RSI
Notes in connection with the sales of certain assets of Borrower (other
than the Collateral) and changes in control of Borrower or to the extent
permitted under this Section 7.3(d)(i) and (2) the redemption, retirement,
defeasance or purchase of the Existing RSI Notes so long as (aa) No Event
of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default, exists or has occurred
and is continuing and (bb) such redemptions, retirements, defeasance,
and/or purchases do not constitute a default or event of default under the
Existing RSI Note Agreements (as in effect on November 27, 1996) or the
New WCI Note Indenture (as in effect on November 27, 1996) or any other
agreement, document or instrument to which Borrower is a party or by which
or its assets are bound; (iii) Borrower shall furnish
-9-
<PAGE>
to Agent and Lenders all notices, demands or other materials either
received from the Existing RSI Note Trustee, any of the holders of the
Existing RSI Notes, or on its or their behalf, promptly after receipt
thereof, or sent by Borrower, or on its behalf, to the Existing RSI Note
Trustee, any of the holders of the Existing RSI Notes, or any other
representative of the holders of the Existing RSI Notes concurrently with
the sending thereof, as the case may be; and (iv) such Indebtedness shall
only be secured by the Equipment and Real Property of Borrower and certain
other related assets and properties of Borrower as set forth on Exhibit K
hereto;"
(b) Section 7.3 of the Loan Agreement is hereby amended by adding a
new Section 7.3(m) as follows:
"(m) Indebtedness of Borrower up to the principal amount of
$300,000,000 evidenced by the New WCI Notes (as reduced by payments of
principal in respect thereof), plus interest thereon at the rate provided
for in the New WCI Notes as in effect on the date of the issuance thereof;
provided, that: (i) Borrower shall only make regularly scheduled payments
of principal and interest or other mandatory payments in respect of such
Indebtedness in accordance with the terms of the New WCI Notes as in
effect on the date of the issuance thereof, except that Borrower may
prepay, in whole or in part, the New WCI Notes as in effect on the date of
the issuance thereof, so long as (A) Borrower provides Agent with two (2)
Business Days' prior written notice of the intention of Borrower to make
any such prepayment, (B) as of the date of such prepayment and after
giving effect thereto, no Obligations (other than pursuant to Letter of
Credit Accommodations and the costs, expenses and other charges relating
thereto) shall be then outstanding, and (C) no Event of Default, or act,
condition or event which with notice or passage of time or both would
constitute an Event of Default, exists or has occurred and is continuing,
(ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter
or change the terms of the New WCI Note Agreements or any agreements,
documents or instruments executed and/or delivered in connection therewith
as in effect on the original date of the execution and delivery thereof or
(B) redeem, retire, defease, purchase or otherwise deposit or invest any
sums for such purpose, except for (1) the issuance of the New WCI Series B
Notes to be offered to the holders of the New WCI Series A Notes in
exchange therefor pursuant to a registration statement filed with the
Securities and Exchange Commission or (2)
-10-
<PAGE>
mandatory repurchases of New WCI Notes as in effect on the original date
of issuance thereof in connection with the sales of certain assets of
Borrower (other than the Collateral) and changes in control of Borrower in
accordance with the terms and conditions of the New WCI Note Agreements as
in effect on the date of the execution and delivery thereof, (iii)
Borrower shall furnish to Agent and Lenders all notices, demands or other
materials either received from the New WCI Note Trustee or any of the
holders of the New WCI Notes, or on its or their behalf, promptly after
receipt thereof, or sent by Borrower, or on its behalf, to the New WCI
Note Trustee or any other representative of the holders of the New WCI
Notes or to any of the holders of the New WCI Notes, concurrently with the
sending thereof, as the case may be, and (iv) such Indebtedness shall only
be secured by the Equipment and Real Property of Borrower and certain
other related assets and properties of Borrower as set forth on Exhibit K
hereto;"
5. Limitation on Liens.
(a) Section 7.4(b) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(b) the mortgages, liens upon or security interests in the
Equipment and Real Property of Borrower and certain other related assets
and properties of Borrower as set forth on Exhibit K hereto in favor of
(i) the Existing RSI Note Trustee to secure Indebtedness permitted under
Section 7.3(d) hereof to the extent any Indebtedness of Borrower evidenced
by the Existing RSI Notes (as in effect on November 27, 1996) remains
outstanding upon consummation of the WCI Debt Tender Offer, (ii) the New
WCI Note Trustee to secure Indebtedness permitted under Section 7.3(m)
hereof, and (iii) the VEBA Trustee for the VEBA Trust to secure the VEBA
Secured Obligations of Borrower under the VEBA Trust Agreements; provided,
that, (A) if, upon consummation of the WCI Debt Tender Offer, any of the
Existing RSI Notes remain outstanding, the second priority mortgages,
liens and security interests of the New WCI Note Trustee and the VEBA
Trustee shall rank pari passu, except that, if the Indebtedness evidenced
by the Existing RSI Notes shall be repaid in full, the mortgages, liens
and security interests of the Existing RSI Trustee with respect to the
Existing RSI Notes shall be terminated, released and discharged, and the
mortgages, liens and security interests of the New WCI Note Trustee shall,
without any further action, rank senior to the mortgages, liens and
security interests of the VEBA Trustee in the Equipment and Real Property
of Borrower and certain related assets and properties of Borrower as set
-11-
<PAGE>
forth on Exhibit K hereto, (B) at all times that the Obligations or the
Indebtedness under the New WCI Notes and/or Existing RSI Notes remain
outstanding, the VEBA Trustee shall have agreed not to exercise any of its
rights or remedies pursuant to such mortgages, liens or security
interests, except to the extent permitted and directed by the New WCI Note
Trustee pursuant to the New WCI Note Agreements (as in effect on November
27, 1996), (C) Agent shall have received, in form and substance
satisfactory to Agent and Lenders, an agreement from each of the VEBA
Trustee and the New WCI Note Trustee permitting Agent, on behalf of
Lenders, to enter and use the Equipment and Real Property and other assets
and properties of Borrower subject to such mortgages, liens and security
interests permitted under this Section 7.4(b) to exercise the rights and
remedies of Agent and Lenders with respect to the Collateral, (D) Borrower
shall not, directly or indirectly, amend, modify, alter or change the
terms of the VEBA Trust Agreements or any agreements, documents or
instruments executed and/or delivered in connection therewith, and (E)
Borrower shall furnish to Agent and Lenders all notices, demands or other
materials either received from the VEBA Trustee or its or any of the
beneficiaries under the VEBA Trust Agreements, or on their behalf,
promptly after receipt thereof, or sent by Borrower, or on its behalf, to
the VEBA Trustee or its or any of the beneficiaries under the VEBA Trust
Agreements, concurrently with the sending thereof, as the case may be;"
(b) Section 7.4 of the Loan Agreement is hereby amended by replacing
the period with a semicolon and the word "and" appearing at the end of Section
7.4(f) and adding a new Section 7.4(g) as follows:
"(g) the mortgages, liens upon or security interests in
substantially all of the real property, plant and equipment of Niles
pursuant to the Open-End Mortgage, dated November 27, 1996, by Niles in
favor of the VEBA Trustee with respect to the premises of Niles located in
Trumbull County, Ohio to secure the obligations of Borrower under the VEBA
Trust Agreements (as in effect on November 27, 1996) and the negative
pledge by Youngstown Sinter pursuant to the VEBA Trust Agreements (as in
effect on November 27, 1996); provided, that, (i) at all times that the
Obligations or the Indebtedness under the New WCI Notes and/or Existing
RSI Notes remain outstanding, the VEBA Trustee shall have agreed not to
exercise any of its rights or remedies pursuant to such mortgages, liens
or security interests and (ii) Agent shall have received, in form and
substance satisfactory to Agent and Lenders, an agreement from the VEBA
Trustee permitting Agent on behalf of Lenders to enter and use the real
property, plant and equipment of Niles subject to such
-12-
<PAGE>
mortgages, liens and security interests to exercise the rights and
remedies of Agent and Lenders with respect to the Collateral."
6. Loans, Investments, Guarantees.
(a) Section 7.5(c) of the Loan Agreement is hereby deleted in its entirety
and the following substituted therefor:
"(c) loans by Borrower to Renco Group as follows:
(i) loans in any fiscal year of Borrower commencing with the
fiscal year of Borrower ending October 31, 1996; provided, that, as to
each such loan, all of the following conditions are satisfied: (A) Excess
Availability shall have been not less than $25,000,000 at all times during
the ninety (90) consecutive day period immediately prior to the date of
making such loan, (B) after giving effect to the payment of any such loan,
Excess Availability shall be not less than $25,000,000, (C) the financial
projections provided by Borrower to Lender for the fiscal year of Borrower
in which such loan is made, prior to the commencement of such fiscal year,
shall reflect that Excess Availability is projected to be not less than
$25,000,000 for the ninety (90) day period immediately after (but not
including) the date of the making of such loan, (D) as of the date of
making of any such loan and after giving effect thereto, no Event of
Default, or act, condition or event which with notice or passage of time
or both would constitute an Event of Default shall exist or have occurred
and be continuing, and (E) Agent shall have received not less than ten
(10) Business Days prior written notice of the intention of Borrower to
make any such loans; or
(ii) in the event that any of the conditions to the making of
loans by Borrower to Renco Group set forth in Section 7.5(c)(i) are not
satisfied, loans in any fiscal year of Borrower not to exceed, in any
fiscal year of Borrower commencing with the fiscal year of Borrower ending
October 31, 1996, in the aggregate, an amount equal to: (A) fifty (50%)
percent of the cumulative After-Tax Profits of Borrower (or if cumulative
After-Tax Profits shall be a loss, minus one hundred (100%) percent of
such loss) earned subsequent to October 31, 1996 and prior to the date
such loan occurs (treating such period as a single accounting period)
minus (B) the aggregate amount of all dividends declared and paid by
Borrower to Renco Group in such period minus (C) the aggregate amount of
all management fees paid by Borrower to Renco Group in such period,
-13-
<PAGE>
other than the monthly management fees contemplated under Section
7.6(b)(ii) below minus (D) the aggregate amount of all loans made by
Borrower to Renco Group (net of repayments and prepayments) in such
period, and still outstanding; provided, that, each of the following
conditions is satisfied as of the date of each such loan, as determined by
Agent: (1) no Event of Default or act, condition or event which with
notice or passage of time or both would constitute an Event of Default
exists or has occurred and is continuing or would exist or occur after
giving effect to such loan; (2) at the time of such loan and after giving
effect thereto, Borrower shall have Excess Availability of not less than
$5,000,000; and (3) Agent shall have received not less than ten (10) days
prior notice of any such loan;"
(b) Section 7.5 of the Loan Agreement is hereby amended to add a new
Section 7.5(j) thereto as follows:
"(j) a loan by Borrower to WCI Holdings as contemplated by the WCI
Holdings Equity Tender Offer, the proceeds of which are used by WCI
Holdings to purchase up to all of the issued and outstanding WCI Public
Shares; provided, that, (A) such loan shall be made by no later than
November 27, 1996, (B) such loan shall be made with a portion of the
proceeds received by Borrower from the issuance and sale of the New WCI
Notes and existing cash balances of Borrower, and (C) the amount of such
loan shall not exceed $60,000,000."
7. Transactions with Affiliates.
(a) Section 7.6(b)(ii) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(ii) Borrower may pay to Renco Group monthly a management fee in an
amount not to exceed, on a non-cumulative basis, (A) $1,680,000 for the
fiscal year ending on October 31, 1997 and (B) $1,200,000 in any other
fiscal year; provided, that, no Event of Default or act, condition or
event which with notice or passage of time or both would constitute an
Event of Default exists or has occurred and is continuing, and the payment
of such fee would not result in an Event of Default or such act, condition
or event;"
(b) Section 7.6(b)(iii) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
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<PAGE>
"(iii) Borrower may in any fiscal year of Borrower commencing with
the fiscal year of Borrower ending October 31, 1996 pay to Renco Group
management fees (in addition to those permitted to be paid under Section
7.6(b)(ii) above) as follows:
(A) Borrower may pay such management fees to Renco Group;
provided, that, each of the following conditions is satisfied: (1)
Excess Availability shall have been not less than $25,000,000 at all
times during the ninety (90) consecutive day period immediately
prior to the date of the payment of any such management fees, (2)
after giving effect to the payment of any such management fees,
Excess Availability shall be not less than $25,000,000, (3) the
financial projections provided by Borrower to Lender for the fiscal
year of Borrower in which such management fees are paid, prior to
the commencement of such fiscal year, shall reflect that Excess
Availability is projected to be not less than $25,000,000 for the
ninety (90) day period immediately after (but not including) the
date of the payment of such management fees, (4) as of the date of
the payment of such management fees and after giving effect thereto,
no Event of Default, or act, condition or event which with notice or
passage of time or both would constitute an Event of Default shall
exist or have occurred and be continuing, and (5) Agent shall have
received not less than ten (10) Business Days prior written notice
of the intention of Borrower to pay such management fees; or
(B) in the event that any of the conditions set forth in
Section 7.6(b)(iii)(A) above are not satisfied, Borrower may pay
such management fees to Renco Group in any such fiscal year up to,
in the aggregate, an amount equal to: (1) fifty (50%) percent of the
cumulative After-Tax Profits of Borrower (or if cumulative After-Tax
Profits shall be a loss, minus one hundred (100%) percent of such
loss) earned subsequent to October 31, 1996 and prior to the date
the payment occurs (treating such period as a single accounting
period) minus (2) the aggregate amount of all dividends declared and
paid by Borrower to Renco Group in such period minus (3) the
aggregate amount of all loans made by Borrower to Renco Group (net
of repayments and prepayments) in such period and still outstanding
minus (4) the aggregate amount of all management fees paid by
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<PAGE>
Borrower to Renco Group in such period, other than the monthly
management fees contemplated under Section 7.6(b)(ii) above;
provided, that, each of the following conditions is satisfied as of
the date of payment of any such management fees, as determined by
Agent: (aa) no Event of Default or act, condition or event which
with notice or passage of time or both would constitute an Event of
Default exists or has occurred and is continuing or would exist or
occur after giving effect to the payment of such fee; (bb) at the
time of the payment of such fee and after giving effect thereto,
Borrower shall have Excess Availability of not less than $5,000,000;
and (cc) Agent shall have received not less than ten (10) days prior
notice of any such management fees;"
8. Consolidated Adjusted Working Capital. Section 7.19 of the Loan
Agreement is hereby deleted in its entirety and the following substituted
therefor:
"7.19 Consolidated Adjusted Working Capital. Borrower and its
Subsidiaries shall, at all times, maintain a Consolidated Adjusted Working
Capital of not less than the following amounts during the following
respective periods:
Period Amount
------ ------
(a) From the date hereof through
October 30, 1993 $25,000,000
(b) From October 31, 1993 through
October 30, 1994 $40,000,000
(c) From October 31, 1994 through
October 30, 1995 $45,000,000
(d) From October 31, 1995 through
April 30, 1996 $50,000,000
(e) From May 1, 1996 through and
including October 31, 1996 $-0-
(f) From November 1, 1996 and at
all times thereafter ($75,000,000)"
9. Consolidated Adjusted Net Worth. Section 7.20 of the Loan Agreement is
hereby deleted in its entirety and the following substituted therefor:
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<PAGE>
"7.20 Consolidated Adjusted Net Worth. Borrower and its Subsidiaries
shall, at all times, maintain a Consolidated Adjusted Net Worth of not
less than the following amounts during the following respective periods:
Period Amount
------ ------
(a) From the date hereof through
October 30, 1993 $40,000,000
(b) From October 31, 1993 through
October 30, 1994 ($40,000,000)
(c) From October 31, 1994 through
and including April 30, 1996 ($30,000,000)
(d) From May 1, 1996 through and
including October 31, 1996 $-0-
(e) From November 1, 1996 and at
all times thereafter ($165,000,000)"
10. Contractual Compensation Payments to Certain Executives.
Notwithstanding anything to the contrary contained in Section 7.6 of the Loan
Agreement, but subject to the terms and conditions contained herein, Borrower
may, solely in connection with the transactions contemplated by this Amendment,
make payments on the date hereof to certain executives of Borrower for
compensation due to such executives in accordance with the terms and conditions
of the agreements as in effect on the date hereof between Borrower and such
executives evidencing such compensation in the aggregate amount not to exceed
$13,230,000.
11. Contingent Cash Consideration Rights. If a Control Event (as defined
in the WCI Holdings Equity Tender Agreements as in effect on the date hereof)
occurs within twelve (12) months from the date hereof, Borrower may make
payments in respect of the Contingent Cash Consideration Rights (as defined in
the WCI Holdings Equity Tender Agreements as in effect on the date hereof)
pursuant to the terms and conditions of the WCI Holdings Equity Tender
Agreements as in effect on the date hereof so long as none of the payments in
respect of the Contingent Cash Consideration Rights shall be made using proceeds
of any Loans.
12. Dividend Payment to Renco Group. Notwithstanding anything to the
contrary contained in Sections 7.5(c), 7.6(b)(iii) and 7.7(b) of the Loan
Agreement, the declaration and payment from legally available funds on November
27, 1996 by Borrower to Renco Group of the dividend in the amount of up to
$108,000,000 (using a portion of the proceeds received by
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<PAGE>
Borrower from the issuance of the New WCI Notes and existing cash balances of
Borrower) shall not be included for purposes of applying any of the tests with
respect to dividend payments to Renco Group contained in such Sections.
13. Waiver. Subject to the terms and conditions contained herein, Agent
and Lenders hereby waive, solely for purposes of the declaration and payment
from legally available funds by Borrower to Renco Group of the dividend in the
amount of up to $108,000,000 (using a portion of the proceeds received by
Borrower from the issuance of the New WCI Notes and existing cash balances of
Borrower), the failure of Borrower to provide five (5) Business Days' prior
notice to Agent of the payment of such dividend.
14. Fee. WCI hereby agrees to pay to Agent for the account of Lenders a
fee in an amount equal to $50,000, which amount shall be payable out of
available cash of Borrower, none of which cash shall be proceeds received by
Borrower from the issuance of the New WCI Notes, simultaneously with the
execution hereof, and which amount is fully earned as of the date hereof.
15. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower or WCI Holdings to Agent and/or Lenders pursuant to the other
Financing Agreements, Borrower hereby represents, warrants and covenants with
and to Lenders as follows (which representations, warranties and covenants are
continuing and shall survive the execution and delivery hereof and shall be
incorporated into and made a part of the Financing Agreements):
(a) WCI Holdings Equity Tender Offer and Acquisition of WCI Public
Shares.
(i) WCI Holdings Equity Tender Offer and the transactions
contemplated thereunder have been duly executed, delivered and performed in
accordance with their terms by the respective parties thereto in all respects,
including the fulfillment (not merely the waiver, except as may be disclosed to
Agent and consented to in writing by Agent) of all conditions precedent set
forth therein and giving effect to the WCI Holdings Equity Tender Agreements and
the assignments to be executed and delivered by Renco Group and the holders of
the WCI Public Shares, WCI Holdings has acquired good and marketable title to
not less than 33,630,826 (92.4%) percent of all of the issued and outstanding
shares of capital stock of Borrower, free and clear of all claims, liens,
pledges and encumbrances of any kind, except as disclosed in writing to Agent.
(ii) All actions and proceedings required by the WCI Holdings
Equity Tender Agreements, applicable law or
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<PAGE>
regulation have been taken and the transactions required thereunder have been
duly and validly taken and consummated.
(iii) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of the
WCI Holdings Equity Tender Offer or the transactions described in the WCI
Holdings Equity Tender Agreements and no governmental or other action or
proceeding has been threatened or commenced, seeking any injunction, restraining
order or other order which seeks to void or otherwise modify the WCI Holdings
Equity Tender Offer or the transactions described in the WCI Holdings Equity
Tender Offer Agreements.
(iv) Borrower has delivered, or caused to be delivered, to
Agent true, correct and complete copies of the WCI Holdings Equity Tender Offer
Agreements.
(b) WCI Holdings Merger.
(i) The WCI Holdings Merger is valid and effective in
accordance with the terms of the WCI Holdings Merger Agreements, and the
corporation statutes of the States of Delaware and Ohio and Borrower is the
surviving corporation pursuant to the WCI Holdings Merger.
(ii) All actions and proceedings required by the WCI Holdings
Merger Agreements, applicable law and regulation have been taken and the
transactions required thereunder had been duly and validly taken and
consummated.
(iii) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of the
WCI Holdings Merger or the transactions described in the WCI Holdings Merger
Agreements and no governmental action or proceeding has been threatened or
commenced seeking any injunction, restraining order or other order which seeks
to void or otherwise modify the WCI Holdings Merger or the transactions
described in the WCI Holdings Merger Agreements.
(iv) Borrower has delivered, or caused to be delivered, to
Agent true, correct and complete copies of the WCI Holdings Merger Agreements.
(c) WCI Debt Tender Offer and Cancellation of Existing RSI Notes.
(i) The WCI Debt Tender Offer and the transactions
contemplated thereunder have been duly executed, delivered and performed in
accordance with their terms by the respective parties thereto in all respects,
including the fulfillment (not merely the waiver, except as may be disclosed to
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<PAGE>
Agent and consented to in writing by Agent) of all conditions precedent set
forth therein and giving effect to the terms of the WCI Debt Tender Offer
Agreements, all of the Existing RSI Notes tendered pursuant to the WCI Debt
Tender Offer have been purchased by Borrower and all obligations, liabilities
and Indebtedness of Borrower evidenced by or arising under such Existing RSI
Notes have been satisfied and performed and all such Existing RSI Notes have
been cancelled, and, if all of the Existing RSI Notes are tendered by the
holders of the Existing RSI Notes pursuant to the WCI Debt Tender Offer, or
otherwise acquired by Borrower all security interests in, and mortgages and
liens upon, any of the assets of Borrower to secure the Indebtedness evidenced
by or arising under the Existing RSI Notes shall be terminated and released.
(ii) All actions and proceedings required by the WCI Debt
Tender Offer Agreements, applicable law and regulation have been taken and the
transactions required thereunder had been duly and validly taken and
consummated.
(iii) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of the
WCI Debt Tender Offer or the transactions described in the WCI Debt Tender Offer
Agreements and no governmental action or proceeding has been threatened or
commenced seeking any injunction, restraining order or other order which seeks
to void or otherwise modify the WCI Debt Tender Offer or the transactions
described in the WCI Debt Tender Offer Agreements.
(iv) Borrower has delivered, or caused to be delivered, to
Agent true, correct and complete copies of the WCI Debt Tender Offer Agreements.
(d) New WCI Notes.
(i) The New WCI Notes have been duly authorized, issued and
delivered by Borrower and all agreements, documents and instruments related
thereto, including, but not limited to, the New WCI Note Indenture, have been
duly authorized, executed and delivered and the transactions contemplated
thereunder performed in accordance with their terms by the respective parties
thereto in all respects, including the fulfillment (not merely the waiver) of
all conditions precedent set forth herein. All actions and proceedings required
by the New WCI Note Agreements and the agreements, documents and instruments
related thereto, applicable law or regulation have been taken and the
transactions required thereunder have been duly and validly taken and
consummated. Neither the execution and delivery of the New WCI Notes, any of the
other New WCI Note Agreements or any of the instruments and documents to be
delivered pursuant thereto, nor the consummation of the transactions therein
contemplated, nor
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<PAGE>
compliance with the provisions therein contemplated, has violated or will
violate any law or regulation or any order or decree of any court or
governmental instrumentality in any respect or does or will conflict with or
result in the breach of, or constitute a default in any respect under, any
indenture, mortgage, deed of trust, agreement or instrument to which either
Borrower or WCI Holdings is a party or may be bound, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the property of
Borrower or WCI Holdings (except as specifically contemplated hereunder or under
the other Financing Agreements) or violate any provision of the Certificate of
Incorporation or By-Laws of Borrower or WCI Holdings.
(ii) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of the
issuance of the New WCI Notes and the transactions described therein and no
governmental or other action or proceeding has been threatened or commenced,
seeking any injunction, restraining order or other order which seeks to void or
otherwise modify the issuance of the New WCI Notes.
(iii) Borrower has delivered, or caused to be delivered, to
Agent true, correct and complete copies of the New WCI Note Agreements and all
other agreements, documents and instruments existing as of the date hereof
relating thereto.
(e) No Default. No Event of Default exists on the date of this
Amendment (after giving effect to the amendments to the Loan Agreement made by
this Amendment).
(f) Corporate Power and Authority. This Amendment has been duly
executed and delivered by Borrower and WCI Holdings and is in full force and
effect as of the date hereof, and the agreements and obligations of Borrower and
WCI Holdings contained herein constitute legal, valid and binding obligations of
Borrower and WCI Holdings enforceable against Borrower and WCI Holdings in
accordance with their respective terms.
(g) Use of Proceeds. All of the payments by Borrower in connection
with the WCI Debt Tender Offer, the WCI Holdings Equity Tender Offer, the
dividend payment to Renco Group, the contractual compensation payments to
certain executives of Borrower and all other transaction fees and expenses
related to the WCI Debt Tender Offer, WCI Holdings Equity Tender Offer, the WCI
Holdings Merger or otherwise (other than the amendment fee hereunder, which fee
shall be paid using existing cash balances of Borrower) shall be paid utilizing
only the proceeds of the New WCI Notes and existing cash balances of Borrower,
and none of the proceeds of any Loans shall be used by Borrower to make any of
the foregoing payments.
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<PAGE>
16. Conditions Precedent. The effectiveness of the consents, waiver and
other terms and conditions contained herein shall be subject to the receipt by
Agent of each of the following, in form and substance satisfactory to Agent:
(a) evidence that: (i) the New WCI Notes, the other New WCI Note
Agreements and all agreements, documents and instruments relating thereto have
been duly authorized, executed and delivered by the parties thereto in
accordance with their terms and (ii) Borrower has received from or on behalf of
the holders of the New WCI Notes cash or other immediately available funds in
the aggregate amount of approximately $291,360,000 constituting the net proceeds
after transaction costs from the issuance of the New WCI Notes;
(b) evidence that the existing cash balances of Borrower and the
proceeds received by Borrower from or on behalf of the holders of the New WCI
Notes have been (i) used to make a loan to WCI Holdings, the proceeds of which
have been used by WCI Holdings to purchase the WCI Public Shares and (ii) used
by Borrower to repurchase up to all of the Existing RSI Notes and Borrower has
been released from all obligations and liabilities relating to such repurchased
Existing RSI Notes, and, if all of the Existing RSI Notes have been repurchased,
Borrower shall be released from all such obligations and liabilities relating
thereto and such arrangements shall otherwise be released and terminated;
(c) evidence that the WCI Holdings Equity Tender Agreements have
been duly executed and delivered by and to the appropriate parties thereto and
the transactions contemplated under the terms of the WCI Holdings Equity Tender
Agreements have been consummated prior to or contemporaneously with the
execution of this Amendment;
(d) evidence that Renco Group has validly contributed all of the
issued and outstanding capital stock of Borrower owned by Renco Group to WCI
Holdings;
(e) evidence that the WCI Holdings Merger Agreements have been duly
executed and delivered by and to the appropriate parties thereto and the
transactions contemplated under the terms of the WCI Holdings Merger Agreements
have been consummated prior to or contemporaneously with the execution of this
Amendment;
(f) evidence that the certificates of merger with respect to the WCI
Holdings Merger have been filed with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Ohio and the WCI Holdings
Merger is valid and effective in accordance with the terms and provisions of the
WCI Holdings Merger Agreements and the applicable corporation statutes of the
State of Delaware and the State of Ohio;
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<PAGE>
(g) the intercreditor agreement between the New WCI Note Trustee on
behalf of the holders of the New WCI Notes, and Agent on behalf of Lenders, duly
authorized, executed and delivered by the New WCI Note Trustee and Borrower;
(h) the intercreditor agreement between the New WCI Note Trustee on
behalf of the holders of the New WCI Notes and the VEBA Trustee on behalf of the
beneficiaries of the VEBA Trust, providing for, among other things, the
agreement by the VEBA Trustee and/or the VEBA Trust (i) not to exercise any
rights and remedies pursuant to the VEBA Trust Agreements or otherwise so long
as any Indebtedness evidenced by or arising under the New WCI Notes is
outstanding (except as specifically directed by the New WCI Note Trustees) and
(ii) to permit Agent on behalf of Lenders to enter and use the real property,
equipment and other assets and properties subject to the lien of the VEBA
Trustee and/or VEBA Trust to exercise the rights and remedies with respect to
the Collateral;
(i) such consents, approvals or other agreements from Lenders and
Participants as may be required by Agent to effectuate the terms and provisions
of this Amendment;
(j) the opinion letter of counsel(s) to Borrower with respect to the
WCI Debt Tender Offer Agreements, the WCI Holdings Equity Tender Offer
Agreements, the WCI Holdings Merger Agreements, and such other matters as
Lenders may request; and
(k) an original of this Amendment, duly authorized, executed and
delivered by Borrower, WCI Holdings and Lenders.
17. Additional Events of Default. The parties hereto acknowledge, confirm
and agree that the failure of Borrower to comply with the covenants, conditions
and agreements contained herein shall constitute an Event of Default under the
Financing Agreements (subject to the applicable cure period, if any, with
respect thereto provided for in the Loan Agreement as in effect on the date
hereof).
18. Effect of this Amendment. Except as modified pursuant hereto, no other
waivers, changes or modifications to the Financing Agreements are intended or
implied, and in all other respects, the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control.
19. Further Assurances. The parties hereto shall execute and deliver such
additional documents and take such additional actions as may be necessary to
effectuate the provisions and purposes of this Amendment.
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<PAGE>
20. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of New York.
21. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns. Any acknowledgment or consent contained herein shall not be construed
to constitute a consent to any other or further action by Borrower or WCI
Holdings or to entitle Borrower or WCI Holdings to any other consent. The Loan
Agreement and this Amendment shall be read and construed as one agreement.
22. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties thereto.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers as of the day and year
first above written.
Very truly yours,
WCI STEEL, INC.
By: /s/ Bret W. Wise
----------------------------------
Title: Vice President, Finance and CFO
-------------------------------
ACCEPTED AND AGREED:
CONGRESS FINANCIAL CORPORATION,
individually and as Agent
By: /s/ Laurence S. Forte
-------------------------
Title: Vice President
----------------------
SECURITY PACIFIC BUSINESS CREDIT INC.
By: /s/ Michael A. Kurshuk
-------------------------
Title: Sr. Account Executive
----------------------
ACKNOWLEDGED AND CONSENTED TO:
WCI STEEL HOLDINGS, INC.
By: /s/ Roger Fay
-------------------------
Title: VP
----------------------
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<PAGE>
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of November 27, 1996 (this
"Intercreditor Agreement") between FLEET NATIONAL BANK, a national banking
association, as Note Trustee (as defined in the recitals hereto) and CONGRESS
FINANCIAL CORPORATION, a California corporation, as Bank Agent (as defined in
the recitals hereto).
R E C I T A L S :
A. Pursuant to an Indenture dated as of November 27, 1996 (as
amended, modified and supplemented and in effect from time to time, the
"Indenture"), between WCI Steel, Inc., an Ohio corporation ("WCI") and Fleet
National Bank, as trustee under the Indenture (in such capacity and together
with any successors and assigns in such capacity, the "Note Trustee"), WCI is
concurrently with the execution and delivery of this Intercreditor Agreement
issuing 10% Senior Secured Notes due December 1, 2004 (the "Notes").
B. Pursuant to the Indenture, the Note Trustee may take certain
actions under the Collateral Documents (as defined in the Indenture) with
respect to the collateral pledged thereunder (such collateral whether now
existing or hereafter arising as granted in the Indenture and the Collateral
Documents collectively referred to herein as the "Note Trustee Collateral").
C. WCI is a party to a certain Amended and Restated Loan and
Security Agreement, dated as of December 29, 1992 (as amended, modified and
supplemented and in effect from time to time, the "Revolving Credit Agreement")
with the banks and financial institutions which are or may from time to time
become parties thereto (collectively, the "Banks") and Congress Financial
Corporation, as agent (in such capacity and together with any successors or
assigns in such capacity, the "Bank Agent").
D. Pursuant to the Revolving Credit Agreement, WCI has entered into
revolving credit and letter of credit financing arrangements with the Banks and
the Bank Agent and pursuant to the Revolving Credit Agreement and the other
Financing Agreements (as defined in the Revolving Credit Agreement)
(collectively, as amended, modified and supplemented and in effect from time to
time, the "Loan Documents"), WCI has secured its obligations in connection
therewith by pledging certain collateral to the Banks and the Bank Agent (such
collateral whether now existing or hereafter arising as granted in the Loan
Documents collectively referred to herein as the "Bank Collateral").
<PAGE>
-2-
E. The Note Trustee has been authorized and directed to enter into
this Intercreditor Agreement pursuant to the Indenture.
F. The Bank Agent has been authorized and directed to enter into
this Intercreditor Agreement pursuant to the Revolving Credit Agreement.
G. The Bank Agent and the Note Trustee desire to execute and deliver
this Intercreditor Agreement to set forth certain agreements between them in
respect of their respective rights and the respective rights of the Banks with
respect to certain of the Bank Collateral and the holders of the Notes with
respect to certain of the Note Trustee Collateral.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
Section 1. Use of Note Trustee Collateral for Work-in-Process. If
the Note Trustee has obtained possession or control of any or all of the Note
Trustee Collateral, the Note Trustee shall notify the Bank Agent and the Bank
Agent may elect, by written notice to the Note Trustee delivered to it within
twenty (20) calendar days of its receipt of such notice from the Note Trustee,
to utilize, at the sole cost, expense, liability and risk of the Bank Agent and
the Banks, each item of Note Trustee Collateral of which the Note Trustee has
obtained possession or control to finish work as promptly as practicable on any
of the Bank Collateral that is work-in-process to the extent permitted by
applicable law; provided that (i) such right to use the Note Trustee Collateral
for purposes of completing work-in-process shall continue for a period of ninety
(90) days after the date of the written notice by the Bank Agent to the Note
Trustee of the election of the Bank Agent to utilize the Note Trustee Collateral
as set forth above, but in no event shall such period extend beyond the date
immediately prior to a sale, lease of one year or more in duration or other
disposition of a significant portion of the Note Trustee Collateral or interests
therein being used by the Bank Agent for such purpose; provided that the Bank
Agent is given at least thirty (30) days prior written notice of such sale,
lease or other disposition by the Note Trustee, (ii) all such work shall be
conducted (a) with the standard of care consistent with the most recent past
practices of WCI and (b) in compliance with all applicable laws unless such
failure to comply would not have a material adverse effect on the value of the
Note Trustee Collateral and would not result in any liability to the Note
Trustee and (iii) the Bank Agent shall, prior
<PAGE>
-3-
to the commencement of any work by the Bank Agent, provide to the Note Trustee
an indemnity agreement in the form annexed hereto as Exhibit A. During the
period referred to in clause (i) of this Section 1, the Bank Agent may not use
the Note Trustee Collateral to perform any work on any part of Bank Collateral
that is raw materials except: (A) to the extent any such raw materials may be
necessary to complete work-in-process and (B) to the extent such raw materials
may be necessary to complete an order from a customer received by WCI prior to
the date of the written notice by the Bank Agent to the Note Trustee of the
election of the Bank Agent to utilize the Note Trustee Collateral as set forth
above. The Bank Agent shall compensate the Note Trustee for all the Note
Trustee's reasonable direct and allocated costs related to use of the Note
Trustee Collateral by the Bank Agent during the period provided for above which
the Note Trustee would not otherwise have had to incur or pay but for the use of
the Note Trustee Collateral by the Bank Agent pursuant to the terms hereof and
directly incident to or attributable or allocated to such use consistent with
the most recent past practices of WCI. Any time periods referred to in this
Section 1 or Section 2 below shall be tolled so long as the Bank Agent is
effectively stayed from enforcing its rights against WCI or any of the Bank
Collateral during the pendency of any proceeding of WCI under the U.S.
Bankruptcy Code or other proceeding or otherwise pursuant to any court order or
other applicable law.
Section 2. Access to Note Trustee Collateral. If the Note Trustee
has obtained possession or control of any or all of the Note Trustee Collateral,
upon reasonable notice to the Note Trustee, the Note Trustee shall permit the
Bank Agent, its employees, agents, advisers and representatives to enter upon
the Note Trustee Collateral solely for purposes of repossessing, removing or
selling the Bank Collateral. The Bank Agent shall compensate the Note Trustee in
cash for any damage to the Note Trustee Collateral directly as a result of such
repossession, removal or sale upon such repossession, removal or sale, and shall
pay the Note Trustee for all the Note Trustee's reasonable direct and
incremental costs related to the provision and supervision of such access to the
Note Trustee Collateral necessary for the repossession, removal or sale of the
Bank Collateral. At any time after the expiration of the applicable time period
provided for in clause (i) of the proviso to the first sentence of Section 1
above, upon seven business days' notice from the Note Trustee requesting that
the Bank Collateral be removed from the Note Trustee's Collateral, the Bank
Agent shall at its sole cost, expense, liability and risk either remove that
portion of the Bank Collateral from the Note Trustee Collateral, or pay the Note
Trustee its reasonable storage costs as provided in such notice, but only if
after such seven business day period expires no stay or
<PAGE>
-4-
other order prohibiting the Bank Agent's removal of such Bank Collateral has
been entered.
Section 3. Use of Certain Note Trustee Collateral. If the Note
Trustee has obtained possession or control of any or all of the Note Trustee
Collateral, the Bank Agent may: (i) enter and use any of the Note Trustee
Collateral consisting of trademarks or other general intangibles marked or
stamped on any inventory or otherwise required to sell or dispose of any of such
inventory and (ii) use any of the Note Trustee Collateral consisting of
computers or other data processing equipment relating to the storage or
processing of records, documents or files pertaining to any accounts and/or
inventory of WCI to deal with or dispose of any of such assets constituting Bank
Collateral.
Section 4. Books and Records. In the event that in the exercise of
their respective rights, the Note Trustee or the Bank Agent shall receive
possession or control of any books and records which contain information
relating to any of the property of WCI in which the other party has been granted
a security interest or lien, it shall notify the other party hereto that it has
received such books and records and shall, as promptly as practicable
thereafter, make available to the other party hereto such books and records for
inspection and duplication.
Section 5. Transfer of Note Trustee Collateral. (a) The Note Trustee
shall promptly notify the Bank Agent of the sale or assignment by the Note
Trustee during the period during which the Bank Agent is entitled to access
pursuant hereto of any portion of the Note Trustee Collateral if any part of the
Bank Collateral is located in or upon any portion of the Note Trustee Collateral
sold or assigned.
(b) If the Note Trustee sells or assigns during any period during
which the Bank Agent is entitled to access pursuant hereto, all or any portion
of the Note Trustee Collateral containing any Bank Collateral, the Note Trustee
shall require the purchaser or assignee thereof to agree with the Bank Agent or
for the benefit of the Bank Agent that it has acquired that portion of the Note
Trustee Collateral subject to the Bank Agent's rights hereunder by delivering an
acknowledgment to that effect to the Bank Agent.
Section 6. Insurance. WCI has agreed to insure the Note Trustee's
interest in the Note Trustee Collateral pursuant to the Indenture and the
Collateral Documents and has agreed to insure the Bank Agent's interest in the
Bank Collateral pursuant to the Loan Documents. To the extent that the insurance
coverage which WCI is
<PAGE>
-5-
required to maintain is carried under a blanket policy which insures both the
Bank Collateral and the Note Trustee Collateral, the Bank Agent and the Note
Trustee agree that (i) the insurance proceeds of any loss solely involving the
Bank Collateral shall be paid directly to the Bank Agent, (ii) the insurance
proceeds of any loss solely involving the Note Trustee Collateral shall be paid
directly to the Note Trustee, and (iii) the insurance proceeds of any loss
involving both the Bank Collateral and the Note Trustee Collateral (a "Combined
Loss") shall be paid to a mutually acceptable third party to be invested in Cash
Equivalents (as defined in the Revolving Credit Agreement) for allocation in
accordance with the interest of the Bank Agent and the Note Trustee as provided
herein, or if not provided herein, as they may mutually agree, with interest
earned on such invested proceeds allocated in the same manner as principal;
provided that if the Note Trustee and the Bank Agent cannot agree on the proper
allocation of the insurance proceeds, such determination shall be made by a
court of competent jurisdiction. If after a Default under either the Revolving
Credit Agreement or the Indenture, either the Bank Agent or the Note Trustee
pays any insurance premiums on behalf of WCI and a Combined Loss occurs during
an insurance period for which such premiums were paid by either the Bank Agent
or the Note Trustee, the party that paid such insurance premiums shall be
reimbursed for the payment of such premiums from the insurance proceeds prior to
the distribution of the balance of such proceeds pursuant to the provisions of
this Section 6.
Section 7. Cooperation; Notices. The Bank Agent and the Note Trustee
agree to use their best efforts to cooperate with each other to (a) provide
notice of, and any information regarding, any release of any of the Note Trustee
Collateral or the Bank Collateral, as the case may be, and (b) give to each
other copies of any notice of the occurrence or existence of an Event of Default
under the Revolving Credit Agreement or the Indenture, respectively, but the
failure to give such notice shall not affect the effectiveness of any notice of
an Event of Default as against WCI or the validity of this Intercreditor
Agreement or create a cause of action against the party failing to give such
notice or create any claim or right on behalf of any third party. The sending of
such notice shall not give the recipient any obligation to cure such Event of
Default.
Section 8. Successor and Assigns. The Bank Agent and the Note
Trustee will cause any of their respective successors and assigns, and WCI will
cause any successor, assign, replacement or other party that succeeds to or
substitutes for or otherwise acquires either the Bank Agent's or the Note
Trustee's respective rights and interest in the Bank Collateral or the Note
Trustee
<PAGE>
-6-
Collateral, as the case may be, or in any significant portion thereof, to assume
and incur all of the obligations of the Bank Agent or the Note Trustee
hereunder, as the case may be, and regardless of whether the obligations of WCI
to such replacement party are greater or less than WCI's obligations to the Bank
Agent or the Note Trustee, as the case may be. Upon so assuming or incurring all
of such obligations of the Bank Agent or the Note Trustee, as the case may be,
such party shall succeed to all the rights and benefits of the Bank Agent or the
Note Trustee, as the case may be, under this Intercreditor Agreement. This
Intercreditor Agreement shall not be amended, supplemented or modified without
the written consent of the Bank Agent, the Note Trustee, or with respect to any
replacement party that has assumed obligations hereunder, the written consent of
such replacement party, as applicable.
Section 9. Further Assurances. The parties hereto will use all
reasonable efforts to execute such certificates and other documents and to take
such other actions as may be reasonably necessary to consummate the transactions
contemplated hereby.
Section 10. Severability. Any provision of this Intercreditor
Agreement which is prohibited or unenforceable in any jurisdiction, the
substantive laws of which are held to be applicable hereto, shall not invalidate
the remaining provisions hereof, and any such prohibition or unenforceability in
any such jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
Section 11. Execution in Counterparts. This Intercreditor Agreement
may be executed in counterparts, each of which shall be deemed to be an original
but all of which together shall constitute a single agreement.
Section 12. Choice of Law. This Intercreditor Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and performed wholly in the State of New York.
Section 13. Captions; Gender and Number. The captions and section
headings of this Intercreditor Agreement are for convenience only and are not to
be used to define the provisions hereof. All terms contained herein shall be
construed, whenever the context of this Intercreditor Agreement requires, so
that the singular includes the plural and so that the masculine includes the
feminine.
<PAGE>
-7-
Section 14. Concerning the Niles Property. Notwithstanding anything
to the contrary herein or in the Collateral Documents, for purposes of Sections
1, 2 and 3 hereof and Section 19 of that certain Intercreditor Agreement, dated
as of the date hereof, between Fleet National Bank, as Second Note Trustee, and
Bank One Trust Company, N.A., as Trustee, the definition of Note Trustee
Collateral shall include the property subject to that certain Open End Mortgage,
dated as of the date hereof, made by Niles Properties, Inc. in favor of Bank One
Trust Company, N.A., as Trustee.
<PAGE>
-8-
IN WITNESS WHEREOF, the parties hereto have caused this
Intercreditor Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first written above.
FLEET NATIONAL BANK,
as Note Trustee
By: /s/ Philip G. Kane, Jr.
-------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
CONGRESS FINANCIAL CORPORATION,
as Bank Agent
By: /s/ Laurence S. Forte
-------------------------------
Name: Laurence S. Forte
Title: Vice President
Acknowledged and Accepted:
WCI STEEL, INC.
By: /s/ Bret W. Wise
-------------------------------
Name: Bret W. Wise
Title: VP, Finance and Chief
Financial Officer
<PAGE>
EXHIBIT A
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of __________, 19__ (the
"Indemnification Agreement") between FLEET NATIONAL BANK, a national banking
association, as trustee (the "Note Trustee") and CONGRESS FINANCIAL CORPORATION,
a California corporation, as agent (the "Bank Agent").
R E C I T A L S :
A. The Note Trustee, the Bank Agent and WCI Steel, Inc., an Ohio
corporation, entered into an Intercreditor Agreement, dated as of November __,
1996 (as amended, modified and supplemented and in effect from time to time, the
"Intercreditor Agreement"; capitalized terms used herein and not defined shall
have the meanings assigned to such term in the Intercreditor Agreement) pursuant
to which the Note Trustee has agreed to permit the Bank Agent to have access to
and utilize certain Note Trustee Collateral for the purposes set forth in the
Intercreditor Agreement.
B. It is a condition precedent to the Note Trustee's obligation to
permit the Bank Agent to utilize the Note Trustee Collateral to finish Bank
Collateral that the Bank Agent shall execute and deliver this Indemnification
Agreement.
A G R E E M E N T
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
Section 1. Indemnity. The Bank Agent shall indemnify and hold
harmless the Note Trustee and its officers, directors, employees and agents
(each such party, an "Indemnified Party") from and against any and all losses,
claims, liabilities, damages (other than consequential damages) and expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted against such Indemnified Party
(collectively, "Losses"), suffered or incurred by such Indemnified Party and
which are caused by any act or omission by the Bank Agent pursuant to the
exercise by the Bank Agent of its right to utilize
<PAGE>
-2-
any Note Trustee Collateral to finish work in process with respect to any Bank
Collateral pursuant to the Intercreditor Agreement. The foregoing
indemnification shall not include Losses which have been finally judicially
determined by a court of competent jurisdiction to have been caused solely by
the gross negligence or wilful misconduct of the Note Trustee or any other
Indemnified Party acting on behalf of and with the approval of the Note Trustee.
Section 2. Miscellaneous.
(a) This Indemnification Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and performed wholly in the State of New York.
(b) This Indemnification Agreement may be executed in counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute a single agreement.
(c) Any provision of this Indemnification Agreement which is
prohibited or unenforceable in any jurisdiction, the substantive laws of which
are held to be applicable hereto, shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any such jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
(d) No amendment or termination of this Indemnification Agreement
shall be binding on any party hereto unless in writing and signed by the party
sought to be charged therewith.
(e) This Indemnification Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors or
assigns under this Indemnification Agreement or the Intercreditor Agreement.
(f) The Note Trustee's acceptance of this Indemnification Agreement
is not intended to create, and shall not be construed as, any release, waiver or
modification of any right or remedy of the Note Trustee under or pursuant to the
Intercreditor Agreement or otherwise.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
FLEET NATIONAL BANK,
as Note Trustee
By: ____________________________
Name:
Title:
CONGRESS FINANCIAL CORPORATION,
as Bank Agent
By: ____________________________
Name:
Title:
<PAGE>
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT, dated as of November 27, 1996
("Intercreditor Agreement"), between FLEET NATIONAL BANK, a national banking
association, as Second Note Trustee (as hereinafter defined) with an office at
777 Main Street, Hartford, Connecticut 06108, Attn: Corporate Trust
Administration, BANK ONE TRUST COMPANY, N.A., as Trustee ("VEBA Trustee") under
that certain 501(c)(9) Trust Agreement, dated October 1, 1988, between Warren
Consolidated Industries and Bank One Trust Company, N.A., with an office at 100
East Broad Street, 9th Floor, Columbus, Ohio 43271- 0193 and WCI STEEL, INC., an
Ohio corporation (the "Company") with an office at 1040 Pine Avenue, SE, Warren,
Ohio 44483-6528.
R E C I T A L S:
A. Pursuant to a certain indenture dated as of December 14, 1993 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "First Indenture"), between Renco Steel, Inc., a Delaware corporation
("RSI"), the Company and Fleet National Bank (as successor to Shawmut Bank
Connecticut, National Association), as trustee under the First Indenture (in
such capacity and together with any successors and assigns in such capacity, the
"First Note Trustee"), RSI and the Company issued 10 1/2% Senior Notes due March
1, 2002 in the aggregate principal amount of $250,000,000 (the "First Notes").
B. To secure repayment in full of the First Notes, the Company
granted to the First Note Trustee for its benefit and the benefit of the holders
of the First Notes, among other things, a first priority lien on and security
interest in certain of the real and personal property of the Company located in
Trumbull County, Ohio (the "Collateral") pursuant to (i) that certain open-end
mortgage, assignment of rents, security agreement and fixture filing, dated as
of December 14, 1993 (the "First Mortgage") and recorded December 16, 1993 in
Volume 819, Page 1046 of the Trumbull County, Ohio Records and (ii) that certain
security agreement, dated as of December 14, 1993 (the "First Security
Agreement"; together with the First Mortgage, the "First Collateral Documents").
C. Pursuant to a certain indenture dated as of the date hereof (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Second Indenture"), between the Company and Fleet National Bank, as
trustee under the Second Indenture (in such capacity and together with any
successors
<PAGE>
-2-
and assigns in such capacity, the "Second Note Trustee"), the Company is issuing
10% Senior Secured Notes due December 1, 2004 in the aggregate principal amount
of $300,000,000 (the "Second Notes"), the proceeds of which are to be used to,
among other things, repurchase certain of the outstanding First Notes.
D. To secure repayment in full of the Second Notes, the Company
granted to Second Note Trustee for its benefit and the benefit of the holders of
the Second Notes a lien on and security interest in (which lien and security
interest is subject and subordinate only to the lien and security interest
created by the First Collateral Documents) the Collateral pursuant to (i) that
certain open-end mortgage, assignment of rents, security agreement and fixture
filing, dated as of the date hereof (the "Second Mortgage - Fleet"), made by the
Company, as mortgagor, in favor of Second Note Trustee, as mortgagee, and
intended to be recorded in the Trumbull County, Ohio Records and (ii) that
certain security agreement, dated as of the date hereof (the "Second Security
Agreement - Fleet"; together with the Second Mortgage, the "Second Collateral
Documents - Fleet"), between the Company, as pledgor, and the Second Note
Trustee, as collateral agent.
E. Pursuant to that certain VEBA Term Sheet, executed on October 24,
1995 (the "VEBA Agreement"), between the Company and the United Steel Workers of
America, the Company agreed to make certain contributions the post-retirement
health and life insurance benefits for Beneficiaries (as defined in the VEBA
Agreement) of the Retiree Account (as defined in the VEBA Agreement). The VEBA
Agreement provides, among other things, that in the event the Company repays the
outstanding First Notes and incurs new senior indebtedness secured by the
Collateral, the VEBA Trustee, for the benefit of the Beneficiaries of the
Retiree Account, shall be granted a second priority lien on and security
interest in the Collateral.
F. To secure performance of the Company's obligations under the VEBA
Agreement, the Company granted to the VEBA Trustee for the benefit of the
Beneficiaries of the Retiree Account a lien on and security interest in (which
lien and security interest is subject and subordinate to the lien and security
interest created by the First Collateral Documents and, except as otherwise
provided in this Intercreditor Agreement, the Second Collateral Documents -
Fleet) the Collateral pursuant to (i) that certain open-end mortgage, dated as
of the date hereof (the "Second Mortgage -VEBA") made by the Company, as
mortgagor, in favor of the VEBA Trustee, as mortgagee, and intended to be
recorded in the Trumbull County, Ohio Records immediately following recordation
of the Second Mortgage - Fleet and (ii) that certain security agreement,
<PAGE>
-3-
dated as of the date hereof (the "Second Security Agreement -VEBA"; together
with the Second Mortgage - VEBA, the "Second Collateral Documents - VEBA"; the
Second Collateral Documents -VEBA, together with the Second Collateral Documents
- - Fleet and the First Collateral Documents, the "Collateral Documents"), between
the Company, as pledgor, and the VEBA Trustee, as secured party.
G. Second Note Trustee has been authorized and directed to enter
into this Intercreditor Agreement pursuant to the Second Indenture.
H. VEBA Trustee has been authorized and directed to enter into this
Intercreditor Agreement by the Company.
I. Second Note Trustee, the VEBA Trustee and the Company desire to
execute and deliver this Intercreditor Agreement to set forth certain agreements
relating to their respective rights with respect to the Collateral.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
Section 1. Definitions. As used in this Intercreditor Agreement, the
following terms shall have the meanings specified below:
"Designated USWA Official" shall mean President of the United
Steelworkers of America.
"Destruction" shall have the meaning assigned to such term in the
Second Mortgage - Fleet.
"Enforcement" shall mean, collectively or individually, for either
the Second Note Trustee or the VEBA Trustee to repossess any Collateral or
commence the judicial or other enforcement of any rights and remedies of such
party under the Second Collateral Documents - Fleet or the Second Mortgage -
VEBA, as applicable.
"Enforcement Notice" shall mean a written notice delivered by the
Second Note Trustee or the VEBA Trustee, as applicable, to the other party or
the Company, as applicable, announcing that it has commenced Enforcement.
<PAGE>
-4-
"Net Award" shall have the meaning assigned to such term in the
Second Mortgage - Fleet and shall include any amounts received in respect of
personal property pursuant to the Second Collateral Documents - Fleet or the
Second Collateral Documents -VEBA.
"Net Proceeds" shall have the meaning assigned to such term in the
Second Mortgage - Fleet and shall include any amounts received in respect of
personal property pursuant to the Second Collateral Documents - Fleet or the
Second Collateral Documents -VEBA.
"Taking" shall have the meaning assigned to such term in the Second
Mortgage - Fleet.
Section 2. Lien Priorities. Notwithstanding the date, manner or
order of recording of the Collateral Documents or the perfection of the liens
and security interests granted to the Second Note Trustee and the VEBA Trustee,
and notwithstanding any provisions of the Uniform Commercial Code, the Second
Note Indenture or the VEBA Agreement, or any applicable law or decision, or
whether the Second Note Trustee or the VEBA Trustee holds possession of all or
any part of the Collateral (i) at all times that any of the First Notes remain
outstanding, the lien on and security interest in the Collateral granted to the
VEBA Trustee shall be deemed, without further action by any party hereto, to
constitute, subject to the terms hereof, a second priority lien on and security
interest in the Collateral, pari passu with the lien on and security interest in
the Collateral granted to the Second Note Trustee and (ii) at such time as none
of the First Notes remain outstanding, the lien on and security interest in the
Collateral granted to the Second Note Trustee shall constitute, without further
action by any party hereto, a first priority lien on and security interest
therein and the lien on and security interest in the Collateral granted to the
VEBA Trustee shall constitute, without further action by any party hereto, a
second priority lien on and security interest therein, subject and subordinate
in all respects to the lien and security interest granted to the Second Note
Trustee. Second Note Trustee agrees that it shall, at the request of the VEBA
Trustee, execute and deliver any agreement or instrument reasonably requested to
confirm the lien priorities set forth herein. The Company agrees that it shall,
at the request of the Second Note Trustee, execute and deliver, and/or direct
the VEBA Trustee to execute and deliver, any agreement or instrument reasonably
requested to confirm the lien priorities set forth herein.
<PAGE>
-5-
Section 3. Enforcement Actions. (a) Except as otherwise provided in
subsection (b) below, the VEBA Trustee shall not commence Enforcement with
respect to the VEBA Agreement or the Second Collateral Documents - VEBA or any
other security instrument relating thereto.
(b) If any of the First Notes are outstanding at the time that the
Second Note Trustee commences Enforcement, the Second Note Trustee (i) shall
deliver to the VEBA Trustee and the Company an Enforcement Notice and (ii) may,
but shall not be obligated to, include in the Enforcement Notice delivered in
connection therewith a request that the Company or a Designated USWA Official
direct the VEBA Trustee to commence Enforcement of its rights and remedies under
the Second Collateral Documents - VEBA in order to maximize the proceeds
realized in such Enforcement and available for distribution to the Holders of
the Second Notes and the Beneficiaries of the VEBA Trust. Upon receipt of an
Enforcement Notice which includes such a request, the VEBA Trustee shall
promptly commence Enforcement of its rights and remedies under the Second
Collateral Documents - VEBA and deliver to the Second Note Trustee an
Enforcement Notice to that effect. If the VEBA Trustee fails to promptly
commence such Enforcement for any reason and, as a result of such failure, the
Second Note Trustee is unable to make a claim in its Enforcement action for the
obligations of the Company then payable under the VEBA Agreement, the Second
Note Trustee may apply any proceeds received from its Enforcement pursuant to
Section 4(b) hereof notwithstanding whether or not any of the First Notes remain
outstanding.
(c) The Company hereby irrevocably instructs the VEBA Trustee to
commence Enforcement of its rights and remedies under the Second Collateral
Documents - VEBA and to deliver to the Second Note Trustee an Enforcement Notice
to that effect if the Second Note Trustee commences Enforcement and requests
that the VEBA Trustee commence Enforcement of its rights and remedies as
provided in Section 3(b) hereof.
Section 4. Distribution of Enforcement Proceeds. All proceeds of the
Collateral received in connection with any Enforcement by the Second Note
Trustee or the VEBA Trustee shall be paid to the Second Note Trustee (and the
Company hereby directs the VEBA Trustee to promptly pay any such amounts
received by it to the Second Note Trustee) and applied in accordance with the
following procedures:
(a) If any of the First Notes are outstanding at the time such
proceeds are paid to the Second Note Trustee, then such proceeds shall be
applied by the Second Note Trustee as follows:
<PAGE>
-6-
(i) First, to the payment of all costs and expenses incurred by the
Second Note Trustee (and any receiver or other agent appointed by the
Second Note Trustee) in connection with such Enforcement or other method
of realization;
(ii) Second, to the payment of all costs and expenses incurred by
the VEBA Trustee (and any receiver or other agent appointed by the VEBA
Trustee) in connection with such Enforcement or other method of
realization;
(iii) Third, on a pro rata basis to the Second Note Trustee and the
VEBA Trustee based upon (y) the aggregate principal amount of the Second
Notes then outstanding and (z) the aggregate amount of the obligations of
the Company then payable under the VEBA Agreement; provided, that in no
event shall the VEBA Trustee be entitled to receive any proceeds in an
amount greater than the Obligations (as such term is defined in the Second
Mortgage - VEBA);
(iv) Fourth, any surplus of such proceeds remaining after payment in
full of the amounts set forth in the foregoing clauses (i) through (iii)
shall be paid to the Company or to whosoever may be lawfully entitled
thereto or as otherwise required by applicable law.
(b) If none of the First Notes remain outstanding at the time that
such proceeds are paid to the Second Note Trustee, then such proceeds shall be
applied by the Second Note Trustee as follows:
(i) First, to the payment of all costs and expenses incurred by the
Second Note Trustee (and any receiver or other agent appointed by the
Second Note Trustee) in connection with such Enforcement or other method
of realization;
(ii) Second, to the repayment in full of all amounts owing in
respect of the Second Notes, including principal and interest and all
other amounts owing under the Second Note Indenture and the Second
Collateral Documents - Fleet;
(iii) Third, to the payment of all costs and expenses incurred by
the VEBA Trustee (and any receiver or other agent appointed by the VEBA
Trustee) in connection with such Enforcement or other realization.
(iv) Fourth, to the payment of the aggregate amount of the
obligations of the Company then payable under the VEBA
<PAGE>
-7-
Agreement; provided, that in no event shall the VEBA Trustee be entitled
to receive any proceeds in an amount greater than the Obligations; and
(v) Fifth, any surplus of such proceeds remaining after payment in
full of the amounts set forth in clauses (i) through (iii) shall be paid
to the Company or to whosoever may be lawfully entitled thereto or as
otherwise required by law.
Section 5. Distribution of Casualty and Condemnation Proceeds. Any
Net Award received by the Second Note Trustee or the VEBA Trustee in connection
with any Taking and any Net Proceeds received by the Second Note Trustee or the
VEBA Trustee in connection with any Destruction, shall each be paid to the
Second Note Trustee (and the Company hereby directs the VEBA Trustee to promptly
pay any Net Award or Net Proceeds, as applicable, to the Second Note Trustee)
and applied in accordance with the terms and conditions of the Second Mortgage -
Fleet. Additionally, the following qualifications shall apply to each such
application of any Net Award or any Net Proceeds:
(a) If any of the First Notes are outstanding at the time any Net
Award or Net Proceeds, as applicable, are paid to the Second Note Trustee and
the Company makes an election, pursuant to the Second Mortgage - Fleet, to
deposit such Net Award or Net Proceeds, as applicable, with the Second Note
Trustee to be held by it as cash collateral in the Collateral Account (as
defined in the Second Indenture), the Second Note Trustee shall hold such
proceeds as cash collateral until the date upon which repayment of the Second
Notes is due, whether by acceleration or otherwise. At such time, the Second
Note Trustee shall apply such proceeds in the manner set forth in Section 4(a).
Any amounts held by the Second Note Trustee in the Collateral Account shall be
invested in the manner provided in Section 11.07 of the Second Indenture and any
interest earned thereon shall be applied in the manner set forth therein.
(b) If none of the First Notes are outstanding at the time any Net
Award or Net Proceeds, as applicable, are paid to the Second Note Trustee, then
such Net Award or Net Proceeds, as applicable, shall be applied in accordance
with the terms of the Second Mortgage - Fleet and Section 4(b) hereof.
(c) Upon repayment in full of the First Notes and all amounts
secured by the Second Collateral Documents - Fleet and the Second Collateral
Documents - VEBA, any remaining Net Award or Net Proceeds, as applicable, shall
be paid to whomsoever shall be lawfully entitled thereto.
<PAGE>
-8-
Section 6. Sale of Collateral. The Company shall have the right to
sell or otherwise dispose of all or any portion of the Collateral in accordance
with the First Indenture and the Second Indenture, including, without
limitation, Released Real Property (as defined in the Second Indenture). The
Company shall direct the VEBA Trustee to execute all documents and take all
actions reasonably necessary to (i) permit any such disposition of Collateral to
occur free and clear of the lien and security interest of the Second Collateral
Documents - VEBA and (ii) permit the release of any Collateral constituting
Released Real Property from the lien and security interest of the Second
Collateral Documents - VEBA.
Section 7. Direction of VEBA Trustee. The Company shall, upon the
written request of the Second Note Trustee, direct the VEBA Trustee to take any
and all actions deemed necessary by the Second Note Trustee to fulfill the
obligations of the VEBA Trustee hereunder. Notwithstanding any other provisions
hereof to the contrary, if the Company shall fail to so direct the VEBA Trustee
within a reasonable time following delivery of the Second Note Trustee's written
request to do so, the Company hereby directs the VEBA Trustee to take any and
all actions deemed necessary by the Second Note Trustee to fulfill the
obligations of the VEBA Trustee hereunder without further direction of the
Company.
Section 8. Satisfaction of VEBA Agreement. The Company acknowledges
and agrees that, notwithstanding anything to the contrary in the VEBA Agreement
or otherwise, the commencement of Enforcement by the VEBA Trustee at the request
of the Second Note Trustee as contemplated by Section 3(b) hereof shall not
constitute a default under or non-compliance with the terms and conditions of
the VEBA Agreement; provided, however, that in no event shall the foregoing
provision authorize the VEBA Trustee to commence Enforcement other than in
accordance with Section 3 hereof, or, subject to Section 18 hereof, upon
repayment in full of the Second Notes, the Second Collateral Documents - VEBA.
Section 9. Accountings. The Company hereby directs the VEBA Trustee
to render accounts to the Second Note Trustee upon its reasonable request to the
extent required in the opinion of the Second Note Trustee to give effect to the
application of proceeds of Collateral as hereinbefore provided.
Section 10. Notices of Default. Second Note Trustee, on the one
hand, and the VEBA Trustee, on the other hand, shall use their best efforts to
give to the other copies of any notice of the occurrence or existence of an
Event of Default (as defined in the Second Indenture) or a Disposition Event (as
defined in the VEBA
<PAGE>
-9-
Agreement), as applicable, simultaneously with the sending of such notice to the
Company, but the failure to do so shall not affect the validity of such notice
or create a cause of action against the party failing to give such notice or
create any claim or right on behalf of any third party. The sending of such
notice shall not give the recipient the obligation to cure such Event of Default
or Disposition Event.
Section 11. Expiration. This Intercreditor Agreement shall expire
and be of no further force or effect without any further action or notice by the
parties hereto on the date that is the earlier of (i) the date upon which the
Second Notes and all other amounts owing in connection with the Second Note
Indenture and the Second Collateral Documents - Fleet have been paid in full or
(ii) the expiration or termination of the obligations of the Company under the
VEBA Agreement.
Section 12. Successors and Assigns. Second Note Trustee and the VEBA
Trustee will cause any of their respective successors and assigns, and the
Company will cause any successor, assign, replacement or other party that
succeeds to or substitutes for or otherwise acquires the Second Note Trustee's
or the VEBA Trustee's respective rights and interest in the Collateral, or in
any significant portion thereof, to assume all of the obligations of the Second
Note Trustee or the VEBA Trustee hereunder, as the case may be, and regardless
of whether the obligations of the Company to such replacement party are greater
or less than the Company's obligations to Second Note Trustee or the VEBA
Trustee, as the case may be. Upon any such assumption by any party of the
obligations hereunder of the Second Note Trustee or the VEBA Trustee, as the
case may be, such party shall succeed to all the rights and benefits of the
Second Note Trustee or the VEBA Trustee, as the case may be, under this
Intercreditor Agreement. This Intercreditor Agreement shall not be amended,
supplemented or modified without the written consent of the Second Note Trustee,
the VEBA Trustee, and, with respect to any replacement party that has assumed
any obligations hereunder, the written consent of such replacement party, as
applicable.
Section 13. Further Assurances. Each of the parties hereto agrees to
deliver to the other upon reasonable request therefor, instruments and documents
confirming the lien priorities and other rights contemplated herein and to take
such other actions as may be reasonably necessary to consummate and give effect
to the transactions contemplated hereby.
Section 14. Severability. Any provision of this Intercreditor
Agreement which is prohibited or unenforceable in any
<PAGE>
-10-
jurisdiction, the substantive laws of which are held to be applicable hereto,
shall not invalidate the remaining provisions hereof, and any such prohibition
or unenforceability in any such jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 15. Execution in Counterparts. This Intercreditor Agreement
may be executed in counterparts, each of which shall be deemed to be an original
but all of which together shall constitute a single agreement.
Section 16. Choice of Law. This Intercreditor Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and performed wholly in the State of New York.
Section 17. Captions; Gender and Number. The captions and section
headings of this Intercreditor Agreement are for convenience only and are not to
be used to define the provisions hereof. All terms contained herein shall be
construed, whenever the context of this Intercreditor Agreement requires, so
that the singular includes the plural and so that the masculine includes the
feminine.
Section 18. Limitation on Right of VEBA Trustee to Enforce. The
right of the VEBA Trustee to enforce the Second Collateral Documents - VEBA upon
repayment of the Second Notes shall in any event be subject to the terms of the
VEBA Agreement, which provides, inter alia, (i) that (except as provided in
Section 3(b) hereof) in no event may any liens in favor of the VEBA Trustee be
exercised so long as any senior indebtedness is outstanding and (ii) that
nothing contained in the VEBA Agreement or in documents related thereto
restricts the Company's right to refinance or replace the Company's senior
indebtedness, including refinancing or replacement of senior indebtedness, and
any such replacement senior indebtedness may be secured by a lien that is senior
to the lien of the Second Collateral Documents - VEBA.
Section 19. Concerning the Congress Intercreditor Agreement. Each of
the VEBA Trustee and the Company agrees that Congress Financial Corporation
("Congress") may exercise its rights under that certain Intercreditor Agreement,
dated as of the date hereof (the "Congress Intercreditor Agreement"), between
Fleet National Bank, as Note Trustee, and Congress, with respect to the Note
Trustee Collateral referred to therein as if the Company and the VEBA Trustee
were parties thereto and the VEBA Trustee were the Note Trustee referred to
therein. In no event shall this Section
<PAGE>
-11-
19 be amended, modified or otherwise supplemented without the prior written
consent of Congress.
<PAGE>
-12-
IN WITNESS WHEREOF, the parties hereto have caused this
Intercreditor Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first written above.
FLEET NATIONAL BANK,
as Second Note Trustee
By: /s/ Philip G. Kane, Jr.
------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
BANK ONE TRUST COMPANY, N.A., as
trustee under that certain 501(c)(9)
Trust Agreement
By: /s/ Richard P. Hartzell
-------------------------------
Name: Richard P. Hartzell
Title: Vice President
Acknowledged, Accepted and Agreed:
WCI STEEL, INC.
By: /s/ Bret W. Wise
-----------------------
Name: Bret W. Wise
Title: Vice President,
Finance and CFO
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of November 27, 1996 (this
"AGREEMENT"), between WCI STEEL, INC., an Ohio corporation ("WCI"), and BANK ONE
TRUST COMPANY, N.A., as Trustee (the "TRUSTEE") under that certain 501(c)(9)
Trust -Agreement, dated October 1, 1988, between Warren Consolidated Industries,
Inc. and Bank One Trust Company, N.A.
RECITALS
WCI has requested the Trustee to enter into two mortgages, each dated as
of the date hereof, between WCI and the Trustee (collectively, the
"MORTGAGES") and an Intercreditor Agreement, dated as of the date hereof,
among Fleet National Bank, as Second Note Trustee, the Trustee and WCI (as
amended, supplemented or otherwise modified from time to time, the
"INTERCREDITOR AGREEMENT"). The Trustee is willing to enter into the
Mortgages and the Intercreditor Agreement, but only on the condition that WCI
provide the indemnification set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, WCI and the Trustee hereby agree as follows:
1. INDEMNIFICATION. WCI agrees to indemnify the Trustee in its capacity
as such from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever (including, without limitation, fees and expenses of counsel to
the Trustee) which may at any time be imposed on, incurred by or asserted
against the Trustee in any way relating to or arising out of the Mortgages, the
Intercreditor Agreement, this Agreement, or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
(including, without limitation, two Negative Pledge Agreements, each dated as of
the date hereof, made by the Company and Youngstown Sinter Company,
respectively, in favor of the Trustee) or any action taken or omitted by the
Trustee under or in connection with any of the foregoing; PROVIDED that WCI
shall not be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Trustee's gross negligence
or willful misconduct.
<PAGE>
2. EFFECTIVENESS. This Agreement shall become effective as of the date
hereof upon receipt by the Trustee of evidence satisfactory to the Trustee that
this Agreement has been executed and delivered by WCI and the Trustee.
3. REPRESENTATIONS AND WARRANTIES. WCI hereby represents and warrants to
the Trustee that it is duly organized and validly existing under the laws of the
jurisdiction of its organization, has the corporate power and authority to make,
deliver and perform this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement.
4. NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by facsimile
transmission) and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made (a) in the case of delivery by hand, when
delivered, (b) in the case of delivery by mail, [three] days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been electronically confirmed,
addressed as follows, or to such other address as may be hereafter notified by
the respective parties hereto:
WCI: WCI Steel, Incorporated
1040 Pine Street S.E.
Warren, OH 44483-6528
Attention: Mr. Bret Wise
Fax: 330-841-8387
The Trustee: Bank One Trust Company, N.A.
100 East Broad Street
Columbus, OH 43271-0193
Attention: Richard P. Hartzell
Fax: 614-248-2554
PROVIDED that any notice, request or demand to or upon WCI to pay any indemnity
pursuant to Section 1 shall not be effective until received.
5. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of WCI and the Trustee and their respective successors and assigns,
except that WCI may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the Trustee, and the
Trustee may not assign or transfer any of its benefits under this Agreement to
any person or entity (other than a subsidiary or affiliate of the Trustee or a
successor trustee) without the written consent of WCI.
6. COUNTERPARTS. This Agreement may be executed by one or more of the
parties hereto on any number of separate counterparts (including by facsimile
transmission of signature pages hereto) and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
-2-
<PAGE>
7. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF OHIO.
[SIGNATURE PAGES FOLLOW]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
WCI STEEL, INC.
By: /s/ Bret W. Wise
_______________________________
Title: VP, Finance and CFO
BANK ONE TRUST COMPANY, N.A., as Trustee
By: Richard P. Hartzell
_______________________________
Title: Vice President
-4-
<PAGE>
EXHIBIT 12
WCI STEEL, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED OCTOBER 31, JULY 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income before taxes.............................................. 23,636 52,792 25,773 52,426 31,852
Fixed charges.................................................... 23,214 28,926 26,066 19,729 18,988
Capitalized interest............................................. 0 0 0 0 0
--------- --------- --------- --------- ---------
Earnings....................................................... 46,850 81,718 51,839 72,155 50,840
Interest expense................................................. 18,108 26,437 23,607 17,894 17,105
Amortization of financing costs.................................. 5,074 2,272 2,180 1,636 1,637
Rental/Lease interest............................................ 32 217 279 199 246
Capitalized interest............................................. 0 0 0 0 0
--------- --------- --------- --------- ---------
Fixed charges.................................................. 23,214 28,926 26,066 19,729 18,988
Ratio of earnings to fixed charges........................... 2.0x 2.8x 2.0x 3.7x 2.7x
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
WCI Steel, Inc. and Subsidiaries:
The audits referred to in our report dated December 1, 1995, include the
related financial statement schedule as of October 31, 1995 and 1994 and for
each of the years in the three-year period ended October 31, 1995, included
in the Form S-4 Registration Statement under the Securities Act of 1933. The
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Form S-4 Registration Statement
under the Securities Act of 1933.
KPMG PEAT MARWICK LLP
Cleveland, Ohio
December 17, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 17th day of December, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/ Robert Reynolds
-------------------------
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made 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 (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
<PAGE>
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
- --------------------------------------------------
Dated at , as of .
--------------------------------------- --------------------
Revision of February 15, 1996
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank of Connecticut", Hartford, Connecticut,
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank of Connecticut",
Hartford, Connecticut, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
-2-
<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
-3-
<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
-4-
<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
-5-
<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
-7-
<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
-8-
<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
-9-
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
______________________ and Fleet National Bank, as Trustee, does hereby consent
that, pursuant to Section 321(b) of the Trust Indenture Act of 1939, reports of
examinations with respect to the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/
-------------------------------
Its: Assistant Vice President
Dated:
<PAGE>
Board of Governors of the
Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance
Corporation
OMB Number: 3064-0052
Office of the Comptroller
of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- -------------------------------------------------------------------------------
[LOGO] [1]
Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
- -------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES -- FFIEC 031
(960930)
REPORT AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1996 --------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
international Banking Facilities.
- -------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
---------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are
true to the best of my knowledge and belief.
/s/ Giro DeRosa
- -----------------------------------------------------
Signature of Officer Authorized to Sign Report
10/26/96
- -----------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
NOTE: These instructions may in some cases differ from generally accepted
accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ [SIGNATURE ILLEGIBLE]
- -----------------------------------------------------
Director (Trustee)
/s/ [SIGNATURE ILLEGIBLE]
- -----------------------------------------------------
Director (Trustee)
/s/ [SIGNATURE ILLEGIBLE]
- -----------------------------------------------------
Director (Trustee)
- -------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------
0 2 4 9 9
FDIC Certificate Number -----------
(RCRI 9050)
[ADDRESS LABEL]
<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
Bank With Domestic and Foreign Offices
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SIGNATURE PAGE COVER
REPORT OF INCOME
Schedule RI -- Income Statement ................................... RI-1, 2, 3
Schedule RI-A -- Changes in Equity Capital .............................. RI-4
Schedule RI-B -- Charge-offs and Recoveries and Changes in
Allowance for Loan and Lease Losses ............................... RI-4, 5
Schedule RI-C -- Applicable Income Taxes by Taxing Authority ............ RI-5
Schedule RI-D -- Income from International Operations ................... RI-6
Schedule RI-E -- Explanations ........................................ RI-7, 8
REPORT OF CONDITION
Schedule RC -- Balance Sheet ......................................... RC-1, 2
Schedule RC-A -- Cash and Balances Due From Depository Institutions ..... RC-3
Schedule RC-B -- Securities ....................................... RC-3, 4, 5
Schedule RC-C -- Loans and Lease Financing
Receivables:
Part I. Loans and Leases ......................................... RC-6, 7
Part II. Loans to Small Businesses and Small Farms
(included in the forms for June 30 only) ............... RC-7a, 7b
Schedule RC-D -- Trading Assets and Liabilities
(to be completed only by selected banks) ............................. RC-8
Schedule RC-E -- Deposit Liabilities ............................ RC-9, 10, 11
Schedule RC-F -- Other Assets .......................................... RC-11
Schedule RC-G -- Other Liabilities ..................................... RC-11
Schedule RC-H -- Selected Balance Sheet Items for
Domestic Offices .................................................... RC-12
Schedule RC-I -- Selected Assets and Liabilities of IBFs ............... RC-13
Schedule RC-K -- Quarterly Averages .................................... RC-13
Schedule RC-L -- Off Balance Sheet Items ....................... RC-14, 15, 16
Schedule RC-M -- Memoranda ......................................... RC-17, 18
Schedule RC-N -- Past Due and Nonaccrual Loans, Leases,
and Other Assets ................................................ RC-19, 20
Schedule RC-O -- Other Data for Deposit Insurance Assessments ...... RC-21, 22
Schedule RC-R -- Regulatory Capital ................................ RC-23, 24
Optional Narrative Statement Concerning the Amounts Reported
in the Reports of Condition and Income .............................. RC-25
Special Report (to be completed by all banks)
Schedule RC-J -- Repricing Opportunities (sent only to and to be
completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
THE ESTIMATED AVERAGE BURDEN ASSOCIATED WITH THIS INFORMATION COLLECTION IS
32.2 HOURS PER RESPONDENT AND IS ESTIMATED TO VARY FROM 15 TO 230 HOURS PER
RESPONSE, DEPENDING ON INDIVIDUAL CIRCUMSTANCES. BURDEN ESTIMATES INCLUDE THE
TIME FOR REVIEWING INSTRUCTIONS, GATHERING AND MAINTAINING DATA IN THE REQUIRED
FORM, AND COMPLETING THE INFORMATION COLLECTION, BUT EXCLUDE THE TIME FOR
COMPILING AND MAINTAINING BUSINESS RECORDS IN THE NORMAL COURSE OF A
RESPONDENT'S ACTIVITIES. COMMENTS CONCERNING THE ACCURACY OF THIS BURDEN
ESTIMATE AND SUGGESTIONS FOR REDUCING THIS BURDEN SHOULD BE DIRECTED TO THE
OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET,
WASHINGTON, D.C. 20503, AND TO ONE OF THE FOLLOWING:
SECRETARY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551
LEGISLATIVE AND REGULATORY ANALYSIS DIVISION
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C. 20219
ASSISTANT EXECUTIVE SECRETARY
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll-free on (800) 688-FDIC(3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
Legal Title of Bank: Fleet National Bank
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
Call Date: 9/30/96
ST-BK: 25-0590 FFIEC 031
Page RI-1
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1996-SEPTEMBER 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
SCHEDULE RI--INCOME STATEMENT
<TABLE>
<CAPTION>
I480
-------------------------
Dollars Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate .............................................. 4011 854,388 1.a.(1)(a)
(b) Loans to depository institutions .......................................... 4019 1,052 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ....... 4024 405 1.a.(1)(c)
(d) Commercial and industrial loans ........................................... 4012 850,473 1.a.(1)(d)
(e) Acceptances of other banks ................................................ 4026 261 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures:
(1) Credit cards and related plans ........................................ 4054 13,229 1.a.(1)(f)(1)
(2) Other ................................................................. 4055 144,012 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ..................... 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations ................................................... 4503 0 1.a.(1)(h)(1)
(2) Tax-exempt obligations ................................................ 4504 7,756 1.a.(1)(h)(2)
(i) All other loans in domestic offices ....................................... 4058 115,822 1.a.(1)(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ................. 4059 2,981 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases ................................................................ 4505 114,095 1.b.(1)
(2) Tax-exempt leases ............................................................. 4307 1,130 1.b.(2)
c. Interest income on balances due from depository institutions: (1)
(1) In domestic offices ........................................................... 4105 1,047 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs .................. 4106 142 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation
obligations ................................................................... 4027 323,294 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities ........................................................ 4506 0 1.d.(2)(a)
(b) Tax-exempt securities ..................................................... 4507 4,736 1.d.(2)(b)
(3) Other domestic debt securities ................................................ 3657 12,668 1.d.(3)
(4) Foreign debt securities ....................................................... 3658 4,985 1.d.(4)
(5) Equity securities (including investments in mutual funds) ..................... 3659 15,296 1.d.(5)
e. Interest income from trading assets ............................................... 4069 429 i.e.
</TABLE>
- --------------
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RI-2
FDIC Certificate No.: 0 2 4 9 9
-----------
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
--------------
Dollar Amounts in Thousands Year-to-date
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Interest income (continued) RIAD Bil Mil Thou
f. Interest income on federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs.............................. 4020 25,381 1.f.
g. Total interest income (sum of items 1.a through 1.f)................. 4107 2,493,582 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts)............. 4508 10,989 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs)................. 4509 196,360 2.a.(1)(b)(1)
(2) Other savings deposits................................ 4511 38,216 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more...... 4174 130,069 2.a.(1)(b)(3)
(4) All other time deposits............................... 4512 310,562 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs.......................................... 4172 74,619 2.a.(2)
b. Expense of federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs......................... 4180 221,536 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and other borrowed money................................ 4185 145,395 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized
leases............................................................... 4072 630 2.d.
e. Interest on subordinated notes and debentures........................ 4200 47,710 2.e.
f. Total interest expense (sum of items 2.a through 2.e)................ 4073 1,176,086 2.f.
-----------------------
3. Net interest income (item 1.g minus 2.f)................................. RIAD 4074 1,317,496 3.
-----------------------
4. Provisions:
-----------------------
a. Provision for loan and lease losses.................................. RIAD 4230 24,179 4.a.
b. Provision for allocated transfer risk................................ RIAD 4243 0 4.b.
-----------------------
5. Noninterest income:
a. Income from fiduciary activities..................................... 4070 217,705 5.a.
b. Service charges on deposit accounts in domestic offices.............. 4080 169,866 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum
items 8.a through 8.d)............................................... A220 16,406 5.c.
d. Other foreign transaction gains (losses)............................. 4076 781 5.d.
e. Not applicable
f. Other noninterest income:
(1) Other fee income................................................ 5407 576,559 5.f.(1)
(2) All other noninterest income*................................... 5408 270,460 5.f.(2)
-----------------------
g. Total noninterest income (sum of items 5.a through 5.f).............. RIAD 4079 1,251,777 5.g.
6. a. Realized gains (losses) on held-to-maturity securities............... RIAD 3521 1 6.a.
b. Realized gains (losses) on available-for-sale securities............. RIAD 3196 16,196 6.b.
-----------------------
7. Noninterest expense:
a. Salaries and employee benefits....................................... 4135 480,905 7.a.
b. Expenses of premises and fixed assets (net of rental income)
(excluding salaries and employee benefits and mortgage interest)..... 4217 164,769 7.b.
c. Other noninterest expense*........................................... 4092 942,296 7.c.
-----------------------
d. Total noninterest expense (sum of items 7.a through 7.c)............. RIAD 4093 1,587,970 7.d.
-----------------------
8. Income (loss) before income taxes and extraordinary items and other
-----------------------
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) RIAD 4301 973,321 8.
9. Applicable income taxes (on item 8)...................................... RIAD 4302 397,990 9.
-----------------------
10. Income (loss) before extraordinary items and other adjustments (item 8
-----------------------
minus 9)................................................................. RIAD 4300 575,331 10.
-----------------------
</TABLE>
- --------------------
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RI-3
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments:
a. Extraordinary items and other adjustments, gross of income taxes* ..... 4310 0 11.a.
b. Applicable income taxes (on item 11.a)* ............................... 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income taxes
(item 11.a minus 11.b) ................................................ RIAD 4320 0 11.c
12. Net income (loss) (sum of items 10 and 11.c) ............................. RIAD 4340 575,331 12.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------
I481 < -
Memoranda ------------
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after
August 7, 1986, that is not deductible for federal income tax purposes ......................... 4513 2,092 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices
(included in Schedule RI, item 8) .............................................................. 8431 33,068 M.2.
3.-4. Not applicable
5. Number of full-time equivalent employees on payroll at end of current period (round to Number
nearest whole number) .......................................................................... 4150 12,552 M.5.
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying push down MM DD YY
accounting this calendar year, report the date of the bank's acquisition ....................... 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments)
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): Bil Mil Thou
a. Interest rate exposures ..................................................................... 8757 2,536 M.8.a.
b. Foreign exchange exposures .................................................................. 8758 13,870 M.8.b.
c. Equity security and index exposures ......................................................... 8759 0 M.8.c.
d. Commodity and other exposures ............................................................... 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading:
a. Net increase (decrease) to interest income .................................................. 8761 (1,530) M.9.a.
b. Net (increase) decrease to interest expense ................................................. 8762 (7,731) M.9.b.
c. Other (noninterest) allocations ............................................................. 8763 235 M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions) .............................. A251 0 M.10.
--------------------
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
Legal Title of Bank: Fleet National Bank
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
Call Date: 9/30/96
ST-BK: 25-0590 FFIEC 031
Page RI-4
SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483 < -
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------- ---- --- --- ----
<S> <C> <C> <C> <C>
1. Total equity capital originally reported in the December
31, 1995, Reports of Condition and Income................ 3215 1,342,473 1.
2. Equity capital adjustments from amended Reports of
Income, net*............................................. 3216 0 2.
3. Amended balance end of previous calendar year
(sum of items 1 and 2)................................... 3217 1,342,473 3.
4. Net income (loss) (must equal Schedule RI, item 12)...... 4340 575,331 4.
5. Sale, conversion, acquisition, or retirement of
capital stock, net....................................... 4346 0 5.
6. Changes incident to business combinations, net........... 4356 4,161,079 6.
7. LESS: Cash dividends declared on preferred stock......... 4470 0 7.
8. LESS: Cash dividends declared on common stock............ 4460 625,239 8.
9. Cumulative effect of changes in accounting principles
from prior years* (see instructions for this schedule)... 4411 0 9.
10. Corrections of material accounting errors from prior
years* (see instructions for this schedule).............. 4412 0 10.
11. Change in net unrealized holding gains (losses) on
available-for-sale securities............................ 8433 (30,167) 11.
12. Foreign currency translation adjustments................. 4414 0 12.
13. Other transactions with parent holding company* (not
included in items 5, 7, or 8 above)...................... 4415 (1,003,722) 13.
14. Total equity capital end of current period (sum of
items 3 through 13) (must equal Schedule RC, item 28).... 3210 4,419,755 14.
- -----------
*Describe on Schedule RI-E--Explanations.
</TABLE>
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES
IN ALLOWANCE FOR LOAN AND LEASE LOSSES
PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
I486 < -
------------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
------------------------------------------------
Calendar year-to-date
------------------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ---------------------------------------------------------- ---- --- --- ---- ---- --- --- ----
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate: ////////////////////////////////////////////////////////////
a. To U.S. addressees (domicile)....................... 4651 52,012 4661 10,568 1.a.
b. To non-U.S. addressees (domicile)................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances
of other banks: ////////////////////////////////////////////////////////////
a. To U.S. banks and other U.S. depository institutions 4653 0 4663 0 2.a.
b. To foreign banks.................................... 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other
loans to farmers....................................... 4655 6 4665 89 3.
4. Commercial and industrial loans: ////////////////////////////////////////////////////////////
a. To U.S. addressees (domicile)....................... 4645 58,172 4617 39,649 4.a.
b. To non-U.S. addressees (domicile)................... 4646 0 4618 102 4.b.
5. Loans to individuals for household, family, and /////////////////////////////////////////////////////////////
other personal expenditures: ////////////////////////////////////////////////////////////
a. Credit cards and related plans...................... 4656 1,340 4666 1,125 5.a.
b. Other (includes single payment, installment, and all
student loans)...................................... 4657 17,633 4667 2,946 5.b.
6. Loans to foreign governments and official institutions.. 4643 0 4627 0 6.
7. All other loans......................................... 4644 2,987 4628 750 7.
8. Lease financing receivables: /////////////////////////////////////////////////////////////
a. Of U.S. addressees (domicile)........................ 4658 11,644 4668 3,670 8.a.
b. Of non-U.S. addressees (domicile).................... 4659 0 4669 0 8.b.
Total (sum of items 1 through 8)........................ 4635 143,794 4605 58,899 9.
</TABLE>
6
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Page RI-5
Legal Title of Bank: Fleet National Bank
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RI-B -- CONTINUED
PART I. CONTINUED
<TABLE>
<CAPTION>
-------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
-------------------------------------------
Calendar year-to-date
-----------------------------------------------
Memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1-3. Not applicable
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-B, part I, items 4 and 7, above ......................... 5409 513 5410 1,374 M.4.
5. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part I, item 1, above):
a. Construction and land development ................................ 3582 189 3583 253 M.5.a.
b. Secured by farmland .............................................. 3584 145 3585 220 M.5.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit ................ 5411 3,647 5412 536 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties.. 5413 23,744 5414 2,707 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ........ 3588 4,055 3589 395 M.5.d.
e. Secured by nonfarm nonresidential properties ..................... 3590 20,232 3591 6,457 M.5.e.
-------------------------------------------
</TABLE>
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
<TABLE>
<CAPTION>
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income .. 3124 266,943 1.
2. Recoveries (must equal part I, item 9, column B above) ................................. 4605 58,899 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) .......................... 4635 143,794 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a) ................. 4230 24,179 4.
5. Adjustments* (see instructions for this schedule) ...................................... 4815 634,542 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC,
item 4.b) .............................................................................. 3123 840,769 6.
</TABLE>
- -----------------
* Describe on Schedule RI-E -- Explanations.
SCHEDULE RI-C -- APPLICABLE INCOME TAXES BY TAXING AUTHORITY
SCHEDULE RI-C IS TO BE REPORTED WITH THE DECEMBER REPORT OF INCOME.
<TABLE>
<CAPTION>
---------
I489 < -
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Federal ................................................................................... 4780 N/A 1.
2. State and local ........................................................................... 4790 N/A 2.
3. Foreign ................................................................................... 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ........ 4770 N/A 4.
---------------------------
5. Deferred portion of item 4 ................................... RIAD 4772 N/A 5.
-------------------------------------------------
</TABLE>
7
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Page RI-6
Legal Title of Bank: Fleet National Bank
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
<TABLE>
<CAPTION>
-------
I492
--------------------
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou < -
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs: //////////////////
a. Interest income booked................................................................... 4837 N/A 1.a.
b. Interest expense booked.................................................................. 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and //////////////////
IBFs (item 1.a minus 1.b)................................................................ 4839 N/A 1.c.
2. Adjustments for booking location of international operations: //////////////////
a. Net interest income attributable to international operations booked at domestic offices.. 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices.......... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b)..................................... 4842 N/A 2.c.
3. Noninterest income attributable to international operations: //////////////////
a. Noninterest income attributable to international operations.............................. 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations............. 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations....................... 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a //////////////////
minus 3.b and 3.c)....................................................................... 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital allocation //////////////////
adjustment (sum of items 1.c, 2.c, and 3.d).................................................. 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect //////////////////
the effects of equity capital on overall bank funding costs.................................. 4845 N/A 5.
6. Estimated pretax income attributable to international operations after capital allocation //////////////////
adjustment (sum of items 4 and 5)............................................................ 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in item 6..... 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7)............... 4341 N/A 8.
---------------------
Memoranda
---------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
1. Intracompany interest income included in item 1.a above...................................... 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above..................................... 4848 N/A M.2.
---------------------
PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED
BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S.
INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
--------------------
YEAR-to-date
---------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
1. Interest income booked at IBFs............................................................... 4849 N/A 1.
2. Interest expense booked at IBFs.............................................................. 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices //////////////////
(excluding IBFs): //////////////////
a. Gains (losses) and extraordinary items................................................... 5491 N/A 3.a.
b. Fees and other noninterest income........................................................ 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at //////////////////
domestic offices (excluding IBFs)............................................................ 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic //////////////////
offices (excluding IBFs)..................................................................... 4853 N/A 5.
---------------------
</TABLE>
8
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Page RI-7
Legal Title of Bank: Fleet National Bank
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RI-E--EXPLANATIONS
SCHEDULE RI-E IS TO BE COMPLETED EACH QUARTER ON A CALENDAR YEAR-TO-DATE BASIS.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
I495
--------------
Year-to-date
------------------------- < -
Dollars Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains on other real estate owned .............................................. 5415 0 1.a.
b. Net gains on sales of loans ....................................................... 5416 0 1.b.
c. Net gains on sales of premises and fixed assets ................................... 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI,
item 5.f.(2):
d. TEXT 4461 Income on Mortgages Held For Resale 4461 115,563 1.d.
-----------------------------------------------------------------------------------
e. TEXT 4462 Gain From Branch Divestitures 4462 77,976 1.e.
-----------------------------------------------------------------------------------
f. TEXT 4463 4463 1.f.
--- -------------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets ......................................... 4531 207,168 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned ............................................. 5418 0 2.b.
c. Net losses on sales of loans ...................................................... 5419 0 2.c.
d. Net losses on sales of premises and fixed assets .................................. 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI,
Item 7.c:
e. TEXT 4464 Intercompany Corporate Support Function Charges 4464 219,071 2.e.
-----------------------------------------------------------------------------------
f. TEXT 4467 Intercompany Data Processing & Programming Charges 4467 238,115 2.f.
-----------------------------------------------------------------------------------
g. TEXT 4468 4468 2.g.
-----------------------------------------------------------------------------------
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable
income tax effect (from Schedule RI, item 11.b) (itemize and describe all
extraordinary items and other adjustments):
a. (1) TEXT 4469 4469 3.a.(1)
-------------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4486 3.a.(2)
------------ -----------
b. (1) TEXT 4487 4487 3.b.(1)
-------------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4488 3.b.(2)
------------ -----------
c. (1) TEXT 4489 4489 3.c.(1)
-------------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4491 3.c.(2)
-----------
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2)
(itemize and describe all adjustments:
a. TEXT 4492 4492 4.a.
-----------------------------------------------------------------------------------
b. TEXT 4493 4493 4.b.
-----------------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting
principles):
a. TEXT 4494 4494 5.a.
-----------------------------------------------------------------------------------
B. TEXT 4495 4495 5.b.
-----------------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A,
item 10) (itemize and describe all corrections):
a. TEXT 4496 4496 6.a.
-----------------------------------------------------------------------------------
b. TEXT 4497 4497 6.b.
-----------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Page RI-8
Legal Title of Bank: Fleet National Bank
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RI-E--CONTINUED
<TABLE>
<CAPTION>
--------------
Year-to-date
-----------------------
Dollars Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13)
(itemize and describe all such transactions):
a. TEXT 4498 Fleet National Bank Surplus Distribution to FFG 4498 (1,003,722) 7.a.
--------------------------------------------------------------------------------
b. TEXT 4499 4499 7.b
--------------------------------------------------------------------------------
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II,
item 5) (itemize and describe all adjustments):
a. TEXT 4521 12/31/95 ending Balance of Pooled Entities 4521 636,497 8.a.
--------------------------------------------------------------------------------
b. TEXT 4522 Divested Allowance Related to Sold Loans 4522 (1,955) 8.b.
-------------------------------------------------------------------------------- -----------------------
9. Other explanations (the space below is provided for the bank to briefly describe,
at its option, any other significant items affecting the Report of Income): I498 I499 < -
No comment /x/ (RIAD 4769) -----------------------
Other explanations (please type or print clearly):
(TEXT) 4769)
</TABLE>
10
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Page RC-1
Legal Title of Bank: Fleet National Bank
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFC Bil Mil Thou < -
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1)....................... 0081 3,929,278 1.a.
b. Interest-bearing balances(2)................................................ 0071 30,710 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A).................. 1754 284,288 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)................ 1773 7,315,890 2.b.
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
a. Federal funds sold.......................................................... 0276 32,521 3.a.
b. Securities purchased under agreements to resell............................. 0277 0 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C).................................RCFD 2122 32,002,964 4.a.
b. LESS: Allowance for loan and lease losses.............RCFD 3123 840,769 4.b.
c. LESS: Allocated transfer risk reserve.................RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b and 4.c)............................................... 2125 31,162,195 4.d.
5. Trading assets (from Schedule RC-D)............................................ 3545 48,111 5.
6. Premises and fixed assets (including capitalized leases)....................... 2145 560,725 6.
7. Other real estate owned (from Schedule RC-M)................................... 2150 22,784 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M).......................................................... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding................... 2155 14,235 9.
10. Intangible assets (from Schedule RC-M)......................................... 2143 2,311,234 10.
11. Other assets (from Schedule RC-F).............................................. 2160 3,699,236 11.
12. Total assets (sum of items 1 through 11)....................................... 2170 49,411,207 12.
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-2
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION>
-----------------------
Dollar Amounts in Thousands Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E,
part I) ................................................................................. RCON 2200 33,574,312 13.a.
----------------------
(1) Noninterest-bearing(1) ...................................... RCON 6631 10,385,307 13.a.(1)
(2) Interest-bearing ............................................ RCON 6636 23,189,005 13.a.(2)
----------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E,
part II) ................................................................................ RCFN 2200 1,817,711 13.b.
----------------------
(1) Noninterest-bearing ......................................... RCFN 6631 36 13.b.(1)
(2) Interest-bearing ............................................ RCFN 6636 1,817,675 13.b.(2)
----------------------
14. Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased ................................................................. RCFD 0278 4,393,064 14.a.
b. Securities sold under agreements to repurchase .......................................... RCFD 0279 133,568 14.b
15. a. Demand notes issued to the U.S. Treasury ................................................ RCON 2840 1,589,048 15.a.
b. Trading liabilities (from Schedule RC-D) ................................................ RCFD 3548 34,078 15.b.
16. Other borrowed money:
a. With a remaining maturity of one year or less ........................................... RCFD 2332 575,600 16.a.
b. With a remaining maturity of more than one year ......................................... RCFD 2333 647,284 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ............................. RCFD 2910 11,403 17.
18. Bank's liability on acceptances executed and outstanding ................................... RCFD 2920 14,235 18.
19. Subordinated notes and debentures .......................................................... RCFD 3200 1,213,219 19.
20. Other liabilities (from Schedule RC-G) ..................................................... RCFD 2930 987,930 20.
21. Total liabilities (sum of items 13 through 20) ............................................. RCFD 2948 44,991,452 21.
22. Limited-life preferred stock and related surplus ........................................... RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus .............................................. RCFD 3838 125,000 23.
24. Common stock ............................................................................... RCFD 3230 19,487 24.
25. Surplus (exclude all surplus related to preferred stock) ................................... RCFD 3839 2,551,927 25.
26. a. Undivided profits and capital reserves .................................................. RCFD 3632 1,739,604 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities .................. RCFD 8434 (16,263) 26.b
27. Cumulative foreign currency translation adjustments ........................................ RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) .......................................... RCFD 3210 4,419,755 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21,
22, and 28) ................................................................................ RCFD 3300 49,411,207 29.
----------------------
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<CAPTION>
Number
------------------
<S> <C> <C> <C>
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external
auditors as of any date during 1995 ........................................................... RCFD 6724 N/A M.1.
------------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-3
City State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held for trading.
<TABLE>
<CAPTION>
C405
--------------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------- ---------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and
coin..................................................................... 0022 3,629,071 1.
a. Cash items in process of collection and unposted debits............... 0020 2,937,263 1.a.
b. Currency and coin..................................................... 0080 691,808 1.b.
2. Balances due from depository institutions in the U.S..................... 0082 153,295 2.
a. U.S. branches and agencies of foreign banks (including their IBFs).... 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository institutions
in the U.S. (including their IBFs).................................... 0085 153,370 2.b
3. Balances due from banks in foreign countries and foreign central banks... 0070 8,998 3.
a. Foreign branches of other U.S. Banks.................................. 0073 454 3.a.
b. Other banks in foreign countries and foreign central banks............ 0074 9,045 3.b.
4. Balances due from Federal Reserve Banks.................................. 0090 168,048 0090 168,048 4.
5. Total (sum of items 1 through 4) (total of column A must equal
Schedule RC, sum of items 1.a and 1.b)................................... 0010 3,959,988 0010 3,959,412 5.
--------------------------------------------
Memorandum Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2,
column B above) 0050 122,585 M.1.
</TABLE>
SCHEDULE RC-B--SECURITIES
Exclude assets held for trading.
<TABLE>
<CAPTION>
C410
-----------------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
------------------------------------------- -------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
-------------------- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities....... 0211 250 0213 250 1286 1,501,551 1287 1,483,819 1.
2. U.S. Government agency and
corporation obligations
(exclude mortgage-backed
securities):
a. Issued by U.S. Government
agencies(2)................. 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Government-
sponsored agencies(3)....... 1294 0 1295 0 1297 499 1298 503 2.b.
-----------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-4
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-B--CONTINUED
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
------------------------------------ ----------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
----------------- ----------------- ----------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------- ----------------- ----------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states
and political subdivisions
in the U.S.:
a. General obligations...... 1676 172,838 1677 172,764 1678 0 1679 0 3.a.
b. Revenue obligations...... 1681 13,265 1686 13,268 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations.. 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed
securities (MBS):
a. Pass-through securities:
(1) Guaranteed by
GNMA................ 1698 0 1699 0 1701 826,767 1702 821,306 4.a.(1)
(2) Issued by FNMA
and FHLMC........... 1703 886 1705 886 1706 4,672,031 1707 4,668,468 4.a.(2)
(3) Other pass-through
securities.......... 1709 4 1710 4 1711 4 1713 0 4.a.(3)
b. Other mortgage-backed
securities (include
CMOs, REMICs, and
stripped MBS):
(1) Issued or
guaranteed by FNMA,
FHLMC, or GNMA...... 1714 0 1715 0 1716 0 1717 0 4.b.(1)
(2) Collateralized by
MBS issued or
guaranteed by FNMA,
FHLMC, or GNMA...... 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other mortgage-
backed securities... 1733 0 1734 0 1735 481 1736 481 4.b.(3)
5. Other debt securities:
a. Other domestic debt
securities.............. 1737 0 1738 0 1739 715 1741 709 5.a.
b. Foreign debt
securities.............. 1742 97,045 1743 84,773 1744 0 1746 0 5.b.
6. Equity securities:
a. Investments in mutual
funds................... 1747 28,870 1748 28,870 6.a.
b. Other equity securities
with readily determin-
able fair values........ 1749 0 1751 0 6.b.
c. All other equity
securities(1)........... 1752 311,734 1753 311,734 6.c.
7. Total (sum of items 1
through 6) (total of
column A must equal
Schedule RC, item 2.a)
(total of column D must
equal Schedule RC,
item 2.b).................. 1754 284,288 1771 271,945 1772 7,342,648 1773 7,315,890 7.
</TABLE>
- ------------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-5
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-B--CONTINUED
<TABLE>
<CAPTION>
--------
Memoranda C412
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Pledged securities(2) ................................................................. 0416 3,825,264 M.1.
2. Maturity and repricing data for debt securities(2), (3), (4) (excluding those in
nonaccrual status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less ........................................................... 0343 70,352 M.2.a.(1)
(2) Over three months through 12 months ............................................ 0344 102,839 M.2.a.(2)
(3) Over one year through five years ............................................... 0345 2,792,361 M.2.a.(3)
(4) Over five years ................................................................ 0346 2,959,066 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through
2.a.(4) ........................................................................ 0347 5,924,618 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently ................................................... 4544 504,558 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ................ 4545 830,398 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ......... 4551 0 M.2.b.(3)
(4) Less frequently than every five years .......................................... 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through
2.b.(4) ........................................................................ 4553 1,334,956 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal
total debt securities from Schedule RC-B, sum of items 1 through 5, columns A and D,
minus nonaccrual debt securities included in Schedule RC-N, item 9, column C) ...... 0393 7,259,574 M.2.c.
3. Not applicable
4. Held-to-maturity debt securities restructured and in compliance with modified terms
(included in Schedule RC-B, items 3 through 5, column A, above) ....................... 5365 0 M.4.
5. Not applicable
6. Floating rate debt securities with a remaining maturity of one year or less(2), (4)
(included in memorandum items 2.b.(1) through 2.b.(4) above) .......................... 5519 4,700 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-
sale or trading securities during the calendar year-to-date (report the amortized cost
at date of sale or transfer) .......................................................... 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale
accounts in Schedule RC-B, item 4.b):
a. Amortized cost ..................................................................... 8780 0 M.8.a.
b. Fair value ......................................................................... 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in
Schedule RC-B, items 2, 3, and 5):
a. Amortized cost ..................................................................... 8782 0 M.9.a.
b. Fair value ......................................................................... 8783 0 M.9.b.
---------------------
</TABLE>
- --------------
(2) Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
(3) Excludes equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-6
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading.
<TABLE>
<CAPTION>
C415
----------------------- -----------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
----------------------- -----------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ------------------------------------------------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate............................. 1410 11,784,177 1.
a. Construction and land development...................... 1415 548,373 1.a.
b. Secured by farmland (including farm residential and
other improvements).................................... 1420 2,097 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family
residential properties and extended under lines
of credit.......................................... 1797 1,993,022 1.c.(1)
(2) All other loans secured by 1-4 family residential
properties:
(a) Secured by first liens......................... 5367 4,386,615 1.c.(2)(a)
(b) Secured by junior liens........................ 5368 492,852 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential
properties............................................. 1460 534,555 1.d.
e. Secured by nonfarm nonresidential properties........... 1480 3,826,663 1.e.
2. Loans to depository institutions:
a. To commercial banks in the U.S. ....................... 1505 184,751 2.a.
(1) To U.S. branches and agencies of foreign banks.... 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. ............ 1507 184,751 2.a.(2)
b. To other depository institutions in the U.S. ......... 1517 13,595 1517 13,595 2.b.
c. To banks in foreign countries......................... 1510 1,346 2.c.
(1) To foreign branches of other U.S. banks........... 1513 160 2.c.(1)
(2) To other banks in foreign countries............... 1516 1,186 2.c.(2)
3. Loans to finance agricultural production and other
loans to farmers......................................... 1590 5,208 1590 5,208 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)......................... 1763 13,126,493 1763 13,078,732 4.a.
b. To non-U.S. addressees (domicile)..................... 1764 63,365 1764 30,053 4.b.
5. Acceptances of other banks:
a. Of U.S. banks......................................... 1756 0 1756 0 5.a.
b. Of foreign banks...................................... 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other
personal expenditures (i.e., consumer loans) (includes
purchased paper)......................................... 1975 2,129,035 6.
a. Credit cards and related plans (includes check credit
and other revolving credit plans)..................... 2008 98,959 6.a.
b. Other (includes single payment, installment, and all
student loans)........................................ 2011 2,030,076 6.b.
7. Loans to foreign governments and official institutions
(including foreign central banks)........................ 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of
states and political subdivisions in the U.S.
(includes nonrated industrial development obligations)... 2107 155,642 2107 155,642 8.
9. Other loans.............................................. 1563 2,082,709 9.
a. Loans for purchasing or carrying securities
(secured and unsecured)............................... 1545 157,698 9.a.
b. All other loans (exclude consumer loans).............. 1564 1,925,011 9.b.
10. Lease financing receivables (net of unearned income).... 2165 2,456,643 10.
a. Of U.S. addressees (domicile)......................... 2182 2,456,643 10.a.
b. Of non-U.S. addressees (domicile)..................... 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in
items 1-9 above.......................................... 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum
of items 1 through 10 minus item 11) (total of
column A must equal Schedule RC, item 4.a)............... 2122 32,002,964 2122 31,921,891 12.
</TABLE>
16
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-7
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
<TABLE>
<CAPTION>
(Column A) (Column B)
Consolidated Domestic
Bank Offices
----------------- -----------------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- -------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .................. 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms
(included in Schedule RC-C, part I, above and not reported as past due
or nonaccrual in Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile) ...................................... 1687 6,593 M.2.a.(1)
(2) To non-U.S. addressees (domicile) .................................. 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to
individuals for household, family, and other personal expenditures) .... 8691 1,770 M.2.b.
c. Commercial and industrial loans to and lease financing receivables
of non-U.S. addresses (domicile) included in Memorandum item 2.b
above................................................................... 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those in
nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity of:
(1) Three months or less ............................................... 0348 1,695,265 M.3.a.(1)
(2) Over three months through 12 months ............................... 0349 1,681,892 M.3.a.(2)
(3) Over one year through five years ................................... 0356 5,059,493 M.3.a.(3)
(4) Over five years .................................................... 0357 1,758,418 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum
items 3.a.(1) through 3.a.(4))...................................... 0358 10,195,068 M.3.a.(5)
b. Floating rate loans with a repricing frequency of:
(1) Quarterly or more frequently ....................................... 4554 18,981,879 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly .... 4555 1,675,386 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than
annually ........................................................... 4561 758,500 M.3.b.(3)
(4) Less frequently than every five years .............................. 4564 79,024 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1)
through 3.b.(4)) ................................................... 4567 21,494,789 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and
3.b.(5)) (must equal the sum of total loans and leases, net, from
Schedule RC-C, part I, item 12, plus unearned income from
Schedule RC-C, part I, item 11, minus total nonaccrual loans and
leases from Schedule RC-N, sum of items 1 through 8, column C) ......... 1479 31,689,857 M.3.c.
d. Floating rate loans with a remaining maturity of one year or less
(included in Memorandum items 3.b.(1) through 3.b.(4) above) ........... A246 0 M.3.d.
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ............... 2746 305,298 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I,
above) ..................................................................... 5369 0 M.5.
------------------------
6. Adjustable rate closed-end loans secured by first liens on 1-4 family RCON Bil Mil Thou
residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), ------------------------
column B, page RC-6) ....................................................... <C> <C> <C>
5370 1,706,916 M.6.
- --------------
(1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
-----
C420
-----------------------
Dollar Amounts in Thousands Bil Mil Thou
- -------------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C>
ASSETS
1. U.S. Treasury securities in domestic offices ................................................ RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage-
backed securities) .......................................................................... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA
(include CMOs, REMICs, and stripped MBS) ................................................. RCON 3535 0 4.b.
c. All other mortgage-backed securities ..................................................... RCON 3536 0 4.c.
5. Other debt securities in domestic offices ................................................... RCON 3537 0 5.
6. Certificates of deposit in domestic offices ................................................. RCON 3538 0 6.
7. Commercial paper in domestic offices ........................................................ RCON 3539 0 7.
8. Bankers acceptances in domestic offices ..................................................... RCON 3540 0 8.
9. Other trading assets in domestic offices .................................................... RCON 3541 0 9.
10. Trading assets in foreign offices ........................................................... RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity
contracts:
a. In domestic offices ...................................................................... RCON 3543 43,581 11.a.
b. In foreign offices ....................................................................... RCFN 3544 4,530 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... RCFD 3545 48,111 12.
-----------------------
LIABILITIES Bil Mil Thou
-----------------------
13. Liability for short positions ............................................................... RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity
contracts ................................................................................... RCFD 3547 34,078 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... RCFD 3548 34,078 15.
-----------------------
</TABLE>
18
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-9
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-E--DEPOSIT LIABILITIES
PART I. DEPOSITS IN DOMESTIC OFFICES
<TABLE>
<CAPTION>
--------
C425
---------------------------------------------------------------
Nontransaction
Transaction Accounts Accounts
------------------------------------------- ---------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
------------------- ------------------- -------------------
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- ------------------------------------------------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations ....... 2201 9,213,807 2240 8,820,326 2346 21,863,734 1.
2. U.S. Government ................................... 2202 36,789 2280 36,769 2520 29,856 2.
3. States and political subdivisions in the U.S. ..... 2203 683,890 2290 461,287 2530 680,014 3.
4. Commercial banks in the U.S. ...................... 2206 653,505 2310 653,505 2550 771 4.
5. Other depository institutions in the U.S. ......... 2207 225,732 2312 225,732 2349 2,968 5.
6. Banks in foreign countries ........................ 2213 11,881 2320 11,881 2236 0 6.
7. Foreign governments and official institutions
(including foreign central banks) ................. 2216 1,386 2300 1,386 2377 0 7.
8. Certified and official checks ..................... 2330 169,979 2330 169,979 8.
9. Total (sum of items 1 through 8) (sum of
columns A and C must equal Schedule RC,
item 13.a) ........................................ 2215 10,996,969 2210 10,380,865 2385 22,577,343 9.
------------------- ------------------- -------------------
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts .......................... 6835 2,679,044 M.1.a.
b. Total brokered deposits ...................................................................... 2365 1,542,597 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations of less than $100,000 ............................................ 2343 2,240 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than
$100,000 and participated out by the broker in shares of $100,000 or less ................ 2344 1,540,357 M.1.c.(2)
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining
maturity of one year or less (included in Memorandum item 1.c.(1) above) ................. A243 110 M.1.d.(a)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining
maturity of one year or less (included in Memorandum item 1.b above) ..................... A244 601,205 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S.
reported in item 3 above which are secured or collateralized as required under state law) .... 5590 477,275 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d
must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs) .................................................... 6810 10,310,776 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) .................................................. 0352 2,519,554 M.2.a.(2)
b. Total time deposits of less than $100,000 .................................................... 6648 7,097,828 M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................. 6645 2,649,185 M.2.c.
d. Open-account time deposits of $100,000 or more ............................................... 6646 0 M.2.d.
3. All NOW accounts (included in column A above) .................................................... 2398 616,104 M.3.
-------------------
4. Not applicable
</TABLE>
19
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Legal Title of Bank: Fleet National Bank Page PR-10
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-E--CONTINUED
PART I. CONTINUED
Memoranda (continued)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of
Memorandum items 5.a.(1) through 5.b.(3) must equal memorandum item 2.b above):(1)
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of:
(1) Three months or less ................................................................ A225 1,708,719 M.5.a.(1)
(2) Over three months through 12 months ................................................. A226 3,119,370 M.5.a.(2)
(3) Over one year ....................................................................... A227 2,182,483 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of:
(1) Quarterly or more frequently ........................................................ A228 87,256 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ..................... A229 0 M.5.b.(2)
(3) Less frequently than annually ....................................................... A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of
one year or less (included in memorandum items 5.b.(1) through 5.b.(3) above) ........... A231 59,897 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates
of deposit of $100,000 or more and open-account time deposits of $100,000 or more)
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum
items 2.c and 2.d above):(1)
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of:
(1) Three months or less ................................................................ A232 660,156 M.6.a.(1)
(2) Over three months through 12 months ................................................. A233 868,600 M.6.a.(2)
(3) Over one year through five years .................................................... A234 1 ,111,843 M.6.a.(3)
(4) Over five years ..................................................................... A235 8,586 M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of:
(1) Quarterly or more frequently ........................................................ A236 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ..................... A237 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually .............. A238 0 M.6.b.(3)
(4) Less frequently than every five years ............................................... A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above) ........... A240 0 M.6.c.
-----------------
</TABLE>
- --------------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Legal Title of Bank: Fleet National Bank Page RC-11
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-E--CONTINUED
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND
AGREEMENT SUBSIDIARIES AND IBFS)
<TABLE>
<CAPTION>
-------------------------
Dollars Amounts in Thousands RCFN Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations........................................... 2621 1,746,651 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ....................... 2623 0 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks,
including their IBFs)............................................................... 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks)....... 2650 0 4.
5. Certified and official checks ........................................................ 2330 0 5.
6. All other deposits.................................................................... 2668 71,060 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b).................. 2200 1,817,711 7.
-------------------------
Memorandum Dollars Amounts in Thousands RCFN Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
1. Time deposits with a remaining maturity of one year or less
(included in Part II, item 7 above)................................................ A245 1,817,674 M.1.
</TABLE>
SCHEDULE RC-F--OTHER ASSETS
<TABLE>
<CAPTION>
C430
-----------------------------
Dollars Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Income earned, not collected on loans................................................. RCFD 2164 161,790 1.
2. Net deferred tax assets(1)............................................................ RCFD 2148 0 2.
3. Excess residential mortgage servicing fees receivable................................. RCFD 5371 153,788 3.
4. Other (itemize and describe amounts that exceed 25% of this item)..................... RCFD 2168 3,383,658 4.
------------- --------------------------
a. TEXT 3549 Mortgages Held For Resale RCFD 3549 1,555,298 4.a.
------------- ------------------------------------------
b. TEXT 3550 RCFD 3550 4.b.
------------- ------------------------------------------
c. TEXT 3551 RCFD 3551 4.c.
-----------------------------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11).................... RCFD 2160 3,699,236 5.
-------------------------
Memorandum Dollars Amounts in Thousands RCFN Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes........................ RCFD 5610 0 M.1.
</TABLE>
SCHEDULE RC-G--OTHER LIABILITIES
<TABLE>
<CAPTION>
C435
-----------------------------
Dollars Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2)..................... RCON 3645 47,460 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable).......... RCFD 3646 565,126 1.b.
2. Net deferred tax liabilities(1)....................................................... RCFD 3049 268,231 2.
3. Minority interest in consolidated subsidiaries........................................ RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item)..................... RCFD 2938 107,113 4.
------------- --------------------------
a. TEXT 3552 RCFD 3552 4.a.
------------- ------------------------------------------
b. TEXT 3553 RCFD 3553 4.b.
------------- ------------------------------------------
c. TEXT 3554 RCFD 3554 4.c.
-----------------------------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20).................... RCFD 2930 987,930 5.
</TABLE>
- --------------
(1) See discussion of deferred income taxes in Glossary entry on"income taxes."
For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Legal Title of Bank: Fleet National Bank Page RC-12
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
<TABLE>
<CAPTION>
--------
C440 < -
--------------------
Domestic Offices
--------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................. 2155 14,235 1.
2. Bank's liability on acceptances executed and outstanding ...................................... 2920 14,235 2.
3. Federal funds sold and securities purchased under agreements to resell ........................ 1350 32,521 3.
4. Federal funds purchased and securities sold under agreements to repurchase .................... 2800 4,526,632 4.
5. Other borrowed money .......................................................................... 3190 1,222,884 5.
EITHER ////////////////////
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ................... 2163 N/A 6.
OR ////////////////////
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... 2941 1,800,174 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and ////////////////////
IBFs) ......................................................................................... 2192 49,324,712 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and ////////////////////
IBFs) ......................................................................................... 3129 43,104,783 9.
--------------------
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
--------------------
RCON Bil Mil Thou
--------------------
10. U.S. Treasury securities ...................................................................... 1779 1,484,069 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed ////////////////////
securities) ................................................................................... 1785 503 11.
12. Securities issued by states and political subdivisions in the U.S. ............................ 1786 186,103 12.
13. Mortgage-backed securities (MBS): ////////////////////
a. Pass-through securities: ////////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ........................................... 1787 5,490,660 13.a.(1)
(2) Other pass-through securities .......................................................... 1869 4 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): ////////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ........................................... 1877 0 13.b.(1)
(2) All other mortgage-backed securities ................................................... 2253 481 13.b.(2)
14. Other domestic debt securities ................................................................ 3159 709 14.
15. Foreign debt securities ....................................................................... 3160 97,045 15.
16. Equity securities: ////////////////////
a. Investments in mutual funds ................................................................ 3161 28,870 16.a.
b. Other equity securities with readily determinable fair values .............................. 3162 0 16.b.
c. All other equity securities ................................................................ 3169 311,734 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) ......... 3170 7,600,178 17.
--------------------
<CAPTION>
Memorandum (to be completed only by banks with ibfs and other "foreign" offices)
--------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
EITHER ////////////////////
1. Net due from the IBF of the domestic offices of the reporting bank ............................ 3051 0 M.1.
OR ////////////////////
2. Net due to the IBF of the domestic offices of the reporting bank .............................. 3059 N/A M.2.
--------------------
</TABLE>
22
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Legal Title of Bank: Fleet National Bank Page RC-13
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
C445
--------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)............... 2133 0 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I,
item 12, column A........................................................................... 2076 0 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4,
column A)................................................................................... 2077 0 3.
4. Total IBF liabilities (component of Schedule RC, item 21)................................... 2898 0 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E,
part II, items 2 and 3)..................................................................... 2379 0 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5 and 6).... 2381 0 6.
--------------------
</TABLE>
SCHEDULE RC-K--QUARTERLY AVERAGES(1)
<TABLE>
<CAPTION>
C455
------------------------------
Dollar Amounts in Thousands Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
1. Interest-bearing balances due from depository institutions........................ RCFD 3381 11,877 1.
2. U.S. Treasury securities and U.S. Government agency and corporation
obligations(2).................................................................... RCFD 3382 7,015,138 2.
3. Securities issued by states and political subdivisions in the U.S.(2)............. RCFD 3383 170,402 3.
4. a. Other debt securities(2)....................................................... RCFD 3647 98,284 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal
Reserve stock)................................................................. RCFD 3648 347,251 4.b.
5. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs....................................................................... RCFD 3365 34,682 5.
Loans:
a. Loans in domestic offices:
(1) Total loans................................................................ RCON 3360 28,984,270 6.a.(1)
(2) Loans secured by real estate............................................... RCON 3385 11,632,311 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers........ RCON 3386 5,556 6.a.(3)
(4) Commercial and industrial loans............................................ RCON 3387 12,739,363 6.a.(4)
(5) Loans to individuals for household, family, and other personal
expenditures............................................................... RCON 3388 2,145,195 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs...... RCFN 3360 70,538 6.b.
7. Trading assets.................................................................... RCFD 3401 78,267 7.
8. Lease financing receivables (net of unearned income).............................. RCFD 3484 2,345,903 8.
9. Total assets(4)................................................................... RCFD 3368 48,195,765 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS
accounts, and telephone and preauthorized transfer accounts) (exclude demand
deposits)......................................................................... RCON 3485 621,447 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs).......................................... RCON 3486 9,575,516 11.a.
b. Other savings deposits......................................................... RCON 3487 3,366,546 11.b.
c. Time certificates of deposit of $100,000 or more............................... RCON 3345 2,591,101 11.c.
d. All other time deposits........................................................ RCON 3469 7,248,888 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries,
and IBFs.......................................................................... RCFN 3404 1,891,869 12.
13. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in
IBFs.............................................................................. RCFD 3353 5,441,316 13.
14. Other borrowed money.............................................................. RCFD 3355 1,166,403 14.
-------------------------------
</TABLE>
- ----------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-14
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
C460
-----------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C>
1. Unused commitments:
a. Revolving, open-end lines secured by 1-4 family residential properties,
e.g., home equity lines.................................................... 3814 1,603,462 1.a.
b. Credit card lines.......................................................... 3815 35,582 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate....................... 3816 447,874 1.c.(1)
(2) Commitments to fund loans not secured by real estate................... 6550 467,237 1.c.(2)
d. Securities underwriting.................................................... 3817 0 1.d.
e. Other unused commitments................................................... 3818 18,958,713 1.e.
2. Financial standby letters of credit and foreign office guarantees............. 3819 2,194,339 2.
a. Amount of financial standby letters of credit conveyed to others
RCFD 3820 85,446 2.a.
3. Performance standby letters of credit and foreign office guarantees........... 3821 173,093 3.
a. Amount of performance standby letters of credit conveyed to others
RCFD 3822 11,025 3.a.
4. Commercial and similar letters of credit...................................... 3411 155,635 4.
5. Participations in acceptances (as described in the instructions)
conveyed to others by the reporting bank...................................... 3428 13,822 5.
6. Participations in acceptances (as described in the instructions)
acquired by the reporting (nonaccepting) bank................................. 3429 11,805 6.
7. Securities borrowed........................................................... 3432 0 7.
8. Securities lent (including customers' securities lent where the customer
is indemnified against loss by the reporting bank)............................ 3433 200,546 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been
treated as sold for Call Report purposes:
a. FNMA and FHLMC residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the
report date............................................................ 3650 239,132 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date... 3651 239,132 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan
pools:
(1) Outstanding principal balance of mortgages transferred as of the
report date............................................................ 3652 32,676 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date... 3653 32,676 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the
report date............................................................ 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date... 3655 0 9.c.(2)
d. Small business obligations transferred with recourse under Section 208
of the Riegle Community Development and Regulatory Improvement Act
of 1994:
(1) Outstanding principal balance of small business obligations
transferred as of the report date...................................... A249 0 9.d.(1)
(2) Amount of retained recourse on these obligations as of the
report date............................................................ A250 0 9.d.(2)
10. When-issued securities:
a. Gross commitments to purchase............................................. 3434 0 10.a.
b. Gross commitments to sell................................................. 3435 0 10.b.
11. Spot foreign exchange contracts............................................... 8765 1,897,509 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet
derivatives) (itemize and describe each component of this item over 25%
of Schedule RC, item 28, "Total equity capital").............................. 3430 0 12.
a. TEXT 3555 RCFD 3555 12.a.
b. TEXT 3556 RCFD 3556 12.b.
c. TEXT 3557 RCFD 3557 12.c.
d. TEXT 3558 RCFD 3558 12.d.
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-15
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-L--CONTINUED
<TABLE>
<CAPTION>
-----------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives)
itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital").................................................... 5591 0 13.
------------- --------------------------
a. TEXT 5592 RCFD 5592 13.a.
------------- ------------------------------------------
b. TEXT 5593 RCFD 5593 13.b.
------------- ------------------------------------------
c. TEXT 5594 RCFD 5594 13.c.
------------- ------------------------------------------
d. TEXT 5595 RCFD 5594 13.d.
-----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------
C461
---------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- ------------------------------ Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives ---------------------------------------------------------------------------------------
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
- ------------------------------ ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14. Gross amounts (e.g.,
notional amounts) (for each
column, sum of items 14.a
through 14.e must equal
sum of items 15, 16.a, and
16.b):
---------------------- --------------------- --------------------- --------------------
744,062 0 0 42,510 14.a.
---------------------- --------------------- --------------------- --------------------
a. Futures contracts...... RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
---------------------- --------------------- --------------------- --------------------
b. Forward contracts...... 2,569,500 1,809,728 0 27,422 14.b.
---------------------- --------------------- --------------------- --------------------
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
---------------------- --------------------- --------------------- --------------------
c. Exchange-traded option
contracts:
---------------------- --------------------- --------------------- --------------------
(1) Written options.... 0 0 0 0 14.c.(1)
---------------------- --------------------- --------------------- --------------------
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
---------------------- --------------------- --------------------- --------------------
(2) Purchased options.. 902,500 0 0 1,746 14.c.(2)
---------------------- --------------------- --------------------- --------------------
d. Over-the-counter option
contracts: RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
---------------------- --------------------- --------------------- --------------------
(1) Written options.... 1,251,332 1,443 0 0 14.d.(1)
---------------------- --------------------- --------------------- --------------------
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
---------------------- --------------------- --------------------- --------------------
(2) Purchased options.. 13,125,235 1,443 0 0 14.d.(2)
---------------------- --------------------- --------------------- --------------------
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
---------------------- --------------------- --------------------- --------------------
e. Swaps.................. 18,810,986 0 0 0 14.e.
---------------------- --------------------- --------------------- --------------------
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
---------------------- --------------------- --------------------- --------------------
15. Total gross notional
amount of derivative
contracts held for
trading................... 5,345,761 1,812,614 0 1,746 15.
---------------------- --------------------- --------------------- --------------------
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
---------------------- --------------------- --------------------- --------------------
16. Total gross notional
amount of derivative
contracts held for
purposes other than
trading:
---------------------- --------------------- --------------------- --------------------
a. Contracts not marked to
market................. 3,930,500 0 0 42,510 16.a.
---------------------- --------------------- --------------------- --------------------
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
---------------------- --------------------- --------------------- --------------------
b. Contracts not marked
to market.............. 28,127,354 0 0 27,422 16.b.
---------------------- --------------------- --------------------- --------------------
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
---------------------- --------------------- --------------------- --------------------
</TABLE>
25
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-16
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC--L--CONTINUED
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- ----------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives -------------------------------------------------------------------------------------
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17. Gross fair values of
derivative contracts:
a. Contracts held for
trading:
(1) Gross positive
fair value............. 8733 29,453 8734 18,658 8735 0 8736 61 17.a.(1)
(2) Gross negative
fair value............. 8737 20,216 8738 13,862 8739 0 8740 0 17.a.(2)
b. Contracts held for
purposes other than
trading that are marked
to market:
(1) Gross positive
fair value............. 8741 655 8742 0 8743 0 8744 2,261 17.b.(1)
(2) Gross negative
fair value 8745 4,613 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for
purposes other than
trading that are not
marked to market:
(1) Gross positive
fair value............. 8749 67,825 8750 0 8751 0 8752 123 17.c.(1)
(2) Gross negative
fair value............. 8753 112,527 8754 0 8755 0 8756 0 17.c.(2)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1.-2. Not applicable
3. Unused commitments with an original maturity exceeding one year that are reported in
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments
that are fee paid or otherwise legally binding)................................................. 3833 16,723,351 M.3.
a. Participations in commitments with an original maturity ------------------------
exceeding one year conveyed to others............................. RCFD 3834 | 1,632,422 M.3.a.
------------------------
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and performance) issued
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above............... 3377 332,359 M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that
have been securitized and sold without recourse (with servicing retained), amounts outstanding
by type of loan:
a. Loans to purchase private passenger automobiles (to be completed for the
September report only)....................................................................... 2741 6,842 M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans) (to be completed for the
September report only)....................................................................... 2743 0 M.5.c.
---------------------------
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-17
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-M--MEMORANDA
<TABLE>
<CAPTION>
C465
-------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal
shareholders, and their related interests as of the report date:
a. Aggregate amount of all extensions of credit to all executive officers, directors,
principal shareholders, and their related interests...................................... 6164 550,070 1.a
b. Number of executive officers, directors, and principal shareholders to whom the amount of
all extensions of credit by the reporting bank (including extensions of credit to related
interests) equals or exceeds the lesser of $500,000 or 5 percent Number
----------------
of total capital as defined for this purpose in agency regulations. RCFD 6165 22 1.b
----------------
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b)............... 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others
(include both retained servicing and purchased servicing):
a. Mortgages serviced under a GNMA contract ................................................ 5500 25,856,990 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer................................................... 5501 54,298 4.b.(1)
(2) Serviced without recourse to servicer................................................ 5502 34,252,992 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract............................................. 5503 184,834 4.c.(1)
(2) Serviced under a special option contract............................................. 5504 40,751,543 4.c.(2)
d. Mortgages serviced under other servicing contracts....................................... 5505 11,239,928 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must
equal Schedule RC, item 9):
a. U.S. addressees (domicile)............................................................... 2103 14,104 5.a.
b. Non-U.S. addressees (domicile)........................................................... 2104 131 5.b.
6. Intangible assets:
a. Mortgage servicing rights............................................................... 3164 1,534,859 6.a.
b. Other identifiable intangible assets:
(1) Purchased credit card relationships................................................. 5506 0 6.b.(1)
(2) All other identifiable intangible assets............................................ 5507 116,198 6.b.(2)
c. Goodwill................................................................................ 3163 660,177 6.c.
d. Total (sum of items 6.a through 6.c) (must equal schedule RC, item 10).................. 2143 2,311,234 6.d.
e. Amount of intangible assets (included in item 6.b. (2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes............... 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual stock dedicated to redeem the debt.. 3295 75,000 7.
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-18
FDIC Certificate No.: 0 2 4 9 9
-----------
SCHEDULE RC-M--CONTINUED
<TABLE>
<CAPTION>
-------------------------
Dollar Amounts in Thousands Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures........................ RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development in domestic offices...................... RCON 5508 2,221 8.a.(2)(a)
(b) Farmland in domestic offices............................................... RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices...................... RCON 5510 9,228 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices......... RCON 5511 441 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices...................... RCON 5512 10,894 8.a.(2)(e)
(f) In foreign offices......................................................... RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (Must equal Schedule RC, item 7)...... RCFD 2150 22,784 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures........................ RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies.. RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)...... RCFD 2130 0 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies............... RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC,
item 23, "Perpetual preferred stock and related surplus".............................. RCFD 3778 125,000 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include
proprietary, private label, and third party products):
a. Money market funds................................................................. RCON 6441 129,353 10.a.
b. Equity securities funds............................................................ RCON 8427 105,157 10.b.
c. Debt securities funds.............................................................. RCON 8428 10,646 10.c.
d. Other mutual funds................................................................. RCON 8429 0 10.d.
e. Annuities.......................................................................... RCON 8430 97,532 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through
10.e above)........................................................................ RCON 8784 220,741 10.f.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
--------------------
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December report only):
a. Reciprocal holdings of banking organizations' capital instruments....................... 3836 N/A M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments.................... 3837 N/A M.1.b.
--------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-19
FDIC Certificate No.: 0 2 4 9 9
-----------
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES,
AND OTHER ASSETS
<TABLE>
<CAPTION>
The FFIEC regards the information reported in ----
all of Memorandum item 1, in items 1 through 10, C470
column A, and in Memorandum items 2 through 4, -------------------------------------------------------------- < -
column A, as confidential. (Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
------------------ ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate: ////////////////// ////////////////// //////////////////
a. To U.S. addresses (domicile) ................. 1245 1246 63,732 1247 236,175 1.a.
b. To non-U.S. addressees (domicile) ............ 1248 1249 0 1250 0 1.b.
2. Loans to depository institutions and acceptances ///// ////////////////// //////////////////
of other banks: ///// ////////////////// //////////////////
a. To U.S. banks and other U.S. depository ///// ////////////////// //////////////////
institutions ................................. 5377 5378 160 5379 0 2.a.
b. To foreign banks ............................. 5380 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and ///// ////////////////// //////////////////
other loans to farmers .......................... 1594 1597 0 1583 715 3.
4. Commercial and industrial loans: ///// ////////////////// //////////////////
a. To U.S. addressees (domicile) ................ 1251 1252 5,283 1253 60,030 4.a.
b. To non-U.S. addressees (domicile) ............ 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and ///// ////////////////// //////////////////
other personal expenditures: ///// ////////////////// //////////////////
a. Credit cards and related plans ............... 5383 5384 1,272 5385 968 5.a.
b. Other (includes single payment, installment, ///// ////////////////// //////////////////
and all student loans) ....................... 5386 5387 22,269 5388 9,380 5.b.
6. Loans to foreign governments and official ///// ////////////////// //////////////////
institutions .................................... 5389 5390 0 5391 0 6.
7. All other loans ................................. 5459 5460 7,982 5461 645 7.
8. Lease financing receivables: ///// ////////////////// //////////////////
a. Of U.S. addressees (domicile) ................ 1257 1258 114 1259 5,194 8.a.
b. Of non-U.S. addressees (domicile) ............ 1271 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other ///// ////////////////// //////////////////
real estate owned and other repossessed assets) . 3505 3506 0 3507 25,944 9.
----- ------------------ ------------------
<CAPTION>
Amounts reported in items 1 through 8 above include guaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and have already been included in the amounts reported in
items 1 through 8.
------------------ ------------------ ------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
10. Loans and leases reported in items 1 ------------------ ------------------ ------------------
through 8 above which are wholly or partially ///// ////////////////// //////////////////
guaranteed by the U.S. Government ............... 5612 5613 16,166 5614 15,817 10.
a. Guaranteed portion of loans and leases ///// ////////////////// //////////////////
included in item 10 above .................... 5615 5616 15,781 5617 11,488 10.a.
------------------ ------------------ ------------------
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-20
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-N -- CONTINUED
<TABLE>
<CAPTION>
C473
------
(Column A) (Column B) (Column C)
Past Due Past Due 90 Nonaccrual
30 through 89 days or more
days and still and still
Memoranda accruing accruing
------------------ ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
--------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
1. Restructured loans and leases included in ////
Schedule RC-N, items 1 through 8, above (and not ////
reported in Schedule RC-C, part I, Memorandum ////
item 2).............................................. 1658
2. Loans to finance commercial real estate, ////
construction, and land development activities ////
(not secured by real estate) included in ///// ////////////////// //////////////////
Schedule RC-N, items 4 and 7, above................. 6558 6559 0 6560 2,851 M.2.
---- ------------------ ------------------
3. Loans secured by real estate in domestic offices RCON RCON Bil Mil Thou RCON Bil Mil Thou
---- ------------------ ------------------
(included in Schedule RC-N, item 1, above): ///// ////////////////// //////////////////
a. Construction and land development................ 2759 2769 589 3492 22,571 M.3.a.
b. Secured by farmland.............................. 3493 3494 0 3495 159 M.3.b.
c. Secured by 1-4 family residential properties: ///// ////////////////// //////////////////
(1) Revolving, open-end loans secured by ///// ////////////////// //////////////////
1-4 family residential properties and ///// ////////////////// //////////////////
extended under lines of credit............... 5398 5399 3,769 5400 13,509 M.3.c.(1)
(2) All other loans secured by 1-4 family ///// ////////////////// //////////////////
residential properties....................... 5401 5402 53,378 5403 90,447 M.3.c.(2)
d. Secured by multifamily (5 or more) residential ///// ////////////////// //////////////////
properties....................................... 3499 3500 774 3501 9,472 M.3.d.
e. Secured by nonfarm nonresidential properties..... 3502 3503 5,222 3504 100,017 M.3.e.
---- ------------------ ------------------
</TABLE>
<TABLE>
<CAPTION>
---- ------------------
(Column B)
Pa Past due 90
thr? days or more
---- ------------------
RCFD RCFD Bil Mil Thou
---- ------------------
<S> <C> <C>
4. Interest rate, foreign exchange rate, and other ///// //////////////////
commodity and equity contracts: ///// //////////////////
a. Book value of amounts carried as assets.......... 3522 3528 0 M.4.a.
b. Replacement cost of contracts with a ///// //////////////////
positive replacement cost........................ 3529 3530 0 M.4.b.
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590
Address: One Monarch Place Page RC-21
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
SCHEDULE RC-O -- OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS
</TABLE>
<TABLE>
<CAPTION>
C475
-----------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------- -----------------------
<S> <C> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits....................................... 0030 64 1.a.
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits.................... 0031 N/A 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1)....... 0032 N/A 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits...................................... 3510 64 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits................... 3512 N/A 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)...... 3514 N/A 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not
included in total deposits in domestic offices)............................... 3520 145,532 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured
branches in Puerto Rico and U.S. territories and possessions (not included in
total deposits):
a. Demand deposits of consolidated subsidiaries............................... 2211 194,247 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries.................. 2351 17,598 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries....... 5514 9 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories
and possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II)... 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included
in Schedule RC-E, Part II)................................................. 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches
(included in Schedule RC-G, item 1.b)...................................... 5515 0 5.c.
Item 6 is not applicable to state nonmember banks that have not been authorized
by the Federal Reserve to act as pass-through correspondents.
6. Reserve balances actually passed through to the Federal Reserve by the
reporting bank on behalf of its respondent depository institutions that are
also reflected as deposit liabilities of the reporting bank:
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I,
item 4 or 5, column B)..................................................... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in
Schedule RC-E, Part I, item 4 or 5, column A or C, but not column B)....... 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1)
a. Unamortized premiums....................................................... 5516 786 7.a.
b. Unamortized discounts...................................................... 5517 0 7.b.
- -------------------------------------------------------------------------------------------------------------------------
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions acquired under
Section 5(d)(3) of the Federal Deposit Insurance Act (from most recent FDIC
Oakar Transaction Worksheet(s))............................................... 5518 2,188,589 8.
- -------------------------------------------------------------------------------------------------------------------------
9. Deposits in lifeline accounts................................................. 5596 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in
total deposits in domestic offices)........................................... 8432 0 10.
</TABLE>
- ---------------
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists
of nontransaction accounts and all transaction accounts other than demand
deposits.
31
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-22
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-O--CONTINUED
<TABLE>
<CAPTION>
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for //////////////////
certain reciprocal demand balances: //////////////////
a. Amount by which demand deposits would be reduced if reciprocal demand balances //////////////////
between the reporting bank and savings associations were reported on a net basis //////////////////
rather than a gross basis in Schedule RC-E ............................................... 8785 0 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances //////////////////
between the reporting bank and U.S. branches and agencies of foreign banks were //////////////////
reported on a gross basis rather than a net basis in Schedule RC-E ....................... A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of //////////////////
collection were included in the calaculation of net reciprocal demand balances between //////////////////
the reporting bank and the domestic offices of U.S. banks and savings associations //////////////////
in Schedule RC-E ......................................................................... A182 0 11.c.
------------------
<CAPTION>
Memoranda (To Be Completed Each Quarter Except As Noted)
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and //////////////////
1.b.(1) must equal Schedule RC, item 13.a): //////////////////
a. Deposit accounts of $100,000 or less: //////////////////
(1) Amount of deposit accounts of $100,000 or less ....................................... 2702 18,512,871 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number //////////////////
--------------------------
completed for the June report only) ....................... RCON 3779 N/A ////////////////// M.1.a.(2)
--------------------------
b. Deposit accounts of more than $100,000: //////////////////
(1) Amount of deposit accounts of more than $100,000 ..................................... 2710 15,061,441 M.1.b.(1)
Number //////////////////
--------------------------
(2) Number of deposit accounts of more than $100,000 .......... RCON 2722 28,530 ////////////////// M.1.b.(2)
----------------------------------------------
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or YES NO
procedure for determining a better estimate of uninsured deposits than the ------------------
estimate described above ................................................................. 6861 /// x M.2.a.
------------------
RCON Bil Mil Thou
b. If the box marked YES has been checked, report the estimate of uninsured deposits ------------------
determined by using your bank's method or procedure ...................................... 5597 N/A M.2.b.
------------------
- -----------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: C477 < -
----
Pamela S. Flynn, Vice President (401) 278-5194
- ------------------------------------------------------------------------------ --------------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-23
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
</TABLE>
SCHEDULE RC-R--CONTINUED
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C> <C> <C> <C>
--------------
C480
1. Test for determining the extent to which Schedule RC-R must be completed. To be ---------------
completed only by banks with total assets of less than $1 billion. Indicate in the Yes No
appropriate box at the right whether the bank has total capital greater than or -------------------------
equal to eight percent of adjusted total assets ..................................... RCFD 6056 1.
-------------------------
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S.
Government agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the
allowance for loan and lease losses and selected off-balance sheet items as reported on Schedule RC-L
(see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the
box marked NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is
less than eight percent or that the bank is not in compliance with the risk-based capital guidelines.
-----------------------------------------------------------------
NOTE: All banks are required to complete items 2 and 3 below.
See optional worksheet for items 3.a through 3.f. ------------------------------------------
----------------------------------------------------------------- (Column A) (Column B)
Dollar Amounts in Thousands Subordinated Debt(1) Other
- ---------------------------------------------------------------------- and Intermediate Limited-Life
2. Subordinated debt(1) and other limited-life capital instruments Term Preferred Stock Capital Instruments
(original weighted average maturity of at least five years) -------------------- --------------------
with a remaining maturity of: RDFD Bil Mil Thou RCFD Bil Mil Thou
------------------------------------------
a. One year or less................................................ 3780 25,737 3786 0 2.a.
b. Over one year through two years................................. 3781 737 3787 0 2.b.
c. Over two years through three years.............................. 3782 10,745 3788 0 2.c.
d. Over three years through four years............................. 3783 0 3789 0 2.d.
e. Over four years through five years.............................. 3784 0 3790 0 2.e.
f. Over five years................................................. 3785 1,101,000 3791 0 2.f.
------------------------------------------
3. Amounts used in calculated regulatory capital ratios (report amounts
determined by the bank for its own internal regulatory capital --------------------
analyses consistent with applicable capital standards): RCFD Bil Mil Thou
--------------------
a. Tier 1 capital........................................................................ 8274 3,659,643 3.a.
b. Tier 2 capital........................................................................ 8275 1,757,001 3.b.
c. Total risk-based capital.............................................................. 3792 5,416,644 3.c.
d. Excess allowance for loan and lease losses............................................ A222 264,213 3.d.
e. Risk-weighted assets (net of all deductions, including excess allowance).............. A223 45,860,269 3.e.
f. "Average total assets" (net of all assets deducted from Tier 1 capital)(2)............ A224 47,419,390 3.f.
------------------------------------------
(Column A) (Column B)
Items 4-9 and Memoranda items 1 and 2 are to be completed Assets Credit Equiv-
by banks that answered NO to Item 1 above and Recorded alent Amount
by banks with total assets of $1 billion or more. on the of Off-Balance
Balance Sheet Sheet Items(3)
-------------------- --------------------
4. Assets and credit equivalent amounts of off-balance sheet items RCFD Bil Mil Thou RCFD Bil Mil Thou
assigned to the Zero percent risk category: -------------------- --------------------
a. Assets recorded on the balance sheet:
(1) Securities issued by, other claims on, and claims
unconditionally guaranteed by, the U.S. Government
and its agencies and other OECD central governments......... 3794 2,335,793 4.a.(1)
(2) All other................................................... 3795 968,339 4.a.(2)
b. Credit equivalent amount of off-balance sheet items............. 3796 296,454 4.b.
------------------------------------------
</TABLE>
- ----------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
Call Date: 9/30/96 ST-BK: 25-0590 FFIEC 031
Legal Title of Bank: Fleet National Bank Page RC-24
Address: One Monarch Place
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 0 2 4 9 9
---------
SCHEDULE RC-R--CONTINUED
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
----------------------- -----------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet:
(1) Claims conditionally guaranteed by the U.S.
Government and its agencies and other OECD
central governments................................ 3798 692,459 5.a.(1)
(2) Claims collateralized by securities issued by the
U.S. Government and its agencies and other OECD
central governments; by securities issued by
U.S. Government-sponsored agencies; and by cash
on deposit......................................... 3799 0 5.a.(2)
(3) All other.......................................... 3800 8,538,080 5.a.(3)
b. Credit equivalent amount of off-balance sheet items.... 3801 926,409 5.b.
6. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet................... 3802 5,601,621 6.a.
b. Credit equivalent amount of off-balance sheet items.... 3803 413,089 6.b.
7. Assets and credit equivalent amount of off-balance
sheet items assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet................... 3804 32,091,416 7.a.
b. Credit equivalent amount of off-balance sheet items.... 3805 9,770,697 7.b.
8. Balance sheet asset values excluded from the
calculation of the risk-based capital ratio(2)............ 3806 24,268 8.
9. Total assets recorded on the balance sheet (sum of
items 4.a, 5.a, 6.a, 7.a, and 8, column A) (must equal
Schedule RC, item 12 plus items 4.b and 4.c).............. 3807 50,251,976 9.
</TABLE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C>
1. Current credit exposure across all off-balance sheet derivative contracts
covered by the risk-based capital standards........................................ 8764 118,571 M.1
</TABLE>
<TABLE>
<CAPTION>
With a remaining maturity of
------------------------------------------------------------------------------------
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
through five years
------------------------------------------------------------------------------------
RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2. Notional principal amounts
of off-balance sheet
derivative contracts(3):
a. Interest rate
contracts................. 3809 8,972,794 8766 20,272,746 8767 719,181 M.2.a.
b. Foreign exchange
contracts................. 3812 1,431,018 8769 52,587 8770 0 M.2.b.
c. Gold contracts............ 8771 15,034 8772 0 8773 0 M.2.c.
d. Other previous metals
contracts................. 8774 14,134 8775 0 8776 0 M.2.d.
e. Other commodity
contracts................. 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative
contracts................. A000 0 A001 0 A002 0 M.2.f.
</TABLE>
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes on-balance
sheet asset values (or portions thereof) of off-balance sheet interest rate,
foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8
margin accounts and accrued receivables not included in the calculation of
credit equivalent amounts of off-balance sheet derivatives as well as any
portion of the allowance for loan and lease losses in excess of the amount
that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
34
<PAGE>
Legal Title of Bank: Fleet National Bank Call Date: 9/30/96
Address: One Monarch Place ST-BK: 25-0590 FFIEC 031
City, State Zip: Springfield, MA 01102 Page RC-25
FDIC Certificate No.: 0 2 4 9 9
----------
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
AT CLOSE OF BUSINESS ON SEPTEMBER 30, 1996
FLEET NATIONAL BANK SPRINGFIELD MASSACHUSETTS
- ---------------------------- -------------------, ----------------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public. BANKS
CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT
DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE
PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing
not to make a statement may check the "No comment" box below and should make no
entries of any kind in the space provided for the narrative statement; i.e.,
DO NOT enter in this space such phrases as "No statement," "Not applicable,"
"N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement
must not exceed 750 characters, including punctuation, indentation, and
standard spacing between words and sentences. If any submission should exceed
750 characters, as defined, it will be truncated at 750 characters with no
notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- -------------------------------------------------------------------------------
No comment [X] (RCON 6979) C471 C472 < -
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/ Guo DeRosa 10/24/96
-------------------------------------- -----------------
Signature of Executive Officer of Bank Date of Signature
35
